AYALA CORPORATION, petitioner, vs.

RAY BURTON DEVELOPMENT CORPORATION,

respondent.
D E C I S I O N
MARTINEZ, J .:
Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located in Makati City. The
said estate was originally a raw land which was subdivided for sale into different lots devoted for
residential, commercial and industrial purposes. The development of the estate consisted of road and
building construction and installation of a central sewerage treatment plant and drainage system which
services the whole Ayala Commercial Area.
On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought from AYALA a
piece of land identified as Lot 26, Block 2 consisting of 1,188 square meters, located at what is now
known as H.V. de la Costa Street, Salcedo Village, Makati City. The said land, which is now the subject
of this case, is more particularly described as follows:
A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC] Psd-6086, being a portion of Block D,
described as plan [LRC] Psd-5812 LRC [GLRO] Rec. No. 2029) situated in the Municipality of Makati,
Province of Rizal, Is. of Luzon. Bounded on the NE., points 2 to 3 by Lot 31, Block 2 (Creek 6.00 m.
wide) of the subdivision plan, on the SE., points 3 to 4 by Lot 27, Block 2 of the Subdivision plan; on the
SW, points 4 to 5, by proposed Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5 to 1 by Street Lot
2 (17.00 m. wide) of the subdivision plan. On the NW, points 1 to 2 by Lot 25, Block 2 of the subdivision
plan. x x x beginning, containing an area of ONE THOUSAND ONE HUNDRED EIGHTY EIGHT (1,188)
SQUARE METERS.
The transaction was documented in a Deed of Sale[1] of even date, which provides, among others,
that the vendee would comply with certain special conditions and restrictions on the use or occupancy of
the land, among which are -
Deed Restrictions:[2]
a) The total height of the building to be constructed on the lot shall not be more than forty-two (42)
meters, nor shall it have a total gross floor area of more than five (5) times the lot area; and
b) The sewage disposal must be by means of connection into the sewerage system servicing the area.
Special Conditions:[3]
a) The vendee must obtain final approval from AYALA of the building plans and specifications of the
proposed structures that shall be constructed on the land;
b) The lot shall not be sold without the building having been completed; and
c) Any breach of the stipulations and restrictions entitles AYALA to rescission of the contract.
As a result of the sale, a Transfer Certificate of Title No. 132086[4] was issued in the name of
KARAMFIL. The said special conditions and restrictions were attached as an annex to the deed of sale
and incorporated in the Memorandum of Encumbrances at the reverse side of the title of the lot as Entry
No. 2432/T-131086.
On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and Realty Corporation
(PALMCREST) under a Deed of Absolute Sale[5] of even date. This deed was submitted to AYALA for
approval in order to obtain the latters waiver of the special condition prohibiting the resale of the lot until
after KARAMFIL shall have constructed a building thereon. AYALA gave its written conformity to the sale
but reflecting in its approval the same special conditions/restrictions as in the previous sale. AYALAs
conformity was annotated on the deed of sale.[6] PALMCREST did not object to the stipulated conditions
and restrictions.[7]
PALMCREST in turn sold the lot to Ray Burton Development Corporation (RBDC), now
respondent, on April 11, 1988, with the agreement that AYALA retains possession of the Owners
Duplicate copy of the title until a building is erected on said parcel of land in accordance with the
requirements and/or restrictions of AYALA.[8] The Deed of Absolute Sale[9] executed on the said date
was also presented to AYALA for approval since no building had yet been constructed on the lot at the
time of the sale. As in the KARAMFIL-PALMCREST transaction, AYALA gave its conformity to the sale,
subject to RBDCs compliance with the special conditions/restrictions which were annotated in the deed of
sale, thus:
With our conformity, subject to the compliance by the Vendees of the Special Conditions of Sale on the
reverse side of the Deed of Sale dated March 20, 1984 per Doc. No. 140, Page No. 29, Book No. 1,
Series of 1984 of the Notary Public Silverio Aquino.[10]
The conditions and restrictions of the sale were likewise entered as encumbrances at the reverse side of
the Transfer Certificate of Title No. 155384 which was later issued in the name of RBDC.[11] Like
PALMCREST, RBDC was not also averse to the aforesaid conditions and restrictions.[12]
Sometime in June of 1989, RBDC submitted to AYALA for approval a set of architectural plans for
the construction of a 5-storey office building on the subject lot, with a height of 25.85 meters and a total
gross floor area of 4,989.402 square meters.[13] The building was to be known as Trafalgar Tower but
later renamed Trafalgar Plaza. Since the building was well within the 42-meter height restriction, AYALA
approved the architectural plans.
Upon written request[14] made by RBDC, AYALA likewise agreed to release the owners copy of
the title covering the subject lot to the China Banking Corporation as guarantee of the loan granted to
RBDC for the construction of the 5-storey building.
Meanwhile, on November 28, 1989, RBDC, together with the Makati Developers Association, Inc.
(MADAI), of which RBDC is a member, and other lot owners, filed a complaint against AYALA before the
Housing and Land Use Regulatory Board (HLRB), docketed as HLRB Case No. REM-A-0818 (OAALA-
REM-111489-4240). The complaint sought the nullification of the very same Deed Restrictions
incorporated in the deeds of sale of the lots purchased by the complainants from AYALA and annotated
on their certificates of title, on the grounds, inter alia, that said restrictions purportedly: (a) place
unreasonable control over the lots sold by AYALA, thereby depriving the vendees of the full enjoyment of
the lots they bought, in violation of Article 428 of the Civil Code; (b) have been superseded by Presidential
Decree No. 1096 (the National Building Code) and Metro Manila Commission Zoning Ordinance No. 81-
01; (c) violate the constitutional provision on equal protection of the laws, since the restrictions are
imposed without regard to reasonable standards or classifications; and (d) are contracts of adhesion[15]
since AYALA would not sell the lots unless the buyers agree to the deed restrictions. The complaint also
alleged that AYALA is in estoppel from enforcing the restrictions in question when it allowed the
construction of other high-rise buildings in Makati City beyond the height and floor area limits. AYALA
was further charged with unsound business practice.
Early in June of 1990, RBDC made another set of building plans for Trafalgar Plaza and
submitted the same for approval, this time to the Building Official of the Makati City Engineers Office,[16]
not to AYALA. In these plans, the building was to be 26-storey high, or a height of 98.60 meters, with a
total gross floor area of 28,600 square meters. After having obtained the necessary building permits from
the City Engineers Office, RBDC began to construct Trafalgar Plaza in accordance with these new
plans.
On July 11, 1990, the majority of the lot owners in the Makati City area, including the Salcedo and
Legaspi Village areas, in a general assembly of the Makati Commercial Estate Association, Inc.
(MACEA), approved the revision of the Deed Restrictions, which revision was embodied in the
Consolidated and Revised Deed Restrictions[17] (Revised Deed Restrictions) wherein direct height
restrictions were abolished in favor of floor area limits computed on the basis of floor area ratios
(FARs). In the case of buildings devoted solely to office use in Salcedo Village such as the Trafalgar
Plaza the same could have a maximum gross floor area of only eight (8) times the lot area. Thus,
under the Revised Deed Restrictions, Trafalgar Plaza could be built with a maximum gross floor area of
only 9,504 square meters (1,188 sq. m. the size of the subject lot multiplied by 8). Even under the
Revised Deed Restrictions, Trafalgar would still exceed 19,065 square meters of floor area on the basis
of a FARs of 8:1. RBDC did not vote for the approval of the Revised Deed Restrictions and, therefore, it
continued to be bound by the original Deed Restrictions.
In the meantime, on August 22, 1990, the HLRB En Banc rendered a decision[18] (a) upholding the
Deed Restrictions; (b) absolving AYALA from the charge of unsound business practice; and (c) dismissing
HLRB Case No. REM-A-0818. MADAI and RBDC separately appealed the decision to the Office of the
President, which appeal was docketed as O.P. Case No. 4476.
While the appeal was pending before the Office of the President, the September 21, 1990 issue of
the Business World magazine[19] featured the Trafalgar Plaza as a modern 27-storey structure which
will soon rise in Salcedo Village, Makati City. Stunned by this information, AYALA, through counsel, then
sent a letter[20] to RBDC demanding the latter to cease the construction of the building which dimensions
do not conform to the previous plans it earlier approved. RBDC, through counsel, replied with a series of
letters[21] requesting for time to assess the merits of AYALAs demand.
For failing to heed AYALAs bidding, RBDC was sued on January 25, 1991 before the Regional
Trial Court of Makati City (Branch 148). AYALAs complaint for Specific Performance or Rescission,
docketed as Civil Case No. 91-220, prayed inter alia that judgment be rendered
x x x x x x x x x
b. Ordering the defendant to comply with its contractual obligations and to remove or demolish the
portions or areas of the Trafalgar Tower/Plaza Building constructed beyond or in excess of the approved
height as shown by building plans approved by the plaintiff, including any other portion of the building
constructed not in accordance with the building plans and specifications submitted to and approved by
plaintiff.
c. Alternatively, in the event specific performance becomes impossible:
i) Ordering the cancellation and rescission of the Deed of Sale dated March 20, 1984 (Annex A hereof)
and ordering defendant to return to plaintiff Lot 26, Block 2 of Salcedo Village;
ii) Ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of defendant) and
directing the Makati Register of Deeds to issue a new title over the Lot in the name of plaintiff; and
d. Ordering defendant to pay plaintiff attorneys fees in the amount of P500,000.00, exemplary damages
in the amount of P5,000.00 and the costs of the instant suit..[22]
In its answer (with counterclaim) to the complaint, RBDC denied having actual or constructive
notice of the Deed Restrictions imposed by AYALA on the subject lot. RBDC alleged in essence that
even if said deed restrictions exist, the same are not economically viable and should not be enforced
because they constitute unreasonable restrictions on its property rights and are, therefore, contrary to
law, morals, good customs, public order or public policy. Moreover, RBDC claimed that the enforcement
of the deed restrictions has also been arbitrary or discriminatory since AYALA has not made any action
against a number of violators of the deed restrictions.
Meantime, the appeal of MADAI in O.P. Case No. 44761 was considered resolved when it entered
into a compromise agreement with AYALA wherein the latter adopted and acknowledged as binding the
Revised Deed Restrictions of July 11, 1990.[23] On the other hand, RBDCs appeal was dismissed in an
Order dated February 13, 1992, for the reason that, insofar as the disposition of the appealed (HLRB)
decision is concerned, there is virtually no more actual controversy on the subject of the Deed
Restrictions because the same has been overriden by the Revised (Deed) Restrictions which the
appellee Ayala Corporation has in fact acknowledged as binding and in full force and effect x x x.[24]
Accordingly, aside from dismissing RBDCs appeal, the Order of February 13, 1992 also set aside the
appealed HLRB decision. From this order, AYALA sought a reconsideration or clarification, noting, inter
alia, that while the said order has ruled that AYALA can no longer enforce the Deed Restrictions against
RBDC, it does not expressly state that RBDC is bound by the Revised Deed Restrictions. Clarifying this
matter, the Office of the President issued a Resolution dated April 21, 1992,[25] modifying the February
13, 1992 order, ruling: (1) that RBDC is bound by the original Deed Restrictions, but it has the option to
accept and be bound by the Revised Deed Restrictions in lieu of the former; and (2) that the HLRB
decision dated 22 August 1990, to the extent that it absolved Ayala from the charge of unsound business
practice, subject of the basic complaint, is affirmed. This time RBDC moved for a reconsideration of the
April 21, 1992 Order, but the motion was denied in a Resolution dated October 15, 1993.[26] Another
Resolution of March 21, 1994[27] was issued denying with finality RBDCs second motion for
reconsideration.
AYALA then filed a Manifestation[28] in Civil Case No. 91-220, informing the trial court of the
pertinent rulings/resolutions in the proceedings before the HLRB and the Office of the President, which
rulings, AYALA suggested, amount to res judicata on the issue of the validity and enforceability of the
Deed Restrictions involved in the said civil case.
After trial on the merits, the trial court rendered a Decision on April 28, 1994 in favor of RBDC, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant and against
the plaintiff, and as a consequence:
1. The instant case is hereby dismissed;
2. The motion/application for the annotation of the lis pendens is hereby DENIED;
3. The motion/application to hold defendant in continuing contempt is hereby also DENIED;
4. No damages is awarded to any of the parties;
5. Plaintiff is hereby ordered to pay the defendant P30,000.00 for and as attorneys fees and
litigation expenses;
With costs against plaintiff.
SO ORDERED.[29]
The trial courts decision is based on its findings that: (1) RBDC had neither actual nor constructive
notice of the 42-meter height limitation of the building to be constructed on the subject lot; (2) even if the
Deed Restrictions did exist, AYALA is estopped from enforcing the same against RBDC by reason of the
formers failure to enforce said restrictions against other violators in the same area; (3) the Deed
Restrictions partake of the nature of a contract of adhesion; (4) since the Trafalgar Plaza building is in
accord with the minimum requirements of P.D. No. 1096 (The National Building Code), the Deed
Restrictions may not be followed by RBDC; and (5) the rulings of the HLRB and the Office of the
President do not have binding effect in the instant case.
Dissatisfied, AYALA appealed to the Court of Appeals which affirmed the judgment of the trial court
in a Decision[30] dated February 27, 1996 in CA-G.R. CV No. 46488. AYALAs motion for
reconsideration was likewise denied in the Resolution[31] of October 7, 1996.
AYALA now interposes the present petition for review on certiorari, citing several errors in the
decision of the Court of Appeals, some of which involve questions of fact.
The resolution of factual issues raised in the petition would certainly call for a review of the Court
of Appeals findings of fact. As a rule, the re-examination of the evidence proffered by the contending
parties during the trial of the case is not a function that this Court normally undertakes inasmuch as the
findings of fact of the Court of Appeals are generally binding and conclusive on the Supreme Court.[32]
The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of
Court is limited to reviewing only errors of law.[33] A reevaluation of factual issues by this Court is justified
when the findings of fact complained of are devoid of support by the evidence on record, or when the
assailed judgment is based on misapprehension of facts.[34]
The present petition has shown that certain relevant facts were overlooked by the Court of Appeals,
which facts, if properly appreciated, would justify a different conclusion from the one reached in the
assailed decision.
The principal error raised here by petitioner AYALA pertains to the Court of Appeals finding that
RBDC did not have actual or constructive notice of the 42-meter height restriction, since what was
annotated on its (RBDCs) title is the erroneous 23-meter height limit which, according to AYALAs own
witness, Jose Cuaresma, was not applicable to RBDC.[35] Thus, the Court of Appeals concluded, RBDC
has the right to enjoy the subject property as if no restrictions and conditions were imposed
thereon.[36]
The above finding and conclusion of the Court of Appeals, AYALA submits, are based on surmises
and conjectures which are contrary to the evidence on record and (RBDCs) own admissions.[37]
There is merit in AYALAs submission.
The erroneous annotation of the 23-meter height restriction in RBDCs title was explained by Jose
Cuaresma, AYALAs Assistant Manager for Marketing and Sales. Cuaresma testified that when the deed
of sale between PALMCREST and RBDC was submitted to the Register of Deeds of Makati and the
corresponding title was issued in the name of RBDC, the Register of Deeds annotated the wrong height
limit in Entry No. 2432 on the said title, but he emphasized that the incorrect annotation does not apply to
RBDC.[38]
Jose Cuaresma further clarified that the correct height restriction imposed by AYALA on RBDC
was 42 meters.[39] This height ceiling, he said, is based on the deed of restrictions attached as
annex to the deed of sale,[40] and the same has been uniformly imposed on the transferees
beginning from the original deed of sale between AYALA and KARAMFIL.[41]
This clarificatory statement of Jose Cuaresma should have cautioned the Court of Appeals from
making the unfounded and sweeping conclusion that RBDC can do anything it wants on the subject
property as if no restrictions and conditions were imposed thereon, on the mistaken premise that
RBDC was unaware of the correct 42-meter height limit. It must be stressed that Cuaresmas testimony
is bolstered by documentary evidence and circumstances of the case which would show that RBDC was
put on notice about the 42-meter height restriction.
The record reveals that the subject Lot 26 was first sold by AYALA to KARAMFIL under a deed of
sale (Exhibit "A") dated March 20, 1984 and duly notarized by Notary Public Silverio Aquino. Attached to
the deed of sale is an appendix of special conditions/restrictions (deed restrictions), which provides, inter
alia, that the building to be constructed on the lot must have a total height of not more than 42 meters,
and that any building plans and specifications of the proposed structures must have the approval of
AYALA. The deed restrictions were incorporated in the memorandum of encumbrances at the reverse
side of the title of the lot as Entry No. 2432. When the lot was sold by KARAMFIL to PALMCREST, the
deed of sale (Exhibit "B") on this transaction bears an annotation of AYALA's conformity to the transfer,
with the condition that the approval was "subject to the compliance by the vendee of the special
conditions of sale on the reverse side of the deed of sale dated March 20, 1984, per Doc. No. 140,
Page No. 29, Book No. 1, Series of 1984 of Notary Public Silverio F. Aquino" (Exhibit "B-
1"). PALMCREST later resold the lot to RBDC by virtue of a deed of sale (Exhibit "C"), to which AYALA's
approval was also annotated therein (Exhibit "C-1"), but with the same explicit inscription that RBDC, as
vendee, must comply with the special deed restrictions appended to the AYALA-KARAMFIL deed
of sale of March 20, 1984. All these three (3) deeds of sale and the accompanying special
deed restrictions imposing a 42-meter height limit, were duly registered with the Register of
Deeds. Thus, RBDC cannot profess ignorance of the 42-meter height restriction and other special
conditions of the sale.
Verily, the deed restrictions are integral parts of the PALMCREST-RBDC deed of sale,
considering that AYALA's required conformity to the transfer, as annotated therein, was
conditioned upon RBDC's compliance of the deed restrictions. Consequently, as a matter of
contractual obligation, RBDC is bound to observe the deed restrictions which impose a building height of
not more than 42 meters.
Moreover, RBDC was fully aware that it was bound by the 42-meter height limit. This is shown by
the fact that, pursuant to the special conditions/restrictions of the sale, it submitted to AYALA, for
approval, building plans for a 5-storey structure with a height of 25.85 meters. Certainly, RBDC would
not have submitted such plans had it truly believed that it was restricted by a lower 23-meter height
ceiling, in the same manner that RBDC did not seek AYALAs approval when it later made another set of
building plans for the 26-storey Trafalgar Plaza, knowing that the same would be disapproved for
exceeding the 42-meter height restriction. The fact that RBDC was later issued a building permit from
the Makati City Engineer's Office for the construction of the Trafalgar Plaza is not a valid justification to
disregard the stipulated contractual restriction of 42 meters.
Another error which AYALA claims to have been committed by the Court of Appeals is the latters
finding that AYALA, under the principle of estoppel, is now barred from enforcing the deed restrictions
because it had supposedly failed to act against other violators of the said restrictions. AYALA argues that
such finding is baseless and is contrary to the Civil Code provisions on estoppel and applicable
jurisprudence.
We agree with the petitioner.
In support of its finding that estoppel operates against AYALA, the Court of Appeals merely cited its
decision dated November 17, 1993, in CA-G.R. SP No. 29157, entitled Rosa-Diana Realty and
Development Corporation, Petitioner vs. Land Registration Authority and Ayala Corporation,
Respondents, and reiterated its findings therein, to wit:
Also, Ayala is barred from enforcing the deed of restrictions in question, pursuant to the doctrines of
waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed faithful
compliance with the special conditions of sale and with the Salcedo Village deed of restrictions. One of
the conditions was that a building would be constructed within one year. Ayala did nothing to enforce the
terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of the petitioner
realty in 1989, or thirteen (13) years later. We, therefore, see no justifiable reason for Ayala to attempt to
enforce the terms of the conditions of the sale against the petitioner. It should now be estopped from
enforcing the said conditions through any means.
x x x x x x x x x
Even assuming that petitioner RDR violated the floor area and height restrictions, it is markedly
significant that Ayala disregarded the fact that it had previously allowed and tolerated similar and
repeated violations of the same restrictive covenants by property owners which it now seeks to enforce
against the herein petitioner. Some examples of existing buildings in Salcedo Village that greatly
exceeded the gross floor area (5 times lot area) and height (42 meters) limitations are (Rollo, p. 32):
(1) Pacific Star (Nauru Center Building 29 stories and 112.5 meters high)
(2) Sagittarius Building 16 stories
(3) Shell House Building 14 stories
(4) Eurovilla Building 15 stories
(5) LPL Plaza Building 18 stories
(6) LPL Tower Building 24 stories.[42]
An examination of the decision in the said Rosa Diana case reveals that the sole issue raised
before the appellate court was the propriety of the lis pendens annotation. However, the appellate court
went beyond the sole issue and made factual findings bereft of any basis in the record to inappropriately
rule that AYALA is in estoppel and has waived its right to enforce the subject restrictions. Such ruling was
immaterial to the resolution of the issue of the propriety of the annotation of the lis pendens. The finding
of estoppel was thus improper and made in excess of jurisdiction.
Moreover, the decision in CA-G.R. SP No. 29157 is not binding on the parties herein, simply
because, except for Ayala, RBDC is not a party in that case. Section 49, Rule 39 of the Revised Rules of
Court (now Sec. 47, Rule 39 of the 1997 Rules of Civil Procedure) provides in part:
Sec. 49. Effect of judgments. The effect of a judgment or final order rendered by a court or judge of the
Philippines, having jurisdiction to pronounce the judgment or order, may be as follows:
(a) x x x;
(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of action or special proceeding,
litigating for the same thing and under the same title and in the same capacity; (emphasis supplied)
(c) x x x.
The clear mandate of the above-quoted rule is that a final judgment or order of a court is
conclusive and binding only upon the parties to a case and their successors in interest. Both the
present case and the Rosa-Diana case, however, involve different parties who are not litigating for the
same thing nor under the same title and in the same capacity. Hence, the Rosa-Diana decision cannot
have binding effect against either party to the instant case.
In any case, AYALA asserts that a few gross violators of the deed restrictions have been, or are
being, proceeded against.[43] AYALA admits, though, that there are other violations of the restrictions
but these are of a minor nature which do not detract from substantial compliance by the lot owners of the
deed restrictions. AYALA submits that minor violations are insufficient to warrant judicial action, thus:
As a rule, non-objection to trivial breaches of a restrictive covenant does not result in loss of the right to
enforce the covenant by injunction, and acquiescence in violations of a restrictive covenant which are
immaterial and do not affect or injure one will not preclude him from restraining violations thereof which
would so operate as to cause him to be damaged. (20 Am Jur. 2d Sec. 271, p. 835; underscoring
provided).
Occasional and temporary violations by lot owners of a covenant forbidding the use of property for
mercantile purposes are not sufficient as a matter of law to warrant a finding of a waiver or abandonment
of the right to enforce the restriction. A waiver in favor of one person and for a limited purpose is not a
waiver as to all persons generally. (id., at 836; underscoring provided).[44]
It is the sole prerogative and discretion of AYALA to initiate any action against violators of the deed
restrictions. This Court cannot interfere with the exercise of such prerogative/discretion.
How AYALA could be considered in estoppel as found by both the trial court and the Court of
Appeals, was not duly established. Under the doctrine of estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved as against the
person relying thereon. A party may not go back on his own acts and representations to the prejudice of
the other party who relied upon them.[45] Here, we find no admission, false representation or
concealment that can be attributed to AYALA relied upon by RBDC.
What is clear from the record, however, is that RBDC was the party guilty of misrepresentation
and/or concealment when it resorted to the fraudulent scheme of submitting two (2) sets of building plans,
one (1) set conformed to the Deed Restrictions, which was submitted to and approved by AYALA,[46]
while another set violated the said restrictions, and which it presented to the Makati City Building Official
in order to secure from the latter the necessary building permit.[47] It is noteworthy that after the
submission of the second set of building plans to the Building Official, RBDC continued to make
representations to AYALA that it would build the five-storey building in accordance with the first set of
plans approved by AYALA, obviously for the purpose of securing the release of the title of the subject lot
to obtain bank funding. AYALA relied on RBDC's false representations and released the said
title. Hence, RBDC was in bad faith.
AYALA further assigns as error the finding of the respondent court that, while the Deed of Sale to
Ray Burton (RBDC) did not appear to be a contract of adhesion, however, the subject Deed Restrictions
annotated therein appeared to be one.[48] The only basis for such finding is that the Deed Restrictions
and Special Conditions were pre-printed and prepared by AYALA, and that RBDCs participation
thereof was only to sign the Deed of Sale with the said restrictions and conditions.[49]
The respondent court erred in ruling that the Deed Restrictions is a contract of adhesion.
A contract of adhesion in itself is not an invalid agreement. This type of contract is as binding as a
mutually executed transaction. We have emphatically ruled in the case of Ong Yiu vs. Court of Appeals,
et. al.[50] that contracts of adhesion wherein one party imposes a ready-made form of contract on the
other x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality free to
reject it entirely; if he adheres he gives his consent. This ruling was reiterated in Philippine American
General Insurance Co., Inc. vs. Sweet Lines, Inc., et. al.,[51] wherein we further declared through
Justice Florenz Regalado that not even an allegation of ignorance of a party excuses non-compliance
with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions
of a contract of carriage (a contract of adhesion) devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.
Contracts of adhesion, however, stand out from other contracts (which are bilaterally drafted by the
parties) in that the former is accorded inordinate vigilance and scrutiny by the courts in order to shield the
unwary from deceptive schemes contained in ready-made covenants. As stated by this Court, speaking
through Justice J.B.L. Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd.:[52]
The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital, endowed with
overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared
agreements that the weaker party may not change one whit, his participation in the agreement being
reduced to the alternative to take it or leave it labeled since Raymond Saleilles contracts by adherence
(contracts d adhesion) in contrast to those entered into by parties bargaining on an equal footing. Such
contracts (of which policies of insurance and international bill of lading are prime examples) obviously call
for greater strictness and vigilance on the part of the courts of justice with a view to protecting the
weaker party from abuses and imposition, and prevent their becoming traps for the unwary.[53]
(Emphasis supplied)
The stringent treatment towards contracts of adhesion which the courts are enjoined to observe is in
pursuance of the mandate in Article 24 of the New Civil Code that "(i)n all contractual, property or other
relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for
his protection."
Thus, the validity and/or enforceability of a contract of adhesion will have to be determined by the
peculiar circumstances obtaining in each case and the situation of the parties concerned.
In the instant case, the stipulations in the Deed Restrictions and Special Conditions are plain and
unambiguous which leave no room for interpretation. Moreover, there was even no attempt on the part of
RBDC to prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker or a
disadvantaged party on account of its moral dependence, ignorance, mental weakness or other
handicap. On the contrary, as testified to by Edwin Ngo, President of RBDC, the latter is a realty firm and
has been engaged in realty business,[54] and that he, a businessman for 30 years,[55] represented
RBDC in the negotiations and in the eventual purchase of the subject lot from PALMCREST.[56] Edwin
Ngo's testimony proves that RBDC was not an unwary party in the subject transaction. Instead, Edwin
Ngo has portrayed RBDC as a knowledgeable realty firm experienced in real estate business.
In sum, there is more than ample evidence on record pinpointing RBDCs violation of the applicable
FAR restrictions in the Consolidated and Revised Deed Restrictions (CRDRs) when it constructed the 27-
storey Trafalgar Plaza. The prayer of petitioner is that judgment be rendered as follows:
a. Ordering Ray Burton to comply with its contractual obligations in the construction of Trafalgar Plaza
by removing or demolishing the portions of areas thereof constructed beyond or in excess of the
approved height, as shown by the building plans submitted to, and approved by, Ayala, including any
other portion of the building constructed not in accordance with the said building plans;
b. Alternatively, in the event specific performance becomes impossible:
(1) ordering the cancellation and rescission of the March 20, 1984 Deed of Sale and all subsequent
Deeds of Sale executed in favor of the original vendees successors-in-interest and ordering Ray Burton
to return to Ayala Lot 26, Lot 2 of Salcedo Village;
(2) ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of defendant) and
directing the Office of the Register of Deeds of Makati to issue a new title over the lot in the name of
Ayala; and
x x x x x x x x x.[57]
However, the record reveals that construction of Trafalgar Plaza began in 1990, and a certificate of
completion thereof was issued by the Makati City Engineers Office per ocular inspection on November 7,
1996.[58] Apparently Trafalgar Plaza has been fully built, and we assume, is now fully tenanted. The
alternative prayers of petitioner under the CRDRs, i.e., the demolition of excessively built space or to
permanently restrict the use thereof, are no longer feasible.
Thus, we perforce instead rule that RBDC may only be held alternatively liable for substitute
performance of its obligations the payment of damages. In this regard, we note that the CRDRs impose
development charges on constructions which exceed the estimated Gross Limits permitted under the
original Deed Restrictions but which are within the limits of the CRDRs.
In this regard, we quote hereunder pertinent portions of The Revised Deed Restrictions, to wit:
"3. DEVELOPMENT CHARGE
For any building construction within the Gross Floor Area limits defined under Paragraphs C-2.1 to C-2.4
above, but which will result in a Gross Floor Area exceeding certain standards defined in Paragraphs C-
3.1-C below, the OWNER shall pay MACEA, prior to the start of construction of any new building or any
expansion of an existing building, a DEVELOPMENT CHARGE as a contribution to a trust fund to be
administered by MACEA. This trust fund shall be used to improve facilities and utilities in the Makati
Central Business District.
3.1 The amount of the development charge that shall be due from the OWNER shall be computed as
follows:
DEVELOPMENT CHARGE = A x (B - C - D)
where:
A - is equal to the Area Assessment which shall be set at Five Hundred Pesos (P500.00) until December
31, 1990. Each January 1st thereafter, such amount shall increase by ten percent (10%) over the Area
Assessment charged in the immediately preceding year; provided that, beginning 1995 and at the end of
every successive five-year period thereafter, the increase in the Area Assessment shall be reviewed and
adjusted by the VENDOR to correspond to the accumulated increase in the construction cost index during
the immediately preceding five years as based on the weighted average of wholesale price and wage
indices of the National Census and Statistics Office and the Bureau of Labor Statistics.
B - is equal to the total Gross Floor Area of the completed or expanded building in square meters.
C - is equal to the estimated Gross Floor Area permitted under the original deed restrictions, derived by
multiplying the lot area by the effective original FAR shown below for each location:"[59]
Accordingly, in accordance with the unique, peculiar circumstance of the case at hand, we hold that
the said development charges are a fair measure of compensatory damages which RBDC has caused in
terms of creating a disproportionate additional burden on the facilities of the Makati Central Business
District.
As discussed above, Ray Burton Development Corporation acted in bad faith in constructing
Trafalgar Plaza in excess of the applicable restrictions upon a double submission of plans and exercising
deceit upon both AYALA and the Makati Engineer's Office, and thus by way of example and correction,
should be held liable to pay AYALA exemplary damages in the sum of P2,500,000.00.
Finally, we find the complaint to be well-grounded, thus it is AYALA which is entitled to an award of
attorney's fees, and while it prays for the amount of P500,000.00, we award the amount of P250,000.00
which we find to be reasonable under the circumstances.
WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated February
27, 1996, in CA-G.R. CV No. 46488, and its Resolution dated October 7, 1996 are hereby REVERSED
and SET ASIDE, and in lieu thereof, judgment is hereby rendered finding that:
(1) The Deed Restrictions are valid and petitioner AYALA is not estopped from enforcing them against
lot owners who have not yet adopted the Consolidated and Revised Deed Restrictions;
(2) Having admitted that the Consolidated and Revised Deed Restrictions are the applicable Deed
Restrictions to Ray Burton Development Corporations Trafalgar Plaza, RBDC should be, and is, bound
by the same;
(3) Considering that Ray Burton Development Corporations Trafalgar Plaza exceeds the floor area
limits of the Deed Restrictions, RBDC is hereby ordered to pay development charges as computed under
the provisions of the Consolidated and Revised Deed Restrictions currently in force.
(4) Ray Burton Development Corporation is further ordered to pay AYALA exemplary damages in the
amount of P2,500,000.00, attorneys fees in the amount of P250,000.00, and the costs of suit.
SO ORDERED.
Regalado (Chairman), Melo, Puno, and Mendoza, JJ.,concur


ELISEO FAJARDO, JR., and MARISSA FAJARDO, petitioners, vs. FREEDOM TO BUILD,
INC., respondent.
D E C I S I O N
VITUG, J .:
Freedom To Build, Incorporated, an owner-developer and seller of low-cost housing, sold to
petitioner-spouses, a house and lot designated Lot No. 33, Block 14, of the De la Costa
Homes in Barangka, Marikina, Metro Manila. The Contract to Sell executed between the
parties, contained a Restrictive Covenant providing certain prohibitions, to wit:[1]
"Easements. For the good of the entire community, the homeowner must observe
a two-meter easement in front. No structure of any kind (store, garage, bodega,
etc.) may be built on the front easement.
"x x x.............................x x x.............................x x x
"Upward expansion. A second storey is not prohibited. But the second storey
expansion must be placed above the back portion of the house and should not
extend forward beyond the apex of the original building.
"x x x.............................x x x.............................x x x
"Front expansion: 2nd Storey: No unit may be extended in the front beyond the
line as designed and implemented by the developer in the 60 sq. m. unit. In other
words, the 2nd floor expansion, in front, is 6 meters back from the front property line
and 4 meters back from the front wall of the house, just as provided in the 60 sq. m.
units."[2]
The above restrictions were also contained in Transfer Certificate of Title No. N-115384
covering the lot issued in the name of petitioner-spouses.
The controversy arose when petitioners, despite repeated warnings from respondent,
extended the roof of their house to the property line and expanded the second floor of their
house to a point directly above the original front wall.[3] Respondent filed before the Regional
Trial Court, National Capital Judicial Region, Branch 261, Pasig City, an action to demolish the
unauthorized structures.
After trial, judgment was rendered against petitioners; thus:
"WHEREFORE, premises considered, defendant spouses Eliseo B. Fajardo, Jr.,
and Marissa F. Fajardo are hereby directed to immediately demolish and remove
the extension of their expanded housing unit that exceeds the limitations imposed
by the Restrictive Covenant, otherwise the Branch Sheriff of this Court shall execute
this decision at the expense of the defendants.
"As to damages and attorney's fees, it appearing from the records of this case that
no evidence to sustain the same was adduced by either of the parties, the Court
deems it proper not to award any.
"SO ORDERED."[4]
On appeal to it, the Court of Appeals affirmed the decision of the trial court.
In their petition for review to this Court, the spouses contest the judgment of the courts below.
Adjacent owners reportedly have no objection to the construction, and have even expressed
interest in undertaking a similar expansion in their respective residences. Moreover, the
couple's two children, a son and a daughter, might soon get married and then share, with their
families, living quarters with petitioners. The latter also assail the personality of private
respondent to question the construction which have effectively relinquished its ownership, right
or interest over the subdivision upon the execution of the Deed of Absolute Sale in favor of the
individual homeowners. Per the contract between Freedom to Build Incorporated and the De la
Costa Low Income Project Homeowners' Association (hereinafter homeowners' association),
petitioners aver, the enforcement of the prohibitions contained in the "Restrictive Covenant"
originally residing on respondent is now lodged in the homeowners' association. Petitioners
maintain that it is incumbent upon the homeowners' association, not on respondent, to enforce
compliance with the provisions of the covenant.
A perusal of the provisions of the covenant would show that the restrictions therein imposed
were intended -
"For the protection and benefit of the De La Costa Low Income Housing Project,
and of all the persons who may now, or hereafter become owners of any part of the
project, and as part of the consideration for the conveyance of the housing unit,
these restrictions are promulgated in order that; the intents and purposes for which
the project was designed shall be upheld; to wit: subsequent duly approved sale
and assignments of housing units shall be made only to low income families; a
certain level of privacy shall be observed; a community spirit shall be fostered; and
an undisturbed possession and occupancy at the homeowners shall be
maintained."[5]
Restrictive covenants are not, strictly speaking, synonymous with easements. While it may be
correct to state that restrictive covenants on the use of land or the location or character of
buildings or other structures thereon may broadly be said to create easements or rights, it can
also be contended that such covenants, being limitations on the manner in which one may use
his own property,[6] do not result in true easements,[7] but a case of servitudes (burden),
sometimes characterized to be negative easements or reciprocal negative easements.
Negative easement is the most common easement created by covenant or agreement whose
effect is to preclude the owner of the land from doing an act, which, if no easement existed, he
would be entitled to do.[8]
Courts which generally view restrictive covenants with disfavor for being a restriction on the
use of one's property, have, nevertheless, sustained them[9] where the covenants are
reasonable,[10] not contrary to public policy,[11] or to law,[12] and not in restraint of trade.[13]
Subject to these limitations, courts enforce restrictions to the same extent that will lend judicial
sanction to any other valid contractual relationship.[14] In general, frontline restrictions on
constructions have been held to be valid stipulations.[15]
The provisions in a restrictive covenant prescribing the type of the building to be erected are
crafted not solely for the purpose of creating easements, generally of light and view, nor as a
restriction as to the type of construction,[16] but may also be aimed as a check on the
subsequent uses of the building[17] conformably with what the developer originally might have
intended the stipulations to be. In its Memorandum, respondent states in arguing for the
validity of the restrictive covenant that the -
"x x x restrictions are not without specific purpose. In a low cost-socialized housing,
it is of public knowledge that owners-developers are constrained to build as many
number of houses on a limited land area precisely to accommodate marginalized lot
buyers, providing as much as possible the safety, aesthetic and decent living
condition by controlling overcrowding. Such project has been designed to
accommodate at least 100 families per hectare."[18]
There appears to be no cogent reasons for not upholding restrictive covenants aimed to
promote aesthetics, health, and privacy or to prevent overcrowding.
Viewed accordingly, the statement of petitioners that their immediate neighbors have not
opposed the construction is unavailing to their cause, the subject restrictive covenant not being
intended for the benefit of adjacent owners but to prescribe the uses of the building, i.e., to
ensure, among other things, that the structures built on De la Costa Homes Subdivision would
prevent overcrowding and promote privacy among subdivision dwellers. The argument then of
petitioners that expansion is necessary in order to accommodate the individual families of their
two children must fail for like reason. Nor can petitioners claim good faith; the restrictive
covenants are explicitly written in the Contract To Sell and annotated at the back of the
Transfer Certificate of Title.
Petitioners raise the issue of the personality of respondent to enforce the provisions of the
covenant. Broadly speaking, a suit for equitable enforcement of a restrictive covenant can only
be made by one for whose benefit it is intended.[19] It is not thus normally enforceable by one
who has no right nor interest in the land for the benefit of which the restriction has been
imposed.[20] Thus, a developer of a subdivision can enforce restrictions, even as against
remote grantees of lots, only if he retains part of the land.[21] There would have been merit in
the argument of petitioners - that respondent, having relinquished ownership of the subdivision
to the homeowners, is precluded from claiming any right or interest on the same property - had
not the homeowners' association, confirmed by its board of directors, allowed respondent to
enforce the provisions of the restrictive covenant.
Finally, petitioners argue that for lack of a specific provision, prescribing the penalty of
demolition in the "Restrictive Covenant" in the event of a breach thereof, the prayer of
respondent to demolish the structure should fail. This argument has no merit; Article 1168 of
the New Civil Code states:
"When the obligation consists in not doing and the obligor does what has been
forbidden him, it shall be undone at his expense."
This Court is not unaware of its ruling in Ayala Corporation vs. Ray Burton Development
Corporation,[22] which has merely adjudged the payment of damages in lieu of demolition. In
the aforementioned case, however, the elaborate mathematical formula for the determination
of compensatory damages which takes into account the current construction cost index during
the immediately preceding 5 years based on the weighted average of wholesale price and
wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics is
explicitly provided for in the Deed of Restrictions entered into by the parties. This unique and
peculiar circumstance, among other strong justifications therein mentioned, is not extant in the
case at bar.
In sum, the Court holds that -
(1)....The provisions of the Restrictive Covenant are valid;
(2)....Petitioners must be held to be bound thereby; and
(3)....Since the extension constructed exceeds the floor area limits of the Restrictive
Covenant, petitioner-spouses can be required to demolish the structure to the
extent that it exceeds the prescribed floor area limits.
WHEREFORE, the assailed decision, dated 13 July 1998, of the Court of Appeals in CA-G.R.
CV No. 50085, sustaining that of the court a quo, is AFFIRMED. No costs.
SO ORDERED.
Melo, (Chairman), Panganiban, Purisima, and Gonzaga-Reyes, JJ., concur.

PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO DE JESUS, represented by his Attorney-
in-Fact, CHRISTIAN DE JESUS, respondent.
D E C I S I O N
VITUG, J .:
Petitioner Philippine National Bank disputes the decision handed down by the Court of Appeals
promulgated on 23 March 2001 in CA-G.R. CV No. 56001, entitled Generoso De Jesus, represented by
his Attorney-in-Fact, Christian De Jesus, versus Philippine National Bank. The assailed decision has
affirmed the judgment rendered by the Regional Trial Court, Branch 44, of Mamburao, Occidental
Mindoro, declaring respondent Generoso de Jesus as being the true and lawful owner of the 124-square-
meter portion of the land covered by Transfer Certificate of Title (TCT) No. T-17197 and ordering
petitioner bank to vacate the premises, to deliver possession thereof to respondent, and to remove the
improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint against petitioner before the
Regional Trial Court of Occidental Mindoro for recovery of ownership and possession, with damages,
over the questioned property. In his complaint, respondent stated that he had acquired a parcel of land
situated in Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered by TCT No. T-
17197, and that on 26 March 1993, he had caused a verification survey of the property and discovered
that the northern portion of the lot was being encroached upon by a building of petitioner to the extent of
124 square meters. Despite two letters of demand sent by respondent, petitioner failed and refused to
vacate the area.
Petitioner, in its answer, asserted that when it acquired the lot and the building sometime in 1981
from then Mayor Bienvenido Ignacio, the encroachment already was in existence and to remedy the
situation, Mayor Ignacio offered to sell the area in question (which then also belonged to Ignacio) to
petitioner at P100.00 per square meter which offer the latter claimed to have accepted. The sale,
however, did not materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later
mortgaged the lot to the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to be the rightful owner of the
disputed 124-square-meter portion of the lot and ordering petitioner to surrender possession of the
property to respondent and to cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered to be deleted the award to
respondent of attorneys fees, as well as moral and exemplary damages, and litigation expenses.
Petitioner went to this Court, via a petition for review, after the appellate court had denied the
banks motion for reconsideration, here now contending that -
1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A BUILDER IN BAD
FAITH OVER THE ENCROACHED PROPERTY IN QUESTION;
2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN FAVOR OF PNB THE
PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN TECNOGAS PHILIPPINES
MANUFACTURING CORP. VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA 7.[1]
The Regional Trial Court and the Court of Appeals have both rejected the idea that petitioner can
be considered a builder in good faith. In the context that such term is used in particular reference to
Article 448, et seq., of the Civil Code, a builder in good faith is one who, not being the owner of the land,
builds on that land believing himself to be its owner and unaware of any defect in his title or mode of
acquisition.
The various provisions of the Civil Code, pertinent to the subject, read:
Article 448. The owner of the land on which anything has been built, sown, or planted in good faith, shall have the
right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed,
the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more
than that of the building or trees. In such a case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.
Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown
without right to indemnity.
Article 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the
demolition of the work, or that the planting or sowing be removed, in order to replace things in their former
condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay
the price of the land, and the sower the proper rent.
A builder in good faith can, under the foregoing provisions, compel the landowner to make a choice
between appropriating the building by paying the proper indemnity or obliging the builder to pay the price
of the land. The choice belongs to the owner of the land, a rule that accords with the principle of
accession, i.e., that the accessory follows the principal and not the other way around.[2] Even as the
option lies with the landowner, the grant to him, nevertheless, is preclusive. He much choose one. He
cannot, for instance, compel the owner of the building to instead remove it from the land.[3] In order,
however, that the builder can invoke that accruing benefit and enjoy his corresponding right to demand
that a choice be made by the landowner, he should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with no technical meaning or
statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and
the absence of design to defraud or to seek an unconscionable advantage. An individuals personal good
faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations
alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put
the holder upon inquiry.[4] The essence of good faith lies in an honest belief in the validity of ones right,
ignorance of a superior claim, and absence of intention to overreach another.[5] 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.[6]
Given the findings of both the trial court and the appellate court, it should be evident enough that
petitioner would fall much too short from its claim of good faith. Evidently, petitioner was quite aware, and
indeed advised, prior to its acquisition of the land and building from Ignacio that a part of the building sold
to it stood on the land not covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land by Ignacio, has in actuality
been part of the property transferred to petitioner. Article 448, of the Civil Code refers to a piece of land
whose ownership is claimed by two or more parties, one of whom has built some works (or sown or
planted something) and not to a case where the owner of the land is the builder, sower, or planter
who then later loses ownership of the land by sale or otherwise for, elsewise stated, where the
true owner himself is the builder of works on his own land, the issue of good faith or bad faith is
entirely irrelevant. [7]
In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil
Code. The Court commiserates with petitioner in its present predicament; upon the other hand,
respondent, too, is entitled to his rights under the law, particularly after having long been deprived of the
enjoyment of his property. Nevertheless, the Court expresses hope that the parties will still be able to
come up with an arrangement that can be mutually suitable and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001 is AFFIRMED. No
costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, and Carpio, JJ., concur.
Azcuna, J., on sick leave.


G.R. No. L-26694 December 18, 1973
NELITA MORENO VDA. DE BACALING, petitioner, vs. HECTOR LAGUNA, HON. VALERION
ROVIRA, Judge, Court of First Instance and HON. JUDGE ROSENDO BALTAZAR, Judge, City
Court of Iloilo, respondents.
Nicanor D. Sorongon for petitioner.
Apeles L. Padilla for respondents.

ESGUERRA, J .:
I.
Nature of the Case
The petitioner seeks a writ of certiorari with preliminary injunction to annul an Order of Hon. Rosendo
Baltazar, as Judge of the City Court of Iloilo, dated June 30, 1966, ordering the demolition of the
residential house of petitioner.
1
Assailed likewise is an Order, dated August 25, 1966, of Hon. Valerio V.
Rovira, as Judge of the Court of First Instance of Iloilo, stationed at Iloilo City, approving said demolition.
2

II.
Facts of the Case
The record of this case discloses the following facts:
Private respondent Hector Laguda is the registered owner of a residential land known as lot No. 3508
situated at La Paz, Iloilo City
3
many years back, petitioner and her late husband, Dr. Ramon Bacaling,
with the acquiescence of private respondent Laguda, constructed a residential house on a portion of said
lot fronting Huevana Street, paying a monthly rental of P80.00.
4
Unable to pay the lease rental from July
1959 to September 1961, totalling P2,160.00, an action for ejectment (Civil Case No. 6823) was filed by
private respondent Laguda against petitioner in her capacity as judicial administratrix of the estate of her
late husband, Dr. Bacaling, in the City Court of Iloilo City.
5
The filing of said case spawned various court
suits.
Petitioner on July 23, 1962, filed certiorari proceedings in this Court (G.R. No. L-20061) but was
dismissed for lack of merit on August 3, 1962.
6
With this setback, petitioner on November 12, 1962, filed
with the Court of First Instance of Iloilo a petition for certiorari with preliminary injunction (Civil Case No.
6162) but the same was dismissed on December 1, 1962.
7
Unsuccessful in her motion for
reconsideration, petitioner went to the Court of Appeals by way of certiorari (CA-G.R. No. 31882-R) but
her petition was dismissed by that Court on March 7, 1967.
8

Suffering from these series of legal reverses, the petitioner entered into a compromise agreement on July
29, 1964, with private respondent Laguda relative to Civil Case No. 6823.
9
Said agreement inter alia,
provides as follows:
1. Defendant (petitioner herein) agreed to vacate the premises and remove ... the residential house
therefrom ... before December 31, 1966;
2. For the use and occupation ... of the said premises ... from June 1964 to December 31, 1969, the said
defendant will pay plaintiff a monthly rent ... of Eighty (P80.00) Pesos per calendar month ...;
3. Upon failure of defendant to comply with any ... provision of the amicable settlement within ... fifty (50)
days ... the plaintiff shall be entitled to "immediate execution to restore plaintiff in possession of the
premises and to recover all the unpaid monthly rents from June 1, 1964 until said premises are vacated"
by defendant;
4. Defendant "waive her right, under Sec. 6, Rule 39, Rules of Court, to bar enforcement of the execution
of the judgment in the case at anytime within one year from December 31, 1969".
In a decision dated July 30, 1964, the City Court of Iloilo City approved the amicable settlement and
enjoined the parties to comply with its terms. For failure of the petitioner to satisfy the conditions of the
settlement within the 50-day period, private respondent Laguda moved for execution which the Court
granted on July 7, 1965.
10

On July 14, 1965, petitioner moved for reconsideration to quash the writ of execution, but before the Court
could resolve the motion, petitioner on July 19, 1965, served notice of her intention to take the case to the
Court of Appeals.
11
Meanwhile on July 23, 1965, respondent Laguda filed an opposition to the petitioner's
July 14, 1965, motion, alleging that as judicial administratrix as of July 29, 1964, she was legally
authorized to enter into the amicable settlement which was the basis of the decision dated July 30, 1964,
of the City Court of Iloilo sought to be executed and, therefore, her act was binding upon the present
judicial administrator, Atty. Roberto Dineros, who replaced petitioner upon her discharge as such on
November 28, 1964.
12

Denying the petitioner's motion for reconsideration and to quash writ of execution on September 30,
1965, the City Court however, held in abeyance the enforcement of the alias writ of execution until the
Court of First Instance of Iloilo stamped its imprimatur considering the pendency of Special Proceedings
No. 1469 and of the fact that the properties involved therein are in custodia legis.
13
Thereafter, on
October 25, 1965, private respondent Laguda moved the Court of First Instance of Iloilo in Special
Proceedings No. 1469 for the approval of the City Court's order of execution which was granted despite
petitioner's opposition.
14
With the denial of petitioner's motion for reconsideration on December 4, 1965,
a petition for certiorari with preliminary injunction was brought before the Court of Appeals (CA-G.R. No.
36939-R) which dismissed the same on January 18, 1966.
15

On April 14, 1966, the respondent City Judge of Iloilo City issued an alias writ of execution upon
representations of private respondent Laguda, copies of which were served sheriff upon the petitioner and
Atty. Roberto Dineros in his capacity as judicial administrator of the estate of the deceased, Dr. Ramon
Bacaling, in Special Proceedings No. 1469.
16

On June 30, 1966, a Special Order of Demolition was issued by the respondent City Judge upon motion
of private respondent Laguda and over petitioner's opposition, subject, however, to the approval of the
Court of First Instance of Iloilo in Special Proceedings No. 1469.
17
Upon the denial of petitioner's motion
for reconsideration, respondent Laguda on July 12, 1966, filed a manifestation in the Court of First
Instance of Iloilo in Special Proceedings No. 1469, praying for the confirmation of the Order to demolish
the house under custodia legis.
18

On August 4, 1966, petitioner interposed an opposition alleging:
1. That she was no longer in control of the estate funds when the stipulated obligations in the amicable
settlement became due and payable;
2. That the residential house to be demolished is worth P35,000.00 for which she is entitled to
reimbursement as a builder in good faith, in addition to reasonable expenses they may incur in
transferring the same to another place; and
3. That the guardian ad litem of the minor children was not notified of the motion for the issuance of an
order of demolition;
19

On August 25, 1966, respondent Laguda by way of reply disputed petitioner's claim and supported the
legality of the court's ruling.
20
On the same date, the probate court in Special Proceedings No. 1469
approved the order of demolition of the house in controversy.
21
Impugning the said Order as violative of
the provisions of Sec. 14, Rule 39, of the Rules of Court, and of the constitutional mandate on due
process, petitioner moved to reconsider the same but the motion was denied by the Court on September
26, 1966.
22
Frustrated in her effort to set aside the Order of Demolition, petitioner brought this present
action of certiorari with preliminary injunction. Upon giving due course to the petition, this Court issued a
temporary restraining order on October 21, 1966, to prevent the enforcement of the order of demolition in
Special Proceedings No. 1469 of the Court of First Instance of Iloilo, but when served upon the
respondents, the building in question was already partially demolished.
23
Upon petitioner's posting a
bond of P1,000.00, this Court on November 10, 1966, issued a writ of preliminary injunction restraining
the herein respondents from proceeding with the order of demolition, until further orders.
24

III.
Issues of the Case
The issues raised in the instant petition boil down to the following:
1. Whether or not the acts of the petitioner as judicial administratrix prior to her discharge or removal are
valid and binding upon her successor;
2. Whether or not petitioner is a builder in good faith and, therefore, entitled to reimbursement, and/or
reasonable expenses that may be incurred in transferring the house to another place;
3. Whether or not due process was denied to the minor children of deceased Ramon Bacaling, and
petitioner in connection with the motion for the issuance of the order of demolition.
IV.
Discussion
Petitioner claims before this Court that since she was no longer the judicial administratrix of the estate of
her late husband, Dr. Ramon Bacaling, and was no longer in control of estate funds when the stipulated
obligations in the amicable settlement became due and payable, the special order of demolition could not
be enforced.
Such a view is not tenable. Under Section 3, Rule 82 of the Rules of Court, petitioner's lawful acts before
the revocation of her letters of administration or before her removal shall have the same validity as if there
was no such revocation or removal. It is elementary that the effect of revocation of letters testamentary or
of administration is to terminate the authority of the executor or administrator, but the acts of the executor
or administrator, done in good faith prior to the revocation of the letters, will be protected, and a similar
protection will be extended to rights acquired under a previous grant of administration.
25

In connection with the petitioner's contention that she be considered a builder in good faith and, therefore,
entitled to reimbursement in addition to reasonable expenses that may be incurred in transferring the
house to another place, the same cannot stand legal scrutiny. The rule is well-settled that lessees, like
petitioner, are not possessors in good faith, because they knew that their occupancy of the premises
continues only during the life of the lease, and they cannot as a matter of right, recover the value of their
improvements from the lessor, much less retain the premises until they are reimbursed. Their rights are
governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the
value of their improvements if the lessor so elects.
26

It is next urged by petitioner that there was a denial of process for failure of private respondent to notify
the guardian ad litem of the minor children of the deceased Ramon Bacaling, of the motion for execution.
A perusal of the pleadings yields the conclusion that petitioner failed to meet the burden of demonstrating
that there was denial of due process. On the contrary, there is evidence to show that Acting Fiscal
Alfonso Illemberger guardian ad litem of the minor children of the late Ramon Bacaling, has been duly
apprised of the issuance of the assailed special order to demolish, as shown by the certification of the
counsel for petitioner at the foot of his opposition dated August 4, 1966,
27
filed with the Court of First
Instance of Iloilo, and as also shown by the certification of private respondent's counsel at the foot of his
opposition dated September 15, 1966, 28 likewise filed with the same Court.
V.
Conclusion
The petitioner is not entitled to the writ of certiorari. In the case at bar, there is absolutely no showing that
the respondent courts acted so "arbitrarily", "despotically" or "capriciously" as to amount to lack of
jurisdiction in issuing the questioned orders.
"Grave abuse of discretion" which is a ground for certiorari means "such capricious and arbitrary exercise
of judgment as is equivalent, in the eyes of the law, to lack of jurisdiction." 29 Even mere abuse of
discretion is not sufficient by itself to justify the issuance of a writ of certiorari. For that purpose the abuse
of discretion must be grave and patent, and it must be shown that it was exercised arbitrarily or
despotically, which is not the case made out by the present petition.
30

There is something more to be said about the nature and apparent purpose of this case which has its
genesis in the case for illegal detainer (Civil Case No. 6823) brought before the Iloilo City Court. What
transpired therein presents a glaring example of a summary proceeding which was deliberately protracted
and made to suffer undue delay in its disposal. It was originally filed on September 13, 1960;
31
it reached
the appellate courts five (5) times, twice before the Court of Appeals
32
, Once before the Court of First
Instance of Iloilo
33
, and twice before this Court.
34
The present petition smacks of a dilatory tactic and a
frivolous attempt resorted to by petitioner to frustrate the prompt termination of the ejectment case and to
prolong litigation unnecessarily. Such conduct on the part of petitioner and her counsel deserves the
vigorous condemnation of this Court,
35
because it evinces a flagrant misuse of the remedy of certiorari
which should only be resorted to in case of lack of jurisdiction or grave abuse of discretion by a inferior
court. A recourse of this kind unduly taxes the energy and patience of courts and simply wastes the
precious time that they could well devote to really meritorious cases.
VI.
Judgment
IN THE LIGHT OF THE FOREGOING CONSIDERATIONS, the instant petition should be, as it is hereby,
dismissed.
The writ of preliminary injunction issued by this Court on November 10, 1966, is immediately set aside.
36

Treble costs against the petitioner for the reasons above set forth.
37

Makalintal, Castro, Teehankee, Makasiar and Muoz Palma, JJ., concur.


G.R. No. 144635 June 26, 2006
PROGRAMME INCORPORATED, Petitioner, vs. PROVINCE OF BATAAN,
1
Respondent.
D E C I S I O N
CORONA, J .:
In this petition filed under Rule 45 of the Rules of Court, petitioner Programme Incorporated contests the
Court of Appeals (CA) decision
2
and resolution
3
upholding respondent Province of Bataans ownership of
Piazza Hotel and the land on which it stands. The assailed decision in CA-G.R. CV No. 49135 affirmed
the decision of the Regional Trial Court (RTC), Branch 4, Balanga, Bataan in a suit for preliminary
injunction and sum of money filed by petitioner against Bataan Shipyard and Engineering Co., Inc.
(BASECO). The case was docketed as Civil Case No. 129-ML. The dispositive portion of the trial court
decision read:
WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered dismissing the
complaint, without pronouncement as to costs.
Similarly, [BASECOs] counterclaim is dismissed.
On the complaint in intervention, judgment is hereby rendered ordering [petitioner] to pay [respondent] the
rentals for the leased premises in question, namely, the Piazza Hotel and the Mariveles Lodge, situated at
the Bataan Export Processing Zone (BEPZ) Compound in Mariveles, Bataan, at the rate of six thousand
five hundred pesos (P6,500.00) per month for both establishments, starting in August 1989 with legal
interest at 6% per annum, up to and until the legal arrearages shall have been fully paid, and to pay the
succeeding rentals therefor at the same rate.
SO ORDERED.
4

The controversy arose from the following facts.
BASECO was the owner of Piazza Hotel and Mariveles Lodge, both located in Mariveles, Bataan.
On May 14, 1986, BASECO granted petitioner a contract of lease over Piazza Hotel at a monthly rental of
P6,500 for three years, i.e., from January 1, 1986 to January 1, 1989, subject to renewal by mutual
agreement of the parties. After the expiration of the three-year lease period, petitioner was allowed to
continue operating the hotel on monthly extensions of the lease.
In April 1989, however, the Presidential Commission on Good Government (PCGG) issued a
sequestration order against BASECO pursuant to Executive Order No. 1 of former President Corazon C.
Aquino.
5
Among the properties provisionally seized and taken over was the lot on which Piazza Hotel
stood.
On July 19, 1989, however, Piazza Hotel was sold at a public auction for non-payment of taxes to
respondent Province of Bataan. The title of the property was transferred to respondent. BASECOs
Transfer Certificate of Title (TCT) No. T-59631 was cancelled and a new one, TCT No. T-128456, was
issued to the Province of Bataan.
On July 21, 1989, petitioner filed a complaint for preliminary injunction and collection of sum of money
against BASECO (Civil Case No. 129-ML).
6
Respondent, as the new owner of the property, filed a motion
for leave to intervene on November 22, 1990. After its motion was granted, respondent filed a complaint-
in-intervention praying, inter alia, that petitioner be ordered to vacate Piazza Hotel and Mariveles Lodge
for lack of legal interest.
During the pre-trial of the complaint-in-intervention, the parties agreed that the case
7
be tried on the sole
issue of whether respondent province, as complainant-intervenor, was the legitimate owner of the Piazza
Hotel and Mariveles Lodge.
On February 3, 1995, after trial on the merits, the trial court rendered judgment in favor of
respondent.1avvphil.net
On appeal, the CA addressed the issue of ownership of Piazza Hotel and Mariveles Lodge as follows:
[W]e affirm the trial courts ruling that [respondent] Province of Bataan has established by
preponderance of evidence its claim of ownership of Piazza Hotel and Mariveles Lodge. In fact,
[petitioner] has not presented evidence proving its ownership of the said buildings[, whereas
respondent presented] a tax declaration and certificate of title over the same properties, over
which it now exercises full control and dominion. The fact that the subject properties were placed
under sequestration is of no moment for the PCGG is not an owner but a conservator who can exercise
only powers of administration over property sequestered, frozen or provisionally taken over. As the owner
of said properties, [respondent-intervenor] is entitled to the payment of the monthly rental in the sum of
P6,500.00 as ruled by the trial court.
8
(emphasis ours)
We agree with the appellate court.
Time and again, we have ruled that factual matters are best evaluated by trial courts which can scrutinize
evidence and hear testimony presented and offered by the parties (in this case, on the issue of ownership
of the subject property). All the more does this principle ring true in this petition since such factual
determination by the RTC was upheld by the CA.
9
Only questions of law are the proper subject of a
petition for review on certiorari in this Court, unless any of the known exceptions is extant in this case.
10

There is none.
The evidence clearly established respondents ownership of Piazza Hotel.
11
First, the title of the land on
which Piazza Hotel stands was in the name of respondent.
12
Second, Tax Declaration No. 12782 was in
the name of respondent as owner of Piazza Hotel.
13
A note at the back of the tax declaration read:
Transferred by virtue of a final bill of sale executed by the Provincial [Treasurer] of Bataan in favor
of the Provincial Government on Feb. 13, 1989[, a] year after the expiration of the redemption period
from date of auction sale held on Feb. 12, 1988 of all real property declared in the name of [BASECO].
14

(emphasis ours)
Third, petitioner was doubtlessly just a lessee. In the lease contract annexed to the complaint, petitioner
in fact admitted BASECOs (respondents predecessor-in-interest) ownership then of the subject property.
A stipulation in the contract read:
WHEREAS, the lessor (BASECO) is the owner of the building PIAZZA HOTEL and its outlet
MARIVELES LODGE located at BASECO, Mariveles, Bataan xxx
15
(emphasis ours)
The Rules of Court states that "[a]n admission, verbal or written, made by a party in the course of the
proceedings in the same case, does not require proof. The admission may be contradicted only by
showing that it was made through palpable mistake or that no such admission was made."
16

[Such admissions] may be made in (a) the pleadings filed by the parties, (b) in the course of the
trial either by verbal or written manifestations or stipulations, or (c) in other stages of the judicial
proceeding, as in the pre-trial of the case. Admissions obtained through depositions, written
interrogatories or requests for admission are also considered judicial admissions.
17
(emphasis ours)
"To be considered as a judicial admission, the same must be made in the same case in which it is
offered."
18

In its own complaint
19
for preliminary injunction and sum of money, petitioner acknowledged that it was
not the owner of the property when it stated that "[BASECO] lease[d] to [petitioner] the building Piazza
Hotel and its outlet Mariveles Lodge xxx for monthly rentals of P6,500.00."
20
Petitioner could not possibly
be the owner of a building merely leased to it.
21

Furthermore, petitioners reference to Article 448
22
of the
Civil Code to justify its supposed rights as "possessor in good faith" was erroneous.
The benefits granted to a possessor in good faith cannot be maintained by the lessee against the lessor
because, such benefits are intended to apply only to a case where one builds or sows or plants on land
which he believes himself to have a claim of title and not to lands wherein ones only interest is that of a
tenant under a rental contract, otherwise, it would always be in the power of a tenant to improve his
landlord out of his property. Besides, as between lessor and lessee, the Code applies specific provisions
designed to cover their rights.
Hence, the lessee cannot claim reimbursement, as a matter of right, for useful improvements he has
made on the property, nor can he assert a right of retention until reimbursed. His only remedy is to
remove the improvement if the lessor does not choose to pay its value; but the court cannot give him the
right to buy the land.
23

Petitioners assertion that Piazza Hotel was constructed "at (its) expense" found no support in the
records. Neither did any document or testimony prove this claim. At best, what was confirmed was that
petitioner managed and operated the hotel. There was no evidence that petitioner was the one which
spent for the construction or renovation of the property. And since petitioners alleged expenditures were
never proven, it could not even seek reimbursement of one-half of the value of the improvements upon
termination of the lease under Article 1678
24
of the Civil Code.
Finally, both the trial and appellate courts declared that the land as well as the improvement thereon
(Piazza Hotel) belonged to respondent. We find no reason to overturn this factual conclusion.
Since this petition for review on certiorari was clearly without legal and factual basis, petitioners counsel
should not have even filed this appeal. It is obvious that the intention was merely to delay the disposition
of the case.
WHEREFORE, the petition is hereby DENIED. The decision and resolution of the Court of Appeals in CA-
G.R. CV No. 49135 are AFFIRMED.
Costs against petitioner. Same costs against Atty. Benito R. Cuesta I, petitioners counsel, for filing this
flimsy appeal, payable within ten (10) days from finality of this decision.
SO ORDERED.
RENATO C. CORONA Associate Justice
WE CONCUR:
REYNATO S. PUNO Associate Justice Chairperson
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
ADOLFO S. AZCUNA
Asscociate Justice
CANCIO C. GARCIA Associate Justice
A T T E S T A T I O N
I attest 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 Courts Division.
REYNATO S. PUNO Associate Justice Chairperson, Second Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, 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 Courts Division.
ARTEMIO V. PANGANIBAN Chief Justice

FIRST DIVISION


SULO SA NAYON, INC. and/or
PHILIPPINE VILLAGE HOTEL, INC. and JOSE MARCEL E.
PANLILIO,
Petitioners,



- versus -



NAYONG PILIPINO FOUNDATION,
Respondent.
G.R. No. 170923

Present:
PUNO, C.J., Chairperson,
CARPIO,
CORONA,
AZCUNA, and
LEONARDO-DE CASTRO, JJ.

Promulgated:
January 20, 2009

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

D E C I S I O N
PUNO, C.J .:
On appeal are the Court of Appeals (CAs) October 4, 2005 Decision[1] in CA-G.R. SP No. 74631 and
December 22, 2005 Resolution,[2] reversing the November 29, 2002 Decision[3] of the Regional Trial Court (RTC)
of Pasay City in Civil Case No. 02-0133. The RTC modified the Decision[4] of the Metropolitan Trial Court
(MeTC) of Pasay City which ruled against petitioners and ordered them to vacate the premises and pay their
arrears. The RTC declared petitioners as builders in good faith and upheld their right to indemnity.
The facts are as follows:
Respondent Nayong Pilipino Foundation, a government-owned and controlled corporation, is the owner
of a parcel of land in Pasay City, known as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc.
(PVHI), formerly called Sulo sa Nayon, Inc., is a domestic corporation duly organized and existing under Philippine
laws. Petitioner Jose Marcel E. Panlilio is its Senior Executive Vice President.
On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of 36,289
square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of a hotel building, to be known
as the Philippine Village Hotel. The lease was for an initial period of 21 years, or until May 1996. It is renewable
for a period of 25 years under the same terms and conditions upon due notice in writing to respondent of the
intention to renew at least 6 months before its expiration. Thus, on March 7, 1995, petitioners sent respondent a
letter notifying the latter of their intention to renew the contract for another 25 years. On July 4, 1995, the parties
executed a Voluntary Addendum to the Lease Agreement. The addendum was signed by petitioner Jose Marcel E.
Panlilio in his official capacity as Senior Executive Vice President of the PVHI and by Chairman Alberto A. Lim of
the Nayong Pilipino Foundation. They agreed to the renewal of the contract for another 25 years, or until
2021. Under the new agreement, petitioner PVHI was bound to pay the monthly rental on a per square meter basis
at the rate of P20.00 per square meter, which shall be subject to an increase of 20% at the end of every 3-year
period. At the time of the renewal of the lease contract, the monthly rental amounted to P725,780.00.
Beginning January 2001, petitioners defaulted in the payment of their monthly rental. Respondent
repeatedly demanded petitioners to pay the arrears and vacate the premises. The last demand letter was sent on
March 26, 2001.
On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC of Pasay
City. The complaint was docketed as Civil Case No. 708-01. Respondent computed the arrears of petitioners in the
amount of twenty-six million one hundred eighty-three thousand two hundred twenty-five pesos and fourteen
centavos (P26,183,225.14), as of July 31, 2001.
On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled, thus:
. . . . The court is convinced by the evidence that indeed, defendants defaulted in
the payment of their rentals. It is basic that the lessee is obliged to pay the price of the lease
according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to
pay the stipulated rentals, the lessor may eject (sic) and treat the lease as rescinded and sue
to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of
rentals, the lessor may rescind the lease, recover the back rentals and recover possession of
the leased premises. . .
x x x
. . . . Improvements made by a lessee such as the defendants herein on leased
premises are not valid reasons for their retention thereof. The Supreme Court has occasion
to address a similar issue in which it ruled that: The fact that petitioners allegedly made
repairs on the premises in question is not a reason for them to retain the possession of the
premises. There is no provision of law which grants the lessee a right of retention over the
leased premises on that ground. Article 448 of the Civil Code, in relation to Article 546,
which provides for full reimbursement of useful improvements and retention of the premises
until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds
on a land in the belief that he is the owner thereof. This right of retention does not apply to
a mere lessee, like the petitioners, otherwise, it would always be in his power to improve
his landlord out of the latters property (Jose L. Chua and Co Sio Eng vs. Court of Appeals
and Ramon Ibarra, G.R. No. 109840, January 21, 1999).
Although the Contract of Lease stipulates that the building and all the
improvements in the leased premises belong to the defendants herein, such will not defeat
the right of the plaintiff to its property as the defendants failed to pay their rentals in
violation of the terms of the contract. At most, defendants can only invoke [their] right
under Article 1678 of the New Civil Code which grants them the right to be reimbursed one-
half of the value of the building upon the termination of the lease, or, in the alternative, to
remove the improvements if the lessor refuses to make reimbursement.

The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
Nayong Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and
all persons claiming rights under it, ordering the latter to:
1. VACATE the sujet premises an surrener possession thereof to
plaintiff;
2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX
MILLION ONE HUNDRED EIGHTY THREE THOUSAND TWO
HUNDRED TWENTY FIVE PESOS AND
(P) inurre as of July ;
3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE
THOUSAND SEVEN HUNDRED EIGHTY PESOS (P)
per month starting from August an every month thereafter y
way of reasonale ompensation for the use an oupation of the
premises;
4. PAY plaintiff the sum of FIFTY THOUSAND PESOS
(P) y way of attorneys fees[; an
5. PAY the osts of suit
The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for
lack of cause of action. The sai efenants counterclaim however is likewise dismissed as
the complaint does not appear to be frivolous or maliciously instituted.
SO ORDERED.[5]
Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that:
. . . it is clear and undisputed that appellants-lessees were expressly required to
construct a first-class hotel with complete facilities. The appellants were also unequivocally
declared in the Lease Agreement as the owner of the improvements so constructed. They
were even explicitly allowed to use the improvements and building as security or collateral
on loans and credit accommodations that the Lessee may secure for the purpose of financing
the onstrution of the uiling an other improvements (Setion ; pars A to B Lease
Agreement). Moreover, a time frame was setforth (sic) with respect to the duration of the
lease initially for 21 years and renewable for another 25 years in order to enable the
appellants-lessees to recoup their huge money investments relative to the construction and
maintenance of the improvements.
x x x
Considering therefore, the elements of permanency of the construction and
substantial value of the improvements as well as the undispute[d] ownership over the land
improvements, these, immensely engender the application of Art. 448 of the Civil
Code. The only remaining and most crucial issue to be resolved is whether or not the
appellants as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of
the Civil Code may apply with respect to their rights over improvements.
x x x
. . . it is undeniable that the improvement of the hotel building of appellants (sic)
PVHI was constructed with the written consent and knowledge of appellee. In fact, it was
precisely the primary purpose for which they entered into an agreement. Thus, it could not
be denied that appellants were builders in good faith.
Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil
Code, plaintiff-appellee has the sole option or choice, either to appropriate the building,
upon payment of proper indemnity consonant to Art. 546 or compel the appellants to
purchase the land whereon the building was erected. Until such time that plaintiff-appellee
has elected an option or choice, it has no right of removal or demolition against appellants
unless after having selected a compulsory sale, appellants fail to pay for the land (Ignacio vs.
Hilario; 76 Phil. 605). This, however, is without prejudice from the parties agreeing to
adjust their rights in some other way as they may mutually deem fit and proper.
The dispositive portion of the decision of the RTC reads as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered
modifying the decision of [the] MTC, Branch 45 of Pasay City rendered on February 26,
2002 as follows:
1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt
of a copy of this decision a written manifestation of the option or choice it
selected, i.e., to appropriate the improvements upon payment of proper
indemnity or compulsory sale of the land whereon the hotel building of
PVHI and related improvements or facilities were erete;
2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in
the furtherance or exercise of its rights and demolition against appellants
unless and after having selected the option of compulsory sale and
appellants faile to pay [an purhase the lan within a reasonale time
or at suh time as this ourt will iret;
3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in
rent incurred as of July 31, 2001 in the amount of P26,183,225.14;
4. Orering efenants-appellants to pay to plaintiff-appellee the unpai
monthly rentals for the use an oupation of the premises pening this
appeal from July to Novemer only at P per month;
5. The fourth and fifth iretives in the ispositive portion of the trial ourts
eision inluing that the last paragraph thereof JME Panlilios
omplaint is herey affirme;
6. The parties are directed to adjust their respective rights in the interest of
justice as they may eem fit an proper if neessary
SO ORDERED.[6]
Respondent appealed to the CA which held that the RTC erroneously applied the rules on accession, as
found in Articles 448 and 546 of the Civil Code when it held that petitioners were builders in good faith and, thus,
have the right to indemnity. The CA held:
By and large, respondents are admittedly mere lessees of the subject premises
and as such, cannot validly claim that they are builders in good faith in order to solicit the
application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring
error on the part of the RTC to apply the aforesaid legal provisions on the supposition that
the improvements, which are of substantial value, had been introduced on the leased
premises with the permission of the petitioner. To grant the respondents the right of
retention and reimbursement as builders in good faith merely because of the valuable and
substantial improvements that they introduced to the leased premises plainly contravenes the
law and settled jurisprudential doctrines and would, as stated, allow the lessee to easily
improve the lessor out of its property
. . . . Introduction of valuable improvements on the leased premises does not
strip the petitioner of its right to avail of recourses under the law and the lease contract itself
in case of breach thereof. Neither does it deprive the petitioner of its right under Article
1678 to exercise its option to acquire the improvements or to let the respondents remove the
same.
Petitioners Motion for Reonsieration was enie
Hence, this appeal.[7]
Petitioners assign the following errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT HOLDING THAT PETITIONERS WERE BUILDERS IN
GOOD FAITH OVER THE SUBSTANTIAL AND VALUABLE IMPROVEMENTS
WHICH THEY HAD INTRODUCED ON THE SUBJECT PROPERTY, THUS
COMPELLING THE APPLICATION OF ARTICLE 448 OF THE CIVIL CODE IN
RELATION TO ARTICLE 546 OF THE SAME CODE, INSTEAD OF ARTICLE 1678 OF
THE CIVIL CODE.
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS
REVERSIBLE ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE
CONTRACT GOVERNS THE RELATIONSHIP OF THE PARTIES AND
CONSEQUENTLY THE PARTIES MAY BE CONSIDERED TO HAVE IMPLIEDLY
WAIVED THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE TO THE
INSTANT CASE.
III
ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT
BUILDERS IN GOOD FAITH, THE HONORABLE COURT OF APPEALS
COMMITTED A GRAVE REVERSIBLE ERROR WHEN IT OVERLOOKED THE FACT
THAT RESPONDENT ALSO ACTED IN BAD FAITH WHEN IT DID NOT HONOR
AND INSTEAD BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES,
THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.
IV
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL
CODE INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO
ARTICLE 546 OF THE SAME CODE WOULD NOT ONLY WREAK HAVOC AND
CAUSE SUBSTANTIAL INJURY TO THE RIGHTS AND INTERESTS OF
PETITIONER PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT NAYONG
PILIPINO FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER ONLY
SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO WOULD
CONSTITUTE UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT
EXPENSE AND GRAVE PREJUDICE OF PETITIONERS.
V
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR IN NOT HOLDING THAT THE COURTS A QUO DID NOT
ACQUIRE JURISDICTION OVER THE UNLAWFUL DETAINER CASE FOR NON-
COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE
OF A NOTICE TO VACATE UPON PETITIONERS.[8]
First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire jurisdiction to
hear and decide the ejectment case because they never received any demand from respondent to pay rentals and
vacate the premises, since such demand is a jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and
CA. Contrary to the claim of petitioners, documentary evidence proved that a demand letter dated March 26, 2001
was sent y responent through registere mail to petitioners requesting them to pay the rental arrears or else it
will be constrained to file the appropriate legal ation an possess the lease premises
Further petitioners argument that the eman letter is inaequate eause it ontaine no eman to
vacate the leased premises does not persuade. We have ruled that:
The wor vaate is not a talismanic word that must be employed in all
notices. The alternatives in this case are clear cut. The tenants must pay rentals which are
fixed and which became payable in the past, failing which they must move out. There can
be no other interpretation of the notice given to them. Hence, when the petitioners
demanded that either he pays P18,000 in five days or a case of ejectment would be filed
against him, he was placed on notice to move out if he does not pay. There was, in effect, a
notice or demand to vacate.[9]

In the case at bar, the language of the demand letter is plain and simple: respondent demanded payment
of the rental arrears amounting to P26,183,225.14 within ten days from receipt by petitioners, or respondent will be
constrained to file an appropriate legal action against petitioners to recover the said amount. The demand letter
further state that responent will possess the lease premises in ase of petitioners failure to pay the rental arrears
within ten days. Thus, it is clear that the demand letter is intended as a notice to petitioners to pay the rental arrears,
and a notice to vacate the premises in case of failure of petitioners to perform their obligation to pay.
Second, we resolve the main issue of whether the rules on accession, as found in Articles 448 and 546 of
the Civil Code, apply to the instant case.
Article 448 and Article 546 provide:
Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige
the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof.
Art. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession having the option
of refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.
We uphold the ruling of the CA.
The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply only to a case where
one builds, plants, or sows on land in which he believes himself to have a claim of title,[10]
and not to lands where the only interest of the builder, planter or sower is that of a holder,
such as a tenant.[11]
In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they
recognize that the respondent is the owner of the land. What petitioners insist is that because of the improvements,
which are of substantial value, that they have introduced on the leased premises with the permission of respondent,
they should be considered builders in good faith who have the right to retain possession of the property until
reimbursement by respondent.
We affirm the ruling of the CA that introduction of valuable improvements on the leased premises does
not give the petitioners the right of retention and reimbursement which rightfully belongs to a builder in good
faith. Otherwise suh a situation woul allow the lessee to easily improve the lessor out of its property We
reiterate the doctrine that a lessee is neither a builder in good faith nor in bad faith[12] that would call for the
application of Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code,
which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or substance of
the property leased, the lessor upon the termination of the lease shall pay the lessee one-half
of the value of the improvements at that time. Should the lessor refuse to reimburse said
amount, the lessee may remove the improvements, even though the principal thing may
suffer damage thereby. He shall not, however, cause any more impairment upon the property
leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is caused to
the principal thing, and the lessor does not choose to retain them by paying their value at the
time the lease is extinguished.

Under Article 1678, the lessor has the option of paying one-half of the value of the improvements which the lessee
made in good faith, which are suitable for the use for which the lease is intended, and which have not altered the
form and substance of the land. On the other hand, the lessee may remove the improvements should the lessor
refuse to reimburse.
Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as it would
amount to giving away the hotel and its other structures at virtually bargain prices. They allege that the value of the
hotel and its appurtenant facilities amounts to more than two billion pesos, while the monetary claim of respondent
against them only amounts to a little more than twenty six-million pesos. Thus, they contend that it is the lease
contract that governs the relationship of the parties, and consequently, the parties may be considered to have
impliedly waived the application of Article 1678.
We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are deemed
incorporated in each and every contract. Existing laws always form part of any contract. Further, the lease contract
in the case at bar shows no special kind of agreement between the parties as to how to proceed in cases of default
or breach of the contract. Petitioners maintain that the lease contract contains a default provision which does not
give respondent the right to appropriate the improvements nor evict petitioners in cases of cancellation or
termination of the contract due to default or breach of its terms. They cite paragraph 10 of the lease contract, which
provides that:
10. DEFAULT. - . . . Default shall automatically take place upon the failure of
the LESSEE to pay or perform its obligation during the time fixed herein for such
obligations without necessity of demand, or, if no time is fixed, after 90 days from the
receipt of notice or demand from the LESSOR. . .
In case of cancellation or termination of this contract due to the default or breach
of its terms the LESSEE will pay all reasonale attorneys fees osts an expenses of
litigation that may be incurred by the LESSOR in enforcing its rights under this contract or
any of its provisions, as well as all unpaid rents, fees, charges, taxes, assessment and others
which the LESSOR may be entitled to.
Petitioners assert that respondent committed a breach of the lease contract when it filed the ejectment
suit against them. However, we find nothing in the above quoted provision that prohibits respondent to proceed the
way it did in enforcing its rights as lessor. It can rightfully file for ejectment to evict petitioners, as it did before the
court a quo.
IN VIEW WHEREOF petitioners appeal is DENIED. The October 4, 2005 Decision of the Court of
Appeals in CA-G.R. SP No. 74631 and its December 22, 2005 Resolution are AFFIRMED. Costs against
petitioners.
SO ORDERED.

G.R. No. 169129 March 28, 2007
SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS.VICTORINO F. SANTOS, &
LAGRIMAS SANTOS, ERNESTO F. SANTOS, and TADEO F. SANTOS, Petitioners, vs. SPS. JOSE
LUMBAO and PROSERFINA LUMBAO, Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil
Procedure seeking to annul and set aside the Decision
1
and Resolution
2
of the Court of Appeals in CA-
G.R. CV No. 60450 entitled, Spouses Jose Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos
and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo
F. Santos, dated 8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein
respondents Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and ordered herein
petitioners Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F.
Santos, Ernesto F. Santos and Tadeo F. Santos to reconvey to respondents Spouses Lumbao the subject
property and to pay the latter attorneys fees and litigation expenses, thus, reversing the Decision
3
of the
Regional Trial Court (RTC) of Pasig City, dated 17 June 1998 which dismissed the Complaint for
Reconveyance with Damages filed by respondents Spouses Lumbao for lack of merit.
Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the legitimate and
surviving heirs of the late Rita Catoc Santos (Rita), who died on 20 October 1985. The other petitioners
Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita.
Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged owners of the 107-
square meter lot (subject property), which they purportedly bought from Rita during her lifetime.
The facts of the present case are as follows:
On two separate occasions during her lifetime, Rita sold to respondents Spouses Lumbao the subject
property which is a part of her share in the estate of her deceased mother, Maria Catoc (Maria), who died
intestate on 19 September 1978. On the first occasion, Rita sold 100 square meters of her inchoate share
in her mothers estate through a document denominated as "Bilihan ng Lupa," dated 17 August 1979.
4

Respondents Spouses Lumbao claimed the execution of the aforesaid document was witnessed by
petitioners Virgilio and Tadeo, as shown by their signatures affixed therein. On the second occasion, an
additional seven square meters was added to the land as evidenced by a document also denominated as
"Bilihan ng Lupa," dated 9 January 1981.
5

After acquiring the subject property, respondents Spouses Lumbao took actual possession thereof and
erected thereon a house which they have been occupying as exclusive owners up to the present. As the
exclusive owners of the subject property, respondents Spouses Lumbao made several verbal demands
upon Rita, during her lifetime, and thereafter upon herein petitioners, for them to execute the necessary
documents to effect the issuance of a separate title in favor of respondents Spouses Lumbao insofar as
the subject property is concerned. Respondents Spouses Lumbao alleged that prior to her death, Rita
informed respondent Proserfina Lumbao she could not deliver the title to the subject property because the
entire property inherited by her and her co-heirs from Maria had not yet been partitioned.
On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in conspiracy with
one another, executed a Deed of Extrajudicial Settlement,
6
adjudicating and partitioning among
themselves and the other heirs, the estate left by Maria, which included the subject property already sold
to respondents Spouses Lumbao and now covered by TCT No. 81729
7
of the Registry of Deeds of Pasig
City.
On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal demand letter
8
to
petitioners but despite receipt of such demand letter, petitioners still failed and refused to reconvey the
subject property to the respondents Spouses Lumbao. Consequently, the latter filed a Complaint for
Reconveyance with Damages
9
before the RTC of Pasig City.
Petitioners filed their Answer denying the allegations that the subject property had been sold to the
respondents Spouses Lumbao. They likewise denied that the Deed of Extrajudicial Settlement had been
fraudulently executed because the same was duly published as required by law. On the contrary, they
prayed for the dismissal of the Complaint for lack of cause of action because respondents Spouses
Lumbao failed to comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991, which repealed Presidential Decree No. 1508
10

requiring first resort to barangay conciliation.
Respondents Spouses Lumbao, with leave of court, amended their Complaint because they discovered
that on 16 February 1990, without their knowledge, petitioners executed a Deed of Real Estate Mortgage
in favor of Julieta S. Esplana for the sum of P30,000.00. The said Deed of Real Estate Mortgage was
annotated at the back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the
petitioners that they failed to comply with the mandate of the Revised Katarungang Pambarangay Law,
respondents Spouses Lumbao said that the Complaint was filed directly in court in order that prescription
or the Statute of Limitations may not set in.
During the trial, respondents Spouses Lumbao presented Proserfina Lumbao and Carolina Morales as
their witnesses, while the petitioners presented only the testimony of petitioner Virgilio.
The trial court rendered a Decision on 17 June 1998, the dispositive portion of which reads as follows:
Premises considered, the instant complaint is hereby denied for lack of merit.
Considering that [petitioners] have incurred expenses in order to protect their interest, [respondents
spouses Lumbao] are hereby directed to pay [petitioners], to wit: 1) the amount of P30,000.00 as
attorneys fees and litigation expenses, and 2) costs of the suit.
11

Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June 2005, the
appellate court rendered a Decision, thus:
WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision
dated June 17, 1998 of the Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is
hereby REVERSED and SET ASIDE. A new judgment is hereby entered ordering [petitioners] to
reconvey 107 square meters of the subject [property] covered by TCT No. PT-81729 of the Registry of
Deeds of Pasig City, Metro Manila, and to pay to [respondents spouses Lumbao] the sum of P30,000.00
for attorneys fees and litigation expenses.
No pronouncement as to costs.
12

Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid Decision but it was denied in
the Resolution of the appellate court dated 29 July 2005 for lack of merit.
Hence, this Petition.
The grounds relied upon by the petitioners are the following:
I. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN REVERSING THE DECISION
OF THE TRIAL COURT, THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS OF TWO
COURTS.
II. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN ORDERING THE
PETITIONERS TO RECONVEY THE SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES
LUMBAO] AND IN NOT RULING THAT THEY ARE GUILTY OF LACHES, HENCE THEY CANNOT
RECOVER THE LOT ALLEGEDLY SOLD TO THEM.
III. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING HEREIN
PETITIONER[S] TO BE IN GOOD FAITH IN EXECUTING THE "DEED OF EXTRAJUDICIAL
SETTLEMENT" DATED [2 MAY 1986].
IV. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT
PETITIONERS ARE NOT LEGALLY BOUND TO COMPLY WITH THE SUPPOSED BILIHAN NG LUPA
DATED [17 AUGUST 1979] AND [9 JANUARY 1981] THAT WERE SUPPOSEDLY EXECUTED BY THE
LATE RITA CATOC.
V. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT
RESPONDENTS [SPOUSES LUMBAOS] ACTION FOR RECONVEYANCE WITH DAMAGES CANNOT
BE SUPPORTED WITH AN UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN NG LUPA
DATED [17 AUGUST 1979] AND [9 JANUARY 1981].
VI. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT
RESPONDENTS [SPOUSES LUMBAOS] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE (SIC)
FOR NON COMPLIANCE OF THE MANDATE OF [P.D. NO.] 1508, AS AMENDED BY Republic Act No.
7160.
VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT
RESPONDENTS [SPOUSES LUMBAO] SHOULD BE HELD LIABLE FOR PETITIONERS CLAIM FOR
DAMAGES AND ATTORNEY[]S FEES.
Petitioners ask this Court to scrutinize the evidence presented in this case, because they claim that the
factual findings of the trial court and the appellate court are conflicting. They allege that the findings of fact
by the trial court revealed that petitioners Virgilio and Tadeo did not witness the execution of the
documents known as "Bilihan ng Lupa"; hence, this finding runs counter to the conclusion made by the
appellate court. And even assuming that they were witnesses to the aforesaid documents, still,
respondents Spouses Lumbao were not entitled to the reconveyance of the subject property because
they were guilty of laches for their failure to assert their rights for an unreasonable length of time. Since
respondents Spouses Lumbao had slept on their rights for a period of more than 12 years reckoned from
the date of execution of the second "Bilihan ng Lupa," it would be unjust and unfair to the petitioners if the
respondents will be allowed to recover the subject property.
Petitioners allege they are in good faith in executing the Deed of Extrajudicial Settlement because even
respondents Spouses Lumbaos witness, Carolina Morales, testified that neither petitioner Virgilio nor
petitioner Tadeo was present during the execution of the "Bilihan ng Lupa," dated 17 August 1979 and 9
January 1981. Petitioners affirm that the Deed of Extrajudicial Settlement was published in a newspaper
of general circulation to give notice to all creditors of the estate subject of partition to contest the same
within the period prescribed by law. Since no claimant appeared to interpose a claim within the period
allowed by law, a title to the subject property was then issued in favor of the petitioners; hence, they are
considered as holders in good faith and therefore cannot be barred from entering into any subsequent
transactions involving the subject property.
Petitioners also contend that they are not bound by the documents denominated as "Bilihan ng Lupa"
because the same were null and void for the following reasons: 1) for being falsified documents because
one of those documents made it appear that petitioners Virgilio and Tadeo were witnesses to its
execution and that they appeared personally before the notary public, when in truth and in fact they did
not; 2) the identities of the properties in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981
in relation to the subject property in litigation were not established by the evidence presented by the
respondents Spouses Lumbao; 3) the right of the respondents Spouses Lumbao to lay their claim over
the subject property had already been barred through estoppel by laches; and 4) the respondents
Spouses Lumbaos claim over the subject property had already prescribed.
Finally, petitioners claim that the Complaint for Reconveyance with Damages filed by respondents
Spouses Lumbao was dismissible because they failed to comply with the mandate of Presidential Decree
No. 1508, as amended by Republic Act No. 7160, particularly Section 412 of Republic Act No. 7160.
Given the foregoing, the issues presented by the petitioners may be restated as follows:
I. Whether or not the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao
is dismissible for their failure to comply with the mandate of the Revised Katarungang Pambarangay Law
under R.A. No. 7160.
II. Whether or not the documents known as "Bilihan ng Lupa" are valid and enforceable, thus, they can be
the bases of the respondents spouses Lumbaos action for reconveyance with damages.
III. Whether or not herein petitioners are legally bound to comply with the "Bilihan ng Lupa" dated 17
August 1979 and 9 January 1981 and consequently, reconvey the subject property to herein respondents
spouses Lumbao.
It is well-settled that in the exercise of the Supreme Courts power of review, the court is not a trier of facts
and does not normally undertake the re-examination of the evidence presented by the contending parties
during the trial of the case considering that the findings of fact of the Court of Appeals are conclusive and
binding on the Court.
13
But, the rule is not without exceptions. There are several recognized exceptions
14

in which factual issues may be resolved by this Court. One of these exceptions is when the findings of the
appellate court are contrary to those of the trial court. This exception is present in the case at bar.
Going to the first issue presented in this case, it is the argument of the petitioners that the Complaint for
Reconveyance with Damages filed by respondents Spouses Lumbao should be dismissed for failure to
comply with the barangay conciliation proceedings as mandated by the Revised Katarungang
Pambarangay Law under Republic Act No. 7160. This argument cannot be sustained.
Section 408 of the aforesaid law and Administrative Circular No. 14-93
15
provide that all disputes between
parties actually residing in the same city or municipality are subject to barangay conciliation. A prior
recourse thereto is a pre-condition before filing a complaint in court or any government offices. Non-
compliance with the said condition precedent could affect the sufficiency of the plaintiffs cause of action
and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity; but
the same would not prevent a court of competent jurisdiction from exercising its power of adjudication
over the case before it, where the defendants failed to object to such exercise of jurisdiction.
16

While it is true that the present case should first be referred to the Barangay Lupon for conciliation
because the parties involved herein actually reside in the same city (Pasig City) and the dispute between
them involves a real property, hence, the said dispute should have been brought in the city in which the
real property, subject matter of the controversy, is located, which happens to be the same city where the
contending parties reside. In the event that respondents Spouses Lumbao failed to comply with the said
condition precedent, their Complaint for Reconveyance with Damages can be dismissed. In this case,
however, respondents Spouses Lumbaos non-compliance with the aforesaid condition precedent cannot
be considered fatal. Although petitioners alleged in their answer that the Complaint for Reconveyance
with Damages filed by respondents spouses Lumbao should be dismissed for their failure to comply with
the condition precedent, which in effect, made the complaint prematurely instituted and the trial court
acquired no jurisdiction to hear the case, yet, they did not file a Motion to Dismiss the said complaint.
Emphasis must be given to the fact that the petitioners could have prevented the trial court from
exercising jurisdiction over the case had they filed a Motion to Dismiss. However, instead of doing so,
they invoked the very same jurisdiction by filing an answer seeking an affirmative relief from it. Worse,
petitioners actively participated in the trial of the case by presenting their own witness and by cross-
examining the witnesses presented by the respondents Spouses Lumbao. It is elementary that the active
participation of a party in a case pending against him before a court is tantamount to recognition of that
courts jurisdiction and a willingness to abide by the resolution of the case which will bar said party from
later on impugning the courts jurisdiction.
17
It is also well-settled that the non-referral of a case for
barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be
deemed waived if not raised seasonably in a motion to dismiss.
18
Hence, herein petitioners can no longer
raise the defense of non-compliance with the barangay conciliation proceedings to seek the dismissal of
the complaint filed by the respondents Spouses Lumbao, because they already waived the said defense
when they failed to file a Motion to Dismiss.
As regards the second issue, petitioners maintain that the "Bilihan ng Lupa," dated 17 August 1979 and 9
January 1981 are null and void for being falsified documents as it is made to appear that petitioners
Virgilio and Tadeo were present in the execution of the said documents and that the identities of the
properties in those documents in relation to the subject property has not been established by the
evidence of the respondents Spouses Lumbao. Petitioners also claim that the enforceability of those
documents is barred by prescription of action and laches.
It is the petitioners incessant barking that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9
January 1981 were falsified because it was made to appear that petitioners Virgilio and Tadeo were
present in the executions thereof, and their allegation that even respondents Spouses Lumbaos witness
Carolina Morales proved that said petitioners were not present during the execution of the
aforementioned documents. This is specious.
Upon examination of the aforesaid documents, this Court finds that in the "Bilihan ng Lupa," dated 17
August 1979, the signatures of petitioners Virgilio and Tadeo appeared thereon. Moreover, in petitioners
Answer and Amended Answer to the Complaint for Reconveyance with Damages, both petitioners Virgilio
and Tadeo made an admission that indeed they acted as witnesses in the execution of the "Bilihan ng
Lupa," dated 17 August 1979.
19
However, in order to avoid their obligations in the said "Bilihan ng Lupa,"
petitioner Virgilio, in his cross-examination, denied having knowledge of the sale transaction and claimed
that he could not remember the same as well as his appearance before the notary public due to the
length of time that had passed. Noticeably, petitioner Virgilio did not categorically deny having signed the
"Bilihan ng Lupa," dated 17 August 1979 and in support thereof, his testimony in the cross-examination
propounded by the counsel of the respondents Spouses Lumbao is quoted hereunder:
ATTY. CHIU:
Q. Now, you said, Mr. WitnessVirgilio Santos, that you dont know about this document which was
marked as Exhibit "A" for the [respondents spouses Lumbao]?
ATTY. BUGARING:
The question is misleading, your Honor. Counsel premised the question that he does not have any
knowledge but not that he does not know.
ATTY. CHIU:
Q. Being you are one of the witnesses of this document? [I]s it not?
WITNESS:
A. No, sir.
Q. I am showing to you this document, there is a signature at the left hand margin of this document
Virgilio Santos, will you please go over the same and tell the court whose signature is this?
A. I dont remember, sir, because of the length of time that had passed.
Q. But that is your signature?
A. I dont have eyeglasses My signature is different.
Q. You never appeared before this notary public Apolinario Mangahas?
A. I dont remember.
20

As a general rule, facts alleged in a partys pleading are deemed admissions of that party and are binding
upon him, 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.
21
And in spite of the presence of judicial admissions
in a partys pleading, the trial court is still given leeway to consider other evidence presented.
22
However,
in the case at bar, as the Court of Appeals mentioned in its Decision, "[herein petitioners] had not
adduced any other evidence to override the admission made in their [A]nswer that [petitioners Virgilio and
Tadeo] actually signed the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled as to
the purpose of the document, x x x."
23
Virgilios answers were unsure and quibbled. Hence, the general
rule that the admissions made by a party in a pleading are binding and conclusive upon him applies in this
case.
On the testimony of respondents Spouses Lumbaos witness Carolina Morales, this Court adopts the
findings made by the appellate court. Thus -
[T]he trial court gave singular focus on her reply to a question during cross-examination if the [petitioners
Virgilio and Tadeo] were not with her and the vendor [Rita] during the transaction. It must be pointed out
that earlier in the direct examination of said witness, she confirmed that [respondents spouses Lumbao]
actually bought the lot from [Rita] ("nagkabilihan"). Said witness positively identified and confirmed the
two (2) documents evidencing the sale in favor of [respondents spouse Lumbao]. Thus, her subsequent
statement that the [petitioners Virgilio and Tadeo] were not with them during the transaction does not
automatically imply that [petitioners Virgilio and Tadeo] did not at any time sign as witnesses as to the
deed of sale attesting to their mothers voluntary act of selling a portion of her share in her deceased
mothers property. The rule is that testimony of a witness must be considered and calibrated in its entirety
and not by truncated portions thereof or isolated passages therein.
24

Furthermore, both "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were duly
notarized before a notary public. It is well-settled that a document acknowledged before a notary public is
a public document
25
that enjoys the presumption of regularity. It is a prima facie evidence of the truth of
the facts stated therein and a conclusive presumption of its existence and due execution.
26
To overcome
this presumption, there must be presented evidence that is clear and convincing. Absent such evidence,
the presumption must be upheld.
27
In addition, one who denies the due execution of a deed where ones
signature appears has the burden of proving that contrary to the recital in the jurat, one never appeared
before the notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the present
case petitioners denials without clear and convincing evidence to support their claim of fraud and falsity
were not sufficient to overthrow the above-mentioned presumption; hence, the authenticity, due execution
and the truth of the facts stated in the aforesaid "Bilihan ng Lupa" are upheld.
The defense of petitioners that the identities of the properties described in the "Bilihan ng Lupa," dated 17
August 1979 and 9 January 1981 in relation to the subject property were not established by respondents
Spouses Lumbaos evidence is likewise not acceptable.
It is noteworthy that at the time of the execution of the documents denominated as "Bilihan ng Lupa," the
entire property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs and
so the description of the entire estate is the only description that can be placed in the "Bilihan ng Lupa,
dated 17 August 1979 and 9 January 1981" because the exact metes and bounds of the subject property
sold to respondents Spouses Lumbao could not be possibly determined at that time. Nevertheless, that
does not make the contract of sale between Rita and respondents Spouses Lumbao invalid because both
the law and jurisprudence have categorically held that even while an estate remains undivided, co-owners
have each full ownership of their respective aliquots or undivided shares and may therefore alienate,
assign or mortgage them.
28
The co-owner, however, has no right to sell or alienate a specific or
determinate part of the thing owned in common, because such right over the thing is represented by an
aliquot or ideal portion without any physical division. In any case, the mere fact that the deed purports to
transfer a concrete portion does not per se render the sale void. The sale is valid, but only with respect to
the aliquot share of the selling co-owner. Furthermore, the sale is subject to the results of the partition
upon the termination of the co-ownership.
29

In the case at bar, when the estate left by Maria had been partitioned on 2 May 1986 by virtue of a Deed
of Extrajudicial Settlement, the 107- square meter lot sold by the mother of the petitioners to respondents
Spouses Lumbao should be deducted from the total lot, inherited by them in representation of their
deceased mother, which in this case measures 467 square meters. The 107-square meter lot already
sold to respondents Spouses Lumbao can no longer be inherited by the petitioners because the same
was no longer part of their inheritance as it was already sold during the lifetime of their mother.
Likewise, the fact that the property mentioned in the two "Bilihan ng Lupa" documents was described as
"a portion of a parcel of land covered in Tax Declarations No. A-018-01674," while the subject matter of
the Deed of Extrajudicial Settlement was the property described in Transfer Certificate of Title (TCT) No.
3216 of the Registry of Deeds of the Province of Rizal in the name of Maria is of no moment because in
the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981, it is clear that there was only one
estate left by Maria upon her death. And this fact was not refuted by the petitioners. Besides, the property
described in Tax Declaration No. A-018-01674 and the property mentioned in TCT No. 3216 are both
located in Barrio Rosario, Municipality of Pasig, Province of Rizal, and almost have the same boundaries.
It is, thus, safe to state that the property mentioned in Tax Declaration No. A-018-01674 and in TCT No.
3216 are one and the same.
The defense of prescription of action and laches is likewise unjustifiable. In an action for reconveyance,
the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the
property or its title which has been wrongfully or erroneously registered in another persons name to its
rightful or legal owner, or to the one with a better right. It is, indeed, true that the right to seek
reconveyance of registered property is not absolute because it is subject to extinctive prescription.
However, when the plaintiff is in possession of the land to be reconveyed, prescription cannot set in. Such
an exception is based on the theory that registration proceedings could not be used as a shield for fraud
or for enriching a person at the expense of another.
30

In the case at bar, the right of the respondents Spouses Lumbao to seek reconveyance does not
prescribe because the latter have been and are still in actual possession and occupation as owners of the
property sought to be reconveyed, which fact has not been refuted nor denied by the petitioners.
Furthermore, respondents Spouses Lumbao cannot be held guilty of laches because from the very start
that they bought the 107-square meter lot from the mother of the petitioners, they have constantly asked
for the transfer of the certificate of title into their names but Rita, during her lifetime, and the petitioners,
after the death of Rita, failed to do so on the flimsy excuse that the lot had not been partitioned yet.
Inexplicably, after the partition of the entire estate of Maria, petitioners still included the 107-square meter
lot in their inheritance which they divided among themselves despite their knowledge of the contracts of
sale between their mother and the respondents Spouses Lumbao.
Under the above premises, this Court holds that the "Bilihan ng Lupa" documents dated 17 August 1979
and 9 January 1981 are valid and enforceable and can be made the basis of the respondents Spouses
Lumbaos action for reconveyance. The failure of respondents Spouses Lumbao to have the said
documents registered does not affect its validity and enforceability. It must be remembered that
registration is not a requirement for validity of the contract as between the parties, for the effect of
registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify
other persons not parties to a contract that a transaction involving the property had been entered into.
Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a
right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to
him.
31
Hence, the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981, being valid
and enforceable, herein petitioners are bound to comply with their provisions. In short, such documents
are absolutely valid between and among the parties thereto.
Finally, the general rule that heirs are bound by contracts entered into by their predecessors-in-interest
applies in the present case. Article 1311
32
of the NCC is the basis of this rule. It is clear from the said
provision that whatever rights and obligations the decedent have over the property were transmitted to the
heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the
extent of the value of the inheritance of the heirs.
33
Thus, the heirs cannot escape the legal consequence
of a transaction entered into by their predecessor-in-interest because they have inherited the property
subject to the liability affecting their common ancestor. Being heirs, there is privity of interest between
them and their deceased mother. They only succeed to what rights their mother had and what is valid and
binding against her is also valid and binding as against them. The death of a party does not excuse
nonperformance of a contract which involves a property right and the rights and obligations thereunder
pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the
death of the party when the other party has a property interest in the subject matter of the contract.
34

In the end, despite the death of the petitioners mother, they are still bound to comply with the provisions
of the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981. Consequently, they must reconvey
to herein respondents Spouses Lumbao the 107-square meter lot which they bought from Rita,
petitioners mother. And as correctly ruled by the appellate court, petitioners must pay respondents
Spouses Lumbao attorneys fees and litigation expenses for having been compelled to litigate and incur
expenses to protect their interest.
35
On this matter, we do not find reasons to reverse the said findings.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution
of the Court of Appeals dated 8 June 2005 and 29 July 2005, respectively, are hereby AFFIRMED. Herein
petitioners are ordered to reconvey to respondents Spouses Lumbao the subject property and to pay the
latter attorneys fees and litigation expenses. Costs against petitioners.
SO ORDERED.

WILFREDO T. VAGILIDAD G.R. No. 161136
and LOLITA A. VAGILIDAD,
Petitioners,
Present:

PUNO, J., Chairperson,
- versus - SANDOVAL -GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.

GABINO VAGILIDAD, JR. Promulgated:
and DOROTHY VAGILIDAD,
Respondents. November 16, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N


PUNO, J.:
This is a Petition for Review on Certiorari of the Decision[1] and Resolution[2] of the Court of Appeals in
CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, reversing and setting aside the
decision of the Regional Trial Court of Antique, Sixth Judicial Region, Branch II, in Civil Case No. 2825 dated
January 26, 1999.
The facts are stated in the assailed Decision[3] of the appellate court, viz.:
A parcel of land, Lot No. 1253, situated in Atabay, San Jose, Antique,
measuring 4,280 square meters, was owned by Zoilo [Labiao] (hereafter ZOILO) as per
Original Certificate of Title No. RO-2301 issued on March 3, 1931. Sometime in 1931,
ZOILO died. Subsequently, on May 12, 1986, Loreto Labiao (hereafter LORETO), son of
ZOILO, sold to Gabino Vagilidad Jr. (hereafter GABINO JR.) a portion of Lot No. 1253
(hereafter Lot 1253-B), measuring 1,604 square meters as evidenced by the Deed of
Absolute Sale executed by LORETO.

In view of the death of ZOILO, his children, LORETO, Efren Labiao (hereafter
EFREN) and Priscilla Espanueva (hereafter PRISCILLA) executed an Extrajudicial x x x
Settlement of Estate dated January 20, 1987, adjudicating the entire Lot No. 1253, covering
4,280 square meters, to LORETO. On January 29, 1987, Transfer Certificate of Title (TCT)
No. T-16693 was issued in favor of LORETO, EFREN and PRISCILLA, but on even date,
TCT No. T-16693 was cancelled and TCT No. T-16694, covering the said property, was
issued in the name of LORETO alone.

On July 31, 1987, GABINO JR., as petitioner, filed a Petition for the Surrender
of TCT No. T-16694, covering Lot No. 1253, with the Regional Trial Court of San Jose
City, Sixth Judicial Region, against LORETO, docketed as Cadastral Case No. 87-731-A.
The plaintiff alleged that, being the owner of x x x Lot No. 1253-B, under TCT No. T-
16694, by virtue of the sale that took place on May 12, 1986, he is entitled to ask for the
surrener of the owners copy of TCT No. T-16694 to the Register of Deeds of Antique in
order to effect the transfer of title to the name of the petitioner. However, as per motion of
both counsels[,] since the parties seemed to have already reached an amicable settlement
without the knowledge of their counsels, the trial court issued an Order dated March 21,
1994 sending the case to the archives.

On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he
bought from LORETO as per Tax Declaration No. 1038 where the property was specified as
Lot No. 1253-B. GABINO JR. thereafter sold the same lot to Wilfredo Vagilidad (hereafter
WILFREDO) as per Deed of Absolute Sale dated December 7, 1989. On even date, Deed of
Absolute Sale of a Portion of Land involving the opt-described property was also executed
by LORETO in favor of WILFREDO. The aforementioned deeds, which were both executed
on December 7, 1989 [and] notarized by Atty. Warloo Cardenal[,] [appear] to have been
given the same entry number in his notarial books as both contained the designation
Doument No Page No 9 Book No XI Series of 99[

Corollarily, on February 14, 1990, the sale of Lot No. 1253-B to WILFREDO
was registered with the Registry of Deeds of the Province of Antique under Entry No.
180425. Consequently, TCT No. T-18023, cancelling TCT No. 16694, was issued in favor
of WILFREDO pursuant to the Deed of Absolute Sale dated December 7, 1989.

On October 24, 1991, spouses WILFREDO and LOLITA obtained a loan from
the Philippine National Bank (PNB for brevity) in the amount of P150,000.00 and
mortgaged Lot No. 1253-B as collateral of the said loan and the transaction was inscribed at
the back of TCT No. 18023 as Entry No. 186876. Subsequently, the xxx real estate
mortgage was cancelled under Entry No. 191053 as per inscription dated November 17,
1992 in xxx TCT No. 18023.

Subsequently, WILFREDO obtained another loan from Development Bank of
the Philippines (DBP for brevity) in the amount of P200,000.00 and mortgaged Lot No.
1253-B as collateral of the xxx loan and the transaction was inscribed at the back of TCT
No. 18023 as Entry No. 196268. The said loan was paid and, consequently, the mortgage
was cancelled as Entry No. 202500.

On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter
DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document, Reconveyance
and Damages, with the Regional Trial Court of Antique, Sixth Judicial Region, Branch 11,
against spouses WILFREDO and Lolita Vagilidad (hereafter LOLITA), docketed as Civil
Case No. 2825. The plaintiffs claimed that they are the lawful owners of Lot No. 1253-B
which was sold to him by LORETO in 1986. They alleged that [GABINO JR.] is a nephew
of defendant WILFREDO. They likewise raised that when GABINO SR. died, defendant
WILFREDO requested GABINO JR. to transfer the ownership of Lot No. 1253-B in
efenant WILFREDOs name for loaning purposes with the agreement that the lan will e
returned when the plaintiffs need the same. They added that, pursuant to the mentioned
agreement, plaintiff GABINO JR., without the knowledge and consent of his spouse,
DOROTHY, executed the Deed of Sale dated December 7, 1989 in favor of defendant
WILFREDO receiving nothing as payment therefor. They pointed out that after defendant
WILFREDO was able to mortgage the property, plaintiffs demanded the return of the
property but the defendants refused to return the same. The plaintiffs claimed that the same
document is null and void for want of consideration and the same does not bind the non-
consenting spouse. They likewise prayed that the defendant be ordered to pay the plaintiffs
not less than P100,000.00 as actual and moral damages, P as attorneys fees and
P5,000.00 as litigation expenses.

For their part, the defendants, on January 15, 1996, filed their Answer, denying
the material allegations of the plaintiffs. Defendants claimed that they are the lawful owners
of Lot No. 1253-B. They alleged that LORETO, with conformity of his wife, sold to them
Lot No. 1253 on December 7, 1989 for P5,000.00 and the transaction was registered with
the Register of Deeds of the Province of Antique under Entry No. 180425. They added that,
subsequently, TCT No. T-18023, covering Lot No. 1253-B, was issued in favor of the
defendants. Hence, they claimed that the plaintiffs be directed to pay the defendants
P200,000.00 as moral damages, P50,000.00 as exemplary damages, P20,000.00 as
attorneys fees an P30,000.00 for litigation expenses.[4]

The trial court ruled in favor of petitioners WILFREDO and LOLITA and held that LORETO did not validly
convey Lot No. 1253-B to GABINO, JR. on May 12, 1986 since at that time, the heirs of ZOILO had not partitioned
Lot No. 1253.[5] It ruled that LORETO could only sell at that time his aliquot share in the inheritance. He could not
have sold a divided part thereof designated by metes and bounds. Thus, it held that LORETO remained the owner of
the subject lot when he sold it to WILFREDO on December 7, 1989. It further found that there was no proof that
WILFREDO knew of the sale that took place between LORETO and GABINO, JR. on May 12, 1986. The
dispositive portion of the decision states:
WHEREFORE, in view of the foregoing pronouncements and a preponderance of
evidence, judgment is hereby rendered:

1. FINDING the defendants WILFREDO VAGILIDAD and LOLITA
VAGILIDAD to have duly acquired ownership of Lot No. 1253-B containing an area of
1,604 square meters, more or less, situated in San Jose, Antique;

2. SUSTAINING the validity of Transfer Certificate of Title No. T-18023
covering the subject Lot No. 1253-B and issued in the name of the defendant WILFREDO
VAGILIDAD, married to the defendant LOLITA VAGILIDAD;

3. DISMISSING the complaint of the plaintiffs GABINO VAGILIDAD, JR.
and MA. DOROTHY VAGILIDAD, as well as the counterclaims of the defendants
WILFREDO VAGILIDAD and LOLITA VAGILIDAD and of the defendants LORETO
LABIAO and FRANCISCA LABIAO; and

4. PRONOUNCING no cost.[6]


GABINO, JR. and DOROTHY filed an appeal with the Court of Appeals. The appellate court reversed and set
aside the decision of the court a quo, viz.:
WHEREFORE, premises considered, the Decision dated January 26, 1999 of the
Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, in Civil Case No. 2825,
is hereby REVERSED and SET ASIDE and a new one is entered: (1) declaring the Deed of
Absolute Sale [of Portion of Land] dated December 7, 1989 executed by appellee LORETO
in favor of appellee WILFREDO null and void; (2) ordering the defendants-appellees
WILFREDO and LOLITA to reconvey Lot No. 1253-B to plaintiffs-appellants GABINO,
JR. and DOROTHY; and (3) ordering the defendants-appellees to pay the plaintiffs-
appellants P100,000.00 as moral damages, P as attorneys fees an P5,000.00 as
litigation expenses.[7]

The appellate court ruled that the sale made by LORETO in favor of GABINO, JR. on May 12, 1986 is
vali The rights of LORETO to suession are transmitte from the moment of ZOILOs eath in 9 Thus when
LORETO sold the 1,604-square meter portion of Lot No. 1253 to GABINO JR., he already had the right as co-
owner to his share to Lot No. 1253, even if at that time the property had not yet been partitioned. Consequently, the
sale made by LORETO in favor of WILFREDO on December 7, 1989 is void because LORETO and FRANCISCA
were no longer the owners of Lot No. 1253-B as of that time. The appellate court also held WILFREDO and
LOLITA liable for moral damages for falsifying the fictitious deeds of sale on December 7, 1989.

WILFREDO and LOLITA moved for reconsideration but the motion was denied in the questioned Resolution
dated November 13, 2003. Hence, this petition for review on certiorari raising the following errors:

I

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1349
AND ARTICLE 1460 OF THE NEW CIVIL CODE IN THE CASE AT BAR.

II

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE
PROVISION OF ARTICLE 1544 OF THE NEW CIVIL CODE AND THE DOCTRINE OF
DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION OF THE TORRENS
TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL.

III

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1391
OF THE NEW CIVIL CODE AND THE DOCTRINE THAT IN CASE OF FRAUD,
ACTION FOR RECONVEYANCE MUST BE BROUGHT WITHIN FOUR (4) YEARS
FROM THE DISCOVERY OF THE FRAUD.
IV

THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PRIVATE
RESPONDENT MORAL DAMAGES ATTORNEYS FEES AND LITIGATION
EXPENSES.[8]

We deny the petition.
I
First, petitioners contend that the Deed of Absolute Sale between LORETO and GABINO, JR. does not have
a determinate object. They anchor their claim on the following discrepancies: (1) the object of the Deed of Absolute
Sale between LORETO and GABINO, JR. is Lot No. 1253 with an area of 1,604 square meters; (2) the object of the
Deed of Absolute Sale of Portion of Land between LORETO and WILFREDO is a portion of Lot No. 1253, known
as Lot No. 1253-B, also with an area of 1,604 square meters;[9] (3) the Deed of Absolute Sale between LORETO
and GABINO, JR. shows that its object, Lot No. 1253, is not registered under the Land Registration Act nor under
the Spanish Mortgage Law; and (4) the property subject of this action, Lot No. 1253-B, was taken from Lot No.
1253 containing an area of 4,280 square meters previously registered in the name of ZOILO under Original
Certificate of Title (OCT) No. RO-2301.[10] With these discrepancies, petitioners contend that either the Deed of
Absolute Sale between LORETO and GABINO, JR. does not have a determinate object or that Lot No. 1253-B, the
subject parcel, is not the object thereof. Hence, absent a determinate object, the contract is void. They rely on
Articles 1349 and 1460 of the Civil Code, viz.:
Art. 1349. The object of every contract must be determinate, as to its kind. The
fact that the quantity is not determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the need of a new contract
between the parties.


Art. 1460. A thing is determinate when it is particularly designated or physically
segregated from all others of the same class.

The requisite that a thing be determinate is satisfied if at the time the contract is
entered into, the thing is capable of being made determinate without the necessity of a new
or further agreement between the parties.


Petitioners err. The evidence on record shows that Lot No. 1253-B, the subject parcel, and the lot described as
Lot No. 1253 in the Deed of Absolute Sale of May 12, 1986 between LORETO and GABINO, JR., are the same. In
the Deed of Absolute Sale, Lot No. 1253 is described, viz.:

A parcel of land (Lot No. 1253 of the Cadastral Survey of San Jose), with the
improvements thereon. Bounded on the North [by] 1254 and 1255; on the South by road; on
the East by 1253 and road on the West by 1240-Angel Salazar; containing an area of 1,604
square meters more or less declared under Tax Declaration No. 4159.[11]

In the Deed of Absolute Sale of Portion of Land of December 7, 1989 between LORETO and WILFREDO,
the subject parcel is described, viz.:

A parcel of land (Lot No. 1253. Ap-06-00271) of the
Cadastral Survey of San Jose, LRC Cad. Rec. No. 936), situated at
Atabay, San Jose, Antique. Bounded on the N. and E. along lines 1-
2-3 by lot 1255; San Jose Cadastre; on the S. along line 3-4 by
Road; on the W. along line 4-5 by Lot 1240; San Jose Cadastre; and
on the N. along line 5-1 by Lot 1254, San Jose Cadastre containing
an area of [Four] Thousand Two Hundred Eighty (4,280) square
meters, more or less.

of which a portion of land subject of this sale is hereinbelow (sic) particularly
described as follows, to wit:

A portion of Lot No. 1253-B of the Cadastral Survey of San
Jose, situated at Atabay, San Jose, Antique. Bounded on the North
by Lot No. 1254; South by Road; West by Lot 1253-A; and on the
East by Lot No. 1253-C; containing an area of 1,604 square meters,
more or less.[12]


The esription of Lot No the ojet of the Dee of Asolute Sale as not registere uner At No
196[,] otherwise known as the Lan Registration At nor uner the Spanish Mortgage Law[13] is a stray
description of the subject parcel. It is uncorroborated by any evidence in the records. This description solely appears
on the Deed of Absolute Sale and the discrepancy was not explained by LORETO who signed the Deed of Absolute
Sale as vendor. LORETO does not, in fact, deny the existence of the Deed of Absolute Sale. He merely counters that
the Dee of Asolute Sale was purportely a mortgage However LORETOs laim that it was one of mortgage is
clearly negated by a Certification[14] issued by the Bureau of Internal Revenue dated May 12, 1986. It certified that
LORETO was not required to pay the capital gains tax on the transfer of Lot No. 1253 to GABINO, JR. because the
property was classified as an ordinary asset.

To be sure, petitioners could have easily shown that LORETO owned properties other than Lot No. 1253 to
bolster their claim that the object of the Deed of Absolute Sale was different from Lot No. 1253-B which is the
object described in the Deed of Absolute Sale of Portion of Land. They did not proffer any evidence.

The trial court itself comprehensively traced the origin of Lot No. 1253-B. It clearly demonstrated that the
subject parcel was originally part of the registered lot of ZOILO. It also showed how the subject parcel was
eventually bounded by Lot No. 1253-A on the West and by Lot No. 1253-C on the East, as the lot would be later
described in the Deed of Absolute Sale of Portion of Land.

The trial court found that ZOILO previously owned Lot No. 1253 under OCT No. RO-2301 issued on March
3, 1931. On November 14, 1986, Entry No. 167922 was inscribed in the certificate of title, per Order dated March
30, 1978 of Judge Noli Ma. Cortes of the then Court of First Instance of Antique, stating that it was a reconstituted
certificate of title.[15] Lot No. 1253 was subdivided by virtue of a subdivision plan dated June 19, 1987. On January
20, 1987, an Extrajudicial Settlement of Estate executed by LORETO, EFREN and PRISCILLA was entered as
Entry No. 170722. The OCT of ZOILO was cancelled by TCT No. T-16693 in the names of LORETO, EFREN and
PRISCILLA on January 29, 1987. TCT No. T-16693 was cancelled on the same day by TCT No. T-16694 in the
name of LORETO alone. The TCT was partially cancelled by the issuance of TCTs covering Lot Nos. 1253-A,
1253-C and 1253-D. The TCT of Lot No. 1253-B was issued in the name of WILFREDO married to LOLITA on
Feruary 99 WILFREDOs TCT No. T- appears to e a transfer from LORETOs TCT No T-
16694.

II
Next, petitioners contend that the appellate court should have upheld the title of WILFREDO under Article
1544 of the Civil Code and the doctrine of double sale where the buyer who is in possession of the Torrens Title
must prevail.[16] First petitioners title was issue pursuant to the purporte Dee of Asolute Sale of Portion of
Land dated December 7, 1989. Second, WILFREDO did not see any encumbrance at the back of the title of the
subject lot when he purchased it from LORETO on December 7, 1989. Thus, since he is not bound to go beyond the
certificate of title, he has acquired the subject property in due course and in good faith.

We disagree. Article 1544 of the Civil Code states, viz.:
Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession thereof in
good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring
it who in good faith recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.


Petitioners reliane on Artile is misplaced. While title to the property was issued in
WILFREDOs name on Feruary 99 the following irumstanes show that he registere the sujet parel
with evident bad faith.
First, the Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO and
WILFREDO is tainted with blatant irregularities. It is a fact that the Deed of Absolute Sale of Portion of Land and
the Deed of Absolute Sale between GABINO, JR. and WILFREDO are of even date. Both Deeds had the same
object Lot No. 1253-B. Both deeds were notarized by Atty. Warloo Cardenal and bear the same entry in his
notarial register: Document No. 236, Page No. 49, Book No. XI, Series of 1989.
Second, the testimony of a disinterested witness, Febe Mabuhay, established the irregularity. Mabuhay
used to work as secretary for Atty. Cardenal and co-signed as witness in both Deeds. She stated that Atty. Cardenal
instructed her to prepare the two documents in the last week of November 1989. She was present when GABINO,
JR. signed the Deed of Absolute Sale. She testified that after GABINO, JR. left, LORETO and his wife
FRANCISCA arrived and signed the Deed of Absolute Sale of Portion of Land.[17] The Decision of the court a quo
further states, viz.:
[Mabuhay testified that when she prepared the two documents, she] noticed the
similarity of Lot No. 1253 as technically described in both documents but she did not call
the attention of Atty. Warlo[o] Cardenal. [She likewise stated that Atty. Cardenal]
specifically instructed her to assign the same document number to the two documents
notarized on December 7, 1989.[18]

Third, the testimony of Atty. Ernesto Estoya, then Clerk of Court of the Regional Trial Court of Antique,
supports the claim that there was bad faith in the execution of the Deed of Absolute Sale of Portion of Land. Atty.
Estoya brought the notarial record of Atty. Cardenal for the year 1989 pursuant to a subpoena. He stated that he had
not rought oth Dees as require in the supoena eause Do No. 236; Page No. 49; Book No. XI; Series of
99 as entere in the notarial register of Atty Carenal oul not e foun in the files He further explaine that
the last document on page 48 of the notarial register of Atty. Cardenal is Document No. 235, while the first
document on page 49 is Document No. 239, leaving three unexplained gaps for document numbers 236, 237 and
238. Atty. Estoya stated that he was not the one who received the 1989 notarial register of Atty. Cardenal when the
latter surrendered it since he assumed office only in 1994.[19]

Fourth, we give credence to the testimony of GABINO, JR. that LORETO and WILFREDO had employed
the scheme to deprive him and his wife of their lawful title to the subject property. The facts speak for themselves.
WILFREDO knew that he could not use the Deed of Absolute Sale executed in his favor by GABINO, JR. because
the latter had no title to transfer. Without a title, WILFREDO could not use the subject property as collateral for a
bank loan. Hence, LORETO, who had refused to surrender the title to GABINO, JR. and in whose name the land
remained registered, had to execute the Deed of Absolute Sale of Portion of Land in favor of WILFREDO. Hence, it
was convenient for WILFREDO to deny the existence of the Deed of Absolute Sale of December 7, 1989 between
him and GABINO, JR. But the evidence on record shows that after he was able to register the subject property in his
name on February 15, 1990, WILFREDO used the title as collateral in the loans that he contracted with the
Philippine National Bank on October 24, 1991 and the Development Bank of the Philippines on December 1, 1993.
This supports the claim of GABINO, JR. that WILFREDO needed the lot for loaning purposes.

With these corroborating circumstances and the following irrefragable documents on record, the
evidence preponderates in favor of GABINO, JR. One, he acquired Lot No.1253-B from LORETO on May 12,
1986[20] by virtue of the Deed of Absolute Sale. Two, the Bureau of Internal Revenue issued a Certification, also
on May 12, 1986, for the exemption from the payment of capital gains tax when LORETO sold to him the subject
parcel. Three, GABINO, JR. paid the real estate tax on the subject parcel in 1987. Four, he filed a Petition for the
Surrener of LORETOs title on July 9 so he oul transfer the title of the property in his name

Petitioners likewise err in their argument that the contract of sale between LORETO and GABINO, JR. is
void on the ground that at the time of the sale on May 12, 1986, LORETO had a right to dispose only an aliquot part
of the yet undivided property of ZOILO. The subject parcel, being an inherited property, is subject to the rules of co-
ownership under the Civil Code.

Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing,
not materially or physically divided.[21] Before the partition of the property held in common, no individual or co-
owner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or
proportionate share in the entire property.[22]


LORETO sold the subject property to GABINO, JR. on May 12, 1986 as a co-owner. LORETO had a right,
even before the partition of the property on January 19, 1987,[23] to transfer in whole or in part his undivided
interest in the lot even without the consent of his co-heirs. This right is absolute in accordance with the well-settled
doctrine that a co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage
it, and substitute another person for its enjoyment.[24] Thus, what GABINO, JR. obtained by virtue of the sale on
May 12, 1986 were the same rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the
consideration given under their transaction.[25]

LORETO sold some 1,604 square meters of Lot No. 1253 to GABINO, JR. Consequently, when LORETO
purportedly sold to WILFREDO on December 7, 1989 the same portion of the lot, he was no longer the owner of
Lot No. 1253-B Base on the priniple that no one an give what he oes not have[26] LORETO could not have
validly sold to WILFREDO on December 7, 1989 what he no longer had. As correctly pointed out by the appellate
court, the sale made by LORETO in favor of WILFREDO is void as LORETO did not have the right to transfer the
ownership of the subject property at the time of sale.

III
Petitioners contend that since the subdivision plan of Lot No. 1253 was only approved on January 19, 1987,
the appellate court can not presume
that the aliquot part of LORETO was the parcel designated as Lot 1253-B.[27]
Petitioners err. The mere fact that LORETO sold a definite portion of the co-owned lot by metes and bounds
before partition does not, per se, render the sale a nullity. We held in Lopez v. Vda. De Cuaycong[28] that the fact
that an agreement purported to sell a concrete portion of a co-owned property does not render the sale void, for it is
well-established that the binding force of a contract must be recognized as far as it is legally possible to do so.[29]

In the case at bar, the contract of sale between LORETO and GABINO, JR. on May 12, 1986 could be legally
recognized. At the time of sale, LORETO had an aliquot share of one-third of the 4,280-square meter property or
some 1,426[30] square meters but sold some 1,604 square meters to GABINO, JR. We have ruled that if a co-owner
sells more than his aliquot share in the property, the sale will affect only his share but not those of the other co-
owners who did not consent to the sale.[31] Be that as it may, the co-heirs of LORETO waived all their rights and
interests over Lot No. 1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987.
They declared that they have previously received their respective shares from the other estate of their parents
ZOILO and PURIFICACION.[32] The rights of GABINO, JR. as owner over Lot No. 1253-B are thus preserved.
These rights were not effectively transferred by LORETO to WILFREDO in the Deed of Absolute Sale of Portion of
Land. Nor were these rights alienated from GABINO, JR. upon the issuance of the title to the subject property in the
name of WILFREDO. Registration of property is not a means of acquiring ownership.[33] Its alleged
incontrovertibility cannot be successfully invoked by WILFREDO because certificates of title cannot be used to
protect a usurper from the true owner or be used as a shield for the commission of fraud.[34]

IV
On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an action
for reconveyance based on fraud prescribes after the lapse of four years.[35] They cite Article 1391[36] of the Civil
Code and the case of Gerona v. De Guzman.[37]

We disagree. This Court explained in Salvatierra v. Court of Appeals,[38] viz.:
An action for reconveyance based on an implied or constructive trust must perforce
prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very
recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action
for reconveyance based on an implied or constructive trust prescribes in ten years from the
issuance of the Torrens title over the property. The only discordant note, it seems, is
Balbin v. Medalla, which states that the prescriptive period for a reconveyance action
is four years. However, this variance can be explained by the erroneous reliance on
Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948,
hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into
effect until August 30, 1950 xxx. It must be stressed, at this juncture, that Article 1144
and Article 1456 are new provisions. They have no counterparts in the old Civil Code
or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of
the four-year prescriptive period for an action for reconveyance of title of real
property acquired under false pretenses.[39]

[Thus,] under the present Civil Code, xxx just as an implied or constructive trust is
an offspring of xxx Art. 1456, xxx so is the corresponding obligation to reconvey the
property and the title thereto in favor of the true owner. In this context, and vis--vis
prescription, Article 1144 of the Civil Code is applicable[, viz.:]

Art. 1144. The following actions must be brought within ten years from the time
the right of action accrues:


1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment.[40] (emphases supplied)

Thus, in the case at bar, although the TCT of WILFREDO became indefeasible after the lapse of one
year from the date of registration, the attendance of fraud in its issuance created an implied trust in favor of
GABINO, JR. under Article 1456[41] of the Civil Code. Being an implied trust, the action for reconveyance of the
subject property therefore prescribes within a period of ten years from February 15, 1990. Thus, when respondents
filed the instant case with the court a quo on September 26, 1995, it was well within the prescriptive period.
V
On the issue of damages, petitioners contend that the grant is erroneous and the alleged connivance between
Atty. Cardenal and WILFREDO lacks basis.

We disagree. The evidence on record is clear that petitioners committed bad faith in the execution of the
purported Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO and WILFREDO.
As stated by the appellate court, viz.:
xxxx From the series of events, it can be reasonably inferred that appellees
WILFREDO, LORETO and Atty. Cardenal connived in attempting to deprive appellants of
Lot No. 1253-B hene the appellants entitlement to moral amages Further, it is a well-
settle rule that attorneys fees are allowe to e aware if the laimant is ompelle to
litigate with third persons or to incur expenses to protect his interest by reason of an
unjustified act or omission of the party for whom it is sought. xxxx To protect themselves,
the appellants engaged the services of counsel and incurred expenses in the course of
litigation Hene we eem it equitale to awar attorneys fees to the appellant xxx[42]
IN VIEW WHEREOF, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, are AFFIRMED in
toto. Costs against petitioners.

SO ORDERED.


REYNALDO BALOLOY and G.R. No. 157767
ADELINA BALOLOY-HIJE,
Petitioners,

Present:

PUNO, J., Chairman,
- versus - AUSTRIA-MARTINEZ,*
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

Promulgated:
ALFREDO HULAR,
Respondent. September 9, 2004
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


CALLEJO, SR., J .:


Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, as amended, of
the Decision[1] of the Court of Appeals in CA-G.R. CV No. 51081, which affirmed the Decision[2] of the Regional
Trial Court of Sorsogon, Branch 51, in Civil Case No. 93-5871.


The antecedents are as follows:


On May 11, 1993, respondent Alfredo Hular filed a complaint for quieting of title of real property with
damages against the children and heirs of Iluminado Baloloy, namely, Anacorita, Antonio, and petitioners Reynaldo
and Adelina, all surnamed Baloloy. The respondent alleged, inter alia, in his complaint that his father, Astrologo
Hular, was the owner of a parcel of residential land located in Sitio Page, Biriran, Juban, Sorsogon, with an area of
287 square meters, and that such lot was part of Lot No. 3347 of the Juban Cadastre. The respondent alleged that
Iluminao Baloloy the petitioners preeessor-in-interest, was able to secure a Free Patent over the property
through fraud on March 1, 1968, on the basis of which the Register of Deeds issued Original Certificate of Title
(OCT) No. P-16540 in his name. The respondent later discovered that in the cadastral survey of lands in Juban, the
property of his father, which actually consisted of 1,405 square meters was made to form part of Lot No. 3353, the
property of Iluminado Baloloy. According to the respondent, even if the residential land was made to form part of
Lot No. 3353 registered under the name of Iluminado Baloloy, he had acquired ownership of the property by
acquisitive prescription, as he and his predecessors had been in continuous, uninterrupted and open possession of the
property in the concept of owners for more than 60 years.

The respondent prayed for alternative reliefs that, after due hearing, judgment be rendered in his favor,
thus:

a) Declaring the plaintiff as the absolute owner of the land in question;

b) Ordering the defendants to perpetually refrain from disturbing plaintiff in his peaceful
possession in the land in question;

c) Ordering the defendants to remove their houses in the land in question, and to declare
OCT No. P-16540, and whatever paper, form, document or proceeding the defendants
may have, as null and void and without any effect whatsoever as far as the land in
question is concerned as they cast cloud upon the title of the plaintiff;

d) In the alternative, defendants be ordered to reconvey the title in favor of the plaintiff as
far as the land in question is concerned;

e) Ordering the defendants to jointly and severally pay the plaintiff the amount of
P50,000.00 as moral damages; P as attorneys fee plus P500.00 for every
appearance or hearing of his lawyer in court; P1,500.00 as consultation fee; P5,000.00
as incidental litigation expenses; P20,000.00 as exemplary damages; and to pay the
costs.

Plaintiff further prays for such other relief [as are] just and equitable in the premises.[3]


The Evidence of the Respondent

The respondent adduced evidence that the Spouses Lino and Victoriana Estopin were the original
owners of a parcel of land located in Barangay Biriran, Juban, Sorsogon, designated as Lot No. 3347 of the Juban
Cadastre. A major portion of the property, where a house of strong materials was constructed, was agricultural,
while the rest was residential. The respondent also averred that the Spouses Estopin declared the property in their
names under Tax Declaration No. 4790. On the north of the agricultural portion of the property was the road
leading to Biriran, while north of the residential portion was a creek (canal) and the property of Iluminado.



When Lino Estopin died intestate, his widow, Victoriana Lagata, executed a Deed of Absolute Sale[4]
on November 11, 1961 over the agricultural portion of Lot No. 3347, which had an area of 15,906 square meters,
more or less, in favor of Astrologo Hular, married to Lorenza Hular. Shortly thereafter, on November 25, 1961,
Lagata executed a Deed of Absolute Sale[5] over the residential portion of the property with an area of 287 square
meters, including the house constructed thereon, in favor of Hular. Hular and his family, including his son, the
respondent, then resided in the property. In 1961 or thereaouts Iluminao aske Hulars permission to onstrut a
house on a portion of Lot No. 3347 near the road, and the latter agreed. In l977, Lorenza Hular, wife of Astrologo,
elare the resiential lan in the latters name uner Tax Delaration No [6]

Earlier, or on August 14, 1945, Irene Griarte had executed a Deed of Absolute Sale over a coconut land
located in Barangay Biriran, Juban, with an area of 6,666 square meters in favor of Martiniano Balbedina, with the
following boundaries: North, Alejandro Gruta; South, Lino Estopin; East, River Page; West, Pedro Grepal and
Esteban Grepal.[7] Subsequently, after a cadastral survey was conducted on lands in Juban, the property of
Balbedina was designated as Lot No. 3353, with the following boundaries: North: Lot No. 3353 (portion),
Alejandro Gruta; South: Lino Estopin; West: Lot No. 3349; East: creek. A trail was then established between Lot
No. 3353 and Lot No. 3347 resulting in the decrease of Lot No. 3353 owned by Balbedina to 4,651 square
meters. He declared the property under his name under Tax Declaration No. 191 with the following boundaries:
North: Lot No. 3353 (portion) Alejandro Gruta; South: trail; East: creek; West: Lot No. 3349.[8]

On June 4, 1951, Balbedina executed a Deed of Absolute Sale over Lot No. 3353 with an area of only
4,651 square meters in favor of Iluminado.[9] The latter declared the property in his name under Tax Declaration
No. 5359.[10] Iluminado filed an application with the Bureau of Lands for a free patent over the entirety of Lot No.
3353 on January 5, 1960.[11] He indicated in his application that the property was not occupied by any person and
was disposable or alienable public land. In support thereof, he executed an affidavit wherein he declared that he
purchased about one-half portion of the property in 1951 based on a deed of absolute sale attached to said affidavit;
that in 1957, he purchased the other one-half portion ut for eonomi reasons no ee of sale was exeute y
the parties. He also alleged that the improvements on the land consisted of coconut trees.[12] The Bureau of Lands
processed the application in due course.

In the meantime, Iluminado constructed his house on a portion of Lot No. 3353 near the trail (road) leading to
Biriran. He and his family, including his children, forthwith resided in said house.

On Marh 9 the Seretary of Agriultural an Natural Resoures approve Iluminaos
application and issued Free Patent No. 384019 covering Lot No. 3353 with an area of 9,302 square meters, on the
basis of which OCT No. P-16540 was thereafter issued by the Register of Deeds on March 1, 1968.[13]

On August 2, 1975, Alejandro Gruta had executed a deed of absolute sale over a portion of Lot No. 3353
with an area of 4,651 square meters in favor of Estelito Hije, the husband of petitioner Adelina Baloloy, one of
Iluminaos hilren[14]

Before he left for employment in Saudi Arabia in 1979, respondent Hular had his house constructed near the
trail (road) on Lot No. 3347, which, however, occupied a big portion of Lot No. 3353.[15]

Iluminado died intestate on November 29, 1985. His widow and their children continued residing in the
property, while petitioner Reynaldo Baloloy, one of Iluminaos hilren later onstrute his house near that of his
deceased father. When Astrologo died intestate on December 25, 1989, he was survived by his children, Jose,
Romeo, Anacleto, Elena, Leo, Teresita, and the respondent, among others,[16] who continued to reside in their
house.[17]

Sometime in l99 the responents house helper was leaning the akyar ut was prevente from
doing so by petitioner Adelina Baloloy who claimed that their father Iluminado owned the land where the
responents house was loate To determine the veracity of the claim, the respondent had Lot No. 3353 surveyed
by Geodetic Engineer Rodolfo Cunanan on February 16, 1993, in the presence of Balbedina, Antonio Baloloy and
petitioner Reynaldo Baloloy. Cunanan prepared a Special Sketch Plan of Lot No. 3353[18] showing that the house
of Iluminado was constructed on Lot No. 3353[19] near the road behind the houses owned by Astrologo and
Alfredo.[20] The engineer discovered that the residential area deeded by Lagata to Hular had an area of 1,405
square meters, instead of 287 square meters only.[21]

In their Answer to the omplaint the heirs of Iluminao Baloloy averre that Iluminaos house was uilt in
1962 on a portion of Lot No. 3353, which the latter purchased from Balbedina, and not on a portion of Lot No. 3347
which Hular purchased from Lagata. They alleged that Hular constructed his house on a portion of Lot No. 3353
after securing the permission of their father Iluminado, and that the respondent had no cause of action for the
nullification of Free Patent No. 384019 and OCT No. P-16540 because only the State, through the Office of the
Solicitor General, may file a direct action to annul the said patent and title; and even if the respondent was the real
party in interest to file the action, such actions had long since prescribed. The heirs of Baloloy prayed that judgment
be rendered in their favor, thus:
WHEREFORE, it is most respectfully prayed of the Honorable Court to DISMISS
this case pursuant to paragraph 15, et seq., hereof, and/or DECIDE it in favor of the
defendants by UPHOLDING the sanctity of OCT No. P-16540 and ordering plaintiff to:

1. RESPECT efenants proprietary rights an interests on the property in question
covered by OCT No. P-16540;
2. VACATE it at his sole and exclusive expense, and never to set foot on it ever again;
3. PAY defendants:
a) MORAL DAMAGES at P50,000.00 EACH;
b) ACTUAL DAMAGES and UNREALIZED PROFITS at
P1,000.00/MONTH COMPUTED UP TO THE TIME OF
PAYMENT PLUS LEGAL RATE OF INTEREST;
c) EXEMPLARY DAMAGES of P50,000.00
d) ATTYS FEES an LITIGATION EXPENSES of
P100,000.00; and
e) THE COSTS OF THIS SUIT.

DEFENDANTS pray for all other reliefs and remedies consistent with law and
equity.[22]


The Evidence for the Petitioners

Sometime in 1982, Hular asked permission from Iluminado to construct his house on Lot No. 3353 near
the road leading to Biriran. Iluminado agreed, in the presence of his daughter, petitioner Adelina Baloloy. As per
the plan of Lot No. 3353 certified by a Director of the Bureau of Lands on November 6, 1961, Lot No. 3353 had an
area of 9,302 square meters.[23]

As gleaned from the Sketch Plan of Lot Nos. 3347 and 3353 prepared on February 7, 1991 by Geodetic
Engineer Salvador Balilo, the houses of the Baloloy siblings and those of Astrologo and Alfredo were located in Lot
No. 3353.[24] In the said sketch plan, Lot No. 3353 had an area of 9,302 square meters, while Lot No. 3347 had an
area of 9 square meters When apprise of Hulars laim over the property the petitioners an their o-heirs
filed a complaint for unlawful detainer with the Municipal Trial Court of Juban, docketed as Civil Case No. 331.
The case was, however, dismissed for lack of jurisdiction.

On December 4, 1995, the trial court rendered judgment in favor of the respondent. The fallo of the decision
reads:

a/ Declaring plaintiff the absolute owner of the land in question, consisting of 1,405
square meters, more or less, and entitled to the peaceful possession thereof;

b/ Ordering the defendants to reconvey the title to the plaintiff as far as the land in
question is concerned within fifteen (15) days counted from the finality of the
decision, failing in which, the Clerk of Court is hereby ordered to execute the
necessary document of reconveyance of the title in favor of the plaintiff after an
approved survey plan is made;

c/ Ordering defendants to remove their houses from the land in question at their own
expense within fifteen (15) days after the decision has become final;

d/ Ordering the defendants to pay jointly and severally plaintiff the amount of
P as attorneys fees P5,000.00 as incidental litigation expenses;

e/ To pay the costs.

SO ORDERED.[25]



The trial court ruled that the property subject of the complaint, with an area of 1,405 square meters, was part
of Lot No. 3347 which the Spouses Estopin owned, and which they later sold to Astrologo Hular. The trial court
also held that Iluminado committed fraud in securing the free patent and the title for the property in question, and
that when Victoriana Lagata executed the deed of absolute sale on the residential portion of Lot No. 3347, she did
not know that it formed part of Lot No. 3353. It further held that the action of the plaintiff to nullify the title and
patent was imprescriptible.

The petitioners filed on December 8, 1995 a motion to reopen the case to admit Tax Declaration Nos. 6957
and 4790 covering Lot No. 3347, under the names of Astrologo Hular and Victoriana Lagata, respectively, in which
it was declared that Lot No. 3347 was coconut land. The trial court ruled that the motion had been mooted by its
decision.

On appeal, the Court of Appeals rendered judgment affirming the decision of the trial court, and thereafter
denied the motion for reconsideration thereof.

The Present Petition


The petitioners, who are still residing on the subject property, filed their petition for review on certiorari
for the reversal of the decision and resolution of the Court of Appeals.

The issues for resolution are:

(1) whether all the indispensable parties had been impleaded by the respondent in the trial court;
(2) whether the said respondent had a cause of action against the petitioners for the nullification of Free
Patent No. 384019 and OCT No. P-16540; for reconveyance and for possession of the subject property; and for
damages; and
(3) whether the respondent had acquired ownership over the property through acquisitive prescription.

The first issue, while not raised by the parties in the trial court and in the Court of Appeals, is so interwoven
with the other issues raised therein and is even decisive of the outcome of this case; hence, such issue must be
delved into and resolved by this Court.[26]

We note that the action of the respondent in the trial court is for: (a) reinvidicatoria, to declare the respondent
the absolute owner of the subject property and its reconveyance to him as a consequence of the nullification of Free
Patent No. 384019 and OCT No. P-16540; (b) publiciana, to order the petitioners and the other heirs of Iluminado
Baloloy to vacate the property an eliver possession thereof to him; an () amages an attorneys fees

It is the contention of the respondent that the subject property was sold by Lagata to his father,
Astrologo Hular, in 1961. He adduced evidence that when his parents died intestate, they were survived by their
children, the respondent and his siblings Elena, Jose, Romeo, Anacleto, Leo, and Teresita. Article 1078 of the Civil
Code provides that where there are two or more heirs, the whole estate of the decedent is, before partition, owned in
common by such heirs, subject to the payment of the debts of the deceased. Until a division is made, the respective
share of each cannot be determined and every co-owner exercises, together with his co-participants, joint ownership
over the pro indiviso property, in addition to the use and enjoyment of the same.

Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This
article covers all kinds of actions for the recovery of possession, including an accion publiciana and a reinvidicatory
action. A co-owner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is deemed to be instituted for the benefit of all.[27] Any judgment of the court in favor of the co-
owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and
entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are
indispensable parties.

In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property
and praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their
rights over the subject property or conveyed the same to the respondent or such co-owners were aware of the case in
the trial court. The trial court rendered judgment declaring the respondent as the sole owner of the property and
entitle to its possession to the prejuie of the latters silings Patently then, the decision of the trial court is
erroneous.

Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings,
being co-owners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be
stressed that the Republic of the Philippines is also an indispensable party as defendant because the respondent
sought the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is
impleaded as party-defendant, any decision of the Court would not be binding on it. It has been held that the
absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the
complaint including the judgment.[28] The asene of the responents silings as parties renere all proeeings
subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority to act, not only
as to the absent parties but even as to those present.[29]

Even if we glossed over the procedural lapses of the respondent, we rule that he failed to prove the
material allegations of his complaint against the petitioners; and that he is not entitled to the reliefs prayed for.

The burden of proof is on the plaintiff to establish his case by the requisite quantum of evidence. If he
claims a right granted as created by law or under a contract of sale, he must prove his claim by competent
evidence. He must rely on the strength of his own evidence and not on the weakness or absence of the evidence of
that of his opponent.[30] He who claims a better right to real estate property must prove not only his ownership of
the same but also the identity thereof.[31] In Huy v. Huy,[32] we held that where a property subject of controversy
is duly registered under the Torrens system, the presumptive conclusiveness of such title should be given weight and
in the absence of strong and compelling evidence to the contrary, the holder thereof should be considered as the
owner of the property until his title is nullified or modified in an appropriate ordinary action. A Torrens Certificate
is evidence of an indefeasible title to property in favor of the person in whose name appears therein.[33] Such
holder is entitled to the possession of the property until his title is nullified.

The petitioners aver that Lot No. 3347 owned by the Spouses Estopin was coconut, and not residential,
land. The petitioners contend that, under the deed of absolute sale, Victoriana Lagata executed on November 25,
1961 in favor of Astrologo Hular, she sold the residential portion of Lot No. 3347; however, the latter constructed
his house on a portion of Lot No. 3353 which Iluminado had purchased from Balbedina, now covered by OCT No.
P-16540. The petitioners assert that along with their mother Anacorita and their brother Antonio Baloloy, they
constructed their houses on a part of Lot No. 3353, titled in the name of their father Iluminado; hence, they could not
be dispossessed of the said property. The petitioners posit that, whether the house of Hular was constructed on a
portion of Lot No. 3353 of the property of Balbedina or Gruta is irrelevant because both properties are now covered
by OCT No. P-16540 under the name of Iluminado, their predecessor-in-interest.

The Court of Appeals ruled that Victoriana Lagata owned the subject property, which turned out to be
1,405 square meters, and sold the same to Hular. In contrast, the RTC declared in its decision that while under the
deed of absolute sale executed by Irene Griarte in favor of Balbedina, Lot No. 3353 had an area of 6,666 square
meters, Griarte actually owned only 4,651 square meters; a portion of the lot was actually owned by Lino Estopin.
Hence, Balbedina sold only 4,651 square meters to Iluminado[34] because he was aware that he owned only 4,651
square meters of the land. It also held that, unknown to Lagata, a portion of Lot No. 3347 was declared as part of
Lot No. 3353 when the lands in Juban were surveyed. The trial court concluded that Lagata erroneously declared,
under the deed of absolute sale executed on November 25, 1961 in favor of Hular, that the property was part of Lot
No. 3347.

The trial and appellate courts erred in their decisions.

The evidence on record shows that Irene Griarte owned a parcel of land with an area of 6,666 square
meters, more or less.[35] When she sold the property to Martiniano Balbedina on August 14, 1945, it was bounded
on the south by the property of Lino Estopin. There was no trail yet between the property of Griarte on the south
and of Lino Estopin on the north. In the meantime, however, a road (trail) leading to Biriran was established
between the property of Balbedina on the south and that of Lino Estopin on the north. Thereafter, a cadastral survey
of the lands in Juban was conducted by the Bureau of Lands. The property of Balbedina was designated as a portion
of Lot No. 3353, while that of Estopin was designated as Lot No. 3347. The other portion of Lot No. 3353, with an
area of 4,561 square meters, belonged to Alejandro Gruta. Because of the construction of the road, the property of
Balbedina, which was a part of Lot No. 3353, was reduced to 4,651 square meters. Balbedina declared, under Tax
Declaration No. 391, that Lot No. 3353 had an area of 4,651 square meters and was coconut land[36] and that his
property was bounded on the south by a trail (road). Lino Estopin declared Lot No. 3347 under his name for
taxation purposes, in which he stated that his property was bounded on the north by the trail going to
Biriran.[37] Clearly, then, Lot No. 3353 and Lot No. 3347 had a common boundary the trail (road) going to
Biriran.

Balbedina sold his property, which was a portion of Lot No. 3353, with an area of 4,651 square meters
to Iluminado Baloloy on June 4, 1951.[38] Under the deed of absolute sale, the property was bounded on the south
by the trail (road) owned by Lino Estopin.[39] The English translation of the deed of sale attached as page 85 to the
RTC Records, which both the trial court and the appellate court relied upon, is incorrect.
The original deed of absolute sale, which is in Spanish, states that the boundary of the property on the
south is con camino Lino Estopin while the English version of the deed, indicates that the property is bounded
on the south y Lino Estopin Being an earlier document, the deed in Spanish signed by the parties therefore
should prevail. Conformably to such deed, Iluminado Baloloy declared in Tax Declaration No. 5359 under his name
that the property is bounded on the south by a trail,[40] and not by Lot No. 3347 owned by Lino Estopin.

The respondent failed to adduce any documentary evidence to prove how the Spouses Estopin acquired
the disputed property. The responents reliane on the testimonies of Melissa Estopin the aughter of the Spouses
Estopin, and on Porfirio Guamos as well as the May 8, 1993 Affidavit of Martiniano Balbedina, and the deed of sale
executed by Victoriana Lagata on November 27, 1961 in favor of Astrologo Hular to corroborate his claim over the
lot in question, is misplaced.

First. Per the testimony of Porfirio Guamos, the witness of the respondent, Lino Estopin purchased the
disputed property in 1941 from Irene Griarte and insisted that there was a deed of sale evidencing the sale:

Atty. Dealca:
Q The area of the land in question is 1,405 sq. m., you claim that way back in 1944 the
owner of the lan was Lino Estopin; to ?
A 1941.

Q And you said that Lino Estopin was able to acquire the land by purchase?
A That was very long time when Lino Estopin sold the property.

Q My question is whether you know because you testified earlier that Lino Estopin was
able to acquire the land by purchase; do you confirm that?
A Yes, Sir.

Q From whom?
A From Irene Griarte.

Q Were you present when that sale was consummated?
A I was not there.

Q So you do not know how much was it bought by Lino Estopin from Irene Griarte?
A No, Sir.

Q You do not know whether a document to that effect was actually drafted and
executed?
A There was.

Q Have you seen the document?
A I did not see but there was a document.
Q You maintain there was a document but you did not see a document, is that it?
A In my belief there was a document.

Q In your belief, how did you organize that belief when you did not see a document?
A I insist there was a document.

Q That is why, why are you insisting when you did not see a document?
A Well, during the sale that document was used.

Q How was it used when you did not see that document?
A When the deed of sale was executed I did not see the document, but I insist there was
a document.

Q Thats why how were you ale to say efore the court that there was a document
when you contend that you did not see any?
A There was asis in the sale the sale was ase on a oument You cannot sell a
property without document? (sic)

Q Is that your belief?
A Yes, Sir.

Q But you did not see any document?

Atty. Diesta:

Already answered.

Witness:

A I did not see.


Atty. Dealca:

Q You said that that document was used when the property was sold by Lino Estopin to
Alfredo Hular. . .
A In 1961. Yes.[41]


However, the respondent failed to adduce in evidence the said deed or even an authentic copy
thereof. The respondent did not offer any justification for his failure to adduce the same in evidence. As against the
responents veral laim that his father aquire the property from Lagata the Torrens title of Iluminao Baloloy
must prevail.[42]

Second. The respondent even failed to adduce in evidence any tax declarations over the disputed
property under the name of Irene Griarte and/or Lino Estopin, or realty tax payment receipts in their names from
1941 to November 1961. The documents are circumstantial evidence to prove that Irene Griarte claimed ownership
over the disputed property and that Lino Estopin acquired the same from her. After all, such tax declarations and tax
receipts can be strong evidence of ownership of land when accompanied by possession for a period sufficient for
acquisitive prescription.[43]

Third. The respondent even failed to adduce in evidence Tax Declaration No. 4790 covering the two parcels
of land under the name of Lino Estopin to prove his claim that Lot No. 3347 consisted of agricultural and residential
lands. We note that the petitioners appended a certified true copy of Tax Declaration No. 4790 under the name of
Victoriana Lagata over Lot No. 3347 to their Motion to Reopen the Case. In the said declaration, Lot No. 3347 was
esrie as oonut lan; this is ontrary to the responents laim that the sai lot was then residential, and that
the ounary of the property on the north was the roa to Biriran whih in turn is onsistent with the petitioners
claim.[44] Unfortunately, the trial court denied the said motion on the ground that it was mooted by its decision.

Fourth. During the cadastral survey of lands in Juban, the lot of Gruta and that of Balbedina, inclusive of the
subject property, were designated as Lot No. 3353 with a total area of 9,302 square meters under their names, while
that of Lino Estopin was designated as Lot No. 3347 with an area of 15,906 square meters. Iluminado Baloloy
applied for a free patent over Lot No. 3353, including the disputed property, under his name. The respondent failed
to adduce any evidence that the Spouses Estopin anor Astrologo Hular oppose Baleina anor Iluminaos
claim of ownership of Lot No. 3353 during the survey and after the filing of the application. A propos is our ruling
in Urquiaga v. Court of Appeals: [45]

As succinctly observed by respondent Court of Appeals in assessing the totality
of the evidence

We do not agree with defendants that they are also the occupants and possessors of
the sujet lot just eause it is ajaent to their title property Precisely, the boundaries
of efenants title property were etermine elineate an surveye uring the aastral
survey of Dipolog and thereafter indicated in their certificate of title in order that the extent
of their property will be known and fixed. Since the subject lot was already found to be
outside their titled property, defendants have no basis in claiming it or other adjacent lots for
that matter. Otherwise, the very purpose of the cadastral survey as a process of determining
the exact boundaries of adjoining properties will be defeated.


Defenants own title OCT No -357 (in the names of Jose Aguirre and Cristina
Gonzales), in fact belies their claim of occupation and possession over the adjacent subject
lot. Examining said title, we note that: (1) the cadastral survey of Dipolog was conducted
from January 9 to Novemer 9; () efenants title property was one of those lots
surveyed and this was designated as Lot No. 2623; (3) during the survey, it was already
determined and known that Lot No. 2623 is bounded on the northeast, southeast, southwest
and west by Lot No. 4443 (as we have seen in our narration of facts, the subject lot is a
subdivision lot of Lot No. 6552 which was originally identified as Lot No. 4443-B-1,
Dipolog Cadastre 85 Ext.: hence, the subject lot is a portion of Lot No. 4443); and (4)
O.C.T. No. 0-357 was issued on October 11, 1965 on the strength of the judgment rendered
on July 31 (sic), 1941 by the then Court of First Instance of Zamboanga del Norte in
Cadastral Case No. 6, LRC Cadastral Record No. 756.

From the foregoing facts, we find that as early as January, 1923 when the cadastral
survey was started, the boundaries of Lot Nos. 2623 and 4443 were already determined and
delineated. Since the subject lot was surveyed to be part of Lot No. 4443, it means that
uring that time efenants preeessors-in-interest never claimed ownership or possession
over the subject lot. Otherwise, they would have complained so that the subject lot could be
excluded from Lot No. 4443 and included in Lot No. 2623, they being adjacent lots. It is
ovious then that efenants preeessors only laime Lot No an they pursue
their claim in Cadastral Case No. 6, LRC Cadastral Record No. 756 until O.C.T. No. 0-357
was issued to them. The contention of defendants that they and their predecessors-in-
interest occupied and possessed the subject lot since time immemorial therefore is not
true.[46]


Fifth. Under the deed of absolute sale dated November 25, 1961, Lagata sold to Astrologo Hular Lot
No. 3347, and not Lot No. 3353. In Veterans Federation of the Philippines v. Court of Appeals,[47] we ruled that:

Petitioner VFP maintains that the deed of sale was valid and enforceable and
that it was perfected at the very moment that the parties agreed upon the thing which was the
object of the sale and upon the price. The parties herein had agreed on the parcel of land
that petitioner would purchase from respondent PNR, and the same was described therein;
thus, petitioner VFP cannot conveniently set aside the technical description in this
agreement and insist that it is the legal owner of the property erroneously described in the
certificate of title. Petitioner can only claim right of ownership over the parcel of land that
was the object of the deed of sale and nothing else.[48]


Sixth. Under the said deed of sale dated November 11, 1961, Victoriana Lagata sold Lot No. 3347
which had an area of 15,906 square meters and covered by Tax Declaration No. 4790. The deed does not state that
what was sold was only a portion of Lot No. 3347, excluding therefrom the disputed property. This is
understandable, since the subject property is a portion of Lot No. 3353 owned by Alejandro Gruta and Iluminado
Baloloy, and not of Lino Estopin and/or Victoriana Lagata. Lagata could not have sold a portion of Lot No. 3353
which she does not own. As the Latin adage goes: NEMO DAT QUOD NON HABET.

Seventh. The Baleinas Affiavit ate May 8, 1993 offered by the respondent to prove the contents
thereof is inadmissible in evidence against the petitioners. Balbedina did not testify; as such, the petitioners were
deprived of their right to cross-examine him. The said affidavit is thus hearsay and barren of probative weight. The
affidavit varies the contents of the deed of absolute sale which he (Balbedina) executed in favor of Iluminado more
than forty years earlier. In the said affidavit, it was made to appear that Balbedina sold to Iluminado on June 4, 1951
only a portion of Lot 3353 with an area of 3,333 square meters, when under the said deed of absolute sale, the
property that was sold consisted of 4,651 square meters. The affidavit is proscribed by Section 9, Rule 130 of the
Rules of Court, which provides:
Section 9. Evidence of written agreements. - When the terms of an agreement
have been reduced to writing, it is considered as containing all the terms agreed upon and
there can be, between the parties and their successors in interest, no evidence of such terms
other than the contents of the written agreement.
. . .

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

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

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

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

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

SO ORDERED.


ARNELITO ADLAWAN, G.R. No. 161916
Petitioner,
Present:

Panganiban, C.J. (Chairman),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
EMETERIO M. ADLAWAN and
NARCISA M. ADLAWAN, Promulgated:
Respondents.
January 20, 2006

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

DECI SI ON


YNARES-SANTIAGO, J .:


Assailed in this petition for review is the September 23, 2003 Decision[1] of the Court of Appeals in CA-G.R.
SP No. 74921 which set aside the September 13, 2002 Decision[2] of the Regional Trial Court (RTC) of Cebu City,
Branch 7, in Civil Case No. CEB-27806, and reinstated the February 12, 2002 Judgment[3] of the Municipal Trial
Court (MTC) of Minglanilla Metro Ceu in Civil Case No 9 ismissing petitioner Arnelito Alawans unlawful
detainer suit against respondents Emeterio and Narcisa Adlawan. Likewise questioned is the January 8, 2004
Resolution[4] of the Court of Appeals whih enie petitioners motion for reonsieration

The instant ejetment suit stemme from the parties ispute over Lot and the house built thereon,
covered by Transfer Certificate of Title No. 8842,[5] registered in the name of the late Dominador Adlawan and
located at Barrio Lipata, Municipality of Minglanilla, Cebu. In his complaint, petitioner claimed that he is an
acknowledged illegitimate child[6] of Dominador who died on May 28, 1987 without any other issue. Claiming to
be the sole heir of Dominador, he executed an affidavit adjudicating to himself Lot 7226 and the house built
thereon.[7] Out of respect and generosity to respondents who are the siblings of his father, he granted their plea to
occupy the subject property provided they would vacate the same should his need for the property arise. Sometime
in January 1999, he verbally requested respondents to vacate the house and lot, but they refused and filed instead an
action for quieting of title[8] with the RTC. Finally upon responents refusal to hee the last eman letter to
vacate dated August 2, 2000, petitioner filed the instant case on August 9, 2000.[9]

On the other hand, respondents Narcisa and Emeterio, 70 and 59 years of age, respectively,[10] denied
that they begged petitioner to allow them to stay on the questioned property and stressed that they have been
occupying Lot 7226 and the house standing thereon since birth. They alleged that Lot 7226 was originally
registered in the name of their deceased father, Ramon Adlawan[11] and the ancestral house standing thereon was
owned by Ramon and their mother, Oligia Maacap Adlawan. The spouses had nine[12] children including the late
Dominador and herein surviving respondents Emeterio and Narcisa. During the lifetime of their parents and
deceased siblings, all of them lived on the said property. Dominador and his wife, Graciana Ramas Adlawan, who
died without issue, also occupied the same.[13] Petitioner, on the other hand, is a stranger who never had possession
of Lot 7226.

Sometime in 1961, spouses Ramon and Oligia needed money to finance the renovation of their
house. Since they were not qualified to obtain a loan, they transferred ownership of Lot 7226 in the name of their
son Dominador who was the only one in the family who had a college education. By virtue of a January 31, 1962
simulated deed of sale,[14] a title was issued to Dominador which enabled him to secure a loan with Lot 7226 as
collateral. Notwithstaning the exeution of the simulate ee Dominaor then single never ispute his parents
ownership of the lot. He an his wife Graiana i not istur responents possession of the property until they
died on May 28, 1987 and May 6, 1997, respectively.

Responents also ontene that Dominaors signature at the ak of petitioners irth ertifiate was forge
hence, the latter is not an heir of Dominador and has no right to claim ownership of Lot 7226.[15] They argued that
even if petitioner is inee Dominaors aknowlege illegitimate son his right to suee is outful eause
Dominador was survived by his wife, Graciana.[16]

On Feruary the MTC ismisse the omplaint holing that the estalishment of petitioners
filiation an the settlement of the estate of Dominaor are onitions preeent to the arual of petitioners ation
for ejectment. It added that since Dominador was survived by his wife, Graciana, who died 10 years thereafter, her
legal heirs are also entitled to their share in Lot 7226. The dispositive portion thereof, reads:

In View of the foregoing, for failure to prove by preponderance of evidence, the
plaintiffs ause of ation the aove-entitled case is hereby Ordered DISMISSED.

SO ORDERED.[17]

On appeal by petitioner, the RTC reversed the decision of the MTC holding that the title of Dominador
over Lot 7226 cannot be collaterally attacked. It thus ordered respondents to turn over possession of the
controverted lot to petitioner and to pay compensation for the use and occupation of the premises. The decretal
portion thereof, provides:

Wherefore, the Judgment, dated February 12, 2002, of the Municipal Trial Court
of Minglanilla, Cebu, in Civil Case No. 392, is reversed. Defendants-appellees are directed
to restore to plaintiff-appellant possession of Lot 7226 and the house thereon, and to pay
plaintiff-appellant, beginning in August 2000, compensation for their use and occupation of
the property in the amount of P500.00 a month.

So ordered.[18]

Meanwhile the RTC grante petitioners motion for exeution pening appeal[19] which was opposed
by the alleged nephew and nieces of Graciana in their motion for leave to intervene and to file an answer in
intervention.[20] They contended that as heirs of Graciana, they have a share in Lot 7226 and that intervention is
necessary to protect their right over the property. In addition, they declared that as co-owners of the property, they
are allowing respondents to stay in Lot 7226 until a formal partition of the property is made.

The RTC denied the motion for leave to intervene.[21] It, however, recalled the order granting the
execution pending appeal having lost jurisdiction over the case in view of the petition filed by respondents with the
Court of Appeals.[22]

On September 23, 2003, the Court of Appeals set aside the decision of the RTC and reinstated the
judgment of the MTC. It ratiocinated that petitioner and the heirs of Graciana are co-owners of Lot 7226. As such,
petitioner cannot eject respondents from the property via an unlawful detainer suit filed in his own name and as the
sole owner of the property. Thus

WHEEFORE, premises considered, the appealed Decision dated September 13,
2002 of the Regional Trial Court of Cebu City, Branch 7, in Civil Case No. CEB-27806 is
REVERSED and SET ASIDE, and the Judgment dated February 12, 2002 of the Municipal
Trial Court of Minglanilla, Metro Cebu, in Civil Case No. 392 is REINSTATED. Costs
against the respondent.

SO ORDERED.[23]

Petitioners motion for reonsieration was enie Hence, the instant petition.

The decisive issue to be resolved is whether or not petitioner can validly maintain the instant case for
ejectment.

Petitioner averred that he is an acknowledged illegitimate son and the sole heir of Dominador. He in
fact executed an affidavit adjudicating to himself the controverted property. In ruling for the petitioner, the RTC
held that the questioned January 31, 1962 deed of sale validly transferred title to Dominador and that petitioner is his
acknowledged illegitimate son who inherited ownership of the questioned lot. The Court notes, however, that the
RTC lost sight of the fact that the theory of succession invoked by petitioner would end up proving that he is not the
sole owner of Lot 7226. This is so because Dominador was survived not only by petitioner but also by his legal
wife, Graciana, who died 10 years after the demise of Dominador on May 28, 1987.[24] By intestate succession,
Graciana and petitioner became co-owners of Lot 7226.[25] The death of Graciana on May 6, 1997, did not make
petitioner the absolute owner of Lot 7226 because the share of Graciana passed to her relatives by consanguinity and
not to petitioner with whom she had no blood relations. The Court of Appeals thus correctly held that petitioner has
no authority to institute the instant action as the sole owner of Lot 7226.

Petitioner contends that even granting that he has co-owners over Lot 7226, he can on his own file the
instant case pursuant to Article 487 of the Civil Code which provides:

ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of actions for the recovery of possession. Article 487 includes forcible entry
and unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership
(accion de reivindicacion).[26] A co-owner may bring such an action without the necessity of joining all the other
co-owners as co-plaintiffs because the suit is presumed to have been filed to benefit his co-owners. It should be
stressed, however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole owner and
entitled to the possession of the litigated property, the action should be dismissed.[27]

The renowned civilist, Professor Arturo M. Tolentino, explained

A co-owner may bring such an action, without the necessity of joining all the other co-
owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all. If
the action is for the benefit of the plaintiff alone, such that he claims possession for
himself and not for the co-ownership, the action will not prosper. (Emphasis added)[28]

In Baloloy v. Hular,[29] respondent filed a complaint for quieting of title claiming exclusive ownership
of the property, but the evidence showed that respondent has co-owners over the property. In dismissing the
omplaint for want of responents authority to file the ase the Court hel that

Under Article 487 of the New Civil Code, any of the co-owners may bring an
action in ejectment. This article covers all kinds of actions for the recovery of possession,
including an accion publiciana and a reinvidicatory action. A co-owner may bring such an
action without the necessity of joining all the other co-owners as co-plaintiffs because the
suit is deemed to be instituted for the benefit of all. Any judgment of the court in favor of
the co-owner will benefit the others but if such judgment is adverse, the same cannot
prejudice the rights of the unimpleaded co-owners. If the action is for the benefit of the
plaintiff alone who claims to be the sole owner and entitled to the possession thereof, the
action will not prosper unless he impleads the other co-owners who are indispensable
parties.

In this case, the respondent alone filed the complaint, claiming sole ownership
over the subject property and praying that he be declared the sole owner thereof. There is no
proof that the other co-owners had waived their rights over the subject property or conveyed
the same to the respondent or such co-owners were aware of the case in the trial court. The
trial court rendered judgment declaring the respondent as the sole owner of the property and
entitle to its possession to the prejuie of the latters silings Patently then, the decision
of the trial court is erroneous.

Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to
implead his siblings, being co-owners of the property, as parties. The respondent failed to
comply with the rule. It must, likewise, be stressed that the Republic of the Philippines is
also an indispensable party as defendant because the respondent sought the nullification of
OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is
impleaded as party-defendant, any decision of the Court would not be binding on it. It has
been held that the absence of an indispensable party in a case renders ineffective all the
proceedings subsequent to the filing of the complaint including the judgment. The absence
of the responents silings as parties renere all proeeings susequent to the filing
thereof, including the judgment of the court, ineffective for want of authority to act, not only
as to the absent parties but even as to those present.[30]

In the instant case, it is not disputed that petitioner brought the suit for unlawful detainer in his name
alone and for his own benefit to the exclusion of the heirs of Graciana as he even executed an affidavit of self-
adjudication over the disputed property. It is clear therefore that petitioner cannot validly maintain the instant action
considering that he does not recognize the co-ownership that necessarily flows from his theory of succession to the
property of his father, Dominador.

In the same vein there is no merit in petitioners laim that he has the legal personality to file the
present unlawful detainer suit because the ejectment of respondents would benefit not only him but also his alleged
co-owners. However, petitioner forgets that he filed the instant case to acquire possession of the property and to
recover damages. If granted, he alone will gain possession of the lot and benefit from the proceeds of the award of
damages to the exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the alleged
benefit to his co-owners. Incidentally, it should be pointed out that in default of the said heirs of Graciana, whom
petitioner laele as fititious heirs the State will inherit her share[31] an will thus e petitioners o-owner
entitled to possession and enjoyment of the property.

The present controversy should be differentiated from the cases where the Court upheld the right of a
co-owner to file a suit pursuant to Article 487 of the Civil Code. In Resuena v. Court of Appeals,[32] and Sering v.
Plazo,[33] the co-owners who filed the ejectment case did not represent themselves as the exclusive owner of the
property. In Celino v. Heirs of Alejo and Teresa Santiago,[34] the complaint for quieting of title was brought in
behalf of the co-owners precisely to recover lots owned in common.[35] Similarly in Vencilao v. Camarenta,[36]
the amended complaint specified that the plaintiff is one of the heirs who co-owns the controverted properties.

In the foregoing cases, the plaintiff never disputed the existence of a co-ownership nor claimed to be the
sole or exclusive owner of the litigated lot. A favorable decision therein would of course inure to the benefit not
only of the plaintiff but to his co-owners as well. The instant case, however, presents an entirely different backdrop
as petitioner vigorously asserted absolute and sole ownership of the questioned lot. In his complaint, petitioner
made the following allegations, to wit:

3. The plaintiff was the only son (illegitimate) and sole heir of the late
DOMINADOR ADLAWAN who died intestate on 28 May 1987 without any other
descendant nor ascendant x x x.

x x x x

5. Being the only child/descendant and, therefore, sole heir of the deceased
Dominador Adlawan, the plaintiff became the absolute owner, and automatically took
POSSESSION, of the aforementioned house and lot x x x. (Emphasis added)[37]

Clearly the sai ases fin no appliation here eause petitioners ation operates as a omplete
repudiation of the existence of co-ownership and not in representation or recognition thereof. Dismissal of the
complaint is therefore proper. As note y Former Supreme Court Assoiate Justie Egrao L Paras [it is
understood, of course, that the action [under Article 487 of the Civil Code] is being instituted for all. Hence, if the
co-owner expressly states that he is bringing the case only for himself, the action should not be allowed to
prosper[38]

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

WHEREFORE, the petition is DENIED. The September 23, 2003 Decision of the Court of Appeals in
CA-G.R. SP No. 74921 which reinstated the February 12, 2002 Judgment of the Municipal Trial Court of
Minglanilla Metro Ceu ismissing petitioners omplaint in Civil Case No 9 an its January 8, 2004
Resolution, are AFFIRMED.

SO ORDERED.

G.R. No. 168943 October 27, 2006
IGLESIA NI CRISTO, petitioner, vs. HON. THELMA A. PONFERRADA, in her capacity as Presiding
Judge, Regional Trial Court, Br. 104, Quezon City, and HEIRS OF ENRIQUE G. SANTOS,
respondents.

D E C I S I O N

CALLEJO, SR, J .:
This is a Petition for Review on Certiorari of the Decision
1
of the Court of Appeals (CA) in CA-G.R. SP No.
72686 and its Resolution
2
denying the motion for reconsideration of the said decision.
On October 24, 2001, Alicia, Alfredo, Roberto, Enrique and Susan, all surnamed Santos, and Sonia
Santos-Wallin, represented by Enrique G. Santos, filed a complaint
3
for Quieting of Title and/or Accion
Reinvindicatoria before the Regional Trial Court (RTC) of Quezon City against the Iglesia Ni Cristo (INC),
defendant therein.
Plaintiffs alleged therein that, during his lifetime, Enrique Santos was the owner of a 936-square-meter
parcel of land located in Tandang Sora, Quezon City covered by Transfer Certificate of Title (TCT) No.
57272 issued by the Register of Deeds on July 27, 1961 which cancelled TCT No. 57193-289. He had
been in possession of the owners duplicate of said title and had been in continuous, open, adverse and
peaceful possession of the property. He died on February 9, 1970 and was survived by his wife, Alicia
Santos, and other plaintiffs, who were their children. Thereafter, plaintiffs took peaceful and adverse
possession of the property, and of the owners duplicate of said title. When the Office of the Register of
Deeds of Quezon City was burned on June 11, 1988, the original copy of said title was burned as well.
The Register of Deeds had the title reconstituted as TCT No. RT-110323, based on the owners duplicate
of TCT No. 57272. Sometime in February 1996, plaintiffs learned that defendant was claiming ownership
over the property based on TCT No. 321744 issued on September 18, 1984 which, on its face, cancelled
TCT No. 320898, under the name of the Philippine National Bank, which allegedly cancelled TCT No.
252070 in the names of the spouses Marcos and Romana dela Cruz. They insisted that TCT Nos.
321744, 320898 and 252070 were not among the titles issued by the Register of Deeds of Quezon City
and even if the Register of Deeds issued said titles, it was contrary to law. Enrique Santos, during his
lifetime, and his heirs, after his death, never encumbered or disposed the property. In 1996, plaintiffs had
the property fenced but defendant deprived them of the final use and enjoyment of their property.
Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed that, after due hearing, judgment be rendered quieting the title of
plaintiffs over and/or recover possession of their said property in the name of deceased Enrique Santos,
covered by said TCT No. RT-110323(57272) of the Register of Deeds at Quezon City and that:
1. The title of defendant, TCT No. 321744 be ordered cancelled by the Register of Deeds of Quezon City;
2. The defendant be ordered to pay plaintiffs claims for actual damages in the sum of P100,000.00;
3. The defendant be ordered to pay plaintiffs claims for compensatory damages in the sum of at least
P1,000,000.00;
4. The defendant be ordered to pay plaintiffs claims for reimbursement of the lawyers professional fees
consisting of the aforesaid P50,000.00 acceptance fee and reimbursement of the said success fee in par.
10 above; and lawyers expenses of P2,000.00 for each hearing in this case;
5. The defendant be ordered to pay expenses and costs of litigation in the sum of at least P200,000.00.
Other reliefs that are just and equitable in the premises are, likewise, prayed for.
4

As gleaned from the caption of the complaint, plaintiffs appear to be the heirs of Enrique Santos,
represented by Enrique G. Santos. The latter signed the Verification and Certificate of Non-Forum
Shopping which reads:
I, ENRIQUE G. SANTOS, of legal age, under oath, state that I am one of the children of the late Enrique
Santos and I represent the heirs of said Enrique Santos who are my co-plaintiffs in the above-captioned
case and that I directed the preparation of the instant complaint, the contents of which are true and
correct to the best of my knowledge and the attachments are faithful reproductions of the official copies in
my possession.
I hereby certify that I have not commenced any other action or proceeding involving the same issues in
the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency,
and to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, the
Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and that I shall notify this
Commission within three days from notice that a similar action or proceeding has been filed or is pending
thereat.
IN WITNESS WHEREOF, I hereby affix my signature this 23rd day of October 2001 at Pasig City, Metro
Manila.
(Sgd.)
ENRIQUE G. SANTOS
SUBSCRIBED AND SWORN to before me this 23rd day of October 2001 at Pasig City, affiant exhibiting
to me his CTC No. 07303074 issued at Sta. Cruz, Laguna on April 16, 2001.
(Sgd.)
PETER FRANCIS G. ZAGALA Notary Public Until December 31, 2002 PTR No. 0287069 Issued on
1-10-01 At Pasig City
5

Defendant moved to dismiss plaintiffs complaint on the following grounds: (1) plaintiffs failed to faithfully
comply with the procedural requirements set forth in Section 5, Rule 7 of the 1997 Rules of Civil
Procedure; (2) the action (either Quieting of Title or Accion Reinvindicatoria) had prescribed, the same
having been filed only on October 24, 2001 beyond the statutory ten-year period therefor; and (3) that the
complaint is defective in many respects.
6

Defendant asserted that the case involved more than one plaintiff but the verification and certification
against forum shopping incorporated in the complaint was signed only by Enrique Santos. Although the
complaint alleges that plaintiffs are represented by Enrique Santos, there is no showing that he was,
indeed, authorized to so represent the other plaintiffs to file the complaint and to sign the verification and
certification of non-forum shopping.
7
Thus, plaintiffs failed to comply with Section 5, Rule 7 of the Rules of
Court. Defendant cited the ruling of this Court in Loquias v. Office of the Ombudsman.
8

Defendant maintained that the complaint is defective in that, although there is an allegation that Enrique
Santos represents the other heirs, there is nothing in the pleading to show the latters authority to that
effect; the complaint fails to aver with particularity the facts showing the capacity of defendant corporation
to sue and be sued; and the pleading does not state the address of plaintiffs. Defendant likewise averred
that the complaint should be dismissed on the ground of prescription. It argued that plaintiffs anchor their
claim on quieting of title and considering that they are not in possession of the land in question, their
cause of action prescribed after ten years. On the other hand, if the supposed right of plaintiffs is based
on accion reinvindicatoria, prescription would set in after 10 years from dispossession. In both cases,
defendant asserts, the reckoning point is 1984 when defendant acquired TCT No. 321744 and
possession of the land in question.
In their Comment
9
on the motion, plaintiffs averred that the relationship of a co-owner to the other co-
owners is fiduciary in character; thus, anyone of them could effectively act for another for the benefit of
the property without need for an authorization. Consequently, Enrique Santos had the authority to
represent the other heirs as plaintiffs and to sign the verification and certification against forum
shopping.
10
On the issue of prescription, plaintiffs argued that the prescriptive period for the actions
should be reckoned from 1996, when defendant claimed ownership over the property and barred plaintiffs
from fencing their property, not in 1984 when TCT No. 321744 was issued by the Register of Deeds in the
name of defendant as owner.
In its reply, defendant averred that absent any authority from his co-heirs, Enrique Santos must implead
them as plaintiffs as they are indispensable parties. In response, plaintiffs aver that a co-owner of a
property can execute an action for quieting of title without impleading the other co-owners.
The trial court issued an Order
11
denying defendants motion to dismiss. It declared that since Enrique
Santos was one of the heirs, his signature in the verification and certification constitutes substantial
compliance with the Rules. The court cited the ruling of this Court in Dar v. Alonzo-Legasto.
12
The court,
likewise, held that prescription had not set in and that failure to state the address of plaintiffs in the
complaint does not warrant the dismissal of the complaint.
Defendant filed a motion for reconsideration, which the court likewise denied in an Order
13
dated July 10,
2002.
Unsatisfied, defendant, as petitioner, filed a Petition for Certiorari and Prohibition with Prayer for the
Issuance of a Temporary Restraining Order and/or Preliminary Injunction
14
before the CA, raising the
following issues:
I.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION
WHEN SHE HELD THAT THE CERTIFICATION OF NON-FORUM SHOPPING SIGNED BY ENRIQUE
G. SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE 1997
RULES OF CIVIL PROCEDURE, IN CLEAR CONTRAVENTION OF THE RULES OF COURT, AND THE
RULING IN LOQUIAS V. OFFICE OF THE OMBUDSMAN, G.R. NO. 1399396 (SIC), AUGUST 16, 2000,
338 SCRA 62, AND ORTIZ V. COURT OF APPEALS, G.R. NO. 127393, 299 SCRA 708 (DECEMBER 4,
1998).
II.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION IN
APPLYING THE RULING IN DAR, ET. AL. V. HON. ROSE MARIE ALONZO-LEGASTO, ET. AL., G.R.
NO. 143016, AUGUST 30, 2000 TO THE INSTANT CASE.
III.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION
WHEN SHE HELD THAT THE AUTHORITY OF ENRIQUE G. SANTOS TO REPRESENT HIS CO-
HEIRS IN THE FILING OF THE COMPLAINT AGAINST THE "INC" IS A MATTER OF EVIDENCE.
IV.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION
WHEN SHE HELD THAT THE ACTION FOR QUIETING OF TITLE AND/OR ACCION
REINVINDICATORIA (CIVIL CASE NO. Q-01-45415) HAS NOT YET PRESCRIBED.
15

Petitioner averred that, of the plaintiffs below, only plaintiff Enrique Santos signed the verification and
certification of non-forum shopping. Under Section 5, Rule 7 of the 1997 Rules of Civil Procedure, all the
plaintiffs must sign, unless one of them is authorized by a special power of attorney to sign for and in
behalf of the others. Petitioner argues that the bare claim of Enrique Santos that he signed the verification
and certification in his behalf and of the other plaintiffs who are his co-heirs/co-owners of the property
does not even constitute substantial compliance of the rule. Contrary to the ruling of the trial court, the
absence or existence of an authority of Enrique Santos to sign the verification and certification for and in
behalf of his co-plaintiffs is not a matter of evidence. The defect is fatal to the complaint of respondents
and cannot be cured by an amendment of the complaint. The trial court erred in applying the ruling of this
Court in Dar v. Alonzo-Legasto.
16

Petitioner maintained that the action of respondents, whether it be one for quieting of title or an accion
reinvindicatoria, had prescribed when the complaint was filed on October 24, 2001. Petitioner asserts that
this is because when respondents filed their complaint, they were not in actual or physical possession of
the property, as it (petitioner) has been in actual possession of the property since 1984 when TCT No.
321744 was issued to it by the Register of Deeds. This is evident from the nature of a reinvindicatory
action itself which is an action whereby plaintiff alleges ownership over the subject parcel of land and
seeks recovery of its full possession. By their action, respondents thereby admitted that petitioner was in
actual possession of the property, and as such, respondents action for quieting of title or accion
reinvindicatoria may prescribe in ten (10) years from 1984 or in 1994, it appearing that it acted in good
faith when it acquired the property from the registered owner, conformably with Article 555(4) of the New
Civil Code.
On April 7, 2005, the CA rendered the assailed decision
17
dismissing the petition, holding that the RTC
did not commit grave abuse of its discretion amounting to lack or excess of jurisdiction in denying
petitioners motion to dismiss. As the Court held in DAR v. Alonzo-Legasto
18
and in Gudoy v.
Guadalquiver,
19
the certification signed by one with respect to a property over which he shares a common
interest with the rest of the plaintiffs (respondents herein) substantially complied with the Rules. As to the
issue of prescription, the appellate court held that the prescriptive period should be reckoned from 1996,
when petitioner claimed ownership and barred respondents from fencing the property.
Petitioner is now before this Court on petition for review on certiorari, raising the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE CERTIFICATION OF
NON-FORUM SHOPPING SIGNED BY RESPONDENT ENRIQUE G. SANTOS ALONE IS A
SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE 1997 RULES OF CIVIL
PROCEDURE AND IN APPLYING THE CASE OF GUDOY V. GUADALQUIVER, 429 SCRA 723,
WITHOUT REGARD TO MORE RECENT JURISPRUDENCE.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE AUTHORITY OF
RESPONDENT ENRIQUE G. SANTOS TO REPRESENT HIS CO-HEIRS IN THE FILING OF THE
COMPLAINT AGAINST THE PETITIONER IS A MATTER OF EVIDENCE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION FOR
QUIETING OF TITLE AND/OR ACCION REINVINDICATORIA (CIVIL CASE NO. Q-01-45415) HAS NOT
YET PRESCRIBED.
20

Petitioner reiterated its arguments in support of its petition in the CA as its arguments in support of its
petition in the present case.
Sections 4 and 5, Rule 7 of the Revised Rules of Court on verification and certification against forum
shopping read:
Sec. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need not be
under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein
are true and correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on "information and belief" or upon
"knowledge, information and belief," or lacks a proper verification, shall be treated as an unsigned
pleading.
Sec. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed
any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the
same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days
therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-
compliance with any of the undertakings therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal
with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.
The purpose of verification is simply to secure an assurance that the allegations of the petition (or
complaint) have been made in good faith; or are true and correct, not merely speculative. This
requirement is simply a condition affecting the form of pleadings, and noncompliance therewith does not
necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional
requirement.
21

The issue in the present case is not the lack of verification but the sufficiency of one executed by only one
of plaintiffs. This Court held in Ateneo de Naga University v. Manalo,
22
that the verification requirement is
deemed substantially complied with when, as in the present case, only one of the heirs-plaintiffs, who has
sufficient knowledge and belief to swear to the truth of the allegations in the petition (complaint), signed
the verification attached to it. Such verification is deemed sufficient assurance that the matters alleged in
the petition have been made in good faith or are true and correct, not merely speculative.
The same liberality should likewise be applied to the certification against forum shopping. The general
rule is that the certification must be signed by all plaintiffs in a case and the signature of only one of them
is insufficient. However, the Court has also stressed in a number of cases that the rules on forum
shopping were designed to promote and facilitate the orderly administration of justice and thus should not
be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. The
rule of substantial compliance may be availed of with respect to the contents of the certification. This is
because the requirement of strict compliance with the provisions merely underscores its mandatory
nature in that the certification cannot be altogether dispensed with or its requirements completely
disregarded.
23

The substantial compliance rule has been applied by this Court in a number of cases: Cavile v. Heirs of
Cavile,
24
where the Court sustained the validity of the certification signed by only one of petitioners
because he is a relative of the other petitioners and co-owner of the properties in dispute; Heirs of Agapito
T. Olarte v. Office of the President of the Philippines,
25
where the Court allowed a certification signed by
only two petitioners because the case involved a family home in which all the petitioners shared a
common interest; Gudoy v. Guadalquiver,
26
where the Court considered as valid the certification signed
by only four of the nine petitioners because all petitioners filed as co-owners pro indiviso a complaint
against respondents for quieting of title and damages, as such, they all have joint interest in the undivided
whole; and Dar v. Alonzo-Legasto,
27
where the Court sustained the certification signed by only one of the
spouses as they were sued jointly involving a property in which they had a common interest.
It is noteworthy that in all of the above cases, the Court applied the rule on substantial compliance
because of the commonality of interest of all the parties with respect to the subject of the controversy.
Applying the doctrines laid down in the above cases, we find and so hold that the CA did not err in
affirming the application of the rule on substantial compliance. In the instant case, the property involved is
a 936-square-meter real property. Both parties have their respective TCTs over the property.
Respondents herein who are plaintiffs in the case below have a common interest over the property being
the heirs of the late Enrique Santos, the alleged registered owner of the subject property as shown in one
of the TCTs. As such heirs, they are considered co-owners pro indiviso of the whole property since no
specific portion yet has been adjudicated to any of the heirs. Consequently, as one of the heirs and
principal party, the lone signature of Enrique G. Santos in the verification and certification is sufficient for
the RTC to take cognizance of the case. The commonality of their interest gave Enrique G. Santos the
authority to inform the RTC on behalf of the other plaintiffs therein that they have not commenced any
action or claim involving the same issues in another court or tribunal, and that there is no other pending
action or claim in another court or tribunal involving the same issues. Hence, the RTC correctly denied the
motion to dismiss filed by petitioner.
Considering that at stake in the present case is the ownership and possession over a prime property in
Quezon City, the apparent merit of the substantive aspects of the case should be deemed as a special
circumstance or compelling reason to allow the relaxation of the rule.
Time and again, this Court has held that rules of procedure are established to secure substantial justice.
Being instruments for the speedy and efficient administration of justice, they may be used to achieve such
end, not to derail it. In particular, when a strict and literal application of the rules on non-forum shopping
and verification will result in a patent denial of substantial justice, these may be liberally construed.
28
The
ends of justice are better served when cases are determined on the merits after all parties are given full
opportunity to ventilate their causes and defenses rather than on technicality or some procedural
imperfections.
29

Indeed, this Court strictly applied the rules on verification and certification against forum shopping as in
the cases of Loquias v. Office of the Ombudsman
30
and Tolentino v. Rivera.
31
However, in both cases, the
commonality of interest between or among the parties is wanting. In Loquias, the co-parties were being
sued in their individual capacities as mayor, vice mayor and members of the municipal board. In
Tolentino, the lone signature of Tolentino was held insufficient because he had no authority to sign in
behalf of the Francisco spouses. In such case, the Court concluded that Tolentino merely used the
spouses names for whatever mileage he thought he could gain. It is thus clear from these cases that the
commonality of interest is material in the relaxation of the Rules.
Anent the issue of the authority of Enrique G. Santos to represent his co-heirs/co-plaintiffs, we find no
necessity to show such authority. Respondents herein are co-owners of the subject property. As such co-
owners, each of the heirs may properly bring an action for ejectment, forcible entry and detainer, or any
kind of action for the recovery of possession of the subject properties. Thus, a co-owner may bring such
an action, even without joining all the other co-owners as co-plaintiffs, because the suit is deemed to be
instituted for the benefit of all.
32

We uphold the validity of the complaint because of the following circumstances: (1) the caption of the
instant case is Heirs of Enrique Santos v. Iglesia ni Cristo;
33
(2) the opening statement of the complaint
states that plaintiffs are the heirs of Enrique Santos and likewise names the particular heirs of the latter
who instituted the complaint below;
34
(3) the case involves a property owned by the predecessor-in-
interest of plaintiffs therein;
35
and (4) the verification signed by Enrique G. Santos clearly states that he is
one of the children of the late Enrique Santos and that he represents the heirs of said Enrique Santos.
36

On the issue of prescription of action, petitioner avers that the action of respondents is one to quiet title
and/or accion reinvindicatoria, and that respondents asserted ownership over the property and sought the
recovery of possession of the subject parcel of land. It insists that the very nature of the action
presupposes that respondents had not been in actual and material possession of the property, and that it
was petitioner which had been in possession of the property since 1984 when it acquired title thereon.
The action of respondent prescribed in ten years from 1984 when petitioner allegedly dispossessed
respondents, in accordance with Article 555(4) of the New Civil Code.
The contention of petitioner has no merit. The nature of an action is determined by the material
allegations of the complaint and the character of the relief sought by plaintiff, and the law in effect when
the action was filed irrespective of whether he is entitled to all or only some of such relief.
37
As gleaned
from the averments of the complaint, the action of respondents was one for quieting of title under Rule 64
of the Rules of Court, in relation to Article 476 of the New Civil Code. The latter provision reads:
Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is, in truth
and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action
may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any interest
therein.
A cloud is said to be a semblance of a title, either legal or equitable, or a cloud of an interest in land
appearing in some legal form but which is, in fact, unfounded, or which it would be inequitable to
enforce.
38
An action for quieting of title is imprescriptible until the claimant is ousted of his possession.
39

The owner of a real property, as plaintiff, is entitled to the relief of quieting of title even if, at the time of the
commencement of his action, he was not in actual possession of real property. After all, under Article 477
of the New Civil Code, the owner need not be in possession of the property. If on the face of TCT No.
321744 under the name of plaintiff, its invalidity does not appear but rests partly in pais, an action for
quieting of title is proper.
40

In the present case, respondents herein, as plaintiffs below, alleged in their complaint, that their father,
Enrique Santos, was the owner of the property based on TCT No. 57272 issued on July 27, 1961; and
that, after his death on February 9, 1970, they inherited the property; Enrique Santos, during his lifetime,
and respondents, after the death of the former, had been in actual, continuous and peaceful possession
of the property until 1994 when petitioner claimed ownership based on TCT No. 321744 issued on
September 18, 1984 and barred respondents from fencing their property.
Petitioners claim that it had been in actual or material possession of the property since 1984 when TCT
No. 321744 was issued in its favor is belied by the allegations in the complaint that respondents had been
in actual and material possession of the property since 1961 up to the time they filed their complaint on
October 24, 2001.
Admittedly, respondents interposed the alternative reinvindicatory action against petitioner. An accion
reinvindicatoria does not necessarily presuppose that the actual and material possession of the property
is on defendant and that plaintiff seeks the recovery of such possession from defendant. It bears stressing
that an accion reinvindicatoria is a remedy seeking the recovery of ownership and includes jus
possidendi, jus utendi, and jus fruendi as well. It is an action whereby a party claims ownership over a
parcel of land and seeks recovery of its full possession.
41
Thus, the owner of real property in actual and
material possession thereof may file an accion reinvindicatoria against another seeking ownership over a
parcel of land including jus vindicandi, or the right to exclude defendants from the possession thereof. In
this case, respondents filed an alternative reinvindicatory action claiming ownership over the property and
the cancellation of TCT No. 321744 under the name of petitioner. In fine, they sought to enforce their jus
utendi and jus vindicandi when petitioner claimed ownership and prevented them from fencing the
property.
Since respondents were in actual or physical possession of the property when they filed their complaint
against petitioner on October 24, 2001, the prescriptive period for the reinvindicatory action had not even
commenced to run, even if petitioner was able to secure TCT No. 321744 over the property in 1984. The
reason for this is that
x x x one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the
rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity
to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title,
which right can be claimed only by one who is in possession.
42

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in
CA-G.R. SP No. 72686 is AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 168747 October 19, 2007
VICTORIA REGNER, Petitioner, vs. CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU
COUNTRY CLUB, Inc., Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
This Petition for Review on Certiorari seeks to reverse the Decision
1
dated 6 May 2005 of the Court of
Appeals in CA-G.R. CV No. 71028 entitled, "Victoria Regner v. Cynthia Logarta, Teresa R. Tormis and
Cebu Country Club, Inc.," which affirmed the Order dated 9 November 2000 of the Regional Trial Court
(RTC) of Cebu, granting herein respondents motion to dismiss Civil Case No. CEB 23927. The Order
dated 9 November 2000 of the RTC dismissed herein petitioners complaint for declaration of nullity of a
deed of donation, for failure to serve summons on Cynthia Logarta, an indispensable party therein.
Civil Case No. CEB. 23927 arose from the following factual antecedents:
Luis Regner (Luis) had three daughters with his first wife, Anicita C. Regner, namely, Cynthia Logarta
(Cynthia) and Teresa Tormis (Teresa), the respondents herein, and Melinda Regner-Borja (Melinda).
Herein petitioner Victoria Regner (Victoria) is the second wife of Luis.
During the lifetime of Luis, he acquired several properties, among which is a share at Cebu Country Club
Inc., evidenced by Proprietary Ownership Certificate No. 0272. On 15 May 1998, Luis executed a Deed
2

of Donation in favor of respondents Cynthia and Teresa covering Proprietary Ownership Certificate No.
0272 of the Cebu Country Club, Inc.
Luis passed away on 11 February 1999.
On 15 June 1999, Victoria filed a Complaint
3
for Declaration of Nullity of the Deed of Donation with Prayer
for Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order against Cynthia and
Teresa with the RTC, docketed as Civil Case No. CEB. 23927. Victoria alleged in her complaint that: on
17 March 1997, Luis made a written declaration wherein he stated that due to his illness and
forgetfulness, he would not sign any document without the knowledge of his lawyer, Atty. Francis Zosa;
on 15 May 1998, when Luis was already very ill and no longer of sound and disposing mind, Cynthia and
Teresa , conspiring and confederating with each other, fraudulently made or caused to be fraudulently
made a Deed of Donation whereby they made it appear that Luis donated to them Proprietary Ownership
Certificate No. 0272; since Luis no longer had the ability to write or affix his signature, Melinda, acting
under the influence of her sisters, Cynthia and Teresa, fraudulently manipulated the hand of Luis so that
he could affix his thumbmark on the assailed Deed of Donation; on 8 February 1998, or three days before
the death of Luis, and when he was already in comatose condition at the Cebu Doctors Hospital,
Melinda, Teresa, and Cynthia caused the preparation of an affidavit to the effect that Luis affirmed the
Deed of Donation he allegedly executed earlier by lifting his hand to affix his thumbmark on the said
affidavit.
Sheriff Melchor A. Solon served the summonses on Cynthia and Teresa at the Borja Family Clinic in
Tagbilaran City wherein Melinda worked as a doctor, but Melinda refused to receive the summonses for
her sisters and informed the sheriff that their lawyer, Atty. Francis Zosa, would be the one to receive the
same.
Upon her arrival in the Philippines, on 1 June 2000, Teresa was personally served the summons at Room
304, Regency Crest Condominium, Banilad, Cebu City. She filed her Answer
4
with counterclaim with the
RTC on 6 June 2000.
Subsequently, on 12 September 2002, Teresa filed a motion to dismiss Civil Case No. CEB 23927
because of petitioners failure to prosecute her action for an unreasonable length of time.
Petitioner opposed
5
the motion and filed her own motion to set the case for pre-trial, to which Teresa filed
her rejoinder on the ground that their sister, Cynthia, an indispensable party, had not yet been served a
summons. Thus, Teresa prayed for the dismissal of petitioners complaint, as the case would not proceed
without Cynthias presence.
On 9 November 2000, the RTC issued an Order
6
granting respondent Teresas motion to dismiss,
pertinent portions of which read:
Considering that the donees in the Deed of Donation are Cynthia R. Logarta and Teresa R. Tormis, they
are therefore an (sic) indispensable party (sic). In the case of Quisumbing vs. Court of Appeals, 189
SCRA 325, indispensable parties are those with such an interest in the controversy that a final decree
would necessarily affect their rights so that the court could not proceed without their presence
Wherefore, in view of the foregoing, the instant case is hereby dismissed without prejudice.
A motion for reconsideration was filed by petitioner, but the same was denied in an Order dated 14
February 2001.
Aggrieved, petitioner appealed to the Court of Appeals. On 6 May 2005, the Court of Appeals rendered a
Decision denying the appeal and affirming in toto the order of dismissal of the complaint by the RTC and
the denial of the motion for reconsideration thereof. The Court of Appeals ratiocinated that petitioners
failure to move for an extraterritorial service of summons constitutes failure to prosecute for an
unreasonable length of time, thus:
[T]he plaintiff-appellant [Victoria Regner] should have moved for the extraterritorial service of summons
for both defendants-appellees Teresa R. Tormis and Cynthia R. Logarta as they were not residing and
were not found in the Philippines when plaintiff-appellant [Victoria Regner] filed this case below. Although
defendant-appellant Teresa Tormis was personally served with summons on June 1, 2000 when she
came to the Philippines but the same was only effected after a long wait or after the lapse of almost one
year from the date the complaint was filed on June 15, 1999. To allow this practice would be to make the
continuation of like proceedings before the courts dependent on when the defendants would be
personally served with summons by the time they would come to the Philippines, which would only
unnecessarily delay the proceedings and clog the court dockets as well. The afore-cited rule was
precisely crafted to meet situations similar to the present case to avoid unnecessary delays.
It has to be emphasized that it is incumbent upon the plaintiff [Victoria Regner] to move with leave of court
for the extraterritorial service of summons. Taking into account the considerable time that had elapsed
from the filing of the complaint on June 15, 1999 until defendant-appellee Teresa R. Tormis, through
counsel, filed a motion to dismiss on September 12, 2000, or approximately fifteen (15) months, without
any act on the part of plaintiff-appellant [Victoria Regner] to move for extraterritorial service of summons
upon the person of defendant-appellee Cynthia Logarta renders plaintiff-appellants [Victoria Regner]
complaint dismissible for failure to prosecute her action for unreasonable length of time under Section 3,
Rule 17, Revised Rules of Court, x x x.
7

Hence, this appeal via petition
8
for review on certiorari filed by petitioner raising the following assignment
of errors:
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DELAY IN SERVING SUMMONS ON ONE
OF THE DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE NOTWITHSTANDING THAT
THE REST OF THE CO-DEFENDANTS WERE DULY SERVED WITH SUMMONSES
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE ANSWER FILED BY ONE
INDIVIDUAL DEFENDANT REDOUNDS TO THE BENEFIT OF THE OTHER DEFENDANT WHO HAS
NOT BEEN SERVED WITH SUMMONS, THE NATURE OF ACTION BEING ADMITTEDLY COMMON
AMONG ALL DEFENDANTS.
9

From the foregoing, this Court identifies the issues to be resolved in this petition as: (1) Whether a co-
donee is an indispensable party in an action to declare the nullity of the deed of donation, and (2) whether
delay in the service of summons upon one of the defendants constitutes failure to prosecute that would
warrant dismissal of the complaint.
A Court must acquire jurisdiction over the persons of indispensable parties before it can validly pronounce
judgments personal to the parties. Courts acquire jurisdiction over a party plaintiff upon the filing of the
complaint. On the other hand, jurisdiction over the person of a party defendant is assured upon the
service of summons in the manner required by law or otherwise by his voluntary appearance. As a rule, if
a defendant has not been summoned, the court acquires no jurisdiction over his person, and a personal
judgment rendered against such defendant is null and void.
10
A decision that is null and void for want of
jurisdiction on the part of the trial court is not a decision in the contemplation of law and, hence, it can
never become final and executory.
11

Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-interest without whom
there can be no final determination of an action. As such, they must be joined either as plaintiffs or as
defendants. The general rule with reference to the making of parties in a civil action requires, of course,
the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any
and all conditions, their presence being a sine qua non for the exercise of judicial power.
12
It is precisely
"when an indispensable party is not before the court [that] the action should be dismissed."
13
The
absence of an indispensable party renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present.
14

As we ruled in Alberto v. Mananghala
15
:
In an action for recovery of property against a person who purchased it from another who in turn acquired
it from others by the same means or by donation or otherwise, the predecessors of defendants are
indispensable parties if the transfers, if not voided, may bind plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In
the latter case, this Court held:
In order to bring this suit duly to a close, it is imperative to determine the only question raised in
connection with the pending appeal, to wit, whether all the persons who intervened in the matter of the
transfers and donation herein referred to, are or are not necessary parties to this suit, since it is asked in
the complaint that the said transfers and donation be declared null and void an indispensable
declaration for the purpose, in a proper case, of concluding the plaintiff to be the sole owner of the house
in dispute.
If such a declaration of annulment can directly affect the persons who made and who were concerned in
the said transfers, nothing could be more proper and just than to hear them in the litigation, as parties
interested in maintaining the validity of those transactions, and therefore, whatever be the nature of the
judgment rendered, Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente Miranda, and Rafael
Sierra, besides the said minors, must be included in the case as defendants." (Garcia vs. Reyes, 17 Phil.,
130-131.)
It takes no great degree of legal sophistication to realize that Cynthia and Teresa are indispensable
parties to Civil Case No. CEB 23927. Cynthia and Teresa allegedly derived their rights to the subject
property by way of donation from their father Luis. The central thrust of the petitioners complaint in Civil
Case No. CEB 23927 was that Luis could not have donated Proprietary Ownership Certificate No. 0272 to
his daughters Cynthia and Teresa, as Luis was already very ill and no longer of sound and disposing
mind at the time of donation on 15 May 1997. Accordingly, the prayer in petitioners complaint was for the
trial court to declare null and void the Deed of Donation and to restrain the Cebu Country Club, Inc. from
transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa.
Thus, based on the Deed of Donation, Teresa and Cynthia are co-owners of Proprietary Membership
Certificate No. 0272 of Cebu Country Club, Inc. The country club membership certificate is undivided and
it is impossible to pinpoint which specific portion of the property belongs to either Teresa or Cynthia.
Indeed, both Teresa and Cynthia are indispensable parties in Civil Case No. CEB 23927.
An indispensable party has been defined as follows:
An indispensable party is a party who has such an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that a
final decree cannot be made without affecting his interest or leaving the controversy in such a condition
that its final determination may be wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence there cannot be a determination
between the parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a person is not an indispensable
party if his presence would merely permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple litigation.
16

In Servicewide Specialists, Incorporated v. Court of Appeals,
17
this Court held that no final determination
of a case could be made if an indispensable party is not legally present therein:
An indispensable party is one whose interest will be affected by the courts action in the litigation, and
without whom no final determination of the case can be had. The partys interest in the subject matter of
the suit and in the relief sought are so inextricably intertwined with the other parties that his legal
presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a
resolution of the dispute of the parties before the court which is effective, complete, or equitable.
The rationale for treating all the co-owners of a property as indispensable parties in a suit involving the
co-owned property is explained in Arcelona v. Court of Appeals
18
:
As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by a
person having merely an undivided interest in any given tract of land, a judgment in favor of the
defendants would not be conclusive as against the other co-owners not parties to the suit, and thus the
defendant in possession of the property might be harassed by as many succeeding actions of ejectment,
as there might be co-owners of the title asserted against him. The purpose of this provision was to
prevent multiplicity of suits by requiring the person asserting a right against the defendant to include with
him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the
whole matter in dispute may be determined once and for all in one litigation.
Applying the foregoing definitions and principles to the present case, this Court finds that any decision in
Civil Case No. CEB 23927 cannot bind Cynthia, and the Court cannot nullify the donation of the property
she now co-owns with Teresa, even if limited only to the portion belonging to Teresa, to whom summons
was properly served, since ownership of the property is still pro indiviso. Obviously, Cynthia is an
indispensable party in Civil Case No. CEB 23927 without whom the lower court is barred from making a
final adjudication as to the validity of the entire donation. Without the presence of indispensable parties to
a suit or proceeding, a judgment therein cannot attain finality.
19

Being an indispensable party in Civil Case No. CEB 23927, the trial court must also acquire jurisdiction
over Cynthias person through the proper service of summons.
Based on the foregoing disquisitions, the issue of whether the answer filed by Teresa should benefit
Cynthia who was not served summons need not be discussed.
As to determine whether Cynthia was properly served a summons, it will be helpful to determine first the
nature of the action filed against Cynthia and Teresa by petitioner Victoria, whether it is an action in
personam, in rem or quasi in rem. This is because the rules on service of summons embodied in Rule 14
apply according to whether an action is one or the other of these actions.
In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or
the recovery of damages.
20
In contrast, in a real action, the plaintiff seeks the recovery of real property; or,
as indicated in Section 2(a), Rule 4 of the then Rules of Court, a real action is an action affecting title to
real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property. An action in personam is an action against a person on the basis of his
personal liability, while an action in rem is an action against the thing itself, instead of against the
person.
21

In an action in personam, personal service of summons or, if this is not possible and he cannot be
personally served, substituted service, as provided in Section 7, Rule 14 of the Rules of Court,
22
is
essential for the acquisition by the court of jurisdiction over the person of a defendant who does not
voluntarily submit himself to the authority of the court.
23
If defendant cannot be served a summons
because he is temporarily abroad, but is otherwise a Philippine resident, service of summons may, by
leave of court, be made by publication.
24
Otherwise stated, a resident defendant in an action in personam,
who cannot be personally served a summons, may be summoned either by means of substituted service
in accordance with Section 7, Rule 14 of the Rules of Court, or by publication as provided in Sections 15
and 16 of the same Rule.
In all of these cases, it should be noted, defendant must be a resident of the Philippines; otherwise an
action in personam cannot be brought because jurisdiction over his person is essential to make a binding
decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the defendant is
not essential for giving the court jurisdiction so long as the court acquires jurisdiction over the res. If the
defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in
accordance with Section 15, Rule 14 of the Rules of Court, which provides:
Section 15. Extraterritorial service. - When the defendant does not reside and is not found in the
Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which
is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or
contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from
any interest therein, or the property of the defendant has been attached within the Philippines, service
may, by leave of court, be effected out of the Philippines by personal service as under Section 6; or by
publication in a newspaper of general circulation in such places and for such time as the court may order,
in which case a copy of the summons and order of the court shall be sent by registered mail to the last
known address of the defendant, or in any other manner the court may deem sufficient. Any order
granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after
notice, within which the defendant must answer.
As stated above, there are only four instances wherein a defendant who is a non-resident and is not
found in the country may be served a summons by extraterritorial service, to wit: (1) when the action
affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is property
within the Philippines, on which the defendant claims a lien or an interest, actual or contingent; (3) when
the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest
in property located in the Philippines; and (4) when the defendant non-residents property has been
attached within the Philippines. In these instances, service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.
25

In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has jurisdiction
over the res, i.e., the personal status of the plaintiff who is domiciled in the Philippines or the property
litigated or attached. Service of summons in the manner provided in Section 15, Rule 14 of the Rules of
Court is not for the purpose of vesting the court with jurisdiction, but for complying with the requirements
of fair play or due process, so that the defendant will be informed of the pendency of the action against
him; and the possibility that property in the Philippines belonging to him, or in which he has an interest,
might be subjected to a judgment in favor of the plaintiff and he can thereby take steps to protect his
interest if he is so minded.
26

In petitioners Complaint in Civil Case No. CEB No. 23427, she alleged that Cynthia is residing at 462
West Vine No. 201, Glendale, California, 912041, U.S.A.; while Teresa is residing at 2408 South
Hacienda Boulevard, Hacienda Heights, California, but they usually visit here in the Philippines and can
be served summonses and other processes at the Borja Family Clinic, Bohol. Pertinent portions of the
Complaint read:
2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married to Ramon Logarta, resident (sic) 463
West Vine No.201, Glendale, California, 912041, USA. She however usually visits in the Philippines and
can be served with summons and other processes of this Honorable Court at Borja Family Clinic,
Tagbilaran, Bohol;
3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age, married to Antonio Tormis, and a
resident of 2408 South Hacienda Heights, California, 19745, U.S.A. She however usually visits in the
Philippines and can be served with summons and other processes of this Honorable Court at Borja
Family Clinic, Tagbilaran, Bohol.
27

Petitioner prayed for a declaration of nullity of the deed of donation, to restrain Cebu Country Club, Inc.
from transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa,
and for moral and exemplary damages. Civil Case No. CEB 23927 is evidently an action against Cynthia
and Teresa on the basis of their personal liability for the alleged fraudulent transfer of the subject Country
Club membership from Luis to their name. In this sense, petitioner questions the participation and shares
of Cynthia and Teresa in the transferred Country Club membership. Moreover, the membership certificate
from the Cebu Country Club, Inc. is a personal property. Thus, the action instituted by petitioner before
the RTC is in personam.
Being an action in personam, the general rule requires the personal service of summons on Cynthia
within the Philippines, but this is not possible in the present case because Cynthia is a non-resident and is
not found within the Philippines.
As Cynthia is a nonresident who is not found in the Philippines, service of summons on her must be in
accordance with Section 15, Rule 14 of the Rules of Court. Such service, to be effective outside the
Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of general
circulation in such places and for such time as the court may order, in which case a copy of the summons
and order of the court should be sent by registered mail to the last known address of the defendant; or (3)
in any other manner which the court may deem sufficient. The third mode, like the first two, must be made
outside the Philippines, such as through the Philippine Embassy in the foreign country where Cynthia
resides.
Since in the case at bar, the service of summons upon Cynthia was not done by any of the authorized
modes, the trial court was correct in dismissing petitioners complaint.
Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states
SEC. 3. Dismissal due to fault of plaintiff. If, for no justifiable cause, the plaintiff fails to appear on the
date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an
unreasonable length of time, or to comply with these Rules or any order of the court, the complaint may
be dismissed upon motion of the defendant or upon the court's own motion, without prejudice to the right
of the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal shall
have the effect of an adjudication upon the merits, unless otherwise declared by the court.
As can be gleaned from the rule, there are three instances when the complaint may be dismissed due to
the plaintiff's fault: (1) if he fails to appear during a scheduled trial, especially on the date for the
presentation of his evidence in chief; (2) if he fails to prosecute his action for an unreasonable length of
time; and (3) if he fails to comply with the rules or any order of the court.
28

Considering the circumstances of the case, it can be concluded that the petitioner failed to prosecute the
case for an unreasonable length of time. There is failure to prosecute when the plaintiff, being present, is
not ready or is unwilling to proceed with the scheduled trial or when postponements in the past were due
to the plaintiff's own making, intended to be dilatory or caused substantial prejudice on the part of the
defendant.
29

While a court can dismiss a case on the ground of failure to prosecute, the true test for the exercise of
such power is whether, under the prevailing circumstances, the plaintiff is culpable for want of due
diligence in failing to proceed with reasonable promptitude.
30
As to what constitutes an "unreasonable
length of time," within the purview of the above-quoted provision, the Court has ruled that it "depends
upon the circumstances of each particular case," and that "the sound discretion of the court" in the
determination of said question "will not be disturbed, in the absence of patent abuse"; and that "the
burden of showing abuse of judicial discretion is upon the appellant since every presumption is in favor of
the correctness of the court's action."
31
Likewise, the concept of promptness is a relative term and must
not unnecessarily be an inflexible one. It connotes an action without hesitation and loss of time. As to
what constitutes the term is addressed to the consideration of the trial court, bearing in mind that while
actions must be disposed of with dispatch, the essential ingredient is the administration of justice and not
mere speed.
32

It is well to quote the doctrine laid in Padua v. Ericta,
33
as accentuated in the subsequent case Marahay v.
Melicor
34
:
Courts should not brook undue delays in the ventilation and determination of causes. It should be their
constant effort to assure that litigations are prosecuted and resolved with dispatch. Postponements of
trials and hearings should not be allowed except on meritorious grounds; and the grant or refusal thereof
rests entirely in the sound discretion of the Judge. It goes without saying, however, that discretion must
be reasonably and wisely exercised, in the light of the attendant circumstances. Some reasonable
deferment of the proceedings may be allowed or tolerated to the end that cases may be adjudged only
after full and free presentation of evidence by all the parties, especially where the deferment would cause
no substantial prejudice to any part. The desideratum of a speedy disposition of cases should not, if at all
possible, result in the precipitate loss of a partys right to present evidence and either in plaintiff's being
non-suited or the defendant's being pronounced liable under an ex parte judgment.
"[T]rial courts have x x x the duty to dispose of controversies after trial on the merits whenever possible. It
is deemed an abuse of discretion for them, on their own motion, to enter a dismissal which is not
warranted by the circumstances of the case (Municipality of Dingras v. Bonoan, 85 Phil. 458-59 [1950]).
While it is true that the dismissal of an action on grounds specified under Section 3, Rule 17 of the
Revised Rules of Court is addressed to their discretion (Flores v. Phil. Alien Property Administrator, 107
Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio, 105 Phil. 1269
[1959]; Inter-Island Gas Service, Inc. v. De la Gerna, L-17631, October 19, 1966, 18 SCRA 390), such
discretion must be exercised soundly with a view to the circumstances surrounding each particular case
(Vernus-Sanciangco v. Sanciangco, L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that serve as
mitigating circumstances for the delay, the same should be considered and dismissal denied or set aside
(Rudd v. Rogerson, 15 ALR 2d 672; Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]),
especially where the suit appears to be meritorious and the plaintiff was not culpably negligent and no
injury results to defendant (27 C.J.S. 235-36; 15 ALR 3rd 680)." (Abinales vs. Court of First Instance of
Zamboanga City, Br. I, 70 SCRA 590, 595).
"It is true that the allowance or denial of petitions for postponement and the setting aside of orders
previously issued, rest principally upon the sound discretion of the judge to whom they are addressed, but
always predicated on the consideration that more than the mere convenience of the courts or of the
parties of the case, the ends of justice and fairness would be served thereby (Camara Vda. de Zubiri v.
Zubiri, et al., L-16745, December 17, 1966). When no substantial rights are affected and the intention to
delay is not manifest, the corresponding motion to transfer the hearing having been filed accordingly, it is
sound judicial discretion to allow them (Rexwell Corp. v. Canlas, L-16746, December 30, 1961)." x x x.
This Court recalls that the complaint herein was filed on 15 June 1999. The summonses for Cynthia and
Teresa were served on their sister Melinda at the Borja Family Clinic in Tagbilaran City, but the latter
refused to receive the same. It was only on 1 June 2000 that summons was served on Teresa at Room
304, Regency Crest Condominium, Banilad, Cebu City, when she was in the Philippines for a visit.
However, the summons for Cynthia was never served upon her.1wphi1
Although Section 1, Rule 14 of the Rules, imposes upon the clerk of court the duty to serve summons,
this does not relieve the petitioner of her own duty as the plaintiff in a civil case to prosecute the case
diligently. If the clerk had been negligent, it was petitioners duty to call the courts attention to that fact. It
must be noted that it was not even petitioner who called the courts attention that summons had not been
served on Cynthia, but Teresa. This despite the fact that petitioner was aware, as early as 15 June 1999,
when she filed her complaint, that the summonses could not be served on Teresa and Cynthia, as she
admitted therein that Teresa and Cynthia were residing abroad. Petitioner as plaintiff should have asked
that Cynthia and Teresa be summoned by publication at the earliest possible time. She cannot idly sit by
and wait till this is done. She cannot afterwards wash her hands and say that the delay was not her fault.
She cannot simply "fold [her] hands" and say that it is the duty of the clerk of court to have the
summonses served on Cynthia and Teresa for the prompt disposition of her case. If there were no means
of summoning any of the defendants, petitioner should have so informed the court within a reasonable
period of time, so that the case could be disposed of one way or another and the administration of justice
would not suffer delay. The non-performance of that duty by petitioner as plaintiff is an express ground for
dismissing an action. For, indeed, this duty imposed upon her was precisely to spur on the slothful.
For failure to diligently pursue the complaint, petitioner trifled with the right of the respondents to speedy
trial. It also sorely tried the patience of the court and wasted its precious time and attention. To allow
petitioner to wait until such time that summonses were served on respondents would frustrate the
protection against unreasonable delay in the prosecution of cases and violate the constitutional mandate
of speedy dispensation of justice which would in time erode the peoples confidence in the judiciary. We
take a dim view of petitioners complacent attitude. Ex nihilo nihil fit.
35

Likewise, petitioners counsel inexplicably failed to diligently pursue the service of summonses on
respondents. These were acts of negligence, laxity and truancy which the court could have very easily
avoided or timely remedied. Petitioner and her counsel could not avail themselves of this Courts
sympathy, considering their apparent complacency, if not delinquency, in the conduct of their litigation.
Considering the foregoing, we sustain the dismissal by the trial court of the petitioners complaint for
failure to prosecute for a period of more than one year (from the time of filing thereof on 15 June 1997
until Teresas filing of a motion to dismiss).
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the assailed
Decision dated 6 May 2005 of the Court of Appeals in CA-G.R. CV No. 71028 is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.


LEONOR B. CRUZ,
Petitioner,



- versus -




TEOFILA M. CATAPANG,
Respondent.
G.R. No. 164110

Present:

QUISUMBING J. Chairperson
CARPIO
CARPIO MORALES
TINGA an
VELASCO JR JJ

Promulgate:

Feruary
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
This petition for review seeks the reversal of the Deision[1] ate Septemer an the
Resolution[2] ate June of the Court of Appeals in CA-GR SP No 9 The Court of Appeals reverse the
Deision[3] ate Otoer of the Regional Trial Court (RTC) Branh Taal Batangas whih ha earlier
affirme the Deision[4] ate Septemer 999 of the
th
Muniipal Ciruit Trial Court (MCTC) of Taal Batangas
orering responent to vaate an eliver possession of a portion of the lot o-owne y petitioner Luz Cruz an Norma
Maligaya
The anteeent fats of the ase are as follows
Petitioner Leonor B Cruz Luz Cruz an Norma Maligaya are the o-owners of a parel of lan
overing an area of square meters loate at Barangay Mahaang Lulo Taal Batangas[5] With the onsent
of Norma Maligaya one of the aforementione o-owners responent Teofila M Catapang uilt a house on a lot
ajaent to the aovementione parel of lan sometime in 99 The house intrue however on a portion of the
o-owne property[6]
In the first week of Septemer 99 petitioner Leonor B Cruz visite the property an was surprise to
see a part of responents house intruing unto a portion of the o-owne property She then mae several emans
upon responent to emolish the intruing struture an to vaate the portion enroahing on their property The
responent however refuse an isregare her emans[7]
On January 99 the petitioner file a omplaint[8] for forile entry against responent efore the

th
MCTC of Taal Batangas The MCTC eie in favor of petitioner ruling that onsent of only one of the o-
owners is not suffiient to justify efenants onstrution of the house an possession of the portion of the lot in
question[9] The ispositive portion of the MCTC eision reas:
WHEREFORE jugment is herey renere orering the efenant or any
person ating in her ehalf to vaate an eliver the possession of the area illegally oupie
to the plaintiff; orering the efenant to pay plaintiff reasonale attorneys fees of
P plus osts of suit
SO ORDERED[10]
On appeal the RTC Branh Taal Batangas affirme the MCTCs ruling in a Deision ate
Otoer the ispositive portion of whih states:
Wherefore premises onsiere the eision [appeale from is herey
affirme in toto
SO ORDERED[11]
After her motion for reonsieration was enie y the RTC responent file a petition for review with the
Court of Appeals whih reverse the RTCs eision The Court of Appeals hel that there is no ause of ation for forile
entry in this ase eause responents entry into the property onsiering the onsent given y o-owner Norma Maligaya
annot e haraterize as one mae through strategy or stealth whih gives rise to a ause of ation for forile
entry[12] The Court of Appeals eision further hel that petitioners remey is not an ation for ejetment ut an entirely
ifferent reourse with the appropriate forum The Court of Appeals ispose thus:
WHEREFORE premises onsiere the instant Petition is herey
GRANTED The hallenge Deision ate Otoer as well as the Orer ate
January of the Regional Trial Court of Taal Batangas Branh are herey
REVERSED an SET ASIDE an in lieu thereof another is entere DISMISSING the
omplaint for forile entry okete as Civil Case No -T
SO ORDERED[13]
After petitioners motion for reonsieration was enie y the Court of Appeals in a Resolution ate
June she file the instant petition
Raise efore us for onsieration are the following issues:
I
WHETHER OR NOT THE KNOWLEDGE AND CONSENT OF CO-OWNER NORMA
MALIGAYA IS A VALID LICENSE FOR THE RESPONDENT TO ERECT THE
BUNGALOW HOUSE ON THE PREMISES OWNED PRO-INDIVISO SANS CONSENT
FROM THE PETITIONER AND OTHE[R CO-OWNER[
II
WHETHER OR NOT RESPONDENT BY HER ACTS HAS ACQUIRED EXCLUSIVE
OWNERSHIP OVER THE PORTION OF THE LOT SUBJECT OF THE PREMISES
PURSUANT TO THE CONSENT GRANTED UNTO HER BY CO-OWNER NORMA
MALIGAYA TO THE EXCLUSION OF THE PETITIONER AND THE OTHER CO-
OWNER[14]
III
WHETHER OR NOT RESPONDENT IN FACT OBTAINED POSSESSION OF THE
PROPERTY IN QUESTION BY MEANS OF SIMPLE STRATEGY[15]
Petitioner prays in her petition that we effetively reverse the Court of Appeals eision
Simply put the main issue efore us is whether onsent given y a o-owner of a parel of lan to a
person to onstrut a house on the o-owne property warrants the ismissal of a forile entry ase file y another
o-owner against that person
In her memoranum[16] petitioner ontens that the onsent an knowlege of o-owner Norma
Maligaya annot efeat the ation for forile entry sine it is a asi priniple in the law of o-ownership that no
iniviual o-owner an laim title to any efinite portion of the lan or thing owne in ommon until partition
On the other han responent in her memoranum[17] ounters that the omplaint for forile entry annot
prosper eause her entry into the property was not through strategy or stealth ue to the onsent of one of the o-
owners She further argues that sine Norma Maligaya is resiing in the house she uilt the issue is not just possession
de facto ut also one of possession de jure sine it involves rights of o-owners to enjoy the property
As to the issue of whether or not the onsent of one o-owner will warrant the ismissal of a forile
entry ase file y another o-owner against the person who was given the onsent to onstrut a house on the o-
owne property we have hel that a o-owner annot evote ommon property to his or her exlusive use to the
prejuie of the o-ownership[18] In our view a o-owner annot give vali onsent to another to uil a house on
the o-owne property whih is an at tantamount to evoting the property to his or her exlusive use
Furthermore Artiles an 9 of the Civil Coe provie:
Art Eah o-owner may use the thing owne in ommon provie he oes
so in aorane with the purpose for whih it is intene an in suh a way as not to injure the
interest of the o-ownership or prevent the other o-owners from using it aoring to their
rights The purpose of the o-ownership may e hange y agreement express or implie
Art 9 None of the o-owners shall without the onsent of the others make
alterations in the thing owne in ommon even though enefits for all woul result
therefrom However if the withholing of the onsent y one or more of the o-owners is
learly prejuiial to the ommon interest the ourts may affor aequate relief
Artile states eah o-owner may use the thing owne in ommon provie he oes so in
aorane with the purpose for whih it is intene an in suh a way as not to injure the interest of the o-
ownership or prevent the other o-owners from using it aoring to their rights Giving onsent to a thir person to
onstrut a house on the o-owne property will injure the interest of the o-ownership an prevent other o-owners
from using the property in aorane with their rights
Uner Artile 9 none of the o-owners shall without the onsent of the others make alterations in the thing
owne in ommon It neessarily follows that none of the o-owners an without the onsent of the other o-owners valily
onsent to the making of an alteration y another person suh as responent in the thing owne in ommon Alterations
inlue any at of strit ominion or ownership an any enumrane or isposition has een hel impliitly to e an at of
alteration[19] The onstrution of a house on the o-owne property is an at of ominion Therefore it is an alteration
falling uner Artile 9 of the Civil Coe There eing no onsent from all o-owners responent ha no right to onstrut
her house on the o-owne property
Consent of only one o-owner will not warrant the ismissal of the omplaint for forile entry file against the
uiler The onsent given y Norma Maligaya in the asene of the onsent of petitioner an Luz Cruz i not vest upon
responent any right to enter into the o-owne property Her entry into the property still falls uner the lassifiation
through strategy or stealth
The Court of Appeals hel that there is no forile entry eause responents entry into the property
was not through strategy or stealth ue to the onsent given to her y one of the o-owners We annot give our
imprimatur to this sweeping onlusion Responents entry into the property without the permission of petitioner
oul appear to e a seret an lanestine at one in onnivane with o-owner Norma Maligaya whom
responent allowe to stay in her house Entry into the lan effete lanestinely without the knowlege of the
other o-owners oul e ategorize as possession y stealth[20] Moreover responents at of getting only the
onsent of one o-owner her sister Norma Maligaya an allowing the latter to stay in the onstrute house an in
fat e onsiere as a strategy whih she utilize in orer to enter into the o-owne property As suh
responents ats onstitute forile entry
Petitioners filing of a omplaint for forile entry in our view was within the one-year perio for filing the
omplaint The one-year perio within whih to ring an ation for forile entry is generally ounte from the ate of atual
entry to the lan However when entry is mae through stealth then the one-year perio is ounte from the time the
petitioner learne aout it[21] Although responent onstrute her house in 99 it was only in Septemer 99 that
petitioner learne of it when she visite the property Aoringly she then mae emans on responent to vaate the
premises Failing to get a favorale response petitioner file the omplaint on January 99 whih is within the one-year
perio from the time petitioner learne of the onstrution
WHEREFORE the petition is GRANTED The Deision ate Septemer an the
Resolution ate June of the Court of Appeals in CA-GR SP No 9 are REVERSED an SET
ASIDE The Deision ate Otoer of the Regional Trial Court Branh Taal Batangas is
REINSTATED Costs against responent
SO ORDERED.

G.R. No. L-10619 February 28, 1958
LEOGARIO RONQUILLO, ET AL., plaintiffs-appellants, vs. JOSE ROCO, as Administrator of
VICENTE, ROCO Y. DOMINGUEZ ET AL., defendants-appellees.
Moises B. Cruz for appellants. Vicente Roco, Jr. for appellees.
MONTEMAYOR, J .:
Involving as it does only a question of law, the present appeal from the order of the Court of First Instance
of Camarines Sur, dated March 6, 1955, dismissing the amended and supplemental complaint of plaintiffs
on motion of defendants that it did not state a cause of action, was taken directly to this Court.
The facts and the issue involved in the appeal are well and correctly stated in the appealed order, the
pertinent portion of which we are reproducing and making our own:
The amended and supplemental complaint alleged that the plaintiffs have been in the continuous and
uninterrupted use of a road or passage way which traversed the land of the defendants and their
predecessors in interest, in going to Igualdad Street and the market place of Naga City, from their
residential land and back, for more than 20 years; that the defendants and the tenants of Vicente Roco,
the predecessors in interest of the said defendants have long recognized and respected the private legal
easement of road right of way of said plaintiffs; that on May 12, 1953, the defendants Jose Roco thru his
co-defendants, Raymundo Martinez and their men with malice aforethought and with a view to obstructing
the plaintiffs' private legal easement over the property of the late Vicente Roco, started constructing a
chapel in the middle of the said right of way construction actually impeded, obstructed and disturbed the
continuous exercise of the rights of the plaintiffs over said right of way; that on July 10, 1954 the new
defendants Natividad Roco and Gregorio Miras, Jr. with the approval of the defendant, Jose Roco and
with the help of their men and laborers, by means of force, intimidation, and threats, illegally and violently
planted wooden posts, fenced with barbed wire and closed hermitically the road passage way and their
right of way in question against their protests and opposition, thereby preventing them from going to or
coming from their homes to Igualdad Street and the public market of the City of Naga.
It is very clear from the allegations of the plaintiffs in their amended and supplemental complaint, that they
claim to have acquired the easement of right of way over the land of the defendants and the latter's
predecessors in interest, Vicente Roco, thru prescription by their continuous and uninterrupted use of a
narrow strip of land of the defendants as passage way or road in going to Igualdad Street and the public
market of Naga City, from their residential land or houses, and return.
The only question therefore to determine in this case, is whether an easement of right of way can be
acquired thru prescription.
The dismissal was based on the ground that an easement of right of way though it may be apparent is,
nevertheless, discontinuous or intermittent and, therefore, cannot be acquired through prescription, but
only by virtue of a title. Under old as well as the New Civil Code, easements may be continuous
discontinuous (intermittent), apparent or non-apparent, discontinuous being those used at more or less
long intervals and which depend upon acts of man (Articles 532 and 615 of the Old and New Civil Codes,
respectively). Continuous and apparent easements are acquired either, by title or prescription, continuous
non-apparent easements and discentinuous ones whether apparent or not, may be acquired only by
virtue of a title (Articles 537 and 539, and 620 and 622 of the Old and New Civil Codes, respectively).
Both Manresa and Sanchez Roman are of the opinion the easement of right of way is a discontinuous
one:
En cambio, las servidumbres discontinues se ejercitan por un hecho del hombre, y precisamente por eso
son y tienen que ser discontinuas, porque es imposible fisicamente que su uso sea incesante. Asi, la
servidumbre de paso es discontinua, porque no es posible que el hombre este pasando continuamente
por el camino, vereda o senda de que se trate. (4 Manresa, Codigo Civil Espaol, 5th ed, p. 529).
. . . "5 Por razon de los modos de disfrutar las servidumbres, en continuas y discontinuas (1). Las
continuas son aquelles cuyo uso es o puede ser incesante, sin la intervencion de ningun hecho del
hombre, como son las de luces y otras de la misma especie; y las discontinuas, las que se usan
intervalos, mas o menos largos, y dependen de actos del hombre, como las de sen senda, carrera y otras
de esta clase. (3 Sanchez Roman, Derecho Civil, p. 488).
Under the provisions of the Civil Code, old and new, particularly the articles thereof aforecited, it would
therefore appear that the easement of right of way may not be acquired through prescription. Even Article
1959 of the Old Civil Code providing for prescription of ownership and other real rights in real property,
excludes therefrom the exception established by Article 539, referring to discontinuous easements, such
as, easement of right of way. (Bargayo vs. Camumot, 40 Phil., 857, 867).
In the case of Cuayong vs. Benedicto, 37 Phil., 781 where the point in issue was whether or not vested
rights in a right of way can be acquired through user from time immemorial, this Court said:
It is evident, therefore, that no vested right by user from time immemorial had been acquired by plaintiffs
at the time the Civil Code took effect. Under that Code (Article 539) ino discontinuous easement could be
acquired by prescription in any event.
However, in the case of Municipality of Dumangas is Bishop of Jaro, 34 Phil., 545, this same Tribunal
held that the continued use by the public of a path over land adjoining the Catholic church in going to and
from said church through its side door, has given the church the right to such use by prescription, and that
because of said use by the public, an easement of right of way over said land has been acquired by
prescription, not only by the church, but also by the public, which without objection or protest on the part
of the owner of said land, had continually availed itself of the easement.
The minority of which the writer of this opinion is a part, believes that the easement of right of way may
now be acquired through prescription, at least since the introduction into this jurisdiction of the special law
on prescription through the Old Code of Civil Procedure, Act No. 190. Said law, particularly, Section 41
thereof, makes no distinction as to the real rights which are subject to prescription, and there would
appear to be no valid reason, at least to the writer of this opinion, why the continued use of a path or a
road or right of way by the party, specially by the public, for ten years or more, not by mere tolerance of
the owner of the land, but through adverse use of it, cannot give said party a vested right to such right of
way through prescription.
The uninterrupted and continuous enjoyment of a right of way necessary to constitute adverse possession
does not require the use thereof every day for the statutory period, but simply the exercise of the right
more or less frequently according to the nature of the use. (17 Am. Jur. 972)
Even under the case of Cuaycong vs. Benedicto (supra), this Tribunal insinuated the rule that no
discontinuous easement, like an easement of right of way, may, under Article 539 of the Old Civil Code,
be acquired, might possibly have been changed by the provisions of the Code of Civil Procedure relative
to prescription.
. . . Assuming, without deciding, that this rule has been changed by the provisions of the present Code of
Civil Procedure relating to prescription, and that since its enactment discontinuous easement of acquired
by prescription, it is clear that this would not by avail plaintiffs. The Code of Civil Procedure went into
effect on October 1, 1901. The term of prescription for the acquisition of right in real estate is fixed by the
Code (section 41) at ten years. The evidence shows that in February, 1911, before the expiration of the
term of ten years since the time the Code of Civil Procedure took effect, the defendants interrupted the
use of the road by plaintiffs by constructing and maintaining a toll gate on, it collecting toll from persons
making use of it with carts and continued to do so until they were enjoin by the granting of the preliminary
injunction by the trial court in December 1912. . . (Cuayong vs. Benedicto, 37 Phil., 781, 796).
Professor Tolentino in his Commentaries and Jurisprudence on the Civil Code, Vol. I, p. 340, would
appear to be of the opinion that under, the provision of the Code of Civil Procedure relative to
prescription, even discontinuous easements, like the easement right of way, may be acquired through
prescription:
. . . "It is submitted that under Act No. 190, even discontinuous servitudes can be acquired by
prescription, provided it can be shown that the servitude was actual, open, public, continuous, under a
claim of title exclusive of any other right and adverse to all other claimants'."
However, the opinion of the majority must prevail, and it is held that under the present law, particularly,
the provisions of the Civil Code, old and new, unless and until the same is changed or clarified, the
easement of right of way may not be acquired through prescription.
In view of the foregoing, the order appealed from is hereby affirmed. No costs.
Bengzon, Bautista Angelo, Labrador, Concepcion, Endencia, and Felix, JJ., concur. Padilla, J., concurs
in the result.

Separate Opinions
REYES, J.B.L., J ., concurring:
I would like to elaborate my reasons for concurring with the majority in declaring the easement of right of
way not acquirable by prescription.
The essence of this easement ("servidumbre de paso") lies in the power of the dominant owner to cross
or traverse the servient tenement without being prevented or disturbed by its owner. As a servitude, it is a
limitation on the servient owner's rights of ownership, because it restricts his right to exclude others from
his property. But such limitation exists only when the dominant owner actually crosser, or passes over the
servient estate; because when he does not, the servient owner's right of exclusion is perfect and
undisturbed. Since the dominant owner can not be continually and uninterruptedly crossing the servient
estate, but can do so only at intervals, the easement is necessarily of an intermittent or discontinuous
nature.
Because possession of a right consists in the enjoyment of that right (old Civil Code, Art. 430; Art. 423,
new Civil Code) and to enjoy a right is to exercise it, it follows that the possession (enjoyment or exercise)
of a right of way is intermittent and discontinuous. From this premise, it is inevitable to conclude, with
Manresa and Sanchez Roman, that such easement can not be acquired by acquisitive prescription
(adverse possession) because the latter requires that the possession be continuous or uninterrupted (old
Civil Code, Art. 1941; new Civil Code, Art. 1118).
The Code of Civil Procedure (Act 190) did not change the situation. Observe that its section 41, in
conferring prescriptive title upon "ten years adverse possession" qualifies it by the succeeding words
"uninterruptedly continued for ten years which is the same condition of continuity that is exacted by the
Civil Code.
SEC. 41. Title to Land by Prescription. Ten years actual adverse possession by any person claiming to
be the owner for that time of any land or interest in land, uninterruptedly continued for ten years by
occupancy, descent, grants, or otherwise, in whatever way such occupancy may have commenced or
continued, shall vest in every actual occupant or possessor of such land a full and complete title, saving
to the persons under disabilities the rights secured the next section. In order to constitute such title by
prescription or adverse possession, the possession by the claimant or by the person under or through
whom he claims must have been actual, open, public, continous, under a claim of title exclusive of any
other right and adverse to all other claimants. But failure to occupy or cultivate land solely by reason of
war shall not be deemed to constitute an interruption of possession of the claimant, and his title by
prescription shall he complete, if in other regrets perfect, notwithstanding such failure to occupy or
cultivate the land during the continuance of war.
The case of Municipality of Dumangas vs. Bishop of Jaro, 34 Phil. 541, does not, if properly analyzed,
constitute authority to hold that the easement of right of way is acquirable by prescription or adverse
possession. The Court there said:
The record shows that the church of the pueblo of Dumangas was constructed in or about the year 1987;
that wall on the southeast side adjoins the building lot in question; and that since the construction of the
church there has been a side door in this wall through which the worshippers attending divine service
enter and leave, they having to pass over and cross the land in question. It is therefore to be presumed
that the use of said side door also carries with it the use by faithful Catholics of the municipal land over
which they have had to pass in order to gain access to said place of worship, and, as this use of the land
has been continuous, it is evident that the Church has acquired a right to such use by prescription, in view
of the time that has elapsed since the church was built and dedicated to religious worship, during which
period the municipality has not prohibited the passage over the land by the persons who attend services
customarily held in said church.
The record does not disclose the date when the Government ceded to the Church the land on which the
church building was afterwards erected, nor the date of the laying out of the adjacent square that is
claimed by the municipality and on which the side door of the church, which is used as an entrance by the
people who frequent this building, gives. There are good grounds for presuming that in apportioning lands
at the time of the establishment of the pueblo of Dumangas and in designating the land adjacent to the
church as a public square, this latter was impliedly encumbered with the easement of a right of way to
allow the public to enter and leave the church a case provided for by article 567 of the Civil Code for
the municipality has never erected any building or executed any work which would have obstructed the
passage and access to the side door of the church, and the public has been enjoying the right of way over
the land in question for an almost immemorable length of time. Therefore an easement of right of way
over said land has been acquired by prescription, not only by the church, but also by the public which,
without objection or protest, has continually availed itself of the easement in question. (34 Phil., pp. 545-
546).
It will be seen that the ratio decidendi of that case lies in the application of Article 567 of the old Civil Code
that provides as follows:
ART. 567. When an estate acquired by purchase, exchange, or partition is enclosed by other estates of
the vendor, exchanger, or co-owner, the latter shall be obliged to grant a right of way without indemnity, in
the absence of an agreement to the contrary.
Bearing in mind the provisions of the article quoted in relation to the wording of the decision in the
Dumangas case, it can be seen that what the court had in mind is that when the Spanish Crown
apportioned the land occupied by the Church of Dumangas, it impliedly burdened the neighboring public
square (which was also Crown property at the time) with an easement of right of way to allow the public to
enter and leave the church, because without such easement the grant in favor of ecclesiastical authorities
would be irrisory: what would be the use of constructing a church if no one could enter it? Now, if there
was an implied grant of the right of way by the Spanish Crown, it was clearly unnecessary to justify the
existence of the easement through prescriptive acquisition. Why then does the decision repeatedly speak
of prescription? Plainly, the word "prescription" was used in the decision not in the sense of adverse
possession for ten or thirty years, but in the sense of "immemorial usage" that under the law anterior to
the Civil Code of 1889, was one of the ways in which the servitude of right of way could be acquired.
1

This view is confirmed by the fact that throughout the passages hereinabove quoted, the court's decision
stresses that the people of Dumangas have been passing over the public square to go to church since the
town was founded and the church was built, an "almost immemorable length of time." It would seem that
the term "priscription" used in said case was merely a loose expression that is apt to mislead unless the
court's reasoning is carefully analyzed.
Since 1889, however, the Civil Code repealed the prior legislation; and thereafter the right of way could
only be acquired by title and not by adverse possession (usucapio), saving those servitudes already
acquired before the Code came into effect (Decisions, Supreme Court of Spain 27 Oct. 1900, 1st
February 1912; 11 May 1927, and 7 January 1920).
Paras, C.J. and Reyes A., J., concur.


BOGO-MEDELLIN MILLING CO., INC., petitioner, vs. COURT OF APPEALS AND HEIRS OF
MAGDALENO VALDEZ SR., respondents.
D E C I S I O N
CORONA, J .:
This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to annul and set aside
the decision[1] dated November 17, 1995 of the Court of Appeals, Tenth Division, which reversed the
decision[2] dated November 27, 1991 of the Regional Trial Court of Cebu City, Branch IX, which ruled in
favor of herein petitioner, Bogo-Medellin Milling Company, Inc. and dismissed herein private respondents'
complaint for payment of compensation and/or recovery of possession of real property and damages with
application for restraining order or preliminary injunction; and its resolution dated March 2, 1996 denying
petitioner's motion for reconsideration.
The antecedent facts follow.
Magdaleno Valdez, Sr., father of herein private respondents Sergio Valdez, Angelina Valdez-
Novabos, Teresita Argawanon-Mangubat and Daylinda Argawanon-Melendres (hereafter the heirs),
purchased from Feliciana Santillan, on December 9, 1935, a parcel of unregistered land covered by Tax
Declaration No. 3935 with an area of one hectare, 34 ares and 16 centares, located in Barrio Dayhagon,
Medellin, Cebu.[3] He took possession of the property and declared it for tax purposes in his name.[4]
Prior to the sale, however, the entire length of the land from north to south was already traversed in
the middle by railroad tracks owned by petitioner Bogo-Medellin Milling Co., Inc. (hereafter
Bomedco). The tracks were used for hauling sugar cane from the fields to petitioners sugar mill.
When Magdaleno Valdez, Sr. passed away in 1948, herein private respondents inherited the
land. However, unknown to them, Bomedco was able to have the disputed middle lot which was
occupied by the railroad tracks placed in its name in the Cadastral Survey of Medellin, Cebu in 1965. The
entire subject land was divided into three, namely, Cadastral Lot Nos. 953, 954 and 955. Lot Nos. 953
and 955 remained in the name of private respondents. However, Lot No. 954, the narrow lot where the
railroad tracks lay, was claimed by Bomedco as its own and was declared for tax purposes in its name. [5]
It was not until 1989 when private respondents discovered the aforementioned claim of Bomedco
on inquiry with the Bureau of Lands. Through their lawyer, they immediately demanded the legal basis for
Bomedco's claim over Cadastral Lot No. 954 but their letter of inquiry addressed to petitioner went
unheeded, as was their subsequent demand for payment of compensation for the use of the land.[6]
On June 8, 1989, respondent heirs filed a Complaint for Payment of Compensation and/or
Recovery of Possession of Real Property and Damages with Application for Restraining
Order/Preliminary Injunction against Bomedco before the Regional Trial Court of Cebu.[7] Respondent
heirs alleged that, before she sold the land to Valdez, Sr. in 1935, Santillan granted Bomedco, in 1929, a
railroad right of way for a period of 30 years. When Valdez, Sr. acquired the land, he respected the
grant. The right of way expired sometime in 1959 but respondent heirs allowed Bomedco to continue
using the land because one of them was then an employee of the company.[8]
In support of the complaint, they presented an ancient document an original copy of the deed of
sale written in Spanish and dated December 9, 1935[9] to evidence the sale of the land to Magdaleno
Valdez, Sr.; several original real estate tax receipts[10] including Real Property Tax Receipt No. 3935[11]
dated 1922 in the name of Graciano de los Reyes, husband of Feliciana Santillan, and Real Property Tax
Receipt No. 09491[12] dated 1963 in the name of Magdaleno Valdez, Sr. Magdaleno Valdez, Jr. also
testified for the plaintiffs during the trial.
On the other hand, Bomedcos principal defense was that it was the owner and possessor of
Cadastral Lot No. 954, having allegedly bought the same from Feliciana Santillan in 1929, prior to the
sale of the property by the latter to Magdaleno Valdez, Sr. in 1935. It also contended that plaintiffs claim
was already barred by prescription and laches because of Bomedcos open and continuous possession of
the property for more than 50 years.
Bomedco submitted in evidence a Deed of Sale[13] dated March 18, 1929; seven real estate tax
receipts[14] for the property covering the period from 1930 to 1985; a 1929 Survey Plan of private land for
Bogo-Medellin Milling Company;[15] a Survey Notification Card;[16] Lot Data Computation for Lot No.
954;[17] a Cadastral Map for Medellin Cadastre[18] as well as the testimonies of Vicente Basmayor,
Geodetic Engineer and property custodian for Bomedco, and Rafaela A. Belleza, Geodetic Engineer and
Chief of the Land Management Services of the DENR, Region VIII.
In its decision dated November 27, 1991, the trial court[19] rejected Bomedco's defense of
ownership on the basis of a prior sale, citing that its evidence a xerox copy of the Deed of Sale dated
March 18, 1929 was inadmissible and had no probative value. Not only was it not signed by the parties
but defendant Bomedco also failed to present the original copy without valid reason pursuant to Section 4,
Rule 130 of the Rules of Court.[20]
Nonetheless, the trial court held that Bomedco had been in possession of Cadastral Lot No. 954 in
good faith for more than 10 years, thus, it had already acquired ownership of the property through
acquisitive prescription under Article 620 of the Civil Code. It explained:
Under Article 620 of the Civil Code, CONTINUOUS and APPARENT easements can be acquired by prescription
after ten (10) years. The apparent characteristic of the questioned property being used by defendant as an
easement is no longer at issue, because plaintiffs themselves had acknowledged that the existence of the railway
tracks of defendant Bomedco was already known by the late Magdaleno Valdez, herein plaintiffs predecessor-in-
interest, before the late Magdaleno Valdez purchased in 1935 from the late Feliciana Santillan the land described in
the Complaint where defendants railway tracks is traversing [sic] (TSN of February 5, 1991, pp. 7-8). As to the
continuity of defendants use of the strip of land as easement is [sic] also manifest from the continuous and
uninterrupted occupation of the questioned property from 1929 up to the date of the filing of the instant
Complaint. In view of the defendants UNINTERRUPTED possession of the strip of land for more than fifity (50)
years, the Supreme Courts ruling in the case of Ronquillo, et al. v. Roco, et al. (103 Phil 84) is not applicable. This
is because in said case the easement in question was a strip of dirt road whose possession by the dominant estate
occurs only everytime said dirt road was being used by the dominant estate. Such fact would necessarily show that
the easements possession by the dominant estate was never continuous. In the instant case however, there is clear
continuity of defendants possession of the strip of land it had been using as railway tracks. Because the railway
tracks which defendant had constructed on the questioned strip of land had been CONTINUOUSLY occupying said
easement. Thus, defendant Bomedcos apparent and continuous possession of said strip of land in good faith for
more than ten (10) years had made defendant owner of said strip of land traversed by its railway tracks. Because the
railway tracks which defendant had constructed on the questioned strip of land had been continuously occupying
said easement [sic]. Thus, defendant Bomedcos apparent and continuous possession of said strip of land in good
faith for more than ten (10) years had made defendant owner of said strip of land traversed by its railway tracks.
Respondent heirs elevated the case to the Court of Appeals which found that Bomedco did not
acquire ownership over the lot. It consequently reversed the trial court. In its decision dated November
17, 1995, the appellate court held that Bomedco only acquired an easement of right of way by unopposed
and continuous use of the land, but not ownership, under Article 620 of the Civil Code.
The appellate court further ruled that Bomedcos claim of a prior sale to it by Feliciana Santillan
was untrue. Its possession being in bad faith, the applicable prescriptive period in order to acquire
ownership over the land was 30 years under Article 1137 of the Civil Code. Adverse possession of the
property started only in 1965 when Bomedco registered its claim in the cadastral survey of Medellin.
Since only 24 years from 1965 had elapsed when the heirs filed a complaint against Bomedco in 1989,
Bomedcos possession of the land had not yet ripened into ownership.
And since there was no showing that respondent heirs or their predecessor-in-interest was ever
paid compensation for the use of the land, the appellate court awarded compensation to them, to be
computed from the time of discovery of the adverse acts of Bomedco.
Its motion for reconsideration having been denied by the appellate court in its resolution dated
March 22, 1996, Bomedco now interposes before us this present appeal by certiorari under Rule 45,
assigning the following errors:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT REVERSED AND SET ASIDE
THE TRIAL COURTS DECISION DISMISSING PRIVATE RESPONDENTS COMPLAINT.
II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT ORDERED THE PETITIONER
TO PAY THE PRIVATE RESPONDENT THE REASONABLE VALUE OF LOT 954 AND THE AMOUNT OF
TEN THOUSAND (P10,000.00) PESOS AS REASONABLE ATTORNEYS FEES.
Petitioner Bomedco reiterates its claim of ownership of the land through extraordinary acquisitive
prescription under Article 1137 of the Civil Code and laches to defeat the claim for compensation or
recovery of possession by respondent heirs. It also submits a third ground originally tendered by the trial
court acquisition of the easement of right of way by prescription under Article 620 of the Civil Code.
Extraordinary Acquisitive Prescription
Under Art. 1137 of the Civil Code
Petitioners claim of ownership through extraordinary acquisitive prescription under Article 1137 of
the Civil Code cannot be sustained.
There is no dispute that the controversial strip of land has been in the continuous possession of
petitioner since 1929. But possession, to constitute the foundation of a prescriptive right, must be
possession under a claim of title, that is, it must be adverse.[21] Unless coupled with the element of
hostility towards the true owner, possession, however long, will not confer title by prescription.[22]
After a careful review of the records, we are inclined to believe the version of respondent heirs that
an easement of right of way was actually granted to petitioner for which reason the latter was able to
occupy Cadastral Lot No. 954. We cannot disregard the fact that, for the years 1930, 1937, 1949, 1962
and 1963, petitioner unequivocally declared the property to be a central railroad right of way or sugar
central railroad right of way in its real estate tax receipts when it could have declared it to be industrial
land as it did for the years 1975 and 1985.[23] Instead of indicating ownership of the lot, these receipts
showed that all petitioner had was possession by virtue of the right of way granted to it. Were it not so and
petitioner really owned the land, petitioner would not have consistently used the phrases central railroad
right of way and sugar central railroad right of way in its tax declarations until 1963. Certainly an owner
would have found no need for these phrases. A person cannot have an easement on his own land, since
all the uses of an easement are fully comprehended in his general right of ownership.[24]
While it is true that, together with a persons actual and adverse possession of the land, tax
declarations constitute strong evidence of ownership of the land occupied by him,[25] this legal precept
does not apply in cases where the property is declared to be a mere easement of right of way.
An easement or servitude is a real right, constituted on the corporeal immovable property of
another, by virtue of which the owner has to refrain from doing, or must allow someone to do, something
on his property, for the benefit of another thing or person. It exists only when the servient and dominant
estates belong to two different owners. It gives the holder of the easement an incorporeal interest on the
land but grants no title thereto. Therefore, an acknowledgment of the easement is an admission that the
property belongs to another.[26]
Having held the property by virtue of an easement, petitioner cannot now assert that its occupancy
since 1929 was in the concept of an owner. Neither can it declare that the 30-year period of extraordinary
acquisitive prescription started from that year.
Petitioner, however, maintains that even if a servitude was merely imposed on the property in its
favor, its possession immediately became adverse to the owner in the late 1950s when the grant was
alleged by respondent heirs to have expired. It stresses that, counting from the late 1950s (1959 as
found by the trial court), the 30-year extraordinary acquisitive prescription had already set in by the time
respondent heirs made a claim against it in their letters dated March 1 and April 6, 1989.
We do not think so. The mere expiration of the period of easement in 1959 did not convert
petitioners possession into an adverse one. Mere material possession of land is not adverse possession
as against the owner and is insufficient to vest title, unless such possession is accompanied by the intent
to possess as an owner.[27] There should be a hostile use of such a nature and exercised under such
circumstances as to manifest and give notice that the possession is under a claim of right.
In the absence of an express grant by the owner, or conduct by petitioner sugar mill from which an
adverse claim can be implied, its possession of the lot can only be presumed to have continued in the
same character as when it was acquired (that is, it possessed the land only by virtue of the original grant
of the easement of right of way),[28] or was by mere license or tolerance of the owners (respondent
heirs).[29] It is a fundamental principle of law in this jurisdiction that acts of possessory character
executed by virtue of license or tolerance of the owner, no matter how long, do not start the running of the
period of prescription.[30]
After the grant of easement expired in 1959, petitioner never performed any act incompatible with
the ownership of respondent heirs over Cadastral Lot No. 954. On the contrary, until 1963, petitioner
continued to declare the sugar central railroad right of way in its realty tax receipts, thereby doubtlessly
conceding the ownership of respondent heirs. Respondents themselves were emphatic that they simply
tolerated petitioners continued use of Cadastral Lot No. 954 so as not to jeopardize the employment of
one of their co-heirs in the sugar mill of petitioner.[31]
The only time petitioner assumed a legal position adverse to respondents was when it filed a claim
over the property in 1965 during the cadastral survey of Medellin. Since then (1965) and until the filing of
the complaint for the recovery of the subject land before the RTC of Cebu in 1989, only 24 years had
lapsed. Since the required 30-year extraordinary prescriptive period had not yet been complied with in
1989, petitioner never acquired ownership of the subject land.
Laches
Neither can petitioner find refuge in the principle of laches. It is not just the lapse of time or delay
that constitutes laches. The essence of laches is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, through due diligence, could or should have been done
earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or
declined to assert it.[32]
Its essential elements are: (a) conduct on the part of the defendant, or of one under whom he
claims, giving rise to the situation complained of; (b) delay in asserting complainants rights after he had
knowledge of defendants acts and after he has had the opportunity to sue; (c) lack of knowledge or
notice by defendant that the complainant will assert the right on which he bases his suit; and (d) injury or
prejudice to the defendant in the event the relief is accorded to the complainant.[33]
The second element (which in turn has three aspects) is lacking in the case at bar. These aspects
are: (a) knowledge of defendant's action, (b) opportunity to sue defendant after obtaining such knowledge
and (c) delay in the filing of such suit.[34]
Records show that respondent heirs only learned about petitioners claim on their property when
they discovered the inscription for the cadastral survey in the records of the Bureau of Lands in 1989.
Respondents lost no time in demanding an explanation for said claim in their letters to the petitioner dated
March 1, 1989 and April 6, 1989. When petitioner ignored them, they instituted their complaint before the
Regional Trial Court of Cebu City on June 8, 1989.
Petitioners reliance on Caro vs. Court of Appeals [35] and Vda. de Alberto vs. Court of Appeals
[36] is misplaced. There, laches was applied to bar petitioners from questioning the ownership of the
disputed properties precisely because they had knowledge of the adverse claims on their properties yet
tarried for an extraordinary period of time before taking steps to protect their rights.
Further, there is no absolute rule on what constitutes laches. It is a rule of equity and applied not to
penalize neglect or sleeping on ones rights but rather to avoid recognizing a right when to do so would
result in a clearly unfair situation. The question of laches is addressed to the sound discretion of the court
and each case must be decided according to its particular circumstances.[37] It is the better rule that
courts, under the principle of equity, should not be guided or bound strictly by the statute of limitations or
the doctrine of laches if wrong or injustice will result.
It is clear that petitioner never acquired ownership over Cadastral Lot No. 954 whether by
extraordinary acquisitive prescription or by laches.
Acquisition of Easement of Right of Way By
Prescription Under Art. 620 of the Civil Code
Petitioner contends that, even if it failed to acquire ownership of the subject land, it nevertheless
became legally entitled to the easement of right of way over said land by virtue of prescription under
Article 620 of the Civil Code:
Continuous and apparent easements are acquired either by virtue of a title or by prescription of ten years.
The trial court and the Court of Appeals both upheld this view for the reason that the railroad right
of way was, according to them, continuous and apparent in nature. The more or less permanent railroad
tracks were visually apparent and they continuously occupied the subject strip of land from 1959 (the year
the easement granted by Feliciana Santillan to petitioner expired). Thus, with the lapse of the 10-year
prescriptive period in 1969, petitioner supposedly acquired the easement of right of way over the subject
land.
Following the logic of the courts a quo, if a road for the use of vehicles or the passage of persons is
permanently cemented or asphalted, then the right of way over it becomes continuous in nature. The
reasoning is erroneous.
Under civil law and its jurisprudence, easements are either continuous or discontinuous according
to the manner they are exercised, not according to the presence of apparent signs or physical indications
of the existence of such easements. Thus, an easement is continuous if its use is, or may be, incessant
without the intervention of any act of man, like the easement of drainage;[38] and it is discontinuous if it is
used at intervals and depends on the act of man, like the easement of right of way.[39]
The easement of right of way is considered discontinuous because it is exercised only if a person
passes or sets foot on somebody elses land. Like a road for the passage of vehicles or persons, an
easement of right of way of railroad tracks is discontinuous because the right is exercised only if and
when a train operated by a person passes over another's property. In other words, the very exercise of
the servitude depends upon the act or intervention of man which is the very essence of discontinuous
easements.
The presence of more or less permanent railroad tracks does not in any way convert the nature of
an easement of right of way to one that is continuous. It is not the presence of apparent signs or physical
indications showing the existence of an easement, but rather the manner of exercise thereof, that
categorizes such easement into continuous or discontinuous. The presence of physical or visual signs
only classifies an easement into apparent or non-apparent. Thus, a road (which reveals a right of way)
and a window (which evidences a right to light and view) are apparent easements, while an easement of
not building beyond a certain height is non-apparent.[40]
In Cuba, it has been held that the existence of a permanent railway does not make the right of way
a continuous one; it is only apparent. Therefore, it cannot be acquired by prescription.[41] In Louisiana, it
has also been held that a right of passage over another's land cannot be claimed by prescription because
this easement is discontinuous and can be established only by title.[42]
In this case, the presence of railroad tracks for the passage of petitioners trains denotes the
existence of an apparent but discontinuous easement of right of way. And under Article 622 of the Civil
Code, discontinuous easements, whether apparent or not, may be acquired only by title. Unfortunately,
petitioner Bomedco never acquired any title over the use of the railroad right of way whether by law,
donation, testamentary succession or contract. Its use of the right of way, however long, never resulted in
its acquisition of the easement because, under Article 622, the discontinuous easement of a railroad right
of way can only be acquired by title and not by prescription.
To be sure, beginning 1959 when the original 30-year grant of right of way given to petitioner
Bomedco expired, its occupation and use of Cadastral Lot No. 954 came to be by mere tolerance of the
respondent heirs. Thus, upon demand by said heirs in 1989 for the return of the subject land and the
removal of the railroad tracks, or, in the alternative, payment of compensation for the use thereof,
petitioner Bomedco which had no title to the land should have returned the possession thereof or should
have begun paying compensation for its use.
But when is a party deemed to acquire title over the use of such land (that is, title over the
easement of right of way)? In at least two cases, we held that if: (a) it had subsequently entered into a
contractual right of way with the heirs for the continued use of the land under the principles of voluntary
easements or (b) it had filed a case against the heirs for conferment on it of a legal easement of right of
way under Article 629 of the Civil Code, then title over the use of the land is deemed to exist. The
conferment of a legal easement of right of way under Article 629 is subject to proof of the following:
(1) it is surrounded by other immovables and has no adequate outlet to a public highway;
(2) payment of proper indemnity;
(3) the isolation is not the result of its own acts; and
(4) the right of way claimed is at the point least prejudicial to the servient estate, and, insofar as
consistent with this rule, the distance from the dominant estate to the highway is the
shortest.[43]
None of the above options to acquire title over the railroad right of way was ever pursued by
petitioner despite the fact that simple resourcefulness demanded such initiative, considering the
importance of the railway tracks to its business. No doubt, it is unlawfully occupying and using the subject
strip of land as a railroad right of way without valid title yet it refuses to vacate it even after demand of the
heirs. Furthermore, it tenaciously insists on ownership thereof despite a clear showing to the contrary.
We thus uphold the grant by the Court of Appeals of attorneys fees in the amount of P10,000
considering the evident bad faith of petitioner in refusing respondents just and lawful claims, compelling
the latter to litigate.[44]
WHEREFORE, the petition is DENIED. The appealed decision dated November 17, 1995 and
resolution dated March 2, 1996 of the Court of Appeals are AFFIRMED with MODIFICATION. Petitioner
Bogo-Medellin Milling Company, Inc. is hereby ordered to vacate the subject strip of land denominated as
Cadastral Lot No. 954, remove its railway tracks thereon and return its possession to the private
respondents, the heirs of Magdaleno Valdez, Sr. It is also hereby ordered to pay private respondents
attorney's fees in the amount of P10,000.
SO ORDERED.


C-J YULO & SONS, INC., petitioner, vs. ROMAN CATHOLIC BISHOP OF SAN PABLO, INC.,
respondent.
D E C I S I O N
GARCIA, J .:
Appealed to this Court by way of a petition for review on certiorari are the Decision[1] dated
December 19, 1997 and Resolution[2] dated April 30, 1998 of the Court of Appeals in CA-G.R. CV No.
45392, reversing an earlier decision of the Regional Trial Court at Calamba, Laguna, Branch 34, which
ruled in favor of the herein petitioner C-J Yulo & Sons, Inc., in a suit for revocation of donation with
reconveyance of title, thereat commenced by the petitioner against the herein respondent, Roman
Catholic Bishop of San Pablo, Inc.
The facts are not at all disputed:
On September 24, 1977, petitioner donated unto respondent a parcel of land at Canlubang,
Calamba, Laguna with an area of 41,117 square meters and registered in its name under Transfer
Certificate of Title (TCT) No. T-82803. The deed of donation which also bears the acceptance of the
donee recites the considerations therefor and the conditions thereto attached, to wit:
WHEREAS, Donee is a religious corporation engaged in much (sic) humanitarian Christian work in Laguna and
elsewhere, educating and forming the young, caring for the infirm and the aged in the fulfillment of its mission;
WHEREAS, Donor recognizes the need for a privately endowed institution that will care for the homeless and
destitute old people in the community, as well as the other senior citizens who for some reason or other find
themselves without family with whom to live the last years of their life:
WHEREFORE, Donor is willing, in order to help establish and support such an institution to donate the land
necessary for its housing, as well as an area of land whereon it may raise crops for its support and for the sustenance
of its residents;
WHEREAS, Donee is willing and able, with the wanted help of Donor and of other benefactors, to establish, operate
and maintain such a home for the aged.
NOW, THEREFORE, in consideration of all the foregoing premises, Donor hereby transfers and conveys to Donee
by way of donation all its rights, title and interest in that certain parcel of land covered by TCT No. T-82803 of the
Land Records of Laguna, the technical descriptions of which are recited above, subject to the following conditions
and covenants, each of which is a material consideration for this Deed:
1. So much of the land as may be necessary shall be used for the construction of a home for the aged and infirm,
regardless of religion or creed, but preferably those coming from Canlubang, Calamba, Laguna; provided that retired
and/or aged priests may be admitted to the home; and provided further that any senior citizen from the area who has
retired from business or work may likewise be admitted to the home, subject to the payment to the institution of such
sum as he may afford for his support.
2. A Green Belt that is 15 meters wide shall be established and maintained by the Donor along the length of the
land to separate and insulate it from the projected highway.
3. Such part of land as may not be needed for the residence and the Green Belt shall be devoted by Donee with
the help of such residents of the home as are able, to the raising of agricultural crops for the consumption of the
residents of the home, and of such other crops that may be sold to defray the cost of running the home and feeding
its residents; provided, that should the area later become so fully urbanized as to make this limitation on use
economically, impractical, any portion of the land may, with the written consent of the Donor, be put to commercial
use by the Donee by leasing the same for wholesome and socially-acceptable activities; provided further that the
rentals from such commercial leases shall be used, first, to meet the expenses of the home; second, to enlarge its
population and expand its facilities; and finally for other charitable purposes in Laguna, in that order.
4. Donee acknowledges that Donors generous act will greatly aid Donee in accomplishing its mission on earth,
and, recognizing the generosity of the Yulo family as the reason for such act, Donee undertakes to cause every year
the celebration of masses for the intention of the various members of the family of Mr. Jose Yulo, Sr., on festive and
solemn occasions in the said family.
5. Except with prior written consent of the Donor or its successor, the Donee shall not use the land except for the
purpose as provided above in paragraph 1 hereof, nor sell or dispose the land for any reason whatsoever, nor convey
any portion of the same except in lease for commercial use as provided above in paragraph 3 hereof, otherwise the
said land with all real improvements thereon shall revert in trust to the Donor for prompt disposition in favor of
some other charitable organization that Donor may deem best suited to the care of the aged. (Underscoring
supplied).
On the basis of the same deed, TCT No. T-82803 of the donor was cancelled and replaced by TCT
No. T-91348 in the name of donee Roman Catholic Bishop of San Pablo, Inc.
Thereafter, or sometime in 1980, the donee, for purposes of generating funds to build the perimeter
fence on the donated property and the construction of a nucleus building for the aged and the infirm,
leased a portion of the donated property to one Martin Gomez who planted said portion with sugar
cane. There is no dispute that the lease agreement was entered into by the donee without the prior
written consent of the donor, as required in the deed of donation. The lease to Gomez ended in 1985.
The following year, 1986, a portion of the donated property was again leased by the donee, this
time to one Jose Bostre who used the leased area as a ranch. As explained by the donee, it entered into
a lease agreement with Bostre to protect the premises from vandals and for the electrification of the
nucleus building of the home for the aged and in the infirm, which was named as Casa dela Merced. As
before, however, the donee executed the lease contract without the prior written consent of the
donor.
After the termination of the Bostre lease agreement, the donee, for the third time, leased a portion
of the donated property to one Rudy Caballes who used the leased area for fattening cattles. The donee
explained that the lease agreement with Bostre was also for the purposes of generating funds for the
completion of Casa dela Merced. Again, however, the donee did not secure the prior written
consent of the donor.
Hence, on September 20, 1990, pursuant to a board resolution, the donor, through its president
Miguel A. Yulo, addressed a letter to the donee informing the latter that it was revoking the donation in
accordance with Section 5 of the deed due to the donees non-compliance with and material breach of the
conditions thereunder stipulated. In the same letter, the donor requested for the turn-over of the donees
TCT No. T-91348 over the donated property.
In a reply-letter dated November 5, 1990, the donee, through Bishop Pedro N. Bantigue, D.D.,
denied any material breach of the conditions of the deed of donation and manifested its continued and
faithful compliance with the provisions thereof. In the same letter, the donee refused the turn-over of its
title to the donor.
It was against the foregoing backdrop of events when, on November 19, 1990, in the Regional Trial
Court at Calamba, Laguna the donor, alleging non-compliance with and violation by the donee of the
conditions of the deed of donation, filed its complaint in this case against donee Roman Catholic
Archbishop of San Pablo, Inc., therein reciting the imputed non-compliance and violations by the donee of
the terms and conditions of the deed of donation, as follows:
a) non-construction of the home for the aged and infirmed in the lot despite the lapse of a reasonable
and considerable length of time;
b) present land use of the area is a cattle farm, the owner of which has a lease contract with the
donee; and
c) no prior written consent of the donor has been obtained for the present and actual use of the
property donated,
and accordingly prayed that the subject deed of donation be adjudged revoked and void and the donee
ordered to return and/or reconvey the property donated.
In its answer, defendant donee alleged that it was doing its best to comply with the provisions of the
deed of donation relative to the establishment of the home for the aged and the infirm, adding that the
leases of portions of the land were with the express, albeit unwritten consent, of Jesus Miguel Yulo
himself. In the same answer, defendant donee interposed the defense that the donors cause of action
for revocation, if any, had already prescribed because the leases were known to the latter since 1980.
In a decision dated December 22, 1995, the trial court rendered judgment for donor-plaintiff C-J
Yulo & Sons, Inc., thus:
WHEREFORE, judgment is hereby rendered for plaintiff and against the defendant, declaring the Deed of Donation
dated September 24, 1977 (Exh. C) REVOKED, affirming plaintiffs revocation of the same in the letter dated
September 20, 1990 (Exh. D).
Defendant and all persons claiming rights under them are hereby ordered to immediately vacate the premises of the
donated property and to hand over to plaintiff the peaceful possession of the aforesaid premises.
To avoid multiplicity of suits, the Register of Deeds of Calamba, Laguna, is hereby ordered to require the defendant
to surrender Transfer Certificate of Title No. T-91348 (Exh. B) and thereafter cancel the same and issue, upon
payment of the required fees, a new Transfer Certificate of Title in favor of plaintiffs, with cost against the
defendant.
SO ORDERED.
Therefrom, donee-defendant Roman Catholic Bishop of San Pablo, Inc., went to the Court of
Appeals in CA-G.R. CV No. 45392.
In the herein assailed Decision dated December 19, 1997,[3] the Court of Appeals reversed that
of the trial court and upheld the donation in question, to wit:
WHEREFORE, the decision of the trial court dated December 22, 1993 is hereby REVERSED and the donation
dated September 24, 1977 (Exhibit C) which conveyed title to the donated property in the appellees name is hereby
UPHELD.
SO ORDERED.
Its motion for reconsideration having been denied by the same court in its Resolution of April 30,
1998,[4] donor C-J Yulo & Sons, Inc., has come to this Court via the present recourse on its sole
submission that
THE RULING OF THE COURT OF APPEALS (THAT THE REVOCATION OF THE DONATION BY
PETITIONER WAS IMPROPER) IS CONTRARY TO LAW AND APPLICABLE JURISPRUDENCE.
We DENY.
The Court of Appeals sustained the trial courts finding that the donation is an onerous one since
the donee was burdened with the establishment on the donated property of a home for the aged and the
infirm. It likewise agreed with the trial court that there were violations of the terms and conditions of the
deed of donation when the donee thrice leased a portion of the property without the prior written consent
of the donor. Likewise upheld by the appellate court is the ruling of the trial court that the prescriptive
period of the donors right to revoke the donation is ten (10) years based on Article 1144 of the Civil Code,
instead of four (4) years per Article 764 of the same Code, and therefore the action for revocation filed by
the petitioner is not barred by prescription.
Even then, the Court of Appeals reversed the trial courts decision, the reversal being premised on
the appellate courts finding that the breaches thrice committed by the respondent were merely casual
breaches which nevertheless did not detract from the purpose of which the donation was made: the
establishment of a home for the aged and the infirm.
We agree.
Petitioner contends that the case at bar is similar to the 1995 case of Central Philippine University
vs. Court of Appeals,[5] where the donee failed for more than 50 years to establish, as required, a
medical school on the land donated, and where this Court declared the donation to have been validly
revoked.
To the mind of the Court, what is applicable to this case is the more recent [2001] case of Republic
vs. Silim,[6] where respondent Silim donated a 5,600-square meter parcel of land in favor of the Bureau of
Public Schools, Municipality of Malangas, Zamboanga del Sur with the condition that the said property
should be used exclusively and forever for school purposes only. Although a school building was
constructed on the property through the efforts of the Parent-Teachers Association of Barangay
Kauswagan, the funds for a Bagong Lipunan school building could not be released because the
government required that it be built on a one-hectare parcel of land. This led the donee therein to
exchange the donated property for a bigger one.
In Silim, the Court distinguished the four (4) types of donations:
Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or
compensatory; (3) conditional or modal; and (4) onerous. A pure or simple donation is one where the underlying
cause is plain gratuity. This is donation in its truest form. On the other hand, a remuneratory or compensatory
donation is one made for the purpose of rewarding the donee for past services, which services do not amount to a
demandable debt. A conditional or modal donation is one where the donation is made in consideration of future
services or where the donor imposes certain conditions, limitations or charges upon the donee, the value of which is
inferior than that of the donation given. Finally, an onerous donation is that which imposes upon the donee a
reciprocal obligation or, to be more precise, this is the kind of donation made for a valuable consideration, the cost
of which is equal to or more than the thing donated.
Of all the foregoing classifications, donations of the onerous type are the most distinct. This is because, unlike the
other forms of donation, the validity of and the rights and obligations of the parties involved in an onerous donation
is completely governed not by the law on donations but by the law on contracts. In this regard, Article 733 of the
New Civil Code provides:
ARTICLE 733 Donations with onerous cause shall be governed by the rules on contracts, and remuneratory
donations by the provisions of the present Title as regards that portion which exceeds the value of the burden
imposed.
The donation involved in the present controversy is one which is onerous since there is a burden imposed upon the
donee to build a school on the donated property.
Here, the Court of Appeals correctly applied the law on contracts instead of the law on donations
because the donation involved in this case is onerous, saddled as it is by a burden imposed upon the
donee to put up and operate a home for the aged and the infirm. We thus quote with approval the terse
ruling of the appellate court in the challenged decision:
First, the violations of the conditions of the donation committed by the donee were merely casual breaches of the
conditions of the donation and did not detract from the purpose by which the donation was made, i.e., for the
establishment of a home for the aged and the infirm. In order for a contract which imposes a reciprocal obligation,
which is the onerous donation in this case wherein the donor is obligated to donate a 41,117 square meter property in
Canlubang, Calamba, Laguna on which property the donee is obligated to establish a home for the aged and the
infirm (Exhibit C), may be rescinded per Article 1191 of the New Civil Code, the breach of the conditions thereof
must be substantial as to defeat the purpose for which the contract was perfected (Tolentino, Civil Code of the
Philippines, Vol. IV, pp. 179-180; Universal Food Corp. v. Court of Appeals, 33 SCRA 1, 18; Ocampo v. Court of
Appeals, 233 SCRA 551, 562). Thus, in the case of Ocampo v. C.A. (ibid), citing the case of Angeles v.
Calasanz (135 SCRA 323, 330), the Supreme Court ruled:
The right to rescind the contract for non-performance of one of its stipulations x x x is not absolute. In Universal
Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated that:
The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such
substantial and fundamental breach as would defeat the very object of the parties in making the agreement (Song Fo
& Co. v. Hawaiian-Philippine Co., 47 Phil. 821,827). The question of whether a breach of a contract is substantial
depends upon the attendant circumstances (Corpus v. Hon. Alikpala, et al., L-23707 & L-23720, Jan. 17, 1968).
The above ruling of the Court of Appeals is completely in tune with this Courts disposition in
Republic vs. Silim, supra. The donor therein sought to revoke the donation on the ground that the donee
breached the condition to exclusively and forever use the land for school purpose only, but this Court
ruled in favor of the donee:
Without the slightest doubt, the condition for the donation was not in any way violated when the lot donated was
exchanged with another one. The purpose for the donation remains the same, which is for the establishment of a
school. The exclusivity of the purpose was not altered or affected. In fact, the exchange of the lot for a much bigger
one was in furtherance and enhancement of the purpose of the donation. The acquisition of the bigger lot paved way
for the release of funds for the construction of Bagong Lipunan school building which could not be accommodated
by the limited area of the donated lot.
As in Silim, the three (3) lease contracts herein entered into by the donee were for the sole purpose
of pursuing the objective for which the donation was intended. In fact, such lease was authorized by the
donor by express provision in the deed of donation, albeit the prior written consent therefor of the donor is
needed. Hence, considering that the donees acts did not detract from the very purpose for which the
donation was made but precisely to achieve such purpose, a lack of prior written consent of the donor
would only constitute casual breach of the deed, which will not warrant the revocation of the donation.
Besides, this Court cannot consider the requirement of a prior written consent by the donor for all
contracts of lease to be entered into by the donee as an absolute ground for revocation of the donation
because such a condition, if not correlated with the purpose of the donation, would constitute undue
restriction of the donees right of ownership over the donated property.
Instructive on this point is the ruling of this Court in The Roman Catholic Archbishop of Manila vs.
Court of Appeals,[7] viz:
Donation, as a mode of acquiring ownership, results in an effective transfer of title over the property from the donor
to the donee. Once a donation is accepted, the donee becomes the absolute owner of the property
donated. Although the donor may impose certain conditions in the deed of donation, the same must not be contrary
to law, morals, good customs, public order and public policy.
x x x
In the case at bar, we hold that the prohibition in the deed of donation against the alienation of the property for an
entire century, being an unreasonable emasculation and denial of an integral attribute of ownership, should be
declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil
Code. Consequently, as specifically stated in said statutory provision, such condition shall be considered as not
imposed. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. The net
result is that, absent said proscription, the deed of sale supposedly constitutive of the cause of action for the
nullification of the deed of donation is not in truth violative of the latter, hence, for lack of cause of action, the case
for private respondents must fail.
If petitioner would insist that the lack of prior written consent is a resolutory condition that is
absolute in character, the insistence would not stand the validity test under the foregoing doctrine. What
would have been casual breaches of the terms and conditions of the donation, may, in that event, even
be considered as no breach at all when the Court strikes down such absolute condition of prior written
consent by the donor in all instances without any exception whatsoever. The Court, however,
understands that such a condition was written with a specific purpose in mind, which is, to ensure that the
primary objective for which the donation was intended is achieved. A reasonable construction of such
condition rather than totally striking it would, therefore, be more in accord with the spirit of the
donation. Thus, for as long as the contracts of lease do not detract from the purpose for which the
donation was made, the complained acts of the donee will not be deemed as substantial breaches of the
terms and conditions of the deed of donation to merit a valid revocation thereof by the donor.
Finally, anent petitioners contention that the Court of Appeals failed to consider that respondent
had abandoned the idea of constructing a home for the aged and infirm, the explanation in respondents
comment is enlightening. Petitioner relies on Bishop Bantigues letter[8] dated June 21, 1990 as its basis
for claiming that the donee had altogether abandoned the idea of constructing a home for the aged and
the infirm on the property donated. Respondent, however, explains that the Bishop, in his letter, written in
the vernacular, expressed his concern that the surrounding area was being considered to be re-classified
into an industrial zone where factories are expected to be put up. There is no question that this will
definitely be disadvantageous to the health of the aged and the infirm. Thus, the Bishop asked
permission from the donor for a possible exchange or sale of the donated property to ultimately pursue
the purpose for which the donation was intended in another location that is more appropriate.
The Court sees the wisdom, prudence and good judgment of the Bishop on this point, to which it
conforms completely. We cannot accede to petitioners view, which attributed the exact opposite
meaning to the Bishops letter seeking permission to sell or exchange the donated property.
In Silim, supra, this Court ruled that such exchange does not constitute breach of the terms and
conditions of the donation. We see no reason for the Court to think otherwise in this case. To insist that
the home for the aged and infirm be constructed on the donated property, if the industrialization indeed
pushes through, defies rhyme and reason. Any act by the donor to prevent the donee from ultimately
achieving the purpose for which the donation was intended would constitute bad faith, which the Court will
not tolerate.
WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals
AFFIRMED in toto.
No pronouncement as to costs.
SO ORDERED.


G.R. No. 164748 January 27, 2006
THE SECRETARY OF EDUCATION and DR. BENITO TUMAMAO, Schools Division Superintendent
of Isabela, Petitioners, vs. HEIRS OF RUFINO DULAY, SR., represented by IGNACIA VICENTE,
RUFINO DULAY, JR., SUSANA DULAY, ADELAIDA DULAY, LUZVIMINDA DULAY and CECILIA
DULAY, Respondents.
D E C I S I O N
CALLEJO, SR., J .:
This is a petition for review on certiorari of the Decision
1
of the Court of Appeals (CA) in CA-G.R. CV No.
78314 which affirmed the Decision
2
of the Regional Trial Court (RTC) of Santiago City, Isabela, Branch
35, in Civil Case No. 35-2397.
The spouses Rufino Dulay, Sr. and Ignacia Vicente were the owners of a parcel of land located in Rizal,
Santiago, Isabela, with an area of 29,002 square meters. The lot was covered by Original Certificate of
Title No. P-6776.
On August 3, 1981, the spouses Dulay executed a deed of donation
3
over a 10,000-square-meter portion
of their property in favor of the Ministry of Education and Culture (now the Department of Education,
Culture and Sports [DECS]). The deed provided, among others:
That for and in consideration of the benefits that may be derived from the use of the above described
property which is intended for school purposes, the said DONORS do by by (sic) these presents
TRANSFER AND CONVEY by way of DONATION unto the DONEE, its successors and assigns, the
above property to become effective upon the signing of this document.
4

The property was subdivided. On April 13, 1983, Transfer Certificate of Title (TCT) No. T-143337
5

covering the portion identified as Lot 8858-A was issued in the name of the Ministry of Education and
Culture, represented by Laurencio C. Ramel, the Superintendent of Schools of Isabela. However, the
property was not used for school purposes and remained idle.
Sometime in 1988, the DECS, through its Secretary, started construction of the Rizal National High
School building on a parcel of land it acquired from Alejandro Feliciano. The school site was about 2
kilometers away from the land donated by the spouses Dulay.
In a letter
6
to the DECS Secretary dated August 19, 1994, the spouses Dulay requested that the property
be returned to them considering that the land was never used since 1981, or a period of more than 13
years. On August 28, 1994, the Barangay Council of Rizal, Santiago City issued Resolution No. 39
7

recognizing the right of the donors to redeem the subject parcel of land because of the DECS failure to
utilize it for the intended purpose. It further resolved that the Rizal National High School no longer needed
the donated land "considering its distance from the main campus and [the] failure to utilize the property
for a long period of time."
On December 22, 1994, Rufino Dulay, Sr. passed away at the age of 80.
8
His heirs sought the help of the
Sangguniang Panlungsod of Santiago City via an undated letter
9
requesting the approval of a resolution
allowing them to redeem the donated property. The Sangguniang Panlungsod denied the request
inasmuch as the city government was not a party to the deed of donation.
10

On August 31, 1997, the heirs of Dulay, Sr., herein respondents, filed a complaint for the revocation of the
deed of donation and cancellation of TCT No. T-143337 before the RTC of Santiago City, Isabela, Branch
35, against the DECS Secretary and Dr. Benito Tumamao, the Schools Division Superintendent of
Isabela. Respondents alleged that there was a condition in the deed of donation: that the DECS, as
donee, utilize the subject property for school purposes, that is, the construction of a building to house the
Rizal National High School. Respondents alleged that the DECS did not fulfill the condition and that the
land remained idle up to the present. Respondents also averred that the donation inter vivos was
inofficious, since the late Rufino Dulay, Sr. donated more than what he could give by will.
Petitioners, through the Office of the Solicitor General (OSG), interposed the following defenses: (a) the
DECS complied with said condition because the land was being used by the school as its technology and
home economics laboratory; (b) the donation was not inofficious for the donors were the owners of five
other parcels of land, all located at Rizal, Santiago City; (c) the DECS acquired the disputed property by
virtue of purchase made on December 8, 1997 by the barangay of Rizal, Santiago City in the amount of
P18,000.00 as certified by its former Barangay Captain, Jesus San Juan;
11
and (d) the action of the
respondents had prescribed. The OSG also claimed that students planted a portion of the land with rice,
mahogany seedlings, and fruit-bearing trees; the produce would then be sold and the proceeds used for
the construction of a school building on the subject property.
In their Reply,
12
respondents denied that the donated land was being used as a technology and home
economics laboratory, and averred that there were no improvements on the property. Moreover, the fact
that rice was planted on the lot was contrary to the intended purpose of the donation. The respondents
likewise denied that the property had been sold to the barangay. While the other properties of the late
donor had been sold, the deeds thereon had not been registered, and the tax declarations not yet
transferred in the names of the purchasers.
Thereafter, trial ensued. On March 6, 2001, an ocular inspection of the property was conducted by the
parties and their respective counsels, including the Presiding Judge. It was confirmed that the land was
barren, save for a small portion which was planted with palay. A demolished house was also found in the
periphery of the donated lot.
13

On December 26, 2002, the trial court rendered its decision in favor of respondents. The fallo reads:
WHEREFORE, in the light of the foregoing considerations, the Court hereby DECLARES the deed of
donation, Exhibit "A," executed by the late Rufino Dulay, Sr. and his wife Ignacia Vicente over a portion of
the land covered by O.C.T. No. P-6776 and now covered by T.C.T. No. T-143337 in the name of the
donee Department of Education and Culture as REVOKED. The defendant DECS is ORDERED to
execute the deed of reconveyance of the land in favor of the plaintiffs heirs of Rufino Dulay, Sr.
SO ORDERED.
14

In revoking the deed of donation, the trial court ruled that the donation was subject to a resolutory
condition, namely, that the land donated shall be used for school purposes. It was no longer necessary to
determine the intended "school purpose" because it was established that the donee did not use the land.
Thus, the condition was not complied with since the property was donated in July 1981. Moreover, the
DECS did not intend to use the property for school purposes because a school had already been built and
established in another lot located in the same barangay, about two kilometers away from the subject land.
Finally, the trial court rejected petitioners contention that the donation was inofficious.
Aggrieved, the OSG appealed the decision to the CA.
On July 30, 2004, the appellate court rendered judgment affirming the decision. The court held that the
DECS failed to comply with the condition in the donation, that is, to use the property for school purposes.
The CA further ruled that the donation was onerous considering that the donee was burdened with the
obligation to utilize the land for school purposes; therefore, the four-year prescriptive period under Article
764 of the New Civil Code did not apply. Moreover, the CA declared that a deed of donation is considered
a written contract and is governed by Article 1144 of the New Civil Code, which provides for a 10-year
prescriptive period from the time the cause of action accrues. According to the CA, the respondents
cause of action for the revocation of the donation should be reckoned from the expiration of a reasonable
opportunity for the DECS to comply with what was incumbent upon it.
Petitioners filed a motion for reconsideration, which the CA denied.
Petitioners seek relief from this Court via petition for review on certiorari, contending that:
I.
THE DEPARTMENT OF EDUCATION, THROUGH THE RIZAL NATIONAL HIGH SCHOOL, HAD
COMPLIED WITH THE CONDITION IMPOSED IN THE DEED OF DONATION.
II.
RESPONDENTS RIGHT TO SEEK THE REVOCATION OF THE DEED OF DONATION, IF THERE BE
ANY, IS ALREADY BARRED BY PRESCRIPTION AND LACHES.
15

The Court shall resolve the issues raised by petitioners seriatim.
The donee failed to comply with the condition imposed in the deed of donation
The issue of whether or not petitioner DECS was able to comply with the condition imposed in the deed of
donation is one of fact. There is a question of fact when the doubt or difference arises as to the truth or
falsehood of alleged facts or when the query necessarily solicits calibration of the whole evidence
considering mostly the credibility of witnesses, existence and relevancy of specific surrounding
circumstances, their relation to each other and to the whole and probabilities of the situation.
16
Under
Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be raised in a petition for review
on certiorari, for the simple reason that this Court is not a trier of facts. It is not for the Court to calibrate
the evidence on record, as this is the function of the trial court. Although there are well-defined exceptions
to the rule, nevertheless, after a review of the records, we find no justification to depart therefrom.
Moreover, the trial courts findings of facts, as affirmed by the appellate court on appeal, are binding on
this Court, unless the trial and appellate courts overlooked, misconstrued or misinterpreted facts and
circumstances of substance which, if considered, would change the outcome of the case. The case has
been reviewed thoroughly, and we find no justification to reverse the CA decision.
Petitioners, through the OSG, maintain that the condition (to use the property for school purposes) is not
limited to the construction of a school building, but includes utilizing it as a technology and home
economics laboratory where students and teachers plant palay, mahogany seedlings, and fruit-bearing
trees. The OSG insists that the donee did not specify in the deed that the property should be used for the
construction of a school building. According to the OSG, the proceeds of the harvest were used and are
still being used by the Rizal National High School for the construction and improvement of its present
school site. Moreover, it was verified that there was palay planted on the donated property during the
ocular inspection on the property.
In their comment on the petition, respondents dispute petitioners contentions, and aver that no evidence
was presented to prove that, indeed, palay, mahogany seedlings and fruit-bearing trees were planted on
the property. Respondents also emphasized that when the trial court inspected the subject property, it
was discovered to be barren and without any improvement although some portions thereof were planted
with palay. Petitioners even failed to adduce evidence to identify the person who planted the palay.
The contention of petitioners has no merit.
As gleaned from the CA decision, petitioners failed to prove that the donated property was used for
school purposes as indicated in the deed of donation:
We find it difficult to sustain that the defendant-appellants have complied with the condition of donation. It
is not amiss to state that other than the bare allegation of the defendant-appellants, there is nothing in the
records that could concretely prove that the condition of donation has been complied with by the
defendant-appellants. In the same breadth, the planting of palay on the land donated can hardly be
considered and could not have been the "school purposes" referred to and intended by the donors when
they had donated the land in question. Also, the posture of the defendant-appellants that the land
donated is being used as technology and home economics laboratory of the Rizal National High School is
far from being the truth considering that not only is the said school located two kilometers away from the
land donated but also there was not even a single classroom built on the land donated that would
reasonably indicate that, indeed, classes have been conducted therein. These observations, together with
the unrebutted ocular inspection report made by the trial court which revealed that the land donated
remains idle and without any improvement thereon for more than a decade since the time of the donation,
give Us no other alternative but to conclude that the defendant-appellants have, indeed, failed to comply
with what is incumbent upon them in the deed of donation.
17

In its Order
18
dated March 6, 2001, the RTC reiterated that during the ocular inspection of the propert y
conducted in the presence of the litigants and their counsel, it observed that "the land was barren; there
were no improvements on the donated property though a portion thereof was planted with palay [and a
demolished house built in 1979.]"
Moreover, petitioners failed to adduce a shred of evidence to prove that the palay found in the property
was planted by DECS personnel or at its instance or even by students of the Rizal National High School.
No evidence was adduced to prove that there were existing plans to use the property for school purposes.
Petitioners even debilitated their cause when they claimed in the trial court that the barangay acquired the
property by purchase, relying on the certification of former Barangay Captain Jesus San Juan.
The right to seek the revocation of donation had not yet prescribed when respondents filed their complaint
Anent the second issue, we reject the contention of the OSG that respondents cause of action is already
barred by prescription under Article 764 of the New Civil Code, or four years from the non-compliance
with the condition in the deed of donation. Since such failure to comply with the condition of utilizing the
property for school purposes became manifest sometime in 1988 when the DECS utilized another
property for the construction of the school building, the four-year prescriptive period did not commence on
such date. Petitioner was given more than enough time to comply with the condition, and it cannot be
allowed to use this fact to its advantage. It must be stressed that the donation is onerous because the
DECS, as donee, was burdened with the obligation to utilize the land donated for school purposes. Under
Article 733 of the New Civil Code, a donation with an onerous cause is essentially a contract and is thus
governed by the rules on contract.
19
We fully agree with the ruling of the appellate court:
xxx With this, [we] decline to apply the four-year prescriptive period for the revocation of donation
provided under Article 764 of the New Civil Code and instead apply the general rules on contracts since
Article 733 of the same Code, specifically provided that onerous donations shall be governed by the rules
on contracts.
Corollarily, since a deed of donation is considered a written contract, it is governed by Article 1144 of the
New Civil Code, which provides that the prescriptive period for an action arising from a written contract is
ten (10) years from the time the cause of action accrues. In the case of donation, the accrual of the cause
of action is from the expiration of the time within which the donee must comply with the conditions or
obligations of the donation. In the instant case, however, it must be noted that the subject donation fixed
no period within which the donee can comply with the condition of donation. As such, resort to Article
1197 of
the New Civil Code is necessary. Said article provides that if the obligation does not fix a period, but from
its nature and the circumstances it can be inferred that a period was intended, the courts may fix the
duration thereof. Indeed, from the nature and circumstances of the condition of the subject donation, it
can be inferred that a period was contemplated by the donors. The donors could not have intended their
property to remain idle for a very long period of time when, in fact, they specifically obliged the defendant-
appellants to utilize the land donated for school purposes and thus put it in good use. xxx
20

In Central Philippine University v. Court of Appeals,
21
a case squarely in point, we have established that
the legal possibility of bringing the action begins with the expiration of a reasonable opportunity for the
donee to fulfill what has been charged upon it by the donor. Likewise, we held that even if Article 1197 of
the New Civil Code provides that the courts may fix the duration when the obligation does not determine
the period but from its nature and circumstances it can be inferred that a period was intended, the general
rule cannot be applied because to do so would be a mere technicality and would serve no other purpose
than to delay or lead to an unnecessary and expensive multiplication of suits.
22

Altogether, it has been 16 years since the execution of the deed of donation. Petitioner DECS failed to
use the property for the purpose specified in the deed of donation. The property remained barren and
unutilized. Even after respondents sought the return of the property before the courts, petitioner DECS
still failed to draw up plans to use the property for school purposes. In fine, petitioner DECS has no use
for the property; hence, the same shall be reverted to the respondents.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 78314
dated July 30, 2004 is AFFIRMED.
SO ORDERED.

BICOL AGRO-INDUSTRIAL PRODUCERS COOPERATIVE,
INC. (BAPCI),
Petitioner,


- versus


EDMUNDO O. OBIAS, PERFECTO O. OBIAS, VICTOR
BAGASINA, ELENA BENOSA, MELCHOR BRANDES,
ROGELIO MONTERO, PEDRO MONTERO, CLAUDIO
RESARI, PILAR GALON, ANTONIO BUISON, PRUDENCIO
BENOSA, JR., MARIA VILLAMER and ROBERTO PADUA,
Respondent.



G.R. No. 172077









Present:

CARPIO, J., Chairperson,
CARPIO MORALES,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.


Promulgated:
October 9, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

PERALTA, J .:

Before this Court is a Petition for Review on certiorari[1] under Rule 65 of the Rules of Court,
seeking to set aside the August 24, 2005 Decision[2] and March 28, 2006 Resolution[3] of the Court of Appeals
(CA) in CA-G.R. CV No. 59016.

The facts of the case:

Sometime in 1972, the Bicol Sugar Development Corporation (BISUDECO) was established at Himaao,
Pili Camarines Sur In the same year BISUDECO onstrute a roa (the ispute roa) measuring
approximately 7 meters wide and 2.9 kilometers long. The disputed road was used by BISUDECO in hauling and
transporting sugarcane to and from its mill site (Pensumil) and has thus become indispensable to its sugar milling
operations.[4]

On October 30, 1992, petitioner Bicol Agro-Industrial Producers Cooperative, Inc. acquired the assets of
BISUDECO. On April 19, 1993, petitioner filed a Complaint[5] against respondents Edmundo Obias, Perfecto
Obias, Victor Bagasina, Elena Benosa, Melchor Brandes, Rogelio Montero, Pedro Montero, Claudio Resari, Pilar
Galon, Antonio Buison, Prudencio Benosa, Jr., Victor Bagasina Jr., Maria Villamer, and Roberto Padua, alleging
that on March 27, 1993 and April 3, 1993, respondents unjustifiably barricaded the disputed road by placing
amoos woos plaars an stones aross it preventing petitioners an the other sugar planters vehiles from
passing through the disputed road, thereby causing serious damage and prejudice to petitioner.[6]

Petitioner alleged that BISUDECO constructed the disputed road pursuant to an agreement with the owners
of the ricefields the road traversed. The agreement provides that BISUDECO shall employ the children and relatives
of the landowners in exchange for the construction of the road on their properties. Petitioner contends that through
prolonged and continuous use of the disputed road, BISUDECO acquired a right of way over the properties of the
lanowners whih right of way in turn was aquire y it when it ought BISUDECOs assets Petitioner praye
that respondents be permanently ordered to restrain from barricading the disputed road and from obstructing its free
passage.[7]

In an Order[8] dated April 19, 1993, the Regional Trial Court of Pili (RTC), Camarines Sur, 5
th
Judicial
Region, Branch 31, ordered respondents, their agents and representatives to cease and desist from placing barricades
on the disputed road.[9]

In their Answer,[ responents enie having entere into an agreement with BISUDECO
regaring the onstrution an the use of the ispute roa They allege that BISUDECO surreptitiously an
without their knowlege an onsent onstrute the ispute roa on their properties an has sine then
intermittently an isontinuously use the ispute roa for hauling sugarane espite their repeate protests
Responents laime they tolerate BISUDECO in the onstrution an the use of the roa sine BISUDECO was a
government-owne an ontrolle orporation an the entire ountry was then uner Martial Law Responents
likewise enie that the roa has eome a puli roa sine no puli funs were use for its onstrution an
maintenane Moreover responents allege that with the exeption of Emuno an Perfeto Oias they are atual
tillers of the rielans having aquire their rights over sai lans uner Presiential Deree No (PD
) Emuno an Perfeto Oias are the owners of the eastern portion of the property on whih a portion of the
roa going to BISUDECO was onstrute Responents enie that they arriae the roa[

Jaime Manuay an Manolito Maralit for themselves an in representation of other sugarane planters
file the first omplaint-in-intervention[

Petitioner file an Amene Complaint[ an with leave of ourt a Re-Amene Complaint[
where it averre as an alternative ause of ation in the event the lower ourt oes not fin merit in its auses of
ation that it will avail of the enefits provie for uner Artile 9[ of the New Civil Coe Petitioner thus
emane from responents a right of way over the ispute roa for its use[

Responents file an Answer[ to refute petitioners alternative ause of ation Responents laime
that the roa from the sugarmill to the Maharlika Highway at Barangay Romero Bula Camarines Sur whih exits
at the Rural Bank of Bula site ha a istane of only aout kilometers; hene responents asserte that sai roa
was shorter an was a more appropriate right of way than the ispute roa[

On July 99 the RTC issue a Writ of Preliminary Injuntion[9 orering the responents to esist
from onstruting arriaes aross the roa

On June 99 nine other ooperatives[ file their Complaint-in-Intervention[

On June 99 the RTC renere a Deision[ the ispositive portion of whih reas:

WHEREFORE premises onsiere a eision is herey renere elaring the
Writ of Preliminary Injuntion issue against all the herein efenants their agents
representatives an suh other persons ating in their ehalf permanent an perpetual BUT
the plaintiff Biol Agro-Inustrial Cooperative In (BAPCI) is herey orere to pay the
owners of the lots affete y the roa viz: Pero Montero P99; Pero Galon
P9; Clara Paua P; Antonio Buizon P; Rogelio Montero
P; Maria Villamer P; Melhor Branes P; Pruenio
Benosa P ; Elena Benosa P9; Vitor Bagasina Jr P9; an
Clauio Resari P9 Upon full payment thereof the plaintiff shall e elare the
asolute owner of the roa in question Legal rate if interest is herey impose upon the
plaintiff from the finality of this eision until fully payment hereof No osts

SO ORDERED[


The RTC rule that petitioner faile to present any onrete eviene to prove that there was an
agreement etween BISUDECO an responents for the onstrution of the ispute roa[ Moreover it hel
that petitioner i not aquire the same y presription[ The RTC however also hel that petitioner was entitle
to a ompulsory easement of right of way as provie for uner Artile 9 of the New Civil Coe upon payment of
proper inemnity to responents[

Both parties file a motion for reonsieration of the RTC Deision Petitioner ontene that: () the
value of the lan is exessive; () the eviene is insuffiient to justify the awar; () the eision is ontrary to law
an jurispruene Responents on the other han allege that: () the trial ourt erre in elaring the persons
mentione in the eisions ispositive portion to e entitle to inemnity for the onstrution an the use of the
ispute roa; () BAPCI shoul not e elare the asolute owner of the ispute roa upon full payment of the
inemnity ue to the efenants; an () the eision faile to awar amages[

On Septemer 99 the RTC enie oth motions for reonsieration[ The parties then appeale
to the CA

On August the CA renere a Deision the ispositive portion of whih reas:

WHEREFORE premises onsiere the appeal is PARTLY GRANTED The
assaile eision of the Regional Trial Court Branh Pili Camarines Sur in Civil Case
No P-99 is herey MODIFIED as follows: the awars of Php to Clara Paua
an Php to Pruenio Benosa are herey DELETED an the elaration that the
plaintiff BAPCI shall eome the asolute owner of the ispute roa upon full payment of
inemnity is REVERSED an SET ASIDE Aoringly the owners of the servient estate in
the easement of right of way reognize in this Deision shall retain ownership of the lans
affete y the easement in aorane with Art of the Civil Coe We herey AFFIRM
the appeal in all other respets

SO ORDERED[9


The CA affirme the fining of the RTC that there was no onlusive proof to suffiiently estalish the
existene of an agreement etween BISUDECO an responents regaring the onstrution of the ispute
roa[ Moreover the CA also elare that an easement of right of way is isontinuous an as suh annot e
aquire y presription[ The CA likewise affirme the fining of the RTC that petitioner was entitle to a
ompulsory easement of right of way upon payment of proper inemnity to responents The CA however elare
that ownership over the ispute roa shoul remain with responents espite the grant of a ompulsory
easement[ Lastly the CA elete the awars to Pruenio Benosa (Benosa) an Clara Paua (Paua) sine the
former never laime ownership of any portion of the lans affete y the ispute roa an the latter was not a
party to the proeeings elow[

Petitioner then file a Motion for Reonsieration alleging among others that the CA Deision faile to
rule on the issue of estoppel an laches Moreover Benosa an Paua file a Motion for Reonsieration assailing
the portion of the CA Deision eleting the awar of inemnity to them On Marh the CA issue a
Resolution enying the same

Hene herein petition with petitioner raising the following assignment of errors to wit:

I.

THE HONORABLE COURT OF APPEALS ERRED SERIOUSLY IN
NOT FINDING THAT THERE WAS FORGED AN AGREEMENT BETWEEN
BISUDECO MANAGEMENT AND THE PRIVATE RESPONDENTS FOR THE
CONTRUCTION OF THE ROAD IN QUESTION.

II.

THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS
ERRED IN NOT CONSIDERING THE PRINCIPLES OF PRESCRIPTION,
LACHES AND ESTOPPEL IN THE CASE AT BAR.
III.

THE HONORABLE COURT OF APPEALS ERRED IN COMPLETELY
DISREGARDING THE CLASSIFICATION OF THE ROAD IN QUESTION AS
BARANGAY ROAD.


IV.

IN THE ALTERNATIVE CAUSE OF ACTION, THE PUBLIC
RESPONDENT SERIOUSLY ERRED IN CONSIDERING THE VALUATION OF
THE LANDS AFFECTED BY THE ROAD IN 1994, AND NOT IN 1974, WHEN SAID
ROAD WAS CONSTRUCTED.

V.

THE HONORABLE PUBLIC RESPONDENT ERRED SERIOUSLY
WHEN IT FAILED ALSO TO CONSIDER THE LEGAL PRINCIPLE OF UNJUST
ENRIGHTMENT AT THE EXPENSE OF ANOTHER.[

At the outset this Court shall aress some proeural matters Quite notiealy herein petition is
enominate as one file uner Rule [ of the Rules of Court notwithstaning that it seeks to assail the Deision
an Resolution of the CA Clearly petitioner ha availe of the improper remey as the appeal from a final
isposition of the CA is a petition for review uner Rule an not a speial ivil ation uner Rule of the Rules
of Court[

In Active Realty and Development Corporation v. Fernandez,[ this Court isusse the ifferene
etween petitions file uner Rule an Rule viz:

A petition for certiorari uner Rule is proper to orret errors of jurisition
ommitte y the lower ourt or grave ause of isretion whih is tantamount to lak of
jurisition This remey an e availe of when there is no appeal or any plain speey
an aequate remey in the orinary ourse of law

Appeal y certiorari uner Rule of the Rules of Court on the other han is
a moe of appeal availale to a party esiring to raise only questions of law from a jugment
or final orer or resolution of the Court of Appeals the Sandiganbayan the Regional Trial
Court or other ourts whenever authorize y law
x x x The general rule is that the remedy to obtain reversal or modification of
judgment on the merits is appeal. Thus, the proper remedy for the petitioner should
have been a petition for review on certiorari under Rule 45 of the Rules of Court since
the decision sought to be reversed is that of the CA. The existene an availaility of the
right of appeal prosries a resort to certiorari eause one of the requisites for availment
of the latter is preisely that there shoul e no appeal The remey of appeal uner Rule
of the Rules of Court was still availale to the petitioner[

Rule is lear that eisions final orers or resolutions of the Court of Appeals in any ase i.e.,
regarless of the nature of the ation or proeeing involve may e appeale to this Court y filing a petition for
review whih woul e ut a ontinuation of the appellate proess over the original ase[9 Moreover it is asi
that one annot avail of the remey provie for uner Rule when an appeal is still availale Hene petitioner
shoul have file its petition uner Rule

The proeural infirmity notwithstaning an in the interest of sustantial justie this Court shall
onsier herein petition as one file uner Rule espeially sine it was file well within the reglementary perio
prosrie uner the sai Rule The Court also takes notie that the assignment of errors raise y petitioner oes
not allege grave ause of isretion or lak of jurisition on the part of the CA

On the Existence of an Agreement between BISUDECO and Respondents

Anent the first error raise petitioner argues that the CA erre in not fining that BISUDECO an
responents forge an agreement for the onstrution of the roa in ispute Petitioner thus asserts its entitlement to
an easement of right of way over the properties of responents y virtue of sai agreement

An easement of right of way was suintly explaine y the CA in the following manner to wit:

Easement or servitue is an enumrane impose upon an immovale for the
enefit of another immovale elonging to a ifferent owner By its reation easement is
estalishe either y law (in whih ase it is a legal easement) or y will of the parties (a
voluntary easement) In terms of use easement may either e ontinuous or isontinuous
The easement of right of way the privilege of persons or a particular class of persons
to pass over anothers land, usually through one particular path or linen is
characterized as a discontinuous easement because its use is in intervals and depends
on the act of man. Because of this character an easement of a right of way may only be
acquired by virtue of a title[

Artile of the New Civil Coe is the appliale law in the ase at ar viz:

Art Continuous non-apparent easements an discontinuous ones whether
apparent or not may be acquired only by virtue of a title

Base on the foregoing in orer for petitioner to aquire the ispute roa as an easement of right-of-
way it was inument upon petitioner to show its right y title or y an agreement with the owners of the lans that
sai roa traverse

While oneing that they have no iret eviene of the allege agreement petitioner posits that they
presente irumstantial eviene whih if taken olletively woul prove its existene[ Speifially petitioner
ites the following irumstanes to wit:

a The agreement was of puli knowlege[ Allegely BISUDECO an responents
entere into an agreement for the onstrution of the roa provie that the latter their
hilren or relatives were employe with BISUDECO
The roa was ontinuously use y BISUDECO an the puli in general[
There was no protest or omplaint from responents for almost a perio of two
eaes[
The portions of the lan formerly elonging to responents affete y the roa were
alreay segregate an surveye from the main lots[
e The roa in ispute is alreay a barangay roa
The well-entrenhe rule in our jurisition is that only questions of law may e entertaine y this Court in
a petition for review on certiorari This rule however is not iron-la an amits ertain exeptions suh as when
() the onlusion is groune on speulations surmises or onjetures; () the inferene is manifestly mistaken
asur or impossile; () there is grave ause of isretion; () the jugment is ase on a misapprehension of fats;
() the finings of fat are onfliting; () there is no itation of speifi eviene on whih the fatual finings are
ase; () the finings of asene of fats are ontraite y the presene of eviene on reor; () the finings
of the Court of Appeals are ontrary to those of the trial ourt; (9) the Court of Appeals manifestly overlooke
ertain relevant an unispute fats that if properly onsiere woul justify a ifferent onlusion; () the
finings of the Court of Appeals are eyon the issues of the ase; an () suh finings are ontrary to the
amissions of oth parties[

After a painstaking review of the reors this Court fins no justifiation to warrant the appliation of any
exeption to the general rule

Cruial to the petitioners ause was its uren of proving the existene of the allege agreement etween
BISUDECO an responents for the onstrution of the roa In this regar the RTC foun that petitioner faile to
prove its existene to wit:

It is clear that the plaintiff failed to present any concrete evidence to prove that
there was such an agreement between BISUDECO and defendants Hereuner quote
are the testimonies of plaintiffs witnesses regaring the allege agreement

Romeo Devetero Transportation Superintenent of BISUDECO testifie

Cross Examination y Atty Pejo

Q: You also mentione that there was an agreement etween Senator Cea Mr
Oias an some of the tenants?
A: Yes

Q: You mentione that this was not in writing am I right?
A: Yes

Q: How i you know aout it that it was not in writing who tol you Senator
Cea?
A: It was ommonly known to all original employees of the BISUDECO

Q: You know it from the management?
A: From o-employees

Q: You learne aout that agreement from you o-employees?
A: Yes

Q: In other wors therefore that is why you sai you are onfuse etween
Emuno Cea an Perfeto Oias eause you just learne it from other
employees an you were never present when they talke aout it am I right?
A: Yes x x x

To this effet also is the testimony of Angel Loo hea of the agriultural
Department of BAPCI to wit:

A: Yes your Honor?
COURT: From where i you learn?
A: From people whom I talke with at that time an it is a puli ommon
knowlege at that time
x x x

Atty Caranang: I repeat my question Your Honor
You sai you aquire it from or eause of ommon knowlege an you
mentione some people Who are those people you are referring to whom you
aquire that knowlege?
A: Most of all the late Benjamin Bagasina Barangay Captain at that time who
was our employee in onsieration of this agreement then we have also a Civil
Engineering Hea Civil Engineering Department who is responsile for the
maintenane of this roa I learne from him that this arrangement estalishe
the fat why this roa was onstrute

Q: Who is the hea of the Engineering Dept?

x x x

COURT: May answer
A: Engineer Palo Torilla who was then the hea of our Civil Engineering
Dept

But this Engineer Palo Torilla Loos allege soure of the information was
never presente in Court An aoring to the Chief Aountant of BAPCI Davi Severo:

A: When I was interviewing Mrs Alma Montero Penaflor she file to me a
ertain arrangement relate to the use of the lan to Himaao as roa going to
the entral
COURT: You mean Himaao Millsite roa?
A: Yes sir

Atty Caranang:
Q: What arrangement is that supposely file to you?
A: She tol me in exhange for the use of the roa the relatives or owners or
tenants of the lan will e hire y the sugar Central?

COURT:
Q: So only the tenants not the owners?
A: The tenants hilren the roa elongs
x x x

Finally intervenor Antonio Austria in trying to show you that there was onsent
an approval on the part of the efenant Emuno Oias to give the right of way to
BISUDECO at the time to e use in hauling the sugarane of the planters to the Central
averre the following unertain statements:

A: Well he has (si) having a ase against PENSUNIL regaring the property I
think the right of way going to PENSUMIL right now we isuss it an he sai
he is allowing it anymore ut then I remine him wayak in 9 to 9 he
was one of the iggest planters in the part of Partio so he onsente to the late I
think Emuno Cea the owner of BISUDECO at that time to pass his property
sine he is also milling a lot of things at that time an many other things one of
the onession mill was I think some of the tenants there in Himaao will e
employe in the mill
x x x

These aforequoted testimonies of the plaintiffs witnesses failed to
satisfactorily establish the plaintiffs contention that there was such an
agreement. Likewise, the list of the Employees of Defendants relatives, son/daughter
employed by the BISUDECO (Exhibit H) does not in any manner prove the alleged
agreement[

For its part the CA also rule that petitioner faile to prove the existene of the sai agreement to wit:

Like the lower court, we found no conclusive proof to sufficiently establish the
existence of an agreement between BISUDECO and the defendants-appellants
regarding the construction and the use of the disputed road The lower ourt orretly
iselieve the plaintiffs-appellants ontention that an agreement existe eause there is
simply no iret eviene to support this allegation BAPCI sumitte purely irumstantial
eviene that are not suffiiently aequate as asis for the inferene than an agreement
existe By themselves the irumstanes the plaintiffs-appellants ite i.e the
employment of sixteen () relatives of the efenants-appellants; the efenants-
appellants unjustifie silene; the fat that the existene of the agreement is known to
everyone et are events suseptile of iverse interpretations an o not neessarily lea
to BAPCIs esire onlusion Additionally, the testimonies that the plaintiffs-
appellants presented are mainly hearsay, as not one among the witnesses had personal
knowledge of the agreement by reason of direct participation in the agreement or
because the witness was present when the agreement was concluded by the parties
Thus given the efenants-appellants ategorial enial that an agreement existe we
sustain the lowers onlusion that no agreement existe etween BISUDECO an the
efenants-appellants[

Base on the foregoing the inaility of petitioner to prove the existene of an agreement militates its
allegations in herein petition On this sore oth the RTC an the CA are one in ruling that petitioner ha faile to
prove the existene of the agreement etween BISUDECO an the responents for the onstrution of the
roa Also well-estalishe is the rule that "fatual finings of the Court of Appeals are onlusive on the parties
an arry even more weight when the sai ourt affirms the fatual finings of the trial ourt"[9 Hene this Court
fins no reason to reverse suh finings


On Acquisition by Prescription

Petitioner woul have this Court re-examine Costabella Corporation v. Court of Appeals[ (Costabella)
where the Court hel that It is alreay well-estalishe that a right of way is isontinuous an as suh
annot e aquire y presription[ Petitioner ontens that some reognize authorities[ share its
view that an easement of right of way may e aquire y presription

Be that as it may this Court fins no reason to re-examine Costabella This Court is guie y Bogo-Medellin
Milling Co., Inc. v. Court of Appeals[ (Bogo-Medellin) involving the onstrution of a railroa trak to a sugar
mill In Bogo-Medellin this Court isusse the isontinuous nature of an easement of right of way an the rule
that the same annot e aquire y presription to wit:
Continuous an apparent easements are aquire either y virtue of a title or y
presription of ten years
The trial ourt an the Court of Appeals oth uphel this view for the reason that the
railroa right of way was aoring to them continuous and apparent in nature The more
or less permanent railroa traks were visually apparent an they continuously oupie the
sujet strip of lan from 99 (the year the easement grante y Feliiana Santillan to
petitioner expire) Thus with the lapse of the -year presriptive perio in 99
petitioner supposely aquire the easement of right of way over the sujet lan

Following the logic of the courts a quo, if a road for the use of vehicles or the
passage of persons is permanently cemented or asphalted, then the right of way over it
becomes continuous in nature. The reasoning is erroneous.

Under civil law and its jurisprudence, easements are either continuous or
discontinuous according to the manner they are exercised, not according to the presence
of apparent signs or physical indications of the existence of such easements Thus
easement is ontinuous if its use is or may e inessant without the intervention of any at
of man like the easement of rainage; and it is discontinuous if it is used at intervals and
depends on the act of man, like the easement of right of way.

The easement of right of way is considered discontinuous because it is exercised
only if a person passes or sets foot on somebody elses land. Like a road for the passage
of vehicles or persons, an easement of right of way of railroad tracks is discontinuous
because the right is exercised only if and when a train operated by a person passes over
another's property. In other words, the very exercise of the servitude depends upon the
act or intervention of man which is the very essence of discontinuous easements.

The presence of more or less permanent railroad tracks does not, in any way,
convert the nature of an easement of right of way to one that is continuous. It is not the
presence of apparent signs or physical indications showing the existence of an easement,
but rather the manner of exercise thereof, that ategorizes suh easement into ontinuous
or isontinuous The presene of physial or visual signs only lassifies an easement into
apparent or non-apparent. Thus a roa (whih reveals a right of way) an a winow (whih
evienes a right to light an view) are apparent easements while an easement of not
uiling eyon a ertain height is non-apparent

In Cua it has een hel that the existene of a permanent railway does not make the
right of way a continuous one; it is only apparent Therefore it annot e aquire y
presription In Louisiana it has also een hel that a right of passage over another's lan
annot e laime y presription eause this easement is isontinuous an an e
estalishe only y title

In this ase the presene of railroa traks for the passage of petitioners trains
enotes the existene of an apparent ut isontinuous easement of right of way An under
Article 622 of the Civil Code, discontinuous easements, whether apparent or not, may be
acquired only by title Unfortunately petitioner Bomeo never aquire any title over the
use of the railroa right of way whether y law onation testamentary suession or
ontrat Its use of the right of way however long never resulte in its aquisition of the
easement eause uner Artile the isontinuous easement of a railroa right of way
an only e aquire by title an not y presription[

Applying Bogo-Medellin to the ase at ar the onlusion is inevitale that the roa in ispute is a
isontinuous easement notwithstaning that the same may e apparent To reiterate easements are either
ontinuous or isontinuous aoring to the manner they are exercised, not aoring to the presene of apparent
signs or physial iniations of the existene of suh easements Hene even if the roa in ispute has een
improve an maintaine over a numer of years it will not hange its isontinuous nature ut simply make the
same apparent To stress Artile of the New Civil Coe states that isontinuous easements whether apparent
or not may e aquire only y virtue of a title

On Laches and Estoppel

Petitioner argues that estoppel an lahes ar responents from exerising ownership rights over the
properties traverse y the roa in ispute In support of sai argument petitioner posits that BISUDECO ha een
peaefully an ontinuously using the roa without any omplaint or opposition on the part of the responents for
almost twenty years Responents on the other han laim that they merely tolerate the use of their lan as
BISUDECO was a government-owne an ontrolle orporation an onsiering that the ispute roa was
onstrute uring the time of Martial Law

There is no asolute rule on what onstitutes lahes It is a rule of equity an applie not to penalize
neglet or sleeping on ones rights ut rather to avoi reognizing a right when to o so woul result in a learly
unfair situation The question of lahes is aresse to the soun isretion of the ourt an eah ase must e
eie aoring to its partiular irumstanes[ It is the etter rule that ourts uner the priniple of equity
shoul not e guie or oun stritly y the statute of limitations or the otrine of lahes if wrong or injustie will
result[

In herein petition the CA enie petitioners argument in the wise:

As previously explaine in our Deision the appliale law is Artile of the
Civil Coe of the Philippines whih provies:

Art Continuous non-apparent easements an
isontinuous ones whether apparent or not may e aquire only
y virtue of a title

The eminent jurist former Senator Arturo M Tolentino opines that this provision seeks to
prevent the imposition of a burden on a tenement based purely on the generosity, tolerance
and spirit of neighborliness of the owners thereof.

We applie the ite provision to the ase in ruling that no easement of right of
way was aquire; ase on the eviene presente the plaintiff-appellant faile to
satisfatorily prove the existene of an agreement eviening any right or title to use the
ispute roa We aitionally rejete the plaintiff-appellants position that it ha aquire
the easement of right of way through aquisitive presription as settle jurispruene states
that an easement of right of way annot e aquire y presription

We hol the same view on the issue of aquisition of an easement of right of
way y lahes To our min settle jurispruene on the appliation of the priniple of
estoppel y lahes militates against the aquisition of an easement of right of way y lahes

Lahes is a otrine in equity an our ourts are asially ourts of law an not
ourts of equity; equity whih has een aptly esrie as justie outsie legality shoul
e applie only in the asene of an never against statutory law; Aeguetas nunguam
ontravenit legis Base on this priniple we fin that the positive manate of Artile of
the Civil Coe the statutory provision requiring title as asis for the aquisition of an
easement of a right of way prelues the appliation of the equitale priniple of
lahes[


This Court agrees with the CA The fat that the law is ategorial that isontinuous easements annot e
aquire y presription militates against petitioners laim of lahes To stress isontinuous easements an only
e aquire y title More importantly whether or not the elements of lahes are present is a question involving a
fatual etermination y the trial ourt[ Hene the same eing a question of fat it annot e the proper sujet
of herein petition On the other han as to the issue of estoppel this Court likewise agrees with the fining of the
CA that petitioner i not present any eviene that woul show an amission representation or onut y
responents that will give rise to estoppel[9

Classification of the Road in Dispute as a Barangay Road

Petitioner argues that the CA erre when it isregare the lassifiation of the roa in question as a barangay
roa In support of sai argument petitioner presente Exhiit Q a Tax Delaration or Fiel Appraisal an
Assessment Sheet[ (99 FAAS) with Survey Numer - an PIN No --9-- ate April
99 whih they laim proves that the roa in ispute is alreay a barangay roa

The same is again a question of fat whih annot e the proper sujet of herein petition Petitioner annot
have this Court re-examine the evientiary value of the ouments it presente efore the RTC as the same is not a
funtion of this Court In any ase after a loser srutiny of the 99 FAAS this Court hols that the same is
insuffiient to prove petitioners laim

Responents in their Comment[ argue against the lassifiation of the roa in ispute as a barangay roa
in the wise:

Petitioner also state that the Honorale Court of Appeals fails to onsier the fat
that the owner of the roa in question is the Muniipality of Pili in the Provine of
Camarines Sur an as proof of suh laim they presente an marke as Exhiit Q tax
elaration no 9- or Annex D of their Petition However private responents wish to
all the attention of this Honorale Court to the following:

a Tax Delaration No 9- attahe as Annex C- of the Verifie Petition elare in the
name of Emuno Oias (one of the private responents);
b. Actual Use portion of said Annex C-6 marked as Exh. No. N-6-a-1 which states Road
Lot (BISUDECO Road); and
The Memoranda portion in the second page of Annex C-6 which states: Revised to
declare the property in The name of the rightful owner, Edmundo Obias ase from
the approve suivision plan Bs-- (OLT) & tehnial esriptions Likewise
area was mae to onform with the sai suivision plan from sqm to 9 sqm

Oviously the allege Exhiit Q of the Petitioner is an erroneous tax
elaration thus negates the laim of the Petitioner that the same is owne y the
Muniipality of Pili an has een elare a arangay roa Private responents annot
unerstan why the herein Petitioner allege this matter an use it as a proof to support
their laim when they are alreay in possession of a tax elaration orreting the same an
even attahe the same as part of their Petition[

In its Reply[ petitioner ounters:

II While Petitioners laim that the roa elongs to the Muniipal Government of
Pili yet what they attahe to the Petition as Annex C- is a tax elaration of Emuno
Oias Petitioners have the following oservations:

x x x x

() That lan of Emuno Oias overe y Annex C- to the Petition is not
inlue or involve in this ase at ar His name oes not appear to e aware in the
Deision of the Honorale Court of Appeals an also in the list of enefiiaries to reeive
monetary onsierations mae y Mr Angel Loo[

After a painstaking review of the reors this Court is more inline to elieve the laim of responents The
laim of petitioner to the effet that the lan of Emuno Oias is not inlue in the ase at ar is misleaing It
may e true that Emuno was not aware inemnity y the lower ourts however the same oes not mean that
his lans o not form part of the sujet matter of herein petition

It ears to stress that Emuno laime in the CA that he was the owner of the affete rielans an that
responents were merely his tenants-enefiiaries uner PD otherwise known as the Tenant Emanipation
Deree[ The CA however ismisse sai laim eause it was raise for the first time on appeal It also hel
that the averments in the ouments sumitte y Emuno in the RTC esrie responents as "owners" of the
lan they till; hene the same onstitute ining juiial amissions[

Base on the foregoing petitioner's attempt to refute the ontents of the 99 FAAS y laiming that the lans
of Emuno are not involve in the ase at ar must fail It is lear that responents are the tenant-enefiiaries of
the lans of Emuno uner PD ; hene ontrary to the laim of petitioner the lans of Emuno are the sujet
matter of herein petition

In aition it is urious that petitioner relies on the 99 FAAS yet fins exeption to the ontents of the
99 FAAS After a loser srutiny of oth ouments it appears to this Court that the lan esrie in the 99
FAAS is also the same lan esrie in the 99 FAAS Both FAAS involve lan measuring square meters
Likewise oth FAAS have the same PIN Numer (--9--) an Survey Numer (-)
Aoringly the annotation ontaine in the 99 FAAS to the effet that a BISUDECO roa oes not elong to
the Muniipality of Pili serves to weaken petitioners laim

The Court also onsiers portions of the RTC Deision where it an e gathere that the roa in ispute is not
a barangay roa to wit:

At this point it is important to note that efenants amitte the ientity of the
roa an the area of the same as reflete in the Commissioners Report uring the Pre-trial
hel last Septemer 9 99

Engr. Roberto Revilla testified that a portion of the road inside the property
of Edmundo Obias, is a barangay road which are lots A-52 sq.m., B-789 sq.m. and C-
655 sq.m. or a total of 1,497 sq.m. whih starts from the intersetion of the National Roa
an the roa to Pensumil up to Corner 9 of Lot Bs-- (OCT) in the name of
Pero O Montero Engr. Revilla concluded that the actual area occupied by the road in
question is the sum of areas of Lots D-2042 sq.m., E-2230 sq.m., F-756 sq.m., G-663
sq.m., H-501 sq.m. , I-588 sq.m., J-594 sq.m., K-l092 sq.m., L-595 sq.m., M-459 sq.m.,
N-106 sq.m., O-585 sq.m. and P-563 sq.m., or a total of 10,774 square meters Sai roa
starts from orner 9 of the lot of Pero Montero whih is equivalent to orner of Lot
Bs-- (OCT) going to the Southern Diretion an ening at orner of Lot
Ca 9 Pili Caastre overe y OCT No - () in the name of spouses
Emuno Oias an Nelly Valenia an spouses Perfeto Oias an Aelaia Aenojar[

The RTC finings of fat thus shows that while ertain portions of the property of Emuno is a barangay
roa the same only pertains to Lots A B an C or a total of 9 square meters whih is istint from the roa in
ispute whih pertains to ifferent lots (lots E to P) an overs a total area of square meters

In light of the foregoing onsiering that the ontents of the 99 FAAS is isputale it was inument
on petitioner to present ouments whih woul eviene the expropriation of the roa in ispute y the loal
government as a barangay roa Uner the prevailing irumstanes the ouments of the expropriation
proeeings woul have een the est eviene availale an the asene thereof is ertainly amaging to
petitioners ause

Amount of Indemnity Due & On Unjust Enrichment

Petitioner manifeste in the RTC its esire in the alternative to avail of a ompulsory easement of right
of way as provie for uner Artile 9 the New Civil Coe Sai relief was grante y the RTC eause of the
unavailaility of another aequate outlet from the sugar mill to the highway Despite the grant of a ompulsory
easement of right of way petitioner however assails oth the RTC an CA Deision with regar to the amount of
inemnity ue responents

Petitioner likens the proeeings at ar to an expropriation proeeing where
just ompensation must e ase on the value of the lan at the time of taking[ Petitioner thus maintains that
the ompensation ue to responents shoul have een ompute in 9 when the roa was onstrute[9

This Court oes not agree Artile 9 of the New Civil Coe states:

The owner or any person who y virtue of a real right may ultivate or use any
immovale whih is surroune y other immovales pertaining to other persons an
without aequate outlet to a puli highway is entitle to eman a right of way through the
neighoring estates after payment of the proper inemnity

Shoul this easement e estalishe in suh a manner that its use may e ontinuous
for all the nees of the ominant estate estalishing a permanent passage the indemnity
shall consist of the value of the land occupied and the amount of the damage cause to
the servient estate

Base on the foregoing it is lear that the law oes not provie for a speifi formula for the valuation of the
lan Neither oes the same state that the value of the lan must e ompute at the time of taking The only
primorial onsieration is that the same shoul onsist of the value of the lan an the amount of amage ause to
the servient estate Hene the same is a question of fat whih shoul e left to the soun isretion of the RTC In
this regar the RTC rule:

The market value per hetare in 9 or at the time of taking or prior to its
onversion to roa is Phetare the same eing a first lass rielan irrigate therefore
the total market value is P The 99 Market Value of P9 is the value
assigne to the property in question after it was alreay evelope as a roa lot where the
unit value applie per square meter is P for
th
lass resiential lot

It has to e rememere however that the ost of transforming the lan to roa was
entirely orne y BISUDECO inluing its maintenane repair an the ost of the
improvements an y plaintiff after its aquisition Thus the P unit value is
exoritant while the 9 valuation of Phetare is low an unreasonale

In fine this Court will aopt the unit value of P per square meter as shown y
Exhiit Q the Real Property Fiel Assessment Sheet No 9-[

In aition the CA rule:

We stress that the amount of proper inemnity ue to the lanowners oes not only
relate to the market value of their property ut omprehens as well the orresponing
amage ause to the servient estate It is unispute that the BISUDECO egan the
onstrution an use of the ispute roa in 9 While the maintenane was orne y
BISUDECO an now y BAPCI who prinipally use the ispute roa for their sugar
milling operations the efenants-appellants have een eprive of the use o their
riefiels eause of the roas onstrution sine 9 Thus it is ut proper to ompensate
them for this eprivation over an aove the prevailing market value of the affete
property To our min in light of the irumstanes surrouning the aquisition of the
affete rielans an the onstrution of the ispute roa partiularly the asene of a
efinitive agreement to show that the efenants-appellants onsente to the roas
onstrution we fin the P per square meter inemnity aware y the lower ourt in
aorane with the Real Property Fiel Assessment Sheet No 9- to e fair an
reasonale uner the irumstanes[

Withal this Court fins no error as to the proper amount of inemnity ue responents as the finings of oth
the RTC an the CA appear to e fair an reasonale uner the prevailing irumstanes an in aorane with the
provisions of Artile 9 of the New Civil Coe

WHEREFORE premises onsiere the petition is DENIED The August Deision an
Otoer Resolution of the Court of Appeals in CA-GR CV No 9 are herey AFFIRMED

SO ORDERED.

[G.R. No. 129471. April 28, 2000]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and CARLOS
CAJES, respondents.
D E C I S I O N
MENDOZA, J .: Misact
This is a petition for certiorari seeking to reverse the decision[1] and resolution[2] of the Court of Appeals
dated August 30, 1996 and April 23, 1997, respectively, declaring private respondent Carlos Cajes the
owner of 19.4 hectares of land embraced in TCT No. 10101 and ordering the segregation and
reconveyance of said portion to him.
The antecedent facts are as follows:
The land in dispute, consisting of 19.4 hectares located in San Miguel, Province of Bohol, was originally
owned by Ulpiano Mumar, whose ownership since 1917 was evidenced by Tax Declaration No. 3840.[3]
In 1950,[4] Mumar sold the land to private respondent who was issued Tax Declaration No. R-1475 that
same year.[5] The tax declaration was later superseded by Tax Declaration Nos. R-799 issued in 1961[6]
and D-2247 issued in 1974.[7] Private respondent occupied and cultivated the said land,[8] planting
cassava and camote in certain portions of the land.[9]
In 1969, unknown to private respondent, Jose Alvarez succeeded in obtaining the registration of a parcel
of land with an area of 1,512,468.00 square meters,[10] in his name for which he was issued OCT No.
546 on June 16, 1969.[11] The parcel of land included the 19.4 hectares occupied by private respondent.
Alvarez never occupied nor introduced improvements on said land.[12]
In 1972, Alvarez sold the land to the spouses Gaudencio and Rosario Beduya to whom TCT No. 10101
was issued.[13] That same year, the spouses Beduya obtained a loan from petitioner Development Bank
of the Philippines for P526,000.00 and, as security, mortgaged the land covered by TCT No. 10101 to the
bank.[14] In 1978, the SAAD Investment Corp., and the SAAD Agro-Industries, Inc., represented by
Gaudencio Beduya, and the spouses Beduya personally executed another mortgage over the land in
favor of petitioner to secure a loan of P1,430,000.00.[15] Sdjad
The spouses Beduya later failed to pay their loans, as a result of which, the mortgage on the property was
foreclosed.[16] In the resulting foreclosure sale held on January 31, 1985, petitioner was the highest
bidder.[17] As the spouses Beduya failed to redeem the property, petitioner consolidated its
ownership.[18]
It appears that private respondent had also applied for a loan from petitioner in 1978, offering his 19.4
hectare property under Tax Declaration No. D-2247 as security for the loan. As part of the processing of
the application, a representative of petitioner, Patton R. Olano, inspected the land and appraised its
value.
Private respondents loan application was later approved by petitioner.[19] However after releasing the
amount of the loan to private respondent, petitioner found that the land mortgaged by private respondent
was included in the land covered by TCT No. 10101 in the name of the spouses Beduya. Petitioner,
therefore, cancelled the loan and demanded immediate payment of the amount.[20] Private respondent
paid the loan to petitioner for which the former was issued a Cancellation of Mortgage, dated March 18,
1981, releasing the property in question from encumbrance.[21]
Sometime in April of 1986, more than a year after the foreclosure sale, a re-appraisal of the property
covered by TCT No. 10101 was conducted by petitioners representatives. It was then discovered that
private respondent was occupying a portion of said land. Private respondent was informed that petitioner
had become the owner of the land he was occupying, and he was asked to vacate the property. As
private respondent refused to do so,[22] petitioner filed a complaint for recovery of possession with
damages against him. The case was assigned to Branch 1 of the Regional Trial Court, Tagbilaran
City,[23] which after trial, rendered a decision, dated August 22, 1989, declaring petitioner the lawful
owner of the entire land covered by TCT No. 10101 on the ground that the decree of registration was
binding upon the land.[24] The dispositive portion of the decision reads:
WHEREFORE, foregoing considered, the court renders judgment:
1.......Declaring plaintiff bank Development Bank of the Philippines the true and
legal owner of the land in question covered by TCT No. 10101 farm of Gaudencio
Beduya;
2.......Dismissing defendants counterclaim; Sppedsc
3.......Ordering defendant to vacate from the land in question; the portion of which
he claims to belong to him for without basis in fact and law;
4.......Ordering defendant, his agents or any person representing him or those who
may claim substantial rights on the land to vacate therefrom, cease and desist from
disturbing, molesting and interfering plaintiffs possession of the land in question,
and from committing any such act as would tend to mitigate, deny or deprive plaintiff
of its ownership and possession over said land.
SO ORDERED.
On appeal, the Court of Appeals reversed and gave judgment for private respondent, declaring him the
owner of the 19.4 hectares of land erroneously included in TCT No. 10101. The dispositive portion of the
appellate courts decision reads:
WHEREFORE, the appealed decision is hereby REVERSED AND SET ASIDE. A
new decision is hereby rendered:
1. Dismissing the complaint.
2. Declaring the disputed 19.4000 hectares of land embraced in TCT 10101 as
exclusively belonging to defendant-appellant, ordering its segregation from plaintiff-
appellees title and its reconveyance to appellant.
No pronouncement as to costs.
SO ORDERED.[25]
Petitioner moved for a reconsideration but its motion was denied in a resolution dated April 23, 1997.[26]
Hence this petition.
Petitioner contends that:
I.......THE DECISION OF THE RESPONDENT COURT IS NOT IN ACCORD WITH
THE APPLICABLE PROVISIONS OF LAW (Sections 38 and 46 of ACT 496) AND
THE APPLICABLE DECISIONS OF THE SUPREME COURT, PARTICULARLY IN
THE CASE OF BENIN VS. TUASON, 57 SCRA 531.
II.......THE RESPONDENT COURT OVERLOOKED THE ISSUES ABOUT THE
DBP BEING AN INNOCENT MORTGAGEE FOR VALUE OF THE LAND IN
QUESTION AND OF HAVING PURCHASED LATER THE SAME DURING A
PUBLIC AUCTION SALE. Calrsc
III.THE RESPONDENT COURTS RULING DECLARING DBP IN ESTOPPEL IS
ILLOGICAL.[27]
First. Petitioner invokes the ruling of this Court in Benin v. Tuason[28] in support of its claim that its
predecessor-in-interest, Jose Alvarez, became the owner of the land by virtue of the decree of registration
issued in his name. In Benin, three sets of plaintiffs filed separate complaints against Mariano Severo
Tuason and J.M. Tuason & Co., Inc., praying for the cancellation of OCT No. 735 covering two parcels of
land called the Sta. Mesa Estate, or Parcel 1, with an area of 8,798,617.00 square meters, and the
Diliman Estate, or Parcel 2, with an area of 15,961,246.00 square meters. They asked that they be
declared the owners and lawful possessors of said lands.
Benin is distinguished from this case. In the first place, Benin involved vast tracts of lands which had
already been subdivided and bought by innocent purchasers for value and in good faith at the time the
claimants obtained registration. Secondly, when the claimants ancestors occupied the lands in question
and declared them for tax purposes in 1944, the lands were already covered by the tax declarations in the
name of J. M. Tuason & Co., Inc. In 1914, OCT No. 735 was issued in the name of Tuason so that, from
that time on, no possession could defeat the title of the registered owners of the land. Thirdly, the validity
of OCT No. 735 had already been recognized by this Court in several cases[29] and, as a result thereof,
the transfer certificates of title acquired by the innocent purchasers for value were also declared valid. It
was held that neither could the claimants file an action to annul these titles for not only had these actions
prescribed, but the fact was that the claimants were also barred from doing so by laches, having filed the
complaint only in 1955, or 41 years after the issuance of OCT No. 735 to J.M. Tuason & Co., Inc. Thus, it
was not solely the decree of registration which was considered in resolving the Benin case. What was
considered decisive was the valid title or right of ownership of J. M. Tuason & Co., Inc. and that of the
other innocent purchasers for value and in good faith compared to the failure of the claimants to show
their right to own or possess the questioned properties. Sccalr
Petitioner maintains that the possession by private respondent and his predecessor-in-interest of the 19.4
hectares of land for more than 30 years cannot overcome the decree of registration issued in favor of its
predecessor-in-interest Jose Alvarez. Petitioner quotes the following statement in the Benin case:
It follows also that the allegation of prescriptive title in favor of plaintiffs does not
suffice to establish a cause of action. If such prescription was completed before the
registration of the land in favor of the Tuasons, the resulting prescriptive title was
cut off and extinguished by the decree of registration. If, on the contrary, the
prescription was either begun or completed after the decree of registration, it
conferred no title because, by express provision of law, prescription can not operate
against the registered owner (Act 496).[30]
Petitioner would thus insist that, by virtue of the decree of registration, Jose Alvarez and those claiming
title from him (i.e., the spouses Beduya) acquired ownership of the 19.4 hectares of land, despite the fact
that they neither possessed nor occupied these lands.
This view is mistaken. A consideration of the cases shows that a decree of registration cut off or
extinguished a right acquired by a person when such right refers to a lien or encumbrance on the land
not to the right of ownership thereof which was not annotated on the certificate of title issued thereon.
Thus, Act No. 496 provides:
Sec. 39. Every person receiving a certificate of title in pursuance of a decree of
registration, and every subsequent purchaser of registered land who takes a
certificate of title for value in good faith shall hold the same free of all encumbrances
except those noted on said certificate, and any of the following encumbrances
which may be subsisting, namely: Calrspped
First. Liens, claims, or rights arising or existing under the laws of Constitution of the
United States or of the Philippine Islands which the statutes of the Philippine Islands
cannot require to appear of record in the Registry.
Second. Taxes within two years after the same became due and payable.
Third. Any public highway, way, private way established by law, or any Government
irrigation canal or lateral thereof, where the certificate of title does not state that the
boundaries of such highway, way, or irrigation canal or lateral thereof, have been
determined.
But if there are easements or other rights appurtenant to a parcel of registered land
which for any reason have failed to be registered, such easements or rights shall
remain so appurtenant notwithstanding such failure, and shall be held to pass with
the land until cut off or extinguished by the registration of the servient estate, or in
any other manner.
Hence, in Cid v. Javier,[31] it was helds:
. . . Consequently, even conceding arguendo that such an easement has been
acquired, it had been cut off and extinguished by the registration of the servient
estate under the Torrens system without the easement being annotated on the
corresponding certificate of title, pursuant to Section 39 of the Land Registration
Act.
This principle was reiterated in Purugganan v. Paredes[32] which also involved an easement of light and
view that was not annotated on the certificate of title of the servient estate. Scedp
But to make this principle applicable to a situation wherein title acquired by a person through acquisitive
prescription would be considered cut off and extinguished by a decree of registration would run counter to
established jurisprudence before and after the ruling in Benin. Indeed, registration has never been a
mode of acquiring ownership over immovable property. As early as 1911, in the case of City of Manila v.
Lack,[33] the Court already ruled on the purpose of registration of lands, viz.:
The Court of Land Registration was created for a single purpose. The Act is entitled
"An Act to provide for the adjudication and registration of titles to lands in the
Philippine Islands." The sole purpose of the Legislature in its creation was to bring
the land titles of the Philippine Islands under one comprehensive and harmonious
system, the cardinal features of which are indefeasibility of title and the intervention
of the State as a prerequisite to the creation and transfer of titles and interest, with
the resultant increase in the use of land as a business asset by reason of the
greater certainty and security of title. It does not create a title nor vest one. It simply
confirms a title already created and already vested, rendering it forever indefeasible.
. .
Again, in the case of Angeles v. Samia[34] where land was erroneously registered in favor of persons
who neither possessed nor occupied the same, to the prejudice of the actual occupant, the Court held:
. . . The purpose of the Land Registration Act, as this court has had occasion to so
state more than once, is not to create or vest title, but to confirm and register title
already created and already vested, and of course, said original certificate of title
No. 8995 could not have vested in the defendant more title than what was rightfully
due her and her coowners. It appearing that said certificate granted her much more
than she expected, naturally to the prejudice of another, it is but just that the error,
which gave rise to said anomaly, be corrected (City of Manila vs. Lack, 19 Phil.,
324). The defendant and her coowners knew or, at least, came to know that it was
through error that the original certificate of title in question was issued by the court
which heard cadastral case No. 11 of Bacolor, not only in or prior to March, 1933,
but from the time said certificate was issued in their favor, that is, from December
15, 1921. This is evidenced by the fact that, ever since, they remained passive
without even attempting to make the least showing of ownership over the land in
question until after the lapse of more than eleven years. The Land Registration Act
as well as the Cadastral Act protects only the holders of a title in good faith and
does not permit its provisions to be used as a shield for the commission of fraud, or
that one should enrich himself at the expense of another (Gustilo vs. Maravilla, 48
Phil., 442; Angelo vs. Director of Lands, 49 Phil., 838). The above-stated Acts do
not give anybody, who resorts to the provisions thereof, a better title than he really
and lawfully has. If he happened to obtain it by mistake or to secure, to the
prejudice of his neighbor, more land than he really owns, with or without bad faith
on his part, the certificate of title, which may have been issued to him under the
circumstances, may and should be cancelled or corrected (Legarda and Prieto vs.
Saleeby, 31 Phil., 590). This is permitted by section 112 of Act No. 496, which is
applicable to the Cadastral Act because it is so provided expressly by the provisions
of section 11 of the latter Act. It cannot be otherwise because, as stated in the case
of Domingo vs. Santos, Ongsiako, Lim y Cia. (55 Phil., 361), errors in the plans of
lands sought to be registered in the registry and reproduced in the certificate of title
issued later, do not annul the decree of registration on the ground that it is not the
plan but the land itself which is registered in the registry. In other words, if the plan
of an applicant for registration or claimant in a cadastral case alleges that the land
referred to in said plan is 100 or 1,000 hectares, and the land which he really owns
and desires to register in the registry is only 80 ares, he cannot claim to be the
owner of the existing difference if afterwards he is issued a certificate of title
granting him said area of 100 or 1,000 hectares.[35] Edpsc
The principle laid down in this 1938 case remains the prevailing doctrine, its latest application being in the
case of Reyes v. Court of Appeals[36] wherein we ruled that the fact that a party was able to secure a title
in his favor did not operate to vest ownership upon her of the property.
In the present case, private respondent has been in actual, open, peaceful and continuous possession of
the property since 1950. This fact was corroborated by the testimony of Eleuterio Cambangay who
personally knew that Ulpiano Mumar transferred the land covered by Tax Declaration No. 3840[37] in
favor of private respondent in 1950.[38] Private respondents claim based on actual occupation of the land
is bolstered by Tax Declaration Nos. R-1475, R-799 and D-2247[39] which were issued in his name in
1950, 1961 and 1974, respectively. Together with his actual possession of the land, these tax
declarations constitute strong evidence of ownership of the land occupied by him. As we said in the case
of Republic vs. Court of Appeals:[40]
Although tax declarations or realty tax payments of property are not conclusive
evidence of ownership, nevertheless, they are good indicia of possession in the
concept of owner for no one in his right mind would be paying taxes for a property
that is not in his actual or at least constructive possession. They constitute at least
proof that the holder has a claim of title over the property. The voluntary declaration
of a piece of property for taxation purposes manifests not only ones sincere and
honest desire to obtain title to the property and announces his adverse claim
against the State and all other interested parties, but also the intention to contribute
needed revenues to the Government. Such an act strengthens ones bona fide
claim of acquisition of ownership.
More importantly, it was established that private respondent, having been in possession of the land since
1950, was the owner of the property when it was registered by Jose Alvarez in 1969, his possession
tacked to that of his predecessor-in-interest, Ulpiano Mumar, which dates back to 1917.[41] Clearly, more
than 30 years had elapsed before a decree of registration was issued in favor of Jose Alvarez. This
uninterrupted adverse possession of the land for more than 30 years could only ripen into ownership of
the land through acquisitive prescription which is a mode of acquiring ownership and other real rights over
immovable property. Prescription requires public, peaceful, uninterrupted and adverse possession of the
property in the concept of an owner for ten (10) years, in case the possession is in good faith and with a
just title. Such prescription is called ordinary prescription, as distinguished from extraordinary prescription
which requires possession for 30 years in case possession is without just title or is not in good faith.[42]
Edp
In contrast to private respondent, it has been shown that neither Jose Alvarez nor the spouses Beduya
were at any time in possession of the property in question. In fact, despite knowledge by Gaudencio
Beduya that private respondent occupied this 19.4 hectares included in the area covered by TCT No.
10101,[43] he never instituted any action to eject or recover possession from the latter. Hence, it can be
concluded that neither Jose Alvarez nor the spouses Beduya ever exercised any right of ownership over
the land. The fact of registration in their favor never vested in them the ownership of the land in dispute.
"If a person obtains a title under the Torrens system, which includes by mistake or oversight land which
can no longer be registered under the system, he does not, by virtue of the said certificate alone, become
the owner of the lands illegally included."[44]
Considering the circumstances pertaining in this case, therefore, we hold that ownership of the 19.4
hectares of land presently occupied by private respondent was already vested in him and that its inclusion
in OCT No. 546 and, subsequently, in TCT No. 10101, was erroneous. Accordingly, the land in question
must be reconveyed in favor of private respondent, the true and actual owner thereof, reconveyance
being clearly the proper remedy in this case.
"The true owner may bring an action to have the ownership or title to the land
judicially settled and the Court in the exercise of its equity jurisdiction, without
ordering the cancellation of the Torrens title issued upon the patent, may direct the
defendants, the registered owner to reconvey the parcel of land to the plaintiff who
has been found to be the true owner thereof." (Vital vs. Amore, 90 Phil. 955) "The
reconveyance is just and proper in order to terminate the intolerable anomaly that
the patentees should have a torrens title for the land which they and their
predecessors never possessed which has been possessed by Novo in the concept
of owner." (Bustarga v. Novo, 129 SCRA 125)[45]
Second. Generally, an action for reconveyance based on an implied or constructive trust, such as the
instant case, prescribes in 10 years from the date of issuance of decree of registration.[46] However, this
rule does not apply when the plaintiff is in actual possession of the land. Thus, it has been held: Misedp
. . . [A]n action for reconveyance of a parcel of land based on implied or constructive
trust prescribes in ten years, the point of reference being the date of registration of
the deed or the date of the issuance of the certificate of title over the property, but
this rule applies only when the plaintiff or the person enforcing the trust is not in
possession of the property, since if a person claiming to be the owner thereof is in
actual possession of the property, as the defendants are in the instant case, the
right to seek reconveyance, which in effect seeks to quiet title to the property, does
not prescribe. The reason for this is that one who is in actual possession of a piece
of land claiming to be the owner thereof may wait until his possession is disturbed
or his title is attacked before taking steps to vindicate his right, the reason for the
rule being, that his undisturbed possession gives him a continuing right to seek the
aid of a court of equity to ascertain and determine the nature of the adverse claim of
a third party and its effect on his own title, which right can be claimed only by one
who is in possession.[47]
Having been the sole occupant of the land in question, private respondent may seek reconveyance of his
property despite the lapse of more than 10 years.
Nor is there any obstacle to the determination of the validity of TCT No. 10101. It is true that the
indefeasibility of torrens titles cannot be collaterally attacked. In the instant case, the original complaint is
for recovery of possession filed by petitioner against private respondent, not an original action filed by the
latter to question the validity of TCT No. 10101 on which petitioner bases its right. To rule on the issue of
validity in a case for recovery of possession is tantamount to a collateral attack. However, it should not be
overlooked that private respondent filed a counterclaim against petitioner, claiming ownership over the
land and seeking damages. Hence, we could rule on the question of the validity of TCT No. 10101 for the
counterclaim can be considered a direct attack on the same. "A counterclaim is considered a complaint,
only this time, it is the original defendant who becomes the plaintiff. . . . It stands on the same footing and
is to be tested by the same rules as if it were an independent action."[48] In an analogous case,[49] we
ruled on the validity of a certificate of title despite the fact that the original action instituted before the
lower court was a case for recovery of possession. The Court reasoned that since all the facts of the case
are before it, to direct the party to institute cancellation proceedings would be needlessly circuitous and
would unnecessarily delay the termination of the controversy which has already dragged on for 20 years.
Third. Petitioner nonetheless contends that an action for reconveyance does not lie against it, because it
is an innocent purchaser for value in the foreclosure sale held in 1985.
This contention has no merit. Sec. 38 of Act No. 496, the Land Registration Act, provides: Misoedp
If the court after hearing finds that the applicant or adverse claimant has title as
stated in his application or adverse claim and proper for registration, a decree of
confirmation and registration shall be entered. Every decree of registration shall
bind the land, and quiet title thereto, subject only to the exceptions stated in the
following section. It shall be conclusive upon and against all persons, including the
Insular Government and all the branches thereof, whether mentioned by name in
the application, notice, or citation, or included in the general description "To all
whom it may concern." Such decree shall not be opened by reason of the absence,
infancy, or other disability of any person affected thereby, nor by any proceeding in
any court for reversing judgments or decrees; subject, however, to the right of any
person deprived of land or of any estate or interest therein by decree of registration
obtained by fraud to file in the competent Court of First Instance a petition for review
within one year after entry of the decree, provided no innocent purchaser for value
has acquired an interest. Upon the expiration of said term of one year, every decree
or certificate of title issued in accordance with this section shall be incontrovertible.
If there is any such purchaser, the decree of registration shall not be opened, but
shall remain in full force and effect forever, subject only to the right of appeal
hereinbefore provided: Provided, however, That no decree or certificate of title
issued to persons not parties to the appeal shall be cancelled or annulled. But any
person aggrieved by such decree in any case may pursue his remedy by action for
damages against the applicant or any other person for fraud in procuring the
decree. Whenever the phrase "innocent purchaser for value" or an equivalent
phrase occurs in this Act, it shall be deemed to include an innocent lessee,
mortgagee, or other encumbrancer for value. (As amended by Sec. 3, Act 3621;
and Sec. 1, Act No. 3630.) Edpmis
Succinctly put, 38 provides that a certificate of title is conclusive and binding upon the whole world.
Consequently, a buyer need not look behind the certificate of title in order to determine who is the actual
owner of the land. However, this is subject to the right of a person deprived of land through fraud to bring
an action for reconveyance, provided that it does not prejudice the rights of an innocent purchaser for
value and in good faith. "It is a condition sine qua non for an action for reconveyance to prosper that the
property should not have passed to the hands of an innocent purchaser for value."[50] The same rule
applies to mortgagees, like petitioner. Thus, we held:
Where the certificate of title is in the name of the mortgagor when the land is
mortgaged, the innocent mortgagee for value has the right to rely on what appears
on the certificate of title. In the absence of anything to excite suspicion, said
mortgagee is under no obligation to look beyond the certificate and investigate the
title of the mortgagor appearing on the face of said certificate. Although Article 2085
of the Civil Code provides that absolute ownership of the mortgaged property by the
mortgagor is essential, the subsequent declaration of a title as null and void is not a
ground for nullifying the mortgage right of a mortgagee in good faith.[51]
The evidence before us, however, indicates that petitioner is not a mortgagee in good faith. To be sure,
an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the
mortgagors title. Nonetheless, especially in the case of a banking institution, a mortgagee must exercise
due diligence before entering into said contract. Judicial notice is taken of the standard practice for banks,
before approving a loan, to send representatives to the premises of the land offered as collateral and to
investigate who are the real owners thereof. Banks, their business being impressed with public interest,
are expected to exercise more care and prudence than private individuals in their dealings, even those
involving registered lands.[52] Jjsc
In this case, petitioners representative, Patton R. Olano, admitted that he came to know of the property
for the first time in 1979 when he inspected it to determine whether the portion occupied by private
respondent and mortgaged by the latter to petitioner was included in TCT No. 10101. This means that
when the land was mortgaged by the spouses Beduya in 1972, no investigation had been made by
petitioner. It is clear, therefore, that petitioner failed to exercise due care and diligence in establishing the
condition of the land as regards its actual owners and possessors before it entered into the mortgage
contract in 1972 with the Beduyas. Had it done so, it would not have failed to discover that private
respondent was occupying the disputed portion of 19.4 hectares. For this reason, petitioner cannot be
considered an innocent purchaser for value when it bought the land covered by TCT No. 10101 in 1985 at
the foreclosure sale.
Indeed, two circumstances negate petitioners claim that it was an innocent purchaser for value when it
bought the land in question, including the portion occupied by private respondent: (1) petitioner was
already informed by Gaudencio Beduya that private respondent occupied a portion of the property
covered by TCT No. 10101; and (2) petitioners representative conducted an investigation of the property
in 1979 to ascertain whether the land mortgaged by private respondent was included in TCT No. 10101.
In other words, petitioner was already aware that a person other than the registered owner was in actual
possession of the land when it bought the same at the foreclosure sale. A person who deliberately
ignores a significant fact which would create suspicion in an otherwise reasonable man is not an innocent
purchaser for value. "It is a well-settled rule that a purchaser cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor."[53]
Petitioner deliberately disregarded both the fact that private respondent already occupied the property
and that he was claiming ownership over the same. It cannot feign ignorance of private respondents
claim to the land since the latter mortgaged the same land to petitioner as security for the loan he
contracted in 1978 on the strength of the tax declarations issued under his name. Instead of inquiring into
private respondents occupation over the land, petitioner simply proceeded with the foreclosure sale,
pretending that no doubts surround the ownership of the land covered by TCT No. 10101. Considering
these circumstances, petitioner cannot be deemed an innocent mortgagee/purchaser for value. As we
ruled: Scjj
"The failure of appellees to take the ordinary precautions which a prudent man
would have taken under the circumstances, specially in buying a piece of land in the
actual, visible and public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith.
In this connection, it has been held that where, as in this case, the land sold is in the
possession of a person other than the vendor, the purchaser is required to go
beyond the certificates of title and ma[k]e inquiries concerning the rights of the
actual possessor. (Citations omitted.)
. . . .
One who purchases real property which is in the actual possession of another
should, at least, make some inquiry concerning the right of those in possession. The
actual possession by other than the vendor should, at least put the purchaser upon
inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona fide
purchaser as against such possessors."[54]
Fourth. From the foregoing, we find that the resolution of the issue of estoppel will not affect the outcome
of this case. Petitioner claims that the fact that it approved a loan in favor of private respondent and
executed a mortgage contract covering the 19.4 hectares covered by tax declarations issued under
private respondents name does not mean that it is estopped from questioning the latters title. Petitioner
accuses private respondent of having made misrepresentations which led it to believe in his valid title and
ownership.
The claim has no basis. Private respondent made no misrepresentation with regard to the land occupied
by him as he is actually the real owner thereof. Moreover, when private respondent entered into a
mortgage contract with petitioner, his claim of ownership was supported not only by the tax declarations
but also by a certification of the Clerk of Court of the Court of First Instance of Bohol that no civil, land
registration or cadastral case has been filed or instituted before the court affecting the validity of Tax
Declaration No. D-2247 covering the land located in Bugang, San Miguel, Bohol and declared in the
name of Carlos Cajes.[55] These documents were relied upon by private respondent in support of his
claim of ownership. We cannot consider the submission of these documents as misrepresentations by
private respondent as to the actual ownership of the land. Rather, private respondent believed in good
faith and with good reason that he was the owner of the 19.4 hectares occupied by him. Sjcj
As to the question of estoppel, we do not find petitioner to be estopped from questioning private
respondents title. "Estoppel in pais arises when one, by his acts, representations or admission, or by his
own silence when he ought to speak out, intentionally or through culpable negligence, induces another to
believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be
prejudiced if the former is permitted to deny the existence of such facts."[56] In the case at bar, upon
learning that the land occupied by private respondent was also covered by TCT No. 10101, petitioner
immediately demanded full payment of the loan and thereafter cancelled the mortgage contract, a fact
that is admitted by private respondent himself.[57] Indeed, nothing in record indicates that petitioner
impliedly acquiesced to the validity of private respondents title when it found out that the latter was
occupying a portion of the land covered by TCT No. 10101.
However, for reasons aforestated, we uphold private respondents ownership of 19.4 hectares occupied
by him. As a necessary consequence thereof, such portion of land included in TCT No. 10101 must be
segregated and reconveyed in his favor.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED in toto.
SO ORDERED. Supr


AC Enterprises, Inc. vs. Frabelle Properties Corp.

G.R. No. 166744. November 2, 2006.

SCRA Citation: 506 SCRA 625

DOCTRINE: Private and public nuisance; definition The term nuisance is so comprehensive
that it has been applied to almost all ways which have interfered with the rights of the citizens, either in
person, property, the enjoyment of property, or his comfort; A private nuisance is one which violates only
private rights and produces damage to but one or a few persons while a nuisance is public when it
interferes with the exercise of public right by directly encroaching on public property or by causing a
common injury, an unreasonable interference with the right common to the general public. In this case,
the noise generated by an airconditioning system is considered a private nuisance.

Noise emanating from air-con units not nuisance per se Noise becomes actionable only when it
passes the limits of reasonable adjustment to the conditions of the locality and of the needs of the maker
to the needs of the listener; Injury to a particular person in a peculiar position or of especially sensitive
characteristics will not render the noise an actionable nuisance. Whether or not the noise is a nuisance is
an issue to be resolved by the courts.

Test to determine noise as a nuisance The test is whether rights of property, of health or of
comfort are so injuriously affected by the noise in question that the sufferer is subjected to a loss [i.e.
Actual Physical Discomfort]which goes beyond the reasonable limit imposed upon him by the
condition of living, or of holding property, in a particular locality in fact devoted to uses which involve the
emission of noise although ordinary care is taken to confine it within reasonable bounds; or in the vicinity
of property of another owner who, though creating a noise, is acting with reasonable regard for the rights
of those affected by it.

Action to abate private nuisance; incapable of pecuniary estiation an action to abate private
nuisance, even wehere the plaintiff asks for damages is one incapable of pecuniary estimation

FACTS: AC enterprises (Petitioner) is a corporation owns a 10-storey building in Makati City. Frabelle
(Respondent) is a condominium corporation who's condominium development is located behind
petitioner. Respondent complained of the 'unbearable noise emanating from the blower of the air-
conditioning units of petitioner.

ISSUES:
(1) Is it a nuisance as to be resolved only by the courts in the due course of proceedings or a nuisance
per se?

(2) Is an action for abatement of a private nuisance, more specifically noise generated by the blower of
an air-conditioning system, even if the plaintiff prays for damages, one incapable of pecuniary
estimation?

(3) What is the determining factor when noise alone is the cause of complaint?

HELD:
(1) It is a nuisance to be resolved only by the courts in the due course of proceedings; the noise is not a
nuisance per se. Noise becomes actionable only whenn it passes the limits of reasonable adjustment to
the conditions of the locality and of the needs of the maker to the needs of the listener. Injury to a
particular person in a peculiar position or of especially sensitive characteristics will not render the house
an actionable nuisance in the conditions, of present living, noise seems inseparable from the conduct
of many necessary occupations.

(2) Yes, the action is one incapable of pecuniary estimation because the basic issue is something other
than the right to recover a sum of money.


(3) The determining factor is not its intensity or volume; it is that the noise is of such character as to
produce actual physical discomfort and annoyance to a person of ordinary sensibilities rendering adjacent
property less comfortable and valuable.
[G.R. No. 129792. December 21, 1999]
JARCO MARKETING CORPORATION, LEONARDO KONG, JOSE TIOPE and ELISA PANELO,
petitioners, vs. HONORABLE COURT OF APPEALS, CONRADO C. AGUILAR and
CRISELDA R. AGUILAR, respondents.
D E C I S I O N
DAVIDE, JR., C.J .:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners seek the
reversal of the 17 June 1996 decision[1] of the Court of Appeals in C.A. G.R. No. CV 37937 and the
resolution[2]denying their motion for reconsideration. The assailed decision set aside the 15 January 1992
judgment of the Regional Trial Court (RTC), Makati City, Branch 60 in Civil Case No. 7119 and ordered
petitioners to pay amages an attorneys fees to private responents Conrao an Criselda (CRISELDA)
Aguilar.
Petitioner Jaro Marketing Corporation is the owner of Syvels Department Store Makati
City. Petitioners Leonaro Kong Jose Tiope an Elisa Panelo are the stores ranh manager operations
manager, and supervisor, respectively. Private respondents are spouses and the parents of Zhieneth Aguilar
(ZHIENETH).
In the afternoon of 9 May 9 CRISELDA an ZHIENETH were at the n floor of Syvels
Department Store, Makati City. CRISELDA was signing her credit card slip at the payment and verification
counter when she felt a sudden gust of wind and heard a loud thud. She looked behind her. She then beheld
her aughter ZHIENETH on the floor her young oy pinne y the ulk of the stores gift-wrapping
counter/structure. ZHIENETH was crying and screaming for help. Although shocked, CRISELDA was
quick to ask the assistance of the people around in lifting the counter and retrieving ZHIENETH from the
floor.[3]
ZHIENETH was quickly rushed to the Makati Medical Center where she was operated on. The next
day ZHIENETH lost her speech and thereafter communicated with CRISELDA by writing on a magic
slate. The injuries she sustained took their toil on her young body. She died fourteen (14) days after the
accident or on 22 May 1983, on the hospital bed. She was six years old.[4]
The cause of her death was attributed to the injuries she sustained. The provisional medical
certificate[5] issue y ZHIENETHs attening otor esrie the extent of her injuries:
Diagnoses:
1. Shock, severe, sec. to intra-abdominal injuries due to blunt injury
2. Hemorrhage, massive, intraperitoneal sec. to laceration, (L) lobe liver
3. Rupture, stomach, anterior & posterior walls
4. Complete transection, 4th position, duodenum
5. Hematoma, extensive, retroperitoneal
6. Contusion, lungs, severe
CRITICAL
After the burial of their daughter, private respondents demanded upon petitioners the reimbursement of
the hospitalization, medical bills and wake and funeral expenses[6] which they had incurred. Petitioners
refused to pay. Consequently, private respondents filed a complaint for damages, docketed as Civil Case No.
7119 wherein they sought the payment of P157,522.86 for actual damages, P300,000 for moral damages,
P for attorneys fees an an unspecified amount for loss of income and exemplary damages.
In their answer with counterclaim, petitioners denied any liability for the injuries and consequent death
of ZHIENETH. They claimed that CRISELDA was negligent in exercising care and diligence over her
daughter by allowing her to freely roam around in a store filled with glassware and appliances. ZHIENETH
too, was guilty of contributory negligence since she climbed the counter, triggering its eventual collapse on
her. Petitioners also emphasized that the counter was made of sturdy wood with a strong support; it never fell
nor collapsed for the past fifteen years since its construction.
Additionally, petitioner Jarco Marketing Corporation maintained that it observed the diligence of a
good father of a family in the selection, supervision and control of its employees. The other petitioners
likewise raised due care and diligence in the performance of their duties and countered that the complaint was
malicious for which they suffered besmirched reputation and mental anguish. They sought the dismissal of
the omplaint an an awar of moral an exemplary amages an attorneys fees in their favor
In its decision[7] the trial court dismissed the complaint and counterclaim after finding that the
preponderance of the evidence favored petitioners. It ruled that the proximate cause of the fall of the counter
on ZHIENETH was her act of clinging to it. It elieve petitioners witnesses who testifie that ZHIENETH
clung to the counter, afterwhich the structure and the girl fell with the structure falling on top of her, pinning
her stomach. In ontrast none of private responents witnesses testifie on how the ounter fell The trial
ourt also hel that CRISELDAs negligene ontriute to ZHIENETHs aident.
In absolving petitioners from any liability, the trial court reasoned that the counter was situated at the
end or corner of the 2nd floor as a precautionary measure hence, it could not be considered as an attractive
nuisance.[8] The counter was higher than ZHIENETH. It has been in existence for fifteen years. Its structure
was safe and well-balanced. ZHIENETH, therefore, had no business climbing on and clinging to it.
Private respondents appealed the decision, attributing as errors of the trial court its findings that: (1)
the proximate ause of the fall of the ounter was ZHIENETHs misehavior; () CRISELDA was negligent
in her care of ZHIENETH; (3) petitioners were not negligent in the maintenance of the counter; and (4)
petitioners were not liable for the death of ZHIENETH.
Further, private respondents asserted that ZHIENETH should be entitled to the conclusive presumption
that a child below nine (9) years is incapable of contributory negligence. And even if ZHIENETH, at six (6)
years old, was already capable of contributory negligence, still it was physically impossible for her to have
propped herself on the counter. She had a small frame (four feet high and seventy pounds) and the counter
was much higher and heavier than she was. Also, the testimony of one of the stores former employees
Gerardo Gonzales, who accompanied ZHIENETH when she was brought to the emergency room of the
Makati Meial Center elie petitioners theory that ZHIENETH lime the ounter Gonzales claimed
that when ZHIENETH was aske y the otor what she i ZHIENETH replie [Nothing I i not ome
near the ounter an the ounter just fell on me[9] Aoringly Gonzales testimony on ZHIENETHs
spontaneous declaration should not only be considered as part of res gestae but also accorded credit.
Moreover, negligence could not be imputed to CRISELDA for it was reasonable for her to have let go
of ZHIENETH at the precise moment that she was signing the credit card slip.
Finally, private respondents vigorously maintaine that the proximate ause of ZHIENETHs eath
was petitioners negligene in failing to institute measures to have the ounter permanently naile
On the other hand, petitioners argued that private respondents raised purely factual issues which could
no longer be disturbed. They explaine that ZHIENETHs eath while unfortunate an tragi was an
accident for which neither CRISELDA nor even ZHIENETH could entirely be held faultless and
blameless. Further, petitioners adverted to the trial courts rejetion of Gonzales testimony as unworthy of
credence.
As to private responents laim that the ounter shoul have een naile to the groun petitioners
justified that it was not necessary. The counter had been in existence for several years without any prior
accident and was deliberately placed at a corner to avoid such accidents. Truth to tell, they acted without
fault or negligence for they had exercised due diligence on the matter. In fact, the criminal case[10] for
homicide through simple negligence filed by private respondents against the individual petitioners was
dismissed; a verdict of acquittal was rendered in their favor.
The Court of Appeals, however, decided in favor of private respondents and reversed the appealed
judgment. It found that petitioners were negligent in maintaining a structurally dangerous counter. The
ounter was shape like an inverte L[11] with a top wider than the base. It was top heavy and the weight
of the upper portion was neither evenly distributed nor supported by its narrow base. Thus, the counter was
defective, unstable and dangerous; a downward pressure on the overhanging portion or a push from the front
could cause the counter to fall. Two former employees of petitioners had already previously brought to the
attention of the management the danger the counter could cause. But the latter ignored their concern. The
Court of Appeals faulted the petitioners for this omission, and concluded that the incident that befell
ZHIENETH could have been avoided had petitioners repaired the defective counter. It was inconsequential
that the counter had been in use for some time without a prior incident.
The Court of Appeals declared that ZHIENETH, who was below seven (7) years old at the time of the
incident, was absolutely incapable of negligence or other tort. It reasoned that since a child under nine (9)
years could not be held liable even for an intentional wrong, then the six-year old ZHIENETH could not be
made to account for a mere mischief or reckless act. It also absolved CRISELDA of any negligence, finding
nothing wrong or out of the ordinary in momentarily allowing ZHIENETH to walk while she signed the
document at the nearby counter.
The Court of Appeals also rejected the testimonies of the witnesses of petitioners. It found them
biased and prejudiced. It instead gave credit to the testimony of disinterested witness Gonzales. The Court of
Appeals then awarded P99,420.86 as actual damages, the amount representing the hospitalization expenses
incurred by private respondents as evidenced by the hospital's statement of account.[12] It denied an award
for funeral expenses for lack of proof to substantiate the same. Instead, a compensatory damage of P50,000
was awarded for the death of ZHIENETH.
We quote the dispositive portion of the assailed decision,[13] thus:
WHEREFORE, premises considered, the judgment of the lower court is SET ASIDE and another one is
entered against [petitioners], ordering them to pay jointly and severally unto [private respondents] the
following:
1. P50,000.00 by way of compensatory damages for the death of Zhieneth Aguilar, with legal interest
(6% p.a.) from 27 April 1984;
2. P99,420.86 as reimbursement for hospitalization expenses incurred; with legal interest (6% p.a.)
from 27 April 1984;
3. P100,000.00 as moral and exemplary damages;
4. P20,000.00 in the concept of attorneys fees; and
5. Costs.
Private respondents sought a reconsideration of the decision but the same was denied in the Court of
Appeals resolution[14] of 16 July 1997.
Petitioners now seek the reversal of the Court of Appeals eision an the reinstatement of the
judgment of the trial court. Petitioners primarily argue that the Court of Appeals erred in disregarding the
factual findings and conclusions of the trial court. They stress that since the action was based on tort, any
finding of negligence on the part of the private respondents would necessarily negate their claim for damages,
where said negligence was the proximate cause of the injury sustained. The injury in the instant case was the
death of ZHIENETH. The proximate ause was ZHIENETHs at of linging to the ounter This act in turn
caused the counter to fall on her. This an CRISELDAs ontriutory negligene through her failure to
provide the proper are an attention to her hil while insie the store nullifie private responents laim
for damages. It is also for these reasons that parents are made accountable for the damage or injury inflicted
on others by their minor children. Under these circumstances, petitioners could not be held responsible for
the accident that befell ZHIENETH.
Petitioners also assail the reiility of Gonzales who was alreay separate from Syvels at the time
he testified; hence, his testimony might have been tarnished by ill-feelings against them.
For their part, private respondents principally reiterated their arguments that neither ZHIENETH nor
CRISELDA was negligent at any time while inside the store; the findings and conclusions of the Court of
Appeals are substantiated by the evidence on record; the testimony of Gonzales, who heard ZHIENETH
omment on the inient while she was in the hospitals emergeny room shoul reeive reene; an
finally ZHIENETHs part of the res gestae elaration that she i nothing to cause the heavy structure to
fall on her shoul e onsiere as the orret version of the gruesome events
We deny the petition.
The two issues to be resolved are: (1) whether the death of ZHIENETH was accidental or attributable
to negligence; and (2) in case of a finding of negligence, whether the same was attributable to private
respondents for maintaining a defective counter or to CRISELDA and ZHIENETH for failing to exercise due
and reasonable care while inside the store premises.
An accident pertains to an unforeseen event in which no fault or negligence attaches to the
defendant.[15] It is a fortuitous irumstane event or happening; an event happening without any human
agency, or if happening wholly or partly through human agency, an event which under the circumstances is
unusual or unexpete y the person to whom it happens[16]
On the other hand, negligence is the omission to do something which a reasonable man, guided by
those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do.[17] Negligene is the failure to oserve for
the protection of the interest of another person, that degree of care, precaution and vigilance which the
cirumstanes justly eman wherey suh other person suffers injury[18]
Accident and negligence are intrinsically contradictory; one cannot exist with the other. Accident
occurs when the person concerned is exercising ordinary care, which is not caused by fault of any person and
which could not have been prevented by any means suggested by common prudence.[19]
The test in determining the existence of negligence is enunciated in the landmark case of Picart v.
Smith,[20] thus: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of
negligence.[21]
We rule that the tragedy which befell ZHIENETH was no accident and that ZHIENETHs eath oul
only be attributed to negligence.
We quote the testimony of Gerardo Gonzales who was at the scene of the incident and accompanied
CRISELDA and ZHIENETH to the hospital:
Q While at the Makati Medical Center, did you hear or notice anything while the child was being
treated?
A At the emergency room we were all surrounding the child. And when the doctor asked the child
what i you o the hil sai nothing I i not ome near the ounter an the ounter just
fell on me
Q (COURT TO ATTY. BELTRAN)
You want the words in Tagalog to be translated?
ATTY. BELTRAN
Yes, your Honor.
COURT
Granted. Interalate wala po, hindi po ako lumapit doon. Basta bumagsak[22]
This testimony of Gonzales pertaining to ZHIENETHs statement forme (an shoul e amitte as)
part of the res gestae under Section 42, Rule 130 of the Rules of Court, thus:
Part of res gestae. Statements made by a person while a startling occurrence is taking place or immediately
prior or subsequent thereto with respect to the circumstances thereof, may be given in evidence as part of the
res gestae. So, also, statements accompanying an equivocal act material to the issue, and giving it a legal
significance, may be received as part of the res gestae.
It is axiomatic that matters relating to declarations of pain or suffering and statements made to a
physician are generally considered declarations and admissions.[23] All that is required for their admissibility
as part of the res gestae is that they be made or uttered under the influence of a startling event before the
declarant had the time to think and concoct a falsehood as witnessed by the person who testified in
court. Under the circumstances thus described, it is unthinkable for ZHIENETH, a child of such tender age
and in extreme pain, to have lied to a doctor whom she trusted with her life. We therefore accord credence to
Gonzales testimony on the matter i.e., ZHIENETH performed no act that facilitated her tragic death. Sadly,
petitioners i through their negligene or omission to seure or make stale the ounters ase
Gonzales earlier testimony on petitioners insistene to keep an maintain the struturally unstale
gift-wrapping counter proved their negligence, thus:
Q When you assumed the position as gift wrapper at the second floor, will you please describe the gift
wrapping counter, were you able to examine?
A Because every morning before I start working I used to clean that counter and since it is not nailed and it
was only standing on the floor, it was shaky.
xxx
Q Will you please esrie the ounter at : olok [sic] in the afternoon on [sic] May 9 1983?
A At that hour on May 9, 1983, that counter was standing beside the verification counter. And since
the top of it was heavy and considering that it was not nailed, it can collapse at anytime, since the
top is heavy.
xxx
Q And what did you do?
A I informed Mr. Maat about that counter which is [sic] shaky and since Mr. Maat is fond of putting
display decorations on tables, he even told me that I would put some decorations. But since I told
him that it not [sic] nailed and it is shaky he told me better inform also the company about it.
And since the company did not do anything about the counter, so I also did not do anything about
the counter.[24] [Emphasis supplied]
Ramon Guevarra, another former employee, corroborated the testimony of Gonzales, thus:
Q Will you please described [sic] to the honorable Court the counter where you were assigned in
January 1983?
xxx
A That counter assigned to me was when my supervisor ordered me to carry that counter to another
place. I told him that the counter needs nailing and it has to be nailed because it might cause
injury or accident to another since it was shaky.
Q When that gift wrapping counter was transferred at the second floor on February 12, 1983, will you
please describe that to the honorable Court?
A I told her that the counter wrapper [sic] is really in good [sic] condition; it was shaky. I told her
that we had to nail it.
Q When you said she, to whom are you referring to [sic]?
A I am referring to Ms. Panelo, sir.
Q And what was the answer of Ms. Panelo when you told her that the counter was shaky?
A She tol me Why o you have to teah me You are only my subordinate and you are to teach
me? An she even got angry at me when I tol her that
xxx
Q From February 12, 1983 up to May 9, 1983, what if any, did Ms. Panelo or any employee of the
management do to that (sic)
xxx
Witness:
None, sir. They never nailed the counter. They only nailed the counter after the accident
happened.[25] [Emphasis supplied]
Without doubt, petitioner Panelo and another store supervisor were personally informed of the danger
posed by the unstable counter. Yet, neither initiated any concrete action to remedy the situation nor ensure
the safety of the stores employees an patrons as a reasonale an orinary pruent man woul have
done. Thus, as confronted by the situation petitioners miserably failed to discharge the due diligence required
of a good father of a family.
On the issue of the credibility of Gonzales and Guevarra, petitioners failed to establish that the
formers testimonies were biased and tainted with partiality. Therefore, the allegation that Gonzales and
Guevarras testimonies were lemishe y ill feelings against petitioners since they (Gonzales and
Guevarra) were already separated from the company at the time their testimonies were offered in court was
but mere speculation and deserved scant consideration.
It is settled that when the issue concerns the credibility of witnesses, the appellate courts will not as a
general rule disturb the findings of the trial court, which is in a better position to determine the same. The
trial court has the distinct advantage of actually hearing the testimony of and observing the deportment of the
witnesses.[26] However, the rule admits of exceptions such as when its evaluation was reached arbitrarily or
it overlooked or failed to appreciate some facts or circumstances of weight and substance which could affect
the result of the case.[27] In the instant case, petitioners failed to bring their claim within the exception.
Anent the negligence imputed to ZHIENETH, we apply the conclusive presumption that favors
children below nine (9) years old in that they are incapable of contributory negligence. In his book,[28]
former Judge Cezar S. Sangco stated:
In our jurisdiction, a person under nine years of age is conclusively presumed to have acted without
discernment, and is, on that account, exempt from criminal liability. The same presumption and a like
exemption from criminal liability obtains in a case of a person over nine and under fifteen years of age, unless
it is shown that he has acted with discernment. Since negligence may be a felony and a quasi-delict and
required discernment as a condition of liability, either criminal or civil, a child under nine years of age is, by
analogy, conclusively presumed to be incapable of negligence; and that the presumption of lack of
discernment or incapacity for negligence in the case of a child over nine but under fifteen years of age is a
rebuttable one, under our law. The rule, therefore, is that a child under nine years of age must be
conclusively presumed incapable of contributory negligence as a matter of law. [Emphasis supplied]
Even if we attribute contributory negligence to ZHIENETH and assume that she climbed over the
counter no injury shoul have ourre if we aept petitioners theory that the ounter was stale an
sturdy. For if that was the truth, a frail six-year old could not have caused the counter to collapse. The
physical analysis of the counter by both the trial court and Court of Appeals and a scrutiny of the
evidence[29]on record reveal otherwise, i.e., it was not durable after all. Shape like an inverte L the
counter was heavy, huge, and its top laden with formica. It protruded towards the customer waiting area and
its base was not secured.[30]
CRISELDA too, should be absolved from any contributory negligence. Initially, ZHIENETH held on
to CRISELDAs waist later to the latters han[31] CRISELDA momentarily release the hils han from
her clutch when she signed her credit card slip. At this precise moment, it was reasonable and usual for
CRISELDA to let go of her child. Further, at the time ZHIENETH was pinned down by the counter, she was
just a foot away from her mother; and the gift-wrapping counter was just four meters away from
CRISELDA.[32] The time and distance were both significant. ZHIENETH was near her mother and did not
loiter as petitioners would want to impress upon us. She even admitted to the doctor who treated her at the
hospital that she did not do anything; the counter just fell on her.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED and the challenged
decision of the Court of Appeals of 17 June 1996 in C.A. G.R. No. CV 37937 is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.


SPOUSES PELAGIO GULLA G.R. No. 149418
and PERLITA GULLA,
Petitioners, Present:

PANGANIBAN, C.J., Chairperson,
YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
**

CALLEJO, SR., and
CHICO-NAZARIO, JJ.

HEIRS OF ALEJANDRO
LABRADOR, represented by Promulgated:
ALEX LABRADOR,
Respondents. July 27, 2006

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

D E C I S I O N


CALLEJO, SR., J .:


Before the Court is a Petition for Review on Certiorari of the Decision[1] of the Court of Appeals (CA) in
CA-G.R. SP No. 52176. The CA decision affirmed that of the Regional Trial Court (RTC), Branch 69 of Iba,
Zambales in Civil Case No. 1523-I,[2] which in turn affirmed the ruling of the Municipal Trial Court (MTC) of San
Felipe, Zambales in Civil Case No. 381.[3]


Angel Labrador, Leonardo Labrador, Fe Labrador Gamboa, Alex Labrador and Roger Labrador filed a
omplaint against the spouses Pelagio an Perlita Gulla in the RTC of Ia Zamales for Canellation of Tax
Declaration and Reovery of Possession with Damages (accion publiciana). The complaint involved a 22,590-
square-meter lot covered by Original Certificate of Title (OCT) No. P-13350, and the 562-square-meter lot abutting
the titled property. The case was thereafter forwarded to the MTC of San Felipe, Zambales pursuant to Republic Act
No. 7691.[4]

The titled property is located in San Felipe, Zambales and identified as Lot No. 520, Cad. 686-D. According
to the Labradors, the property was declared for taxation purposes under their names (Tax Declaration No. 010-
0469A) and the corresponding taxes were paid thereon. In 1996, the spouses Gulla occupied a portion of the
property fronting the China Sea, as well as the 562-square-meter lot within the salvage area. The spouses Gulla then
constructed a house in the occupied property and fenced its perimeter. The Labradors pointed out that whatever
alleged claims the spouses Gulla had on the property was acquired through a Deed of Waiver of Rights dated July
23, 1996 execute in their favor y another squatter Alfonso Bata To verify the exact location of the portion
occupied by the spouses Gulla, a verification survey of the land was conducted on August 17, 1990 in the presence
of Pelagio Gulla. Geodetic Engineer Crisostomo A. Magarro prepared a sketch indicating portions occupied by the
spouses Gulla, as well as the following report:

a. Lot A in Green color containing an area of 562 square meters is the claim of Pelagio
Gulla, Sr. which is outside the titled property of the Hrs. of Alejandro Labrador and is
within the Salvage Zone;

b. Lot B in Violet containing an area of 820 square meters is the claim of Pelagio Gulla,
Sr. and within the titled property of the Hrs. of Alejandro Labrador and obviously
within the Salvage Zone;

c. Lot C in Red color containing an area of 1,506 square meters is the claim of Pelagio
Gulla, Sr. [and] is also within the titled property of the Hrs. of Alejandro Labrador,
represented by Alex Labrador and covered by O.C.T. No. P-13350.
The Total area claimed by Pelagio Gulla, Sr. is 2,888 square meters (more or less).

[5]
(Underscoring supplied)

For their part, the spouses Gulla claimed that they had been in possession of the 2,888-square-meter property,
Lot A in the sketch of Engr. Magarro, since 1984 and declared the property for taxation purposes under their names
in Tax Declaration (T.D.) No. 010-0549. On October 8, 1994, they filed an application for miscellaneous sales
patent which was certified as alienable and disposable land by the barangay captain, former Mayor Edilberto A.
Abille, and Community Environment and Natural Resources Officer Jaime Centeno. The property was likewise
declared for taxation purposes in their names under T.D. No. 010-0550-R in 1994.

On November 3, 1998, the MTC rendered judgment in favor of the Labradors, ordering the spouses Gulla to
vacate that portion of the property covered by OCT No. P-13350 (Lots B and C in the sketch of Engr. Magarro), and
the 562-square-meter lot within the salvage zone (Lot A). The fallo of the decision reads:

WHEREFORE, by preponderance of evidences, it is hereby ordered upon the
defendants to VACATE the portion including the 565 salvage zone actually occupied by
them immediately and to pay P1,000.00 as monthly rental from July 1996, until they vacate
the premises and P as atual amages an attorneys fee of P20,000.00.

SO ORDERED.[6]


According to the MTC, the Labradors were able to establish ownership over the subject property, as
evidenced by the title under their name (OCT No. P-13350). For their part, the defendant-spouses failed to overcome
the evidence of the plaintiffs, and not being the riparian owners of Lot A which is within the salvage zone, they have
no right to possess the same.[7]

On appeal, the RTC rendered judgment on March 23, 1999 affirming the appealed decision. It
ratiocinated that, as correctly observed by the court a quo, Lot A is beyond the perimeter of the property covered by
OCT No. P-13350 and is within the salvage zone that abutted the property of plaintiffs. Applying Article 440 of the
New Civil Code, the RTC declared that the Labradors had the right to possess the land, it being inseparably attached
to the titled property as an accessory. It further hel that eonomi onveniene is etter attaine in a state of
single ownership than in co-ownership an that natural justice demands that the owner of the principal or more
important thing shoul also own the aessory[8]

This prompted the spouses Gulla to file a petition for review before the CA where they alleged the following:

x x x x

2. THE LOWER COURT ERRED IN RELYING ON THE SURVEY WHICH
WAS UNILATERALLY CONDUCTED BY THE RESPONDENTS.

3. THE LOWER COURT ERRED IN HOLDING THAT THE LAND
OCCUPIED BY PETITIONERS IS WITHIN THE LOT COVERED BY ORIGINAL
CERTIFICATE OF TITLE NO. P-13350.

4. THE LOWER COURT ERRED IN EJECTING THE PETITIONERS EVEN
FROM THE ALLEGED SALVAGE ZONE.

5. THE LOWER COURT ERRED IN AWARDING MONTHLY RENTAL,
ACTUAL DAMAGES AND ATTORNEYS FEES.[9]

The spouses Gulla insisted that the trial court erred in relying on the survey report of Engr. Magarro. In
contrast, their evidence showed that Lot A, with an area of 562 square meters, is alienable and disposable, and is
covered by a 1936 tax declaration under the name of Alfonso Bactad. Since the property is located within the
salvage zone, it is res nullius, hence, could not have been acquired by the Labradors through accession under Article
440 of the New Civil Code. They also insisted that the trial court had no jurisdiction to declare them entitled to the
possession of Lot A since the Republic of the Philippines was not a party to the case. The spouses Gulla concluded
that they cannot be held liable for monthly rentals, actual damages an attorneys fees sine the laime title over
the subject property is fraudulent.

On December 11, 2000, the CA rendered judgment affirming the assailed decision. Applying Article 440 of
the New Civil Code, the appellate court declared that although Lot A is outside the titled property of the Labradors,
y analogy as the owners of the ajoining property the latter have the priority to use it Stated differently, the
Labradors, although not the owners of the property within the salvage zone, have the right to use it more than the
spouses Gulla.

This prompted the aggrieved spouses to file a motion for reconsideration, which the appellate court
denied, hence, the present petition.

The sole issue in this case is whether or not petitioners are entitled to the possession of Lot A which is
located at the foreshore of San Felipe, Zambales as indicated in the report[10] of Engr. Magarro.

Petitioners point out that Lot A is not covered by any certificate of title. The free patent issued to
responents as well as the tax elaration overing the property refers only to Lot a totally ifferent lot from
what they are occupying, or Lot A. Moreover, the lower courts erred in ruling that the salvage zone is incorporated
in the title of respondents, since the zone is res nullius and cannot be the subject of the commerce of man, part of the
public domain and intended for public use; so long as this is so, it cannot be appropriated by any person except
through express authorization granted in due form by a competent authority.[11] Petitioners insist that the
adjudication of the salvage zone is best determined at an appropriate forum. Petitioners further allege that
respondents are claiming possession over Lot A by virtue of a fraudulently acquired patent, the validity of which is
still the subject of a pending civil case between Alfonso Bactad and herein respondents.

Petitioners reiterate that they occupied the subject land openly, notoriously, and in the concept of owners for
many years since 1986. Responents ontention that they oupie the lan lanestinely is negate y the very
location/nature of the property, i.e., that it is situated in the coastal area which is very much exposed. Considering
the size of the allege property of responents aout hetares it is impossile to seretly oupy the sai area
It is thus more credible to state that respondents were not actually working on or were never in possession of the
contested property. According to respondents, the lower courts should have taken judicial notice of the alarming
numer of smart iniviuals who after having otaine title y means of onnetions woul suenly file ases
in courts knowing that rulings will be issued in their favor on the basis of alleged titles.[12]

The petition is meritorious.

In ruling for respondents, the CA ratiocinated, thus:

The ownership of property gives the right by accession to everything which is
produced thereby, or which is incorporated or attached thereto, either naturally or artificially
(Article 440, Civil Code). Accession is the right of an owner of a thing to the products of
said thing as well as to whatever is inseparably attached thereto as an accessory (Sanchez
Roman, Vol. II, p. 89).

In the case at bar, it is undisputed that the area of 562 square meters is outside the
title property of the responents an is within the salvage zone ajaent to responents
property. However, while it is true that the salvage zone cannot be the subject of commerce,
the adjoining owner thereof, the respondents in this case, has the priority to use
it. Otherwise stated, herein respondents [do] not own the salvage zone but as an adjacent
owner, he has the right to use it more than the petitioners applying the basic rule as stated
above.

Moreover, the law provides the different modes of acquiring ownership, namely: (a)
occupation; (b) intellectual creation; (c) law; (d) donation; (e) succession; (f) tradition, as
a consequence of certain contracts; and (g) prescription. It will be noted that accession is
not one of those listed therein. It is therefore safe to conclude that accession is not a mode
of acquiring ownership. The reason is simple: accession presupposes a previously existing
ownership by the owner over the principal. This is not necessarily so in the other modes of
acquiring ownership. Therefore, fundamentally and in the last analysis, accession is a right
implicitly included in ownership, without which it will have no basis or existence. (p. 179,
Paras, Vol. II, Thirteenth Edition (1994), Civil Code). In general, the right to accession is
automatic (ipso jure), requiring no prior act on the part of the owner of the principal
(Villanueva v. Claustro, 23 Phil. 54).

In the light of the foregoing, the lower court therefore is correct in ejecting the
petitioners even if the portion occupied by them is in the salvage zone.[13]

The trial court, the RTC and the CA were one in ruling that the 562-square-meter property, Lot A, is part of
the public domain, hence, beyond the commerce of men and not capable of registration. In fact, the land is within
the salvage zone fronting the China Sea as well as the property covered by OCT No. P-13350 in the name of
responents The provision relie upon is Artile of the New Civil Coe whih states that [the ownership of
property gives the right by accession to everything which is produced thereby, or which is incorporated or attached
thereto either naturally or artifiially The provision however oes not apply in this ase onsiering that Lot A is
a foreshore land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides. Such
property belongs to the public domain and is not available for private ownership until formally declared by the
government to be no longer needed for public use.[14] Respondents thus have no possessory right over the property
unless upon application, the government, through the then Bureau of Lands, had granted them a permit.[15]


There is no question that no such permit was issued or granted in favor of respondents. This being the case,
responents have no ause of ation to ause petitioners evition from the subject property. The real party-in-
interest to file a complaint against petitioners for recovery of possession of the subject property and cause
petitioners evition therefrom is the Repuli of the Philippines through the Offie of the Soliitor General.
Consequently, petitioners cannot be required to pay any rentals to respondents for their possession of the property.

IN LIGHT OF ALL THE FOREGOING, the petition is partially GRANTED. The Decision of the Court
of Appeals CA-G.R. SP No. 52176 is AFFIRMED WITH THE MODIFICATION that the complaint of
respondents is DISMISSED insofar as Lot A with an area of 562 square meters is concerned. The Municipal Trial
Court of San Felipe, Zambales, is ORDERED to dismiss the complaint of the plaintiffs in Civil Case No. 381
insofar as Lot A with an area of 562 square meters is concerned without prejudice to the right of the Republic of the
Philippines to take such appropriate action for the recovery of said lot from petitioners.

Let a copy of this decision be served on the Office of the Solicitor General for appropriate action.

SO ORDERED.


MCDONALDS CORPORATION and G.R. No. 143993
MCGEORGE FOOD INDUSTRIES, INC.,
Petitioners,
Present:
Davide, Jr., C.J.,
Chairman,
- versus - Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.

L.C. BIG MAK BURGER, INC.,
FRANCIS B. DY, EDNA A. DY,
RENE B. DY, WILLIAM B. DY,
JESUS AYCARDO, ARACELI Promulgated:
AYCARDO, and GRACE HUERTO,
Respondents. August 18, 2004

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


DECISION


CARPI O, J .:


The Case



This is a petition for review[1] of the Decision dated 26 November 1999 of the Court of Appeals[2] finding
respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering
petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying
reconsideration. The Court of Appeals Deision reverse the Septemer 99 Deision[3] of the Regional Trial
Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and
unfair competition.


The Facts

Petitioner MDonals Corporation (MDonals) is a orporation organize uner the laws of
Delaware, United States. MDonals operates by itself or through its franchisees, a global chain of fast-food
restaurants MDonals[4] owns a family of marks[5] inluing the Big Ma mark for its oule-decker
hamurger sanwih[6] MDonals registere this traemark with the Unite States Traemark Registry on
October 1979.[7] Based on this Home Registration MDonals applie for the registration of the same mark in the
Principal Register of the then Philippine Bureau of Patents Traemarks an Tehnology (PBPTT) now the
Intelletual Property Offie (IPO) Pending approval of its appliation MDonals introue its Big Ma
hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed
registration of the Big Ma mark in the Principal Register based on its Home Registration in the United States.

Like its other marks MDonals isplays the Big Ma mark in items[8] and paraphernalia[9] in its
restaurants an in its outoor an inoor signages From 9 to 99 MDonals spent P10.5 million in
avertisement for Big Ma hamurger sanwihes alone[10]

Petitioner MGeorge Foo Inustries (petitioner MGeorge) a omesti orporation is MDonals
Philippine franchisee.[11]

Responent LC Big Mak Burger In (responent orporation) is a omesti orporation which
operates fast-food outlets and snack vans in Metro Manila and nearby provinces.[12] Responent orporations
menu includes hamburger sandwiches and other food items.[13] Respondents Francis B. Dy, Edna A. Dy, Rene B.
Dy, William B. Dy, Jesus Aycardo Araeli Ayaro an Grae Huerto (private responents) are the
incorporators, stockholders and directors of respondent corporation.[14]

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the Big Mak
mark for its hamurger sanwihes MDonals oppose responent orporations appliation on the groun that
Big Mak was a olorale imitation of its registere Big Ma mark for the same foo prouts MDonals also
informed respondent Francis Dy (responent Dy) the hairman of the Boar of Diretors of responent
orporation of its exlusive right to the Big Ma mark an requeste him to desist from using the Big Ma
mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the
Regional Trial Court of Makati Branh (RTC) for traemark infringement an unfair ompetition In its
Orer of July 99 the RTC issue a temporary restraining orer (TRO) against responents enjoining them
from using the Big Mak mark in the operation of their business in the National Capital Region.[15] On 16 August
1990, the RTC issued a writ of preliminary injunction replacing the TRO.[16]

In their Answer, respondents admitte that they have een using the name Big Mak Burger for their fast-
foo usiness Responents laime however that MDonals oes not have an exlusive right to the Big Ma
mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations (Isaiyas Group)
registered the same mark for hamburger sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio
(Topaio) similarly registere the same mark on June 9 prior to MDonals registration on July 9
Alternatively, respondents claimed that they are not liable for trademark infringement or for unfair competition, as
the Big Mak mark they sought to register oes not onstitute a olorale imitation of the Big Ma mark
Respondents asserted that they di not frauulently pass off their hamurger sanwihes as those of petitioners Big
Mac hamburgers.[17] Respondents sought damages in their counterclaim.

In their Reply petitioners enie responents laim that MDonals is not the exlusive owner of the Big
Ma mark Petitioners asserte that while the Isaiyas Group an Topaio i register the Big Ma mark ahea of
MDonals the Isaiyas Group i so only in the Supplemental Register of the PBPTT an suh registration oes
not provide any protection. MDonals islose that it ha acquired Topaios rights to his registration in a Dee
of Assignment dated 18 May 1981.[18]



The Trial Courts Ruling


On 5 September 1994, the RTC rendered jugment (RTC Deision) fining responent orporation liale
for trademark infringement and unfair competition. However, the RTC dismissed the complaint against private
respondents and the counterclaim against petitioners for lack of merit and insufficiency of evidence. The RTC held:

Unenialy the mark B[ig M[a is a registere traemark for plaintiff
MDonals an as such, it is entitled [to] protection against infringement.

xxxx
There exist some istintions etween the names B[ig M[a an B[ig
M[ak as appearing in the respective signages, wrappers and containers of the food
products of the parties. But infringement goes beyond the physical features of the
questioned name and the original name. There are still other factors to be considered.

xxxx




Significantly, the contending parties are both in the business of fast-food chains and
restaurants. An average person who is hungry and wants to eat a hamburger sandwich may
not be discriminating enough to look for a MDonals restaurant an uy a B[ig M[a
hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip
into his poket an orer a B[ig M[ak hamurger sanwih. Plaintiff MDonals fast-
food chain has attained wide popularity and acceptance by the consuming public so much so
that its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to
e the same as efenant orporations moile snack vans located along busy streets or
highways. But the thing is that what is being sold by both contending parties is a food item
a hamburger sandwich which is for immediate consumption, so that a buyer may easily be
confused or deceived into thinking that the B[ig M[ak hamburger sandwich he bought
is a food-prout of plaintiff MDonals or a susiiary or allie outlet thereof. Surely,
defendant corporation has its own secret ingredients to make its hamburger sandwiches as
palatable and as tasty as the other brands in the market, considering the keen competition
among mushrooming hamburger stands and multinational fast-food chains and
restaurants. Hence the traemark B[ig M[a has been infringed by defendant
corporation when it use the name B[ig M[ak in its signages wrappers an ontainers
in connection with its food business. xxxx

Di the same ats of efenants in using the name B[ig M[ak as a traemark or
tradename in their signages, or in causing the name B[ig M[ak to e printe on the
wrappers and containers of their food products also constitute an act of unfair competition
under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more
inclusive than the law concerning the infringement of trademark, which is of more limited
range, but within its narrower range recognizes a more exclusive right derived by the
adoption and registration of the trademark by the person whose goods or services are first
associated therewith. xxx Notwithstanding the distinction between an action for trademark
infringement and an action for unfair competition, however, the law extends substantially
the same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act
No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off
on the public the goods of one man as the goods of another. The hoie of B[ig M[ak as
tradename by defendant corporation is not merely for sentimental reasons but was clearly
made to take advantage of the reputation, popularity and the established goodwill of
plaintiff MDonals For, as stated in Section 29, a person is guilty of unfair competition
who in selling his goods shall give them the general appearance, of goods of another
manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages
in which they are contained, or the devices or words thereon, or in any other feature of their
appearance, which would likely influence purchasers to believe that the goods offered are
those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus,
plaintiffs have established their valid cause of action against the defendants for trademark
infringement and unfair competition and for damages.[19]



The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs MDonals
Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak
Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16 August
1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual
damages in the amount of P400,000.00, exemplary damages in the amount of P100,000.00,
an attorneys fees an expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B.
Dy, Wiliam B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all
counter-claims, are dismissed for lack of merit as well as for insufficiency of evidence.[20]



Respondents appealed to the Court of Appeals.


The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered jugment (Court of Appeals Deision) reversing the
RTC Deision an orering MDonals to pay responents P1,600,000 as actual and compensatory damages and
P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that
the use of defendants-appellants of its corporate name the whole LC B[ig M[ak
B[urger I[n whih appears on their foo pakages signages an avertisements is an
infringement of their traemark B[ig M[a whih they use to ientify [their oule
eker sanwih sol in a Styrofoam ox pakaging material with the MDonals logo of
umrella M stampe thereon together with the printed mark in red bl[o]ck capital letters,
the words being separated by a single space. Specifically, plaintiffs-appellees argue that
defendants-appellants use of their orporate name is a olorale imitation of their traemark
Big Ma

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation
exists. As the definition dictates, it is not sufficient that a similarity exists in both names, but
that more importantly, the over-all presentation, or in their essential, substantive and
distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary
course of purchasing the genuine article. A careful comparison of the way the trademark
B[ig M[a is eing use y plaintiffs-appellees and corporate name L.C. Big Mak
Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take
place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-
appellants, the plaintiffs-appellees traemark is use to esignate only one prout a
double decker sandwich sold in a Styrofoam ox with the MDonals logo On the other
hand, what the defendants-appellants corporation is using is not a trademark for its food
product but a business or corporate name. They use the usiness name LC Big Mak
Burger In in their restaurant business which serves diversified food items such as siopao,
noodles, pizza, and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly,
defendants-appellants orporate or usiness name appearing in the foo pakages an
signages are written in silhouette red-orange letters with the an m in upper ase
letters Aove the wors Big Mak are the upper ase letter LC Below the wors Big
Mak are the wors Burger In spelle out in upper ase letters Furthermore, said
corporate or business name appearing in such food packages and signages is always
accompanied by the company mascot, a young chubby boy named Maky who wears a red T-
shirt with the upper ase m appearing therein and a blue lower garment. Finally, the
defendants-appellants foo pakages are mae of plasti material

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the
appearance of the product and the manner that the traename Big Mak is being used and
presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-
appellees traemark an efenants-appellants orporate name Plaintiffs-appellees
prout arrying the traemark B[ig M[a is a oule decker sandwich (depicted in the
tray mat containing photographs of the various food products xxx sold in a Styrofoam box
with the MDonals logo an traemark in re l[ok apital letters printe thereon xxx
at a price which is more expensive than the defendants-appellants omparale foo
products. In order to uy a Big Ma a ustomer nees to visit an air-conditioned
MDonals restaurant usually located in a nearby commercial center, advertised and
identified by its logo - the umrella M, and its mascot Ronal MDonal A typical
MDonals restaurant boasts of a playground for kids, a second floor to accommodate
additional customers, a drive-thru to allow customers with cars to make orders without
alighting from their vehicles, the interiors of the building are well-lighted, distinctly
eorate an painte with pastel olors xxx In uying a B[ig M[a it is necessary to
specify it by its trademark. Thus a ustomer nees to look for a MDonals an enter it
first before he an fin a hamurger sanwih whih arry the mark Big Ma On the
other hand, defendants-appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition, We
likewise find the same untenable.

Unfair ompetition is efine as the employment of deception or any other means
contrary to good faith by which a person shall pass off the goods manufactured by him or in
which he deals, or his business, or service, for those of another who has already established
good will for his similar good, business or services, or any acts calculated to produce the
same result (Sec. 29, Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow that there was
malice and that the entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees
that defendants-appellants deliberately tried to pass off the goods manufactured by them for
those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-
appellants orporate name with the plaintiffs-appellees traemark is not sufficient evidence
to conclude unfair competition. Defendants-appellants explaine that the name M[ak in
their corporate name was derived from both the first names of the mother and father of
defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is
up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a
settled rule that the law always presumes good faith such that any person who seeks to be
awarded damages due to acts of another has the burden of proving that the latter acted in
bad faith or with ill motive.

[21]


Petitioners sought reonsieration of the Court of Appeals Deision ut the appellate ourt enie their
motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS
CORPORATE NAME LC BIG MAK BURGER INC IS NOT A COLORABLE
IMITATION OF THE MCDONALDS TRADEMARK BIG MAC SUCH
COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK
INFRINGEMENT.

A. Responents use the wors Big Mak as traemark for their prouts an
not merely as their business or corporate name.

B. As a traemark responents Big Mak is unenialy an unquestionaly
similar to petitioners Big Ma traemark ase on the ominany test
and the idem sonans test resulting inexorably in confusion on the part of
the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE
INHERENT SIMILARITY BETWEEN THE MARK BIG MAK AND THE
WORD MARK BIG MAC AS AN INDICATION OF RESPONDENTS INTENT
TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR
COMPETITION.[22]

Petitioners pray that we set asie the Court of Appeals Deision an reinstate the RTC Deision

In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises
only questions of fact. On the merits, respondents contend that the Court of Appeals committed no reversible error
in finding them not liable for trademark infringement and unfair competition and in ordering petitioners to pay
damages.


The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under
Rule 45.

2. On the merits (a) whether responents use the wors Big Mak not only as part of the orporate
name LC Big Mak Burger In ut also as a traemark for their hamburger products, and (b) whether respondent
corporation is liable for trademark infringement and unfair competition.[23]

The Courts Ruling


The petition has merit.


On Whether the Questions Raised in the Petition are
Proper for a Petition for Review


A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for
review uner Setion of Rule (Setion )[24] raising only questions of law. A question of law exists when the
doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or
difference arises on the truth or falsity of the alleged facts.

[25]

Here, petitioners raise questions of fact and law in assailing the Court of Appeals finings on responent
orporations non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due
course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals,
the Court opts to accept the petition, this being one of the recognized exceptions to Section 1.[26] We took a similar
course of action in Asia Brewery, I nc. v. Court of Appeals[27] which also involved a suit for trademark
infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting
findings.



On the Manner Respondents Used
Big Mak in their Business




Petitioners contend that the Court of Appeals erre in ruling that the orporate name LC Big Mak Burger
In appears in the pakaging for responents hamurger prouts an not the wors Big Mak only

The contention has merit.

The evidence presented during the hearings on petitioners motion for the issuane of a writ of preliminary
injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger sandwiches
ore the wors Big Mak The other esriptive wors urger an % pure eef were set in smaller type
along with the locations of branches.[28] Responents ash invoies simply refer to their hamurger sanwihes
as Big Mak[29] It is responents snak vans that arry the wors LC Big Mak Burger In[30]
It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their
hamburger sandwiches relied on by the Court of Appeals.[31] Responents plasti wrappers an ags were
identical with those petitioners presente uring the hearings for the injuntive writ exept that the letters LC an
the wors Burger In in responents eviene were ae aove an elow the wors Big Mak respectively.
Sine petitioners omplaint was ase on fats existing efore and during the hearings on the injunctive writ, the
facts established during those hearings are the proper factual bases for the disposition of the issues raised in this
petition.


On the I ssue of Trademark Infringement



Section 22 (Setion ) of Repuli At No as amene (RA ) the law appliale to this
case,[32] defines trademark infringement as follows:

Infringement, what constitutes. Any person who [1] shall use, without the consent
of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered
mark or trade-name in connection with the sale, offering for sale, or advertising of any
goods, business or services on or in connection with which such use is likely to cause
confusion or mistake or to deceive purchasers or others as to the source or origin of such
goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or
colorably imitate any such mark or trade-name and apply such reproduction, counterfeit,
copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such goods, business or
services, shall be liable to a civil action by the registrant for any or all of the remedies
herein provided.[33]


Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used, without
petitioners onsent a olorale imitation of the Big Ma mark in avertising an selling responents hamurger
sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the hamburgers or
the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of
plaintiffs mark; () the plaintiffs ownership of the mark; an () the use of the mark or its colorable imitation by
the alleged infringer results in likelihoo of onfusion[34] Of these, it is the element of likelihood of confusion
that is the gravamen of trademark infringement.[35]

On the Validity of the Big MacMark
and McDonalds Ownership of such Mark


A mark is valid if it is istintive and thus not barred from
registration under Section 4[36] of RA (Setion ) However one registere not only the marks valiity ut
also the registrants ownership of the mark is prima facie presumed.[37]


Respondents contend that of the two wors in the Big Ma mark it is only the wor Ma that is
vali eause the wor Big is generi an esriptive (prosrie uner Setion [e) an thus inapale of
exlusive appropriation[38]

The contention has no merit. The Big Ma mark whih shoul e treate in its entirety an not issete
word for word,[39] is neither generic nor descriptive. Generic marks are commonly used as the name or description
of a kind of goods,[40] suh as Lite for eer[41] or Choolate Fuge for hoolate soa rink[42] Descriptive
marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has
never seen it or does not know it exists,[43] suh as Arthritiare for arthritis medication.[44] On the ontrary Big
Ma falls uner the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of
the product it represents.[45] As such, it is highly distinctive and thus valid. Signifiantly the traemark Little
Deie for snak akes was foun aritrary or faniful[46]
The Court also fins that petitioners have uly estalishe MDonals exlusive ownership of the Big
Ma mark Although Topacio and the Isaiyas Group registere the Big Ma mark ahea of MDonals
Topaio as petitioners islose ha alreay assigne his rights to MDonals The Isaiyas Group on the other
hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the Principal
Register, and thus not distinctive, has no real protection.[47] Indeed, we have held that registration in the
Supplemental Register is not even a prima facie eviene of the valiity of the registrants exlusive right to use the
mark on the goods specified in the certificate.[48]

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely,
confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling Products
I nternational, I ncorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,[49] the Court distinguished these
two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the onfusion of goos in
which event the ordinarily prudent purchaser would be induced to purchase one product in
the elief that he was purhasing the other xxx The other is the confusion of business:
Here though the goos of the parties are ifferent the efenants prout is suh as might
reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff
and defendant which, in fact oes not exist


Under Act No. 666,[50] the first trademark law, infringement was limited to confusion of goods only, when the
infringing mark is use on goos of a similar kin[51] Thus, no relief was afforded to the party whose registered
mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress
enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the
requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is
likely to result in confusion on the

soure or origin of suh goos or servies or ientity of suh usiness[52] Thus, while there is confusion of goods
when the products are competing, confusion of business exists when the products are non-competing but related
enough to produce confusion of affiliation.[53]


On Whether Confusion of Goods and
Confusion of Business are Applicable


Petitioners laim that responents use of the Big Mak mark on responents hamurgers results in
confusion of goods, particularly with respect to petitioners hamurgers laele Big Ma Thus, petitioners
alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the
property rights of plaintiffs in the MDonals Marks partiularly the mark B[ig
M[a Defenants unauthorize ats are likely an alulate to confuse, mislead or
deceive the public into believing that the products and services offered by defendant Big
Mak Burger, and the business it is engaged in, are approved and sponsored by, or affiliated
with, plaintiffs.[54] (Emphasis supplied)


Since responents use the Big Mak mark on the same goos i.e. hamurger sanwihes that petitioners Big
Ma mark is use traemark infringement through onfusion of goos is a proper issue in this ase

Petitioners also claim that respondents use of the Big Mak mark in the sale of hamurgers the same
business that petitioners are engaged in, results in confusion of business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff
McDonals nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of
plaintiffs exlusive right to use and/or appropriate the MDonals marks efenant Big
Mak Burger ating through iniviual efenants has een operating Big Mak Burger a
fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches,
french fries and other food products, and has caused to be printed on the wrapper
of efenants foo prouts an inorporate in its signages the name Big Mak Burger
which is confusingly similar to and/or is a colorable imitation of the plaintiff
MDonals mark B[ig M[a xxx Defendant Big Mak Burger has thus unjustly
created the impression that its business is approved and sponsored by, or affiliated
with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by defendants, which unduly
prejudice and infringe upon the property rights of plaintiffs MDonals an MGeorge as
the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the
MDonals marks and which are likely to have caused confusion or deceived the public
as to the true source, sponsorship or affiliation of defendants food products and
restaurant business, plaintiffs have suffered and continue to suffer actual damages in the
form of injury to their business reputation and goodwill, and of the dilution of the distinctive
quality of the MDonals marks in particular the mark B[ig M[a[55] (Emphasis
supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that
petitioners sell using the Big Mac mark. Thus, trademark infringement through confusion of business is also a
proper issue in this case.

Responents assert that their Big Mak hamurgers ater mainly to the low-income group while
petitioners Big Ma hamurgers ater to the mile and upper income groups. Even if this is true, the likelihood
of confusion of business remains, since the low-inome group might e le to elieve that the Big Mak
hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right to
use the Big Ma mark On the other hand, respondents would benefit by associating their low-end hamburgers,
through the use of the Big Mak mark with petitioners high-en Big Ma hamurgers leaing to likelihoo of
confusion in the identity of business.

Responents further laim that petitioners use the Big Ma mark only on petitioners oule-decker
hamurgers while responents use the Big Mak mark on hamurgers an other prouts like siopao nooles an
pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam box with the
MDonals logo an traemark in re lok letters at a prie more expensive than the hamurgers of
respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and plastic bags.
Responents further point out that petitioners restaurants are air-conditioned buildings with drive-thru service,
ompare to responents moile vans

These and other factors respondents cite cannot negate the undisputed fact that respondents use their
Big Mak mark on hamurgers the same foo prout that petitioners sell with the use of their registered mark
Big Ma Whether a hamburger is single, double or triple-decker, and whether wrapped in plastic or styrofoam,
it remains the same hamburger food product. Even responents use of the Big Mak mark on non-hamburger
foo prouts annot exuse their infringement of petitioners registere mark otherwise registere marks will lose
their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments
of the market, and at different price levels depending on variations of the products for specific segments of the
market. The Court has recognized that the registered trademark owner enjoys protection in product and market
areas that are the normal potential expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is
entitled is not limited to guarding his goods or business from actual market competition with
identical or similar products of the parties, but extends to all cases in which the use by a
junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of
source, as where prospective purchasers would be misled into thinking that the
complaining party has extended his business into the field (see 148 ALR 56 et seq; 53
Am Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am.
Jur. 576, 577).[56] (Emphasis supplied)



On Whether Respondents Use of the Big Mak
Mark Results in Likelihood of Confusion


In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the
holistic test.[57] The dominancy test focuses on the similarity of the prevalent features of the competing trademarks
that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use of
responents Big Mak mark on hamurgers relie on the holisti test Thus the Court of Appeals rule that it is
not sufficient that a similarity exists in both name(s), but that more importantly, the overall presentation, or in their
essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary
course of purchasing the genuine artile The holistic test considers the two marks in their entirety, as they appear
on the goods with their labels and packaging. It is not enough to consider their words and compare the spelling and
pronunciation of the words.[58]

Respondents now vigorously argue that the Court of Appeals appliation of the holisti test to this ase
is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test
considers the dominant features in the competing marks in determining whether they are confusingly
similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product
arising from the adoption of the dominant features of the registered mark, disregarding minor
differences.[59] Courts will consider more the aural and visual impressions created by the marks in the public
mind, giving little weight to factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,[60] the Court ruled:

xxx It has been consistently held that the question of infringement of a
trademark is to be determined by the test of dominancy. Similarity in size, form and color,
while relevant, is not conclusive. If the competing trademark contains the main or
essential or dominant features of another, and confusion and deception is likely to
result, infringement takes place. Duplication or imitation is not necessary; nor is it
necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing
Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh
(CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether
the use of the marks involved would be likely to cause confusion or mistakes in the mind of
the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107
F. 2d 588; xxx) (Emphasis supplied.)


The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,[61] Phil. Nut I ndustry, I nc.
v. Standard Brands I nc.,[62] Converse Rubber Corporation v. Universal Rubber Products, I nc.,[63] and Asia
Brewery, I nc. v. Court of Appeals.[64] In the 2001 case of Societe Des Produits Nestl, S.A. v. Court of
Appeals,[65] the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on
trademarks and unfair competition that confusing similarity is to be determined on the
basis of visual, aural, connotative comparisons and overall impressions engendered by the
marks in controversy as they are encountered in the realities of the
marketplace. (Emphasis supplied)



The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual
Property Code which defines infringement as the olorale imitation of a registered mark xxx or a dominant
feature thereof

Applying the ominany test the Court fins that responents use of the Big Mak mark results in
likelihood of confusion. First Big Mak souns exactly the same as Big Ma Seon the first wor in Big
Mak is exactly the same as the first wor in Big Ma Thir the first two letters in Mak are the same as the
first two letters in Ma Fourth the last letter in Mak while a k souns the same as when the wor Mak
is pronounced. Fifth in Filipino the letter k replaes in spelling thus Calooan is spelle Kalookan

In short, aurally the two marks are the same, with the first word of both marks phonetically the same,
and the second word of both marks also phonetically the same. Visually, the two marks have both two words and
six letters, with the first word of both marks having the same letters and the second word having the same first two
letters. In spelling, considering the Filipino language, even the last letters of both marks are the same.

Clearly, respondents have adopted in Big Mak not only the dominant but also almost all the
features of Big Mac Applied to the same food product of hamburgers, the two marks will likely result in
confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks in
determining the issue of confusing similarity. Thus, in Marvex Commercial Co., I nc. v. Petra Hawpia & Co., et
al.,[66] the Court held:

The following random list of confusingly similar sounds in the matter of
trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will
reinfore our view that SALONPAS an LIONPAS are onfusingly similar in soun:
Gol Dust an Gol Drop; Jantzen an Jass-Sea; Silver Flash an Supper
Flash; Casarete an Celorite; Celluloi an Cellonite; Chartreuse an
Charseurs; Cutex an Cutilean; Hee an Meje; Kotex an Femetex;
Zuso an Hoo Hoo Leon Amur in his ook Trae-Mark Law an Pratie pp 9-
421, cities, as coming within the purview of the idem sonans rule Yusea an U-C-A
Steinway Pianos an Steinerg Pianos an Seven-Up an Lemon-Up In Co Tiong
vs. Director of Patents, this Court unequivoally sai that Celura an Corura are
confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that
the name Lusolin is an infringement of the traemark Sapolin as the soun of the two
names is almost the same. (Emphasis supplied)

Certainly Big Ma an Big Mak for hamurgers reate even greater onfusion not only aurally ut also
visually.

Inee a person annot istinguish Big Ma from Big Mak y their soun When one hears a Big
Ma or Big Mak hamurger avertisement over the raio one woul not know whether the Ma or Mak
ens with a or a k

Petitioners aggressive promotion of the Big Ma mark as orne y their avertisement expenses, has built
goodwill and reputation for such mark making it one of the easily recognizable marks in the market today. This
increases the likelihoo that onsumers will mistakenly assoiate petitioners hamurgers an usiness with those of
responents

Responents inaility to explain sufficiently how an why they ame to hoose Big Mak for their
hamburger sandwiches indicates their intent to imitate petitioners Big Ma mark Contrary to the Court of
Appeals fining responents laim that their Big Mak mark was inspire y the first names of responent Dys
mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more
creative choice for a corporate name by using the names of his parents, especially since he
was allegedly driven by sentimental reasons. For one he oul have put his fathers name
ahea of his mothers as is usually one in this patriarhal soiety an erive letters from
said names in that order. Or, he could have taken an equal number of letters (i.e., two) from
each name, as is the more usual thing done. Surely, the more plausible reason behind
Responents hoie of the wor M[ak espeially when taken in onjunction with the
wor B[ig was their intent to take avantage of Petitioners xxx B[ig M[a
trademark, with their alleged sentiment-fouse explanation merely thought of as a
convenient, albeit unavailing, excuse or defense for such an unfair choice of name.[67]


Asent proof that responents aoption of the Big Mak mark was due to honest mistake or was
fortuitous,[68] the inesapale onlusion is that responents aopte the Big Mak mark to rie on the oattails
of the more estalishe Big Ma mark[69] This saves respondents much of the expense in advertising to create
market recognition of their mark and hamburgers.[70]

Thus we hol that onfusion is likely to result in the puli min We sustain petitioners laim of
trademark infringement.

On the Lack of Proof of
Actual Confusion


Petitioners failure to present proof of actual confusion does not negate their claim of trademark infringement.
As noted in American Wire & Cable Co. v. Director of Patents,[71] Section 22 requires the less stringent standard
of likelihood of onfusion only While proof of actual confusion is the best evidence of infringement, its absence
is inconsequential.[72]


On the I ssue of Unfair Competition

Setion 9 (Setion 9)[73] of RA 166 defines unfair competition, thus:
xxxx

Any person who will employ deception or any other means contrary to good faith by
which he shall pass off the goods manufactured by him or in which he deals, or his business,
or services for those of the one having established such goodwill, or who shall commit any
acts calculated to produce said result, shall be guilty of unfair competition, and shall be
subject to an action therefor.
In particular, and without in any way limiting the scope of unfair competition, the
following shall be deemed guilty of unfair competition:
(a) Any person, who in selling his goods shall give them the general
appearance of goods of another manufacturer or dealer, either as to the goods
themselves or in the wrapping of the packages in which they are contained, or the devices
or words thereon, or in any feature of their appearance, which would be likely to influence
purchasers to believe that the goods offered are those of a manufacturer or dealer, other than
the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance
as shall deceive the public and defraud another of his legitimate trade, or any subsequent
vendor of such goods or any agent of any vendor engaged in selling such goods with a like
purpose;
(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of another who
has identified such services in the mind of the public; or
(c) Any person who shall make any false statement in the course of trade or who
shall commit any other act contrary to good faith of a nature calculated to discredit the
goods, business or services of another. (Emphasis supplied)


The essential elements of an action for unfair competition are (1) confusing similarity in the general
appearance of the goods, and (2) intent to deceive the public and defraud a competitor.[74] The confusing similarity
may or may not result from similarity in the marks, but may result from other external factors in the packaging or
presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance
of the goods as offered for sale to the public.[75] Actual fraudulent intent need not be shown.[76]
Unfair competition is broader than trademark infringement and includes passing off goods with or
without trademark infringement. Trademark infringement is a form of unfair competition.[77] Trademark
infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or
probable deception on the public because of the general appearance of the goods. There can be trademark
infringement without unfair competition as when the infringer discloses on the labels containing the mark that he
manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark
owner.[78]

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off
their hamurgers as Big Ma hamurgers Petitioners a that responents frauulent intent an e inferre from
the similarity of the marks in question.[79]

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the impression that
they are buying that of his competitors.[80] Thus, the defendant gives his goods the general appearance of the
goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark B[ig M[a is use y plaintiff MDonals to ientify its oule
decker hamburger sandwich. The packaging material is a styrofoam box with the
MDonals logo an traemark in re with lok apital letters printe on it All letters of
the B[ig M[a mark are also in red and block capital letters. On the other hand,
efenants B[ig M[ak sript print is in orange with only the letter B an M eing
capitalized and the packaging material is plastic wrapper xxxx Further plaintiffs logo an
mascot are the umbrella M an Ronal MDonals respectively, compared to the
masot of efenant Corporation whih is a huy oy alle Maky isplaye or
printe etween the wors Big an Mak[81] (Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general appearance of
petitioners Big Ma hamurgers

The dissimilarities in the packaging are minor compared to the stark similarities in the words that give
responents Big Mak hamurgers the general appearane of petitioners Big Ma hamurgers Setion
29(a) expressly provies that the similarity in the general appearane of the goos may e in the evies or
words use on the wrappings Respondents have applied on their plastic wrappers and bags almost the same
words that petitioners use on their styrofoam box. What attracts the attention of the buying public are the words
Big Mak whih are almost the same aurally an visually as the wors Big Ma The dissimilarities in the
material and other devices are insignificant compared to the glaring similarity in the words used in the wrappings.

Setion 9(a) also provies that the efenant gives his goos the general appearane of goods of
another manufaturer Responents goos are hamurgers whih are also the goos of petitioners If
respondents sold egg sandwiches only instead of hamurger sanwihes their use of the Big Mak mark woul not
give their goods the general appearane of petitioners Big Ma hamurgers In such case, there is only trademark
infringement but no unfair competition. However sine responents hose to apply the Big Mak mark on
hamurgers just like petitioners use of the Big Ma mark on hamburgers, respondents have obviously clothed
their goos with the general appearane of petitioners goos

Moreover there is no notie to the puli that the Big Mak hamurgers are prouts of LC Big Mak
Burger In Responents introue uring the trial plasti wrappers an ags with the wors LC Big Mak
Burger In to inform the puli of the name of the seller of the hamburgers. However, petitioners introduced
uring the injuntive hearings plasti wrappers an ags with the Big Mak mark without the name LC Big Mak
Burger In Responents elate presentation of plasti wrappers an ags earing the name of LC Big Mak
Burger In as the seller of the hamurgers is an after-thought designed to exculpate them from their unfair
business conduct. As earlier state we annot onsier responents eviene sine petitioners omplaint was
based on facts existing before and during the injunctive hearings.

Thus, there is actually no notie to the puli that the Big Mak hamurgers are prouts of LC Big
Mak Burger In an not those of petitioners who have the exlusive right to the Big Ma mark This clearly
shows responents intent to eeive the puli Ha responents plae a notie on their plasti wrappers an
ags that the hamurgers are sol y LC Big Mak Burger In then they oul valily laim that they id not
intend to deceive the public. In such case, there is only trademark infringement but no unfair
competition.[82] Respondents, however, did not give such notice. We hold that as found by the RTC, respondent
corporation is liable for unfair competition.










The Remedies Available to Petitioners


Under Section 23[83] (Setion ) in relation to Setion 9 of RA a plaintiff who suessfully
maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here,
the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5
September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive
writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the amount of actual
amages is a reasonale perentage (9%) of responent orporations gross sales for three (9-1989 and 1991)
of the six years (1984-199) responents have use the Big Mak mark[84]

The RTC also did not err in awarding exemplary damages by way of correction for the public good[85]
in view of the fining of unfair ompetition where intent to eeive the puli is essential The awar of attorneys
fees and expenses of litigation is also in order.[86]

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November
1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision
dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big
Mak Burger, Inc. liable for trademark infringement and unfair competition.

SO ORDERED.


G.R. No. L-44428 September 30, 1977
AVELINO BALURAN, petitioner, vs. HON. RICARDO Y. NAVARRO, Presiding Judge, Court of
First Instance of Ilocos Norte, Branch I and ANTONIO OBEDENCIO, respondents.
Alipio V. Flores for petitioner.
Rafael B. Ruiz for private respondent.

MUOZ PALMA, J .:
Spouses Domingo Paraiso and Fidela Q. Paraiso were the owners of a residential lot of around 480
square meters located in Sarrat, Ilocos Norte. On or about February 2, 1964, the Paraisos executed an
agreement entitled "BARTER" whereby as party of the first part they agreed to "barter and exchange" with
spouses Avelino and Benilda Baluran their residential lot with the latter's unirrigated riceland situated in
Sarrat, Ilocos Norte, of approximately 223 square meters without any permanent improvements, under
the following conditions:
1. That both the Party of the First Part and the Party of the Second Part shall enjoy the material
possession of their respective properties; the Party of the First Part shall reap the fruits of the unirrigated
riceland and the Party of the Second Part shall have a right to build his own house in the residential lot.
2. Nevertheless, in the event any of the children of Natividad P. Obencio, daughter of the First Part, shall
choose to reside in this municipality and build his own house in the residential lot, the Party of the Second
Part shall be obliged to return the lot such children with damages to be incurred.
3. That neither the Party of the First Part nor the Party of the Second Part shall encumber, alienate or
dispose of in any manner their respective properties as bartered without the consent of the other.
4. That inasmuch as the bartered properties are not yet accordance with Act No. 496 or under the
Spanish Mortgage Law, they finally agreed and covenant that this deed be registered in the Office of the
Register of Deeds of Ilocos Norte pursuant to the provisions of Act No. 3344 as amended. (p. 28, rollo)
On May 6, 1975 Antonio Obendencio filed with the Court of First Instance of Ilocos Norte the present
complaint to recover the above-mentioned residential lot from Avelino Baluran claiming that he is the
rightful owner of said residential lot having acquired the same from his mother, Natividad Paraiso
Obedencio, and that he needed the property for Purposes Of constructing his house thereon inasmuch as
he had taken residence in his native town, Sarrat. Obedencio accordingly prayed that he be declared
owner of the residential lot and that defendant Baluran be ordered to vacate the same forfeiting his
(Obedencio) favor the improvements defendant Baluran had built in bad faith.
1

Answering the complaint, Avelino Baluran alleged inter alia (1) that the "barter agreement" transferred to
him the ownership of the residential lot in exchange for the unirrigated riceland conveyed to plaintiff's
Predecessor-in-interest, Natividad Obedencio, who in fact is still in On thereof, and (2) that the plaintiff's
cause of action if any had prescribed.
2

At the pre-trial, the parties agreed to submit the case for decision on the basis of their stipulation of facts.
It was likewise admitted that the aforementioned residential lot was donated on October 4, 1974 by
Natividad Obedencio to her son Antonio Obedencio, and that since the execution of the agreement of
February 2, 1964 Avelino Baluran was in possession of the residential lot, paid the taxes of the property,
and constructed a house thereon with an value of P250.00.
3
On November 8, 1975, the trial Judge
Ricardo Y. Navarro rendered a decision the dispositive portion of which reads as follows:
Consequently, the plaintiff is hereby declared owner of the question, the defendant is hereby ordered to
vacate the same with costs against defendant.
Avelino Baluran to whom We shall refer as petitioner, now seeks a review of that decision under the
following assignment of errors:
I The lower Court erred in holding that the barter agreement did not transfer ownership of the lot in suit
to the petitioner.
II The lower Court erred in not holding that the right to re-barter or re- exchange of respondent Antonio
Obedencio had been barred by the statute of limitation. (p. 14, Ibid.)
The resolution of this appeal revolves on the nature of the undertaking contract of February 2, 1964 which
is entitled "Barter Agreement."
It is a settled rule that to determine the nature of a contract courts are not bound by the name or title given
to it by the contracting parties.
4
This Court has held that contracts are not what the parties may see fit to
call them but what they really are as determined by the principles of law.
5
Thus, in the instant case, the
use of the, term "barter" in describing the agreement of February 2, 1964, is not controlling. The
stipulations in said document are clear enough to indicate that there was no intention at all on the part of
the signatories thereto to convey the ownership of their respective properties; all that was intended, and it
was so provided in the agreement, was to transfer the material possession thereof. (condition No. 1, see
page I of this Decision) In fact, under condition No. 3 of the agreement, the parties retained the right to
alienate their respective properties which right is an element of ownership.
With the material ion being the only one transferred, all that the parties acquired was the right of usufruct
which in essence is the right to enjoy the Property of another.
6
Under the document in question, spouses
Paraiso would harvest the crop of the unirrigated riceland while the other party, Avelino Baluran, could
build a house on the residential lot, subject, however, to the condition, that when any of the children of
Natividad Paraiso Obedencio, daughter of spouses Paraiso, shall choose to reside in the municipality and
build his house on the residential lot, Avelino Baluran shall be obliged to return the lot to said children
"With damages to be incurred." (Condition No. 2 of the Agreement) Thus, the mutual agreement each
party enjoying "material possession" of the other's property was subject to a resolutory condition the
happening of which would terminate the right of possession and use.
A resolutory condition is one which extinguishes rights and obligations already existing.
7
The right of
"material possession" granted in the agreement of February 2, 1964, ends if and when any of the children
of Natividad Paraiso, Obedencio (daughter of spouses Paraiso, Party of the First Part) would reside in the
municipality and build his house on the property. Inasmuch as the condition opposed is not dependent
solely on the will of one of the parties to the contract the spouses Paraiso but is Part dependent on
the will of third persons Natividad Obedencio and any of her children the same is valid.
8

When there is nothing contrary to law, morals, and good customs Or Public Policy in the stipulations of a
contract, the agreement constitutes the law between the parties and the latter are bound by the terms
thereof.
9

Art. 1306 of the Civil Code states:
Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, Morals, good customs, public order, or
public policy.
Contracts which are the private laws of the contracting parties, should be fulfilled according to the literal
sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the
contracting parties, for contracts are obligatory, no matter what their form may be, whenever the essential
requisites for their validity are present. (Philippine American General Insurance Co., Inc. vs. Mutuc, 61
SCRA 22)
The trial court therefore correctly adjudged that Antonio Obedencio is entitled to recover the possession
of the residential lot Pursuant to the agreement of February 2, 1964.
Petitioner submits under the second assigned error that the causa, of action if any of respondent
Obedencio had Prescribed after the lapse of four years from the date of execution of the document of
February 2, 1964. It is argued that the remedy of plaintiff, now respondent, Was to ask for re-barter or re-
exchange of the properties subject of the agreement which could be exercised only within four years from
the date of the contract under Art. 1606 of the Civil Code.
The submission of petitioner is untenable. Art. 1606 of the Civil Code refers to conventional redemption
which petitioner would want to apply to the present situation. However, as We stated above, the
agreement of the parties of February 2, 1964, is not one of barter, exchange or even sale with right to
repurchase, but is one of or akin the other is the use or material ion or enjoyment of each other's real
property.
Usufruct may be constituted by the parties for any period of time and under such conditions as they may
deem convenient and beneficial subject to the provisions of the Civil Code, Book II, Title VI on Usufruct.
The manner of terminating or extinguishing the right of usufruct is primarily determined by the stipulations
of the parties which in this case now before Us is the happening of the event agreed upon. Necessarily,
the plaintiff or respondent Obedencio could not demand for the recovery of possession of the residential
lot in question, not until he acquired that right from his mother, Natividad Obedencio, and which he did
acquire when his mother donated to him the residential lot on October 4, 1974. Even if We were to go
along with petitioner in his argument that the fulfillment of the condition cannot be left to an indefinite,
uncertain period, nonetheless, in the case at bar, the respondent, in whose favor the resolutory condition
was constituted, took immediate steps to terminate the right of petitioner herein to the use of the lot.
Obedencio's present complaint was filed in May of 1975, barely several months after the property was
donated to him.
One last point raised by petitioner is his alleged right to recover damages under the agreement of
February 2, 1964. In the absence of evidence, considering that the parties agreed to submit the case for
decision on a stipulation of facts, We have no basis for awarding damages to petitioner.
However, We apply Art. 579 of the Civil Code and hold that petitioner will not forfeit the improvement he
built on the lot but may remove the same without causing damage to the property.
Art. 579. The usufructuary may make on the property held in usufruct such useful improvements or
expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance;
but he shall have no right to be indemnified therefor. He may, however. He may, however, removed such
improvements, should it be possible to do so without damage to the property. (Emphasis supplied)
Finally, We cannot close this case without touching on the unirrigated riceland which admittedly is in the
possession of Natividad Obedencio.
In view of our ruling that the "barter agreement" of February 2, 1964, did not transfer the ownership of the
respective properties mentioned therein, it follows that petitioner Baluran remains the owner of the
unirrigated riceland and is now entitled to its Possession. With the happening of the resolutory condition
provided for in the agreement, the right of usufruct of the parties is extinguished and each is entitled to a
return of his property. it is true that Natividad Obedencio who is now in possession of the property and
who has been made a party to this case cannot be ordered in this proceeding to surrender the riceland.
But inasmuch as reciprocal rights and obligations have arisen between the parties to the so-called "barter
agreement", We hold that the parties and for their successors-in-interest are duty bound to effect a
simultaneous transfer of the respective properties if substance at justice is to be effected.
WHEREFORE, Judgment is hereby rendered: 1) declaring the petitioner Avelino Baluran and respondent
Antonio Obedencio the respective owners the unirrigated riceland and residential lot mentioned in the
"Barter Agreement" of February 2, 1964; 2) ordering Avelino Baluran to vacate the residential lot and
removed improvements built by thereon, provided, however that he shall not be compelled to do so
unless the unirrigated riceland shall five been restored to his possession either on volition of the party
concerned or through judicial proceedings which he may institute for the purpose.
Without pronouncement as to costs. So Ordered.
Teehankee (Chairman), Makasiar, Martin, Fernandez and Guerrero, JJ., concur.
[G.R. No. 111737. October 13, 1999]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. THE HONORABLE COURT OF
APPEALS AND SPOUSES TIMOTEO and SELFIDA S. PIEDA, respondents.
D E C I S I O N
GONZAGA-REYES, J .:
Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals[1] in CA-G.R. CV
No 9 entitle SPOUSES TIMOTEO PIEDA ET AL vs DEVELOPMENT BANK OF THE
PHILIPPINES whih affirme the eision of the Regional Trial Court (RTC) Branh [2], Roxas City in Civil
Case No. V-4590, for cancellation of certificate of title and/or specific performance, accounting and damages with a
prayer for the issuance of a writ of preliminary injunction.
The records show that respondent spouses Pieda (PIEDAS) are the registered owners of a parcel of land
(Lot 11-14-1-14) situated at barangay Astorga Dumarao, Capiz containing an area of 238,406 square meters, more
or less, and covered by Homestead Patent No. 0844 and Original Certificate of Title No. P-1930. On March 7,
1972, the PIEDAS mortgaged the above described parcel of land to petitioner, Development Bank of the
Philippines (DBP) to secure their agricultural loan in the amount of P20,000.00. The PIEDAS failed to comply
with the terms and conditions of the mortgage compelling DBP to extrajudicially foreclose on February 2, 1977. In
the foreclosure sale, DBP was the highest bidder and a Sheriff Certificate of Sale was executed in its favor. In the
orresponing Certifiate of Sale the sheriff iniate that This property is sold subject to the redemption within
five (5) years from the date of registration of this instrument and in the manner provided for by law applicable to this
ase The certificate of sale was registered in the Register of Deeds of Capiz on April 25, 1977. On March 10,
1978, after the expiration of the one-year redemption period provided for under Section 6, ACT 3135, DBP
consolidated its title over the foreclosed property by executing an Affidavit of Consolidation of
Ownership. Subsequently a Final Dee of Sale was exeute in DBPs favor whih was registere together with
the Affidavit of Consolidation of Ownership with the Register of Deeds of Capiz on May 30, 1978. Consequently,
Original Certificate of Title No. P-1930 was cancelled and TCT No. T-15559 was issued in the name of
DBP. Thereafter, DBP took possession of the foreclosed property and appropriated the produce thereof.
On July 5, 1978, the Ministry of Justice issued Opinion No. 92, Series of 1978[3] which declared that lands
covered by P.D. No. 27[4], like the herein subject property, may not be the object of foreclosure proceedings after
the promulgation of said decree on Oct. 21, 1972.
On August 24, 1981, the PIEDAS offered to redeem the foreclosed property by offering P10,000.00 as
partial redemption payment. This amount was accepted by DBP who issued O.R. No. 1665719 and through a letter,
conditionally approved the offer of redemption considering the P10,000.00 as down payment.[5] However, on
November 11, 1981, DBP sent the PIEDAS another letter informing them that pursuant to P.D. 27, their offer to
redeem and/or repurchase the subject property could not be favorably considered for the reason that said property
was tenanted.[6] On November 16, 1981, in deference to the above-mentioned opinion, DBP through Ramon
Buenaflor sent a letter to the Acting Register of Deeds of Capiz requesting the latter to cancel TCT No. T-15559 and
to restore Original Certificate of Title No. P-1930 in the name of the PIEDAS. The Acting Register of Deeds, in
reply to such request, suggested that DBP file a petition in court pursuant to Section 108 of Presidential Decree
1529[7]. In compliance with said suggestion, DBP petitioned for the cancellation of TCT No. T-15559 with then
Court of First Instance of Capiz, Branch II, docketed as Special Case No. 2653. The petition was favorably acted
upon on February 22, 1982. Thus, the foreclosure proceeding conducted on February 2, 1977 was declared null and
void and the Register of Deeds of Capiz was ordered to cancel TCT No. 15559; OCT No. 1930 was ordered revived.
Meanwhile, on December 21, 1981, the PIEDAS filed the instant complaint against DBP for cancellation of
certificate of title and/or specific performance, accounting and damages with a prayer for the issuance of a writ of
preliminary injunction averring that DBP, in evident bad faith, caused the consolidation of its title to the parcel of
land in question in spite of the fact that the 5-year redemption period expressly stated in the Sheriffs Certifiate of
Sale had not yet lapsed and that their offer to redeem the foreclosed property was made well within said period of
redemption.[8]
After trial, the RTC ruled in favor of the PIEDAS stating that DBP violated the stipulation in the Sheriffs
Certificate of Sale which provided that the redemption period is five (5) years from the registration thereof in
consonance with Section 119[9] of CA No. 141[10]. DBP should therefore assume liability for the fruits that said
property produced from said land considering that it prematurely took possession thereof. The dispositive portion of
the decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against the defendant Development Bank of
the Philippines as follows:
1. Condemning the defendant DBP to pay the plaintiffs P201,138.28 less whatever amount the
plaintiffs still have to pay the said defendant DBP as balance of their loan account reckoned up to
the date of this decision; P as attorneys fees; P5,000.00 as litigation expenses and
costs.
SO ORDERED.[11]
DBP appealed to the Court of Appeals, which affirmed the decision of the RTC. The Court of Appeals stated
that since DBP was in evident bad faith when it unlawfully took possession of the property subject of the dispute
an efie what was written on the Sheriffs Certifiate of Sale the PIEDAS were entitle to reover the fruits
produced by the property or its equivalent valued at P72,000.00 per annum or a total of P216,000.00 for the three-
year period. Respondent court stated that said amount was not rebutted by DBP and was fair considering the size of
the land in question. The court added that any discussion with respect to the redemption period was of little
significance since the foreclosure proceeding was declared null and void in Special Civil Case No. 2653[12] on
February 22, 1982. Thus, the right of the PIEDAS to redeem the property has become moot and
academic. Finally the awar of attorneys fees amounting to P10,000.00[13] was justified considering that the
PIEDAS were compelled to protect their interests.[14]
DBPs Motion for Reonsieration[15] was denied; hence this petition where it assigns the following errors:
Ground No. 1 The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quos Decision
Awarding Actual Damages In The Amount Of P216,000.00 In Favor Of The Private Respondents Notwithstanding
The Absence Of Evidence Substantiating Said Award. Thus, The Honorable Court Of Appeals Had Decided This
Instant Case In A Way Not In Accord With Applicable Law And Jurisprudence.
2. Ground No. 2 - The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quos Finding That
DBP Was In Bad Faith When It Took Possession Of The Property In Question Notwithstanding the Contrary
Evidence Adduced By Petitioner DBP. Thus, The Honorable Court Of Appeals Departed From The Accepted And
Usual Course of Judicial Proceedings.
3. Ground No. 3 - The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quos Decision
Awarding Attorneys Fees And Litigation Costs In Favor Of The Private Respondents Notwithstanding Absence Of
Evidence Proving the Same. Clearly, The Lower Court Committed Misapprehension Of Facts That Can Be
Considered A Question Of Law.[16]
DBP maintains that the valuation of the income derived from the property in dispute allegedly amounting to
P216,000.00 was not proven by the PIEDAS. DBP argues that they granted the PIEDAS a loan of P20,000.00 in
March 7, 1972 and up to the time of the foreclosure of the property, the PIEDAS have paid only P2,000.00 on their
principal. The failure of the PIEDAS to pay this loan is attributable to the fact that said property did not produce
income amounting to P72,000.00 per annum. According to DBP, in the absence of receipts or other evidence to
support such a claim, the Court of Appeals should not have granted said amount considering that the PIEDAS had
the burden of proving actual damages. Furthermore, Selfida Pieda herself admitted that the property never
produced income amounting to P72,000.00 per annum. At any rate, the actual amount earned by the property in
terms of rentals turned over by the tenant-farmers or caretakers of the land were duly receipted and were duly
accounted for by the DBP.
DBP also alleges that the mere fact that DBP took possession and administration of the property does not
warrant a finding that DBP was in bad faith. First, records show that the PIEDAS consented to and approved the
takeover of DBP. Second, Sec. 7[17] of Act No. 3135[18] allows the mortgagee-buyer to take possession of the
mortgaged property even during the redemption period. Thir DBPs at of onsoliating the title of the property in
its name does not constitute bad faith as there is no law which prohibits the purchaser at public auction from
consolidating title in its name after the expiration of the one (1) year redemption period reckoned from the time the
Certificate of Sale was registered; and neither is there any law or jurisprudence which prohibits the PIEDAS from
exercising their right of redemption over said property within five (5) years even if title is consolidated in the name
of the purchaser. When DBP consolidated title over the property in its name, the new TCT issued in its favor was
subject to the lien i.e. the right of redemption of the PIEDAS; if there was a failure to register this in the TCT,
DBP should not be faulted. Besides, even if the five (5) year period of redemption was not indicated therein, Sec.
44[19] and 46[20] of Presidential Decree No. 1529[21] attaches such lien by operation of law even in the absence of
an annotation in the title. Moreover, Sec. 119 of CA No. 141 also makes said right of redemption a statutory lien,
which subsists and binds the whole world despite the absence of registration.
DBP also oul not have een in a faith when it enie the PIEDAS offer to reeem the property sine
the denial was premised on Opinion No. 92 of the Minister of Justice series of 1978 which stated that said land was
covered under P.D. 27 and could not be the subject of foreclosure proceedings. For this reason, DBP immediately
filed a petition to nullify the foreclosure proceedings which was favorably acted upon prior to the service of
summons and the complaint in the present case on DBP on June 30,1982. If DBP was really in bad faith, it would
not have filed said petition for said petition was against its own interests.
Further, DBP asserts that PIEDAS appointed DBP as their attorney-in-fact or agent in case of foreclosure of
the property under Section 4 of the mortgage contract, which provides:
4. xxx In case of foreclosure, the Mortgagor hereby consents to the appointment of the mortgagee or any of its
employees as receiver, without any bond, to take charge of the mortgage property at once, and to hold possession of
the case and the rents and profits derived from the mortgaged property before the sale. xxx[22]
DBP was therefore entitled to take possession of the property pursuant to the mortgage contract.
Finally, considering that DBP lawfully had material possession of the property after it consolidated its title,
DBP was entitled to the fruits and income thereof pursuant to Section 34, Rule 39 of the Rules of Court:
Sec. 34. Rents and Profits Pending Redemption. Statement thereof and credit therefor on redemption. The
purchaser, from the time of the sale until a redemption, and a redemptioner, from the time of his redemption until
another redemption, is entitled to receive the rents of the property sold or the value of the use or occupation thereof
when such property is in the possession of a tenant. xxx
Taking all this into consideration, DBP cannot be faulted for taking over possession of the property in question.
The core issue in this case is whether DBP was in bad faith when it took possession of the disputed lot.
We rule in the negative an fin DBPs ontentions meritorious
A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw,
which invalidates it.[23] Good faith is always presumed, and upon him who alleges bad faith on the part of a
possessor rests the burden of proof.[24] It was therefore incumbent on the PIEDAS to prove that DBP was aware
of the flaw in its title i.e. the nullity of the foreclosure. This, they failed to do.
Responent PIEDAS argue that DBPs a faith stems from the fat that DBP onsoliate title over the
ispute property espite the statement in the Sheriffs Certifiate of Sale to the effet that sai lan was subject to a
five year redemption period. The period of redemption of extrajudicially foreclosed land is provided under Section
6 of ACT No. 3135 to wit:
Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the
debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a
lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the
same at any time within the term of one year from and after the date of sale; and such redemption shall be governed
by the provisions of section four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of
Civil Procedure[25], in so far as these are not inconsistent with the provisions of this Act.
If no redemption is made within one year, the purchaser is entitled as a matter of right to consolidate[26] and to
possess[27] the property.[28] Aoringly DBPs at of onsoliating its title and taking possession of the subject
property after the expiration of the period of redemption was in accordance with law. Moreover, it was in
consonance with Section 4 of the mortgage contract between DBP and the PIEDAS where they agreed to the
appointment of DBP as receiver to take charge and to hold possession of the mortgage property in case of
foreclosure. DBPs ats annot therefore e tainte with a faith
The right of DBP to consolidate its title and take possession of the subject property is not affected by the
PIEDAS right to repurhase sai property within five years from the ate of onveyane grante y Setion 9
of CA No. 141. In fact, without the act of DBP consolidating title in its name, the PIEDAS would not be able to
assert their right to repurchase granted under the aforementioned section. Respondent PIEDAS are of the
erroneous belief that said section prohibits a purchaser of homestead land in a foreclosure sale from consolidating
his title over said property after the one-year period to redeem said property has expired. Section 119 does not
contain any prohibition to convey homestead land but grants the homesteader, his widow or legal heirs a right to
repurchase said land within a period of five years in the event that he conveys said land. This is in consonance with
the policy of homestead laws to distribute disposable agricultural lands of the State to land-destitute citizens for their
home and cultivation.[29] The right to repurchase under Section 119 aims to preserve and keep in the family of the
homesteader that portion of public land which the State had gratuitously given him.[30] Such right is based on the
assumption that the person under obligation to reconvey the property has the full title to the property because it was
voluntarily onveye to him or that he onsoliate his title thereto y reason of a reemptioners failure to exerise
his right of redemption.[31] It is also settle that the five-year period of redemption fixed in Section 119 of the
Public Land Law of homestead sold at extrajudicial foreclosure begins to run from the day after the expiration of the
one-year perio of repurhase allowe in an extrajuiial forelosure[32] Thus DBPs onsoliation of title i not
derogate from or impair the right of the PIEDAS to redeem the same under C.A. No. 141.
It may be argued that P.D. 27 was already in effect when DBP foreclosed the property. However, the legal
propriety of the foreclosure of the land was put into question only after Opinion No. 92 series of 1978 of the
Ministry of Justice declared that said land was covered by P.D. 27 and could not be subject to foreclosure
proceedings. The Opinion of the Ministry of Justice was issued on July 5, 1978 or almost two months after DBP
consolidated its title to the property on March 10, 1978. By law and jurisprudence, a mistake upon a doubtful or
difficult question of law may properly be the basis of good faith.[33]
In the case of Maneclang vs. Baun,[34] we held that when a contract of sale is void, the possessor is entitled
to keep the fruits during the period for which it held the property in good faith. Good faith of the possessor ceases
when an action to recover possession of the property is filed against him and he is served summons therefore.[35] In
the present case, DBP was served summons on June 30, 1982.[36] By that time, it was no longer in possession of the
disputed land as possession thereof was given back to the PIEDAS after the foreclosure of DBP was declared null
and void on February 22, 1982. Therefore, any income collected by DBP after it consolidated its title and took
possession of the property on May 30, 1978 up to February 22, 1982 belongs to DBP as a possessor in good faith
since its possession was never legally interrupted.
Finally, we elete the awar for attorneys fees Although attorneys fees may e aware if the laimant is
compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or
omission of the party from whom it is sought[37] we hol that DBPs ats were learly not unjustifie
WHEREFORE, the instant petition is hereby GRANTED, and the appealed decision of the Court of Appeals
is REVERSED. The Development Bank of the Philippines is absolved from any liability to Timoteo and Selfida
Pieda in so far as it orders the DBP to pay the PIEDAS P216,000.00 as annual produce value of the land;
P in attorneys fees P5,000.00 in litigation expenses and the costs of the suit. This decision is without
prejudice to whatever liability the PIEDAS may still have to the DBP with respect to their loan.
SO ORDERED.
Melo, (Acting Chief Justice) Vitug, Panganiban, and Purisma, JJ., concur.

G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATION, petitioner, vs. WEAREVER TEXTILE MILLS,
INC., and HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel) for petitioner.
Jose V. Mancella for respondent.

DE CASTRO, J .:
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court)
promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified
herein, of Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal Branch
VI, issued in Civil Case No. 36040, as wen as the resolution dated September 22, 1981 of the said
appellate court, denying petitioner's motion for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and
Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned
several receivables with the former under a Receivable Purchase Agreement. To secure the collection of
the receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials
inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into
private respondent's premises and was not able to effect the seizure of the aforedescribed machinery.
Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal,
Branch VI, docketed as Civil Case No. 36040, the case before the lower court.
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of
which was however subsequently restrained upon private respondent's filing of a motion for
reconsideration. After several incidents, the lower court finally issued on February 11, 1981, an order
lifting the restraining order for the enforcement of the writ of seizure and an order to break open the
premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private
respondent's filing of a further motion for reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent
and removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private
respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized by
the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin,
much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil
Code, the same being attached to the ground by means of bolts and the only way to remove it from
respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff
could do to enfore the writ was to take the main drive motor of said machinery. The appellate court
rejected petitioner's argument that private respondent is estopped from claiming that the machine is real
property by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has
brought the case to this Court for review by writ of certiorari. It is contended by private respondent,
however, that the instant petition was rendered moot and academic by petitioner's act of returning the
subject motor drive of respondent's machinery after the Court of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject motor drive, it
made itself unequivocably clear that said action was without prejudice to a motion for reconsideration of
the Court of Appeals decision, as shown by the receipt duly signed by respondent's representative.
1

Considering that petitioner has reserved its right to question the propriety of the Court of Appeals'
decision, the contention of private respondent that this petition has been mooted by such return may not
be sustained.
The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is
real or personal property from the point of view of the parties, with petitioner arguing that it is a
personality, while the respondent claiming the contrary, and was sustained by the appellate court, which
accordingly held that the chattel mortgage constituted thereon is null and void, as contended by said
respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court,
speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only have meant
to convey the house as chattel, or at least, intended to treat the same as such, so that they should not
now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood
on a rented lot to which defendants-appellants merely had a temporary right as lessee, and although this
can not in itself alone determine the status of the property, it does so when combined with other factors to
sustain the interpretation that the parties, particularly the mortgagors, intended to treat the house as
personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs.
F.L. Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it
is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the
chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-
appellants, having treated the subject house as personality.
Examining the records of the instant case, We find no logical justification to exclude the rule out, as the
appellate court did, the present case from the application of the abovequoted pronouncement. If a house
of strong materials, like what was involved in the above Tumalad case, may be considered as personal
property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so
agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a
machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may
not be likewise treated as such. This is really because one who has so agreed is estopped from denying
the existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays
stress on the fact that the house involved therein was built on a land that did not belong to the owner of
such house. But the law makes no distinction with respect to the ownership of the land on which the
house is built and We should not lay down distinctions not contemplated by law.
It must be pointed out that the characterization of the subject machinery as chattel by the private
respondent is indicative of intention and impresses upon the property the character determined by the
parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the
parties to a contract may by agreement treat as personal property that which by nature would be real
property, as long as no interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never represented nor
agreed that the machinery in suit be considered as personal property but was merely required and
dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at the
time of signing. This contention lacks persuasiveness. As aptly pointed out by petitioner and not denied
by the respondent, the status of the subject machinery as movable or immovable was never placed in
issue before the lower court and the Court of Appeals except in a supplemental memorandum in support
of the petition filed in the appellate court. Moreover, even granting that the charge is true, such fact alone
does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on
record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to
nullify the same. On the other hand, as pointed out by petitioner and again not refuted by respondent, the
latter has indubitably benefited from said contract. Equity dictates that one should not benefit at the
expense of another. Private respondent could not now therefore, be allowed to impugn the efficacy of the
chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned machinery is
real, not personal property, becomes very apparent. Moreover, the case of Machinery and Engineering
Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to the case at bar, the
nature of the machinery and equipment involved therein as real properties never having been disputed
nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears
more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and
set aside, and the Orders of the lower court are hereby reinstated, with costs against the private
respondent.
SO ORDERED.


AURORA L. TECSON, SPOUSES JOSE L. TECSON and
LEONILA TECSON,
Petitioners,




-versus-



G.R. No. 180683


Present:

CORONA, C.J.,
Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
PERALTA,* and
PEREZ, JJ.

MINERVA, MARIA, FRANCISCO, AGUSTINA, JOSE,
ROMUALDO, ELIZABETH and VICTOR, all surnamed
FAUSTO, and ISABEL VDA. DE FAUSTO,
Respondents.







Promulgated:

June 1, 2011
x--------------------------------------------------------------------------------- x

D E C I S I O N

PEREZ, J .:


For Review[1] are the Decision[2] dated 12 December 2006 and Resolution[3] dated 2 October 2007 of the
Court of Appeals in CA-G.R. CV No. 70303. In the said decision and resolution, the Court of Appeals reversed the
Regional Trial Court (RTC), Branch 19 of Pagadian City[4] thereby allowing the respondents to recover four
hundred fifty-seven (457) square meters of land from Transfer Certificate of Title (TCT) No. T-4,342 in the name of
petitioner Jose Tecson. The decretal portion of the decision of the appellate court reads:[5]

WHEREFORE, in the light of the foregoing, the appeal is hereby
GRANTED. The assailed decision is hereby REVERSED and SET ASIDE.

Defendant-appellee Atty. Jose L. Tecson is entitled only to 507 square meters
under Lot 2189-A; he is DIRECTED to reconvey, within thirty (30) days from notice, the
excess of 457 square meters thereof to herein plaintiff-appellants in order to restore the
latters original area of square meters uner Lot 9-B pursuant to Exhiit B
(Subdivision Plan Psd-09-06- ate Marh 9) an Exhiit C (the
Agreement of Partition dated April 15, 1974). Failure on his part to reconvey the aforesaid
457 square meters within the period prescribed thereto, the Clerk of Court of RTC, Branch
19, Pagadian City, is hereby directed to cause the transfer of the same in favor of herein
plaintiff-appellants pursuant to Section 10, Rule 39 of the Rules of Court.

Defendant-appellees Aurora L. Tecson and Atty. Jose L. Tecson are directed to
pay, jointly and severally, plaintiff-appellants the following:

a.) P200,000 as moral damages;
b.) P10,000 as exemplary damages; and
c.) P as attorneys fees

The antecedents of this case are as follows:

Sometime in 1945, Atty. Agustin Fausto (Atty. Fausto) acquired in co-ownership with his sister,
Waldetrudes Fausto-Nadela (Waldetrudes), Lot 2189a one thousand fifteen (1,015) square meter parcel of land
situated at Jose Zulueta Street corner National Highway in Pagadian City, Zamboanga Del Sur.[6] In 1953, Atty.
Fausto constructed his house on a portion of the said lot.[7]

In 1970, following a cadastral proceeding, Atty. Fausto and Waldetrudes were recognized as co-owners
of Lot 2189. Consequently, Original Certificate of Title (OCT) No. 734[8] covering Lot 2189 was issued in the
names of:

[I]n undivided shares, Waldetrudes Fausto, married to Leon Nadela; and Agustin Fausto,
married to Isabel Pareja, x x x.

Not long after, Atty. Fausto and Waldetrudes decided to partition Lot 2189. For this purpose,
Waldetrudes hired one Engr. Ernesto D. Aguilar (Engr. Aguilar) to prepare a subdivision plan for the lot. On 25
March 1974, Engr. Aguilar prepared subdivision plan Psd-09-06-000110 (First Plan)[9] that divided Lot 2189 into
two (2) lots, i.e., Lot 2189-A with an area of 507 square meters, and Lot 2189-B with an area of 508 square
meters. An illustration of the First Plan shows this division:



On 6 April 1974, the Regional Director of the Bureau of Lands approved the First Plan.

On 15 April 1974, Atty. Fausto and Waldetrudes formalized their decision to subdivide Lot 2189 by
executing an Agreement of Partition.[10] Under this agreement (First Partition Agreement), Waldetrudes was to be
given absolute ownership over Lot 2189-A, while Atty. Fausto was to be conferred separate dominion over Lot
2189-B.[11] The First Partition Agreement, however, was never registered with the Register of Deeds.

On 14 March 1975, Atty. Fausto died. He was survived by herein respondents, who are his wife[12] and
children.[13]

On 7 July 1977, however, Waldetrudes entered into a Contract to Sell[14] with herein petitioner Aurora L.
Tecson (Aurora). In it Waletrues unertook to sell among others her ideal share in Lot 9 to Aurora upon
full payment of the purchase price.[15]

On 28 July 1977, Engr. Aguilar prepared a second subdivision plan (Second Plan)[16] for Lot 2189. The
Second Plan, designated as Psd-268803, drastically altered the division of Lot 2189 under the First Plan.[17] It
introduced the following changes:

1. Waletrues Lot 2189-A with an area of 507 square meters under the First Plan was now Lot 2189-B
with an increased area of 964 square meters.[18]
2. Atty Faustos Lot 9-B with an area of 508 square meters under the First Plan was now Lot 2189-A
with a decreased area of 51 square meters.[19]

An illustration of the Second Plan will further highlight these changes:



The Second Plan was approved by the Land Registration Commission on 12 August 1977.

On 28 September 1977, a second partition over Lot 2189 (Second Partition Agreement)[20] was
executed between the respondents in their capacity as heirs of Atty. Fausto on one hand, and Waldetrudes on the
other. Presumably with the Second Plan as a new basis, the agreement named Waldetrudes as the owner of Lot
2189-B while the respondents were allocated Lot 2189-A.

On 8 May 1978, Waldetrudes sold Lot 2189-B, with an area of nine hundred sixty-four (964) square
meters, to Aurora.[21]

Meanwhile, it would seem that the Register of Deeds had refused registration of the Second Partition
Agreement in view of the fact that several of the respondents, namely Jose, Romualdo, Elizabeth and Victor

were
still minors.[22] Hence, a guardianship proceeding was commenced by respondent Isabel Vda. De Fausto
(Isabel)the wife of Atty. Faustoto secure her appointment as the legal guardian of her minor children in
connection with the Second Partition Agreement.[23]

On July 9 the guarianship ourt grante Isaels Petition[24] and, on 17 January 1980, issued an
Order approving the Second Partition Agreement.[25]

On 19 February 1980, the following events transpired:

1. The Second Partition Agreement was finally registered with the Register of Deeds. As a consequence,
OCT No. 734 covering Lot 2189 was cancelled and, in lieu thereof, were issued the following titles:

a. Transfer Certificate of Title (TCT) No. T-4,335 covering Lot 2189-A in the name of Atty.
Fausto; and

b. TCT No. T-4,336 for Lot 2189-B in the name of Waldetrudes.[26]
2. The sale of Lot 2189-B in favor of Aurora was likewise registered with the Register of
Deeds.[27] Accordingly, the newly issued TCT No. T-4,336 was immediately cancelled and replaced by TCT No.
T-4,338[28] in the name of Aurora.

3. Aurora executed a Deed of Absolute Sale,[29] conveying Lot 2189-B to her brother, herein petitioner
Atty. Jose L. Tecson (Atty. Tecson).

4. On the very same day, the above deed was registered with the Register of Deeds.[30]

On 20 February 1980, TCT No. T-4,338 was cancelled. In its place, TCT No. T-4,342[31] was issued,
this time, in the name of Atty. Tecson.

Seven (7) years after, or on 28 May 1987, the respondents filed a Complaint[32] for the Declaration of Nullity
of Documents, Titles, Reconveyance and Damages against Waldetrudes and the petitioners before the Regional Trial
Court (RTC) of Pagadian City. In essence, the respondents seek the recovery of four hundred fifty-seven (457)
square meters of land from TCT No. T-4,342, which they believe was unlawfully taken from the lawful share of
their predecessor-in-interest, Atty. Fausto, in Lot 2189.[33]

The respondents allege that Atty. Fausto and Waldetrudes are, in actual fact, co-owners in equal share of
Lot 2189.[34] They insist on the First Partition Agreement as the only true, correct and binding division of Lot
2189.[35] Hence, Atty. Fausto is entitled not merely to the meager fifty-one (51) square meter lot actually given to
him under the Second Plan and Second Partition Agreement, but to the five hundred eight (508) square meters of
land allotted for him under the original partition.[36]

Verily, Waldetrudes could not have sold more than her rightful share of only five hundred seven (507)
square meters.[37] The respondents, thus, ask for the nullification of the sale of Lot 2189-B to the petitioners, at
least with respect to the excess amounting to four hundred fifty-seven (457) square meters.[38]

In the same vein, the respondents impugn the validity and binding effect of the Second Plan and the
ensuing Second Partition Agreement.[39] They denounce the said plan and agreement as mere handiworks of
respondent Atty. Tecson himself in a frauulent sheme to get a lions share of Lot 9[40] More particularly, the
respondents claim that:

1. Atty. Tecson was the one who deceived them into signing the Second Partition Agreement.[41] The
respondents say that they were not involved in the preparation of the Second Partition Agreement.[42] It was only
respondent Atty. Tecson who presented them with the said agreement and who misleadingly told them that it was
require to failitate the sale of Waletrues share[43] The respondents explain that they believed Atty. Tecson
because he was their long-time neighbor, a close family friend and, not the least, a respected member of the
community being a former governor of the province.[44]

2. The respondents also point out that the Second Partition Agreement did not specify the exact areas
allotted for each component lot, and that they were never furnished with copies of the Second Plan.[45]

3. The Second Plan, which supposedly supplants the First Plan and divides Lot 2189 into two (2) vastly
unequal portions was prepare without the responents knowlege or onsent[46] For which reason, the Second
Plan could not be binding upon them.

4. The guardianship proceeding purportedly initiated in the name of respondent Isabel was actually
orchestrated and financed by Atty. Tecson.[47] Atty. Tecson was the one who hired Atty. Fausto M. Lingating, his
former legal adviser during his term as governor, to handle the guardianship case for and on behalf of Isabel.[48]

On 20 October 1988, Waldetrudes, who was originally sued by the respondents as a defendant in the
RTC, executed an affidavit[49] expressing her intent to join the respondents in their cause. In the mentioned
affidavit, Waldetrudes confirmed the allegations of the respondents as follows:

x x x x

4. That the truth of the matter is that, my brother the late Agustin Fausto and I
are co-owners of a parcel of land covered by Original Certificate of Title No. 734 of Lot
2189, situated at Gatas District, Pagadian City, containing an area of 1,015 square meters,
more or less, in equal share pro indiviso;

5. That sometimes (sic) in 1974 the late Agustin Fausto and myself agreed to
terminate our co-ownership and have the area surveyed and the same was approved and
designated as PSD-09-06-000110, of which we have executed an agreement of partition on
April 15, 1974 apportioning Lot No. 2189-A with an area of 508 square meters in favor of
my late brother Agustin Fausto and Lot No. 2189-B with an area of 507 square meters in my
favor;

6. That the aforestated documents were not registered in the Office of the
Register of Deeds until the death of my brother Agustin Fausto on March 14, 1975,
however, the papers or documents involving Lot No. 2189 was kept by me;

7. That due to financial problem especially I am already very old and sickly, I
thought of selling my portion which is Lot 2189-B in favor of Jose L. Tecson, however, in
the document the vendee appears to be the sister of Jose L. Tecson in the person of Aurora
L. Tecson;

8. That I do not know later on how Jose L. Tecson maneuvered to have the
parcel of land again surveyed reducing the area of my brother to only 51 square meters,
when in truth and in fact the portion of my late brother has an area of 508 square meters;

9. That while it is true that I sold Jose L. Tecson my portion of Lot 2189-B but
the area sold is only 507 square meters and there is no intention on my part to sell to Jose L.
Tecson more than that area;

10. That several occasion in the past I was made to sign documents by Jose L.
Tecson in relation to the portion sold in his favor, trusting him to be closed (sic) to the
family, not knowing later on that he maneuvered to change the area of my portion from 507
square meters to 964 square meters encroaching the share of my late brother Atty. Agustin
Fausto thereby reducing his area to 51 square meters;

11. That because of the illegal maneuvering which does not reflect to be my
true intention in selling my share to Jose L. Tecson, I am informing the Honorable Court
that I am joining as party plaintiff in Civil Case No. 2692 in order that the truth will come
out and justice will prevail.

On 18 August 1992, the trial court ordered Waldetrudes to be dropped as a party-defendant from the case and,
instead, be impleaded therein as a party-plaintiff.[50]

During the trial, Waldetrudes[51] and respondents Romualdo,[52] Minerva[53] and Isabel[54] were able
to testify.

In its decision dated 8 December 2000, the RTC dismissed the complaint of the respondents.[55] The trial
court found no merit in the position of the respondents and considered the petitioners to be innocent purchasers for
value of Lot 2189-B.[56] The dispositive portion of the ruling of the trial court reads:[57]

WHEREFORE, judgment is hereby rendered dismissing the case, and placing
defendants spouses Jose Tecson and Leonila F. Tecson in physical possession of Lot No.
2189-B, with an area of 964 square meters in accordance with the approved subdivision plan
on August 12, 1977 of the then Land Registration Commission; and ordering the plaintiffs to
pay defendants:

a. Moral damages in the amount of P30,000.00;
b. Attorneys fee in the amount of P15,000.00;
c. And the cost of litigation expenses in the amount of P5,000.00.

As earlier mentioned, the Court of Appeals reversed the ruling of the trial court on appeal.[58] Hence, the
present appeal by the petitioners.

The primary issue in this appeal is whether the respondents may recover the four hundred fifty-seven (457)
square meters of land from TCT No. T-4,342, registered in the name of petitioner Atty. Tecson.

The petitioners would like this Court to answer in the negative.

The claim of petitioner Atty. Tecson over the entire nine hundred sixty-four (964) square meters of land
covered by TCT No. T-4,342 is intricately linked with the validity of the Second Plan and the Second Partition
Agreement. As a perusal of the facts reveal, TCT No. T-4,342, along with its precursors TCT Nos. T-4,338 and T-
4,336, are but derivates of the division of Lot 2189 fixed by the Second Plan and the Second Partition Agreement.

Understandably, the petitioners argue in favor of the validity of the Second Plan and the Second
Partition Agreement.[59] They eny Atty Tesons partiipation in the preparation of the sai
instruments.[60] The petitioners insist that the Second Plan and the Second Partition Agreement were voluntary and
intelligent deeds of Waldetrudes and the respondents themselves.[61]
The petitioners also claim that the Second Plan and the Second Partition Agreement present a more
accurate reflection of the true nature of the co-ownership between Atty. Fausto and Waldetrudes. Contrary to what
the respondents profess, Waldetrudes and Atty. Fausto were not actually co-owners in equal share of Lot
2189.[62] In truth, the siblings were not even co-owners at all.[63]

According to the petitioners, Lot 2189 was originally the conjugal property of Waldetrudes and her late
husband, Leon Nadela.[64] At the inception, Atty. Fausto was never a co-owner of Lot 2189.[65] Suitably, it was
only Waldetrudes who initially declared Lot 2189 for taxation purposes per Tax Declaration No. 6521.[66]

During the cadastral proceedings in 1970, however, Waldetrudes allowed Lot 2189 to be registered in
her name and the name of Atty. Fausto as co-owners.[67] The petitioners claim that Waldetrudes consented to such
a registration only because Atty. Fausto had already constructed his house on a portion of Lot 2189.[68] The
registered co-ownership etween Waletrues an Atty Fausto is therefore ase merely on the silings atual
occupancy of Lot 2189.[69]

The petitioners point out that the interest of Atty. Fausto in Lot 2189 was only limited to the house he
constructed thereonwhich, as it happened, lies evenly on the fifty-one (51) square meter portion eventually
assigned to him under the Second Plan and Second Partition Agreement.[70] Hence, the Second Plan and the
Second Partition Agreement must be sustained as perfectly valid instruments.

We are not convinced.

Waldetrudes and Atty. Fausto are Co-owners in Equal Share

After reviewing the arguments and evidence presented in this case, We rule that Waldetrudes and Atty. Fausto
are, indeed, co-owners of Lot 2189. Moreover, We hold that the siblings have equal shares in the said lot.

First. The mother title of Lot 2189, OCT No. 734, states in no unclear terms that Waldetrudes and Atty.
Fausto were co-owners of the subject lot. The inscription in the original title for Lot 2189 carries more than
sufficient weight to prove the existence of a co-ownership between Waldetrudes and Atty. Fausto.

Second. Other than the bare assertion of the petitioners, there is absolutely no proof on record that
Waldetrudes was the sole beneficial owner of Lot 2189. Tax Declaration No. 6521 simply cannot prevail over OCT
No. 734 as conclusive evidence of the true ownership of Lot 2189.[71]

Third. During the cadastral proceeding involving Lot 2189, Waldetrudes herself stated that Atty. Fausto
was a co-owner of the subject lot. The transcript taken from the proceeding shows:[72]

Commissioner: What is your relation with Waldetrudes Fausto who is the claimant of Lot
No. 2189 (portion) of a parcel of land located at Pagadian City and more particularly
bounded as follows: On the North by Lot No. 2190, on the East by Zulueta St., on the South
by National Highway and on the West by Gatas Creek with an area of 1015 sq. meters and a
house as a permanent improvement.

A: I am the very one sir.

Q: How did you acquire the said land?

A: I purchase (sic) it from Sofia Vda. Claro in the year 1945 but a copy of the document
was lost.

x x x x

Q: Who is your co-owner of this land?

A: My co-owner is my brother Atty. Agustin Fausto.


Fourth. There was likewise no eviene ehin the petitioners allegation that the registered co-
ownership between Waldetrudes and Atty. Fausto was based on their actual occupancy of Lot 2189. On the
contrary, OCT No. 734 categorically states that Waldetrudes and Atty. Fausto are co-owners in undivided share of
Lot 2189. The conspicuous silence of OCT No. 734 as to the definite extent of the respective shares of Atty. Fausto
and Waldetrudes in Lot 2189 gives rise to a presumption that they are in equal measure. We are at once reminded of
Article 485 of the Civil Code,[73] to wit:



Article 485. x x x.

The portions belonging to the co-owners in the co-ownership shall be presumed equal,
unless the contrary is proved.


Fifth. The equality in terms of share in Lot 2189, was affirmed by Waldetrudes when she testified in
open court, to wit:[74]

DIRECT EXAMINATION

ATTY. PERALTA

Q: Now considering that you are, you owned that parcel of land jointly with your younger
brother Atty. Agustin Fausto, what is the extent of your ownership?

A: We have co-equal shares sir.

Clearly, the evidence preponderates in favor of the position that Waldetrudes and Atty. Fausto were co-owners
in equal share of Lot 2189.

Second Plan and Second Partition Agreement is Invalid

Having settled the existence and extent of the co-ownership between Waldetrudes and Atty. Fausto, We next
inquire into the validity of the Second Plan and Second Partition Agreement.

We find the Second Plan and Second Partition Agreement to be invalid.

We agree with the findings of the Court of Appeals that Atty. Tecson was behind the execution of the Second
Partition Agreement.[75] It was Atty. Tecson who misled Waldetrudes and the respondents into signing the Second
Partition Agreeement without giving them notice of the existence of a Second Plan.[76] As a consequence,
Waldetrudes and the respondents were misinformed as to the true nature of the Second Partition Agreement. These
factual findings are adequately supported by the positive testimonies of respondents Romualdo Fausto,[77] Minerva
Fausto[78] and Isabel,[79] to wit:

ROMUALDOS DIRECT EXAMINATION


ATTY. PERALTA:

Q: Will you please go over if this is the machine copy of the Deed of partition which was
brought to you by Atty. Tecson and requested you to sign the same?

A: Yes sir that is the one.

x x x x

Q: When was that Dee of Partition marke as Exhiit G presente to you y Atty
Tecson?

A: Early part of 1977. I was already connected with the Provincial Assessor that was the
time I have seen so many Deed of Sale and the area is specified so before I signed I
asked Atty. Tecson where is the area and he told me never mind the area it will be
surveyed and I did not insist because I trusted him very much.

Q: By the time this was presented to you by Atty. Tecson there was no survey of 2189?

A: There was no survey.

x x x x



COURT:

This document which you said you were present during the signing of your
brothers and sisters but you cannot remember whether you were present for the others
where did you sign this document?

A: At our house.

COURT:

Who delivered this document to you[r] house?

A: Atty. Tecson.

COURT:

You want to impress this court that when you affixed your signatures in your
house Atty. Tecson was present?

A: Yes sir.

COURT:

After signing what was done to this document?

A: We are not aware of that but we just waited for the survey because Atty. Tecson told us
that the survey follows later.

COURT:

Who kept this document?

A: My Auntie Waldetrudes Nadela.

COURT:

It is clear now that this document was signed in your house and it was kept by
your Auntie?

A: Yes, sir.

x x x x

ATTY. PERALTA:

Q: When Atty. Tecson went your house to request you to sign how did he tell you?

A: He told us just to sign the document and the survey will just follow we just sign the
document without the area and he told us that the area will just follow later.
Q: When you signed the document with your mother, brothers and sisters Atty. Tecson
brought the documents?

A: Yes, sir.


MINERVA FAUSTOS DIRECT EXAMINATION


ATTY. PERALTA:

Q: Why, at the time when who brought this deed of partition for signature?

A: Jose L. Tecson.

Q: You are referring to one of the defendants, Jose L. Tecson?

A: Yes, sir.

Q: Now, when this was brought by Jose L. Tecson, the defendant Jose L. Tecson, where did
he

COURT: For a moment.

Q: You said that defendant Jose L. Tecson brought that deed of partition. Were you there
when defendant Jose L. Tecson brought that deed of partition?

A: Yes, your Honor.

Q: Where was it brought?

A: In the house.

COURT: Proceed.

ATTY. PERALTA:

Q: Who were present in your house when this was brought by defendant Jose L. Tecson?

A: Myself, Neneth or Agustin, Romualdo and Jose Fausto. There were four (4) of us when
that deed of partition was brought to the house, myself, my sister Agustina, my
brothers Romualdo and Jose.

Q: Do you want to convey to the Court that when this was brought to you Francisco Fausto,
Victor Fausto and your sister Elizabeth, Maria Fausto were not around when this was
brought by Jose L. Tecson for signature in your house?

A: Yes, sir.

x x x x

Q: Why did you sign above the typewritten name of Francisco Fausto knowing that he was
not around?

A: Because defendant Jose L. Tecson told me to affix the signature of Francisco Fausto
because this deed of partition is just to facilitate the transferring (sic) of the title of the
land.

x x x x

Q: Who signed for her, for and behalf of Maria Lilia Fausto?

A: I signed myself.

Q: Why did you sign for Maria Lilia Fausto?

A: Because Jose L. Tecson told me to sign the document in order that the deed of partition
could be accomplished.

x x x x

Q: Now, how about the residence certificates appearing after the name of Agustina Fausto,
with her own residence certificate 3976584 to have been issued January 6, 1977,
Pagadian City, and the Residence Certificate of Jose Fausto which has the same
number 3976584 issued on January 6, 1977, Pagadian City, who placed this residence
certificate?

A: All of us sir never exhibited our residence certificates. It was the Tecsons who supplied
the residence certificate numbers.


ISABELS DIRECT EXAMINATION


ATTY. PERALTA:

Q: Do you remember having signed a Deed of Partition together with some of your
children?

A: Yes sir[.] I can remember.

Q: Who brought that Deed of Partition for signature together with some of your children?

A: Governor Tecson.

Q: Were you able to sign the Deed of Partition?

A: I signe that Dee of Partition eause aoring to him just sign this for purposes of
suiviing the property

x x x x

Q: Do you recall if you have filed guardianship proceeding?

A: I have not remembered having filed a guardianship proceeding.

Q: Have you heard that there was guardianship proceeding?

A: All I can remember about that guardianship proceeding was that when Gov. Tecson let
me sign a guardianship because some of my children were not around.

Q: Do you want to convey to this court that personally you have not filed guardianship
proceeding but it was Governor Tecson who let you sign some documents regarding
guardianship?

A: It was Governor Tecson who explained to me to sign that guardianship proceeding
because according to him it will facilitate and I thought that guardianship was only for
purposes of being guardian to my children as a mother.

Indeed, the lack of a plausible explanation why a co-owner would gratuitously cede a very substantial portion
of his rightful share to another co-owner in partition renders the foregoing testimonies more credible as against the
plain general denial of Atty. Tecson. On this point, We find no reversible error on the part of the Court of Appeals.

The established facts have several legal consequences:

First. The Second Plan, having been prepared without the knowledge and consent of any of the co-owners of
Lot 2189, have no binding effect on them.

Second. The Second Partition Agreement is null and void as an absolute simulation,[80] albeit induced by a
third party. The fraud perpetrated by Atty. Tecson did more than to vitiate the consent of Waldetrudes and
the respondents. It must be emphasized that Waldetrudes and the respondents never had any intention of
entering into a new partition distinct from the First Partition Agreement. The established facts reveal that
Waldetrudes and the respondents assented to the Second Partition Agreement because Atty. Tecson told them that
the instrument was merely required to expedite the sale of Waldetrudes share.[81]

In other words, the deceit employed by Atty. Tecson goes into the very nature of the Second Partition
Agreement and not merely to its object or principal condition. Evidently, there is an absence of a genuine intent
on the part of the co-owners to be bound under a new partition proposing a new division of Lot 2189. The apparent
consent of Waldetrudes and the respondents to the Second Partition Agreement is, in reality, totally wanting. For
that reason, the Second Partition Agreement is null and void.

Third. The Second Partition Agreement being a complete nullity, it cannot be ratified either by the lapse of
time or by its approval by the guardianship court.[82]

Fourth. The First Plan and the First Partition Agreement remain as the valid and binding division of Lot
2189. Hence, pursuant to the First Partition Agreement, Waldetrudes is the absolute owner of Lot 2189-A with an
area of only five hundred seven (507) square meters. Atty. Fausto, on the other hand, has dominion over Lot 2189-
B with an area of five hundred eight (508) square meters.

Fifth. Inevitably, Waldetrudes can only sell her lawful share of five hundred seven (507) square meters. The
sales in favor of Aurora and, subsequently, Atty. Tecson, are thereby null and void insofar as it exceeded the 507
square meter share of Waldetrudes in Lot 2189. Nemo dat quod non habet.[83]

Atty. Tecson is not an innocent purchaser for value

The remaining bar to the recovery by the respondents of the excess area held by Atty. Tecson is the
principle of an innocent purchaser for value of land under the Torrens System of Registration.

The petitioners claim that they are bona fide purchasers of the entire nine hundred sixty-four (964)
square meters of land covered by Lot 2189-Bwith Aurora merely relying on the strength of TCT No. T-4,336 in
the name of Waldetrudes, while Atty. Tecson placing confidence in TCT No. T-4,338 in the name of Aurora. Both
TCT Nos. T-4,336 and T-4,338 define the area of Lot 2189-B as nine hundred sixty-four (964) square
meters.[84] The petitioners allege that at the time they made their respective purchase, they did not know of the
existing partition of Lot 2189 per the First Plan and the First Partition Agreement.[85]

We disagree. The proven facts indicate that Atty. Tecson knew or, at the very least, should have known
that Atty. Fausto and Waldetrudes were co-owners in equal share of Lot 2189. We must be reminded of the
following circumstances:

1. Atty. Tecson was a long-time friend and neighbor of the Faustos.[86] Atty. Tecson himself testified
that he considered Atty. Fausto as a good friend and even admitted that he would sometimes visit the latter in his
house to play mahjong.[87] By this, Atty. Tecson knew that Atty. Fausto has an actual interest in Lot 2189.

2. Atty. Tecson was the one who presented the Second Partition Agreement to Waldetrudes and the
respondents;[88]

3. Waldetrudes and the respondents were not involved in the preparation of the Second Partition
Agreement and, at the time they signed the said agreement, had no knowledge of the existence of the Second
Plan;[89] and

4. The Second Partition Agreement failed to state the specific areas allotted for each component of Lot
2189 and made no mention of the division proposed by the Second Plan.[90]

Being the one behind the execution of the Second Partition Agreement, there is no doubt that Atty.
Tecson knew that Lot 2189 was owned in common by Waldetrudes and Atty. Fausto. This, taken together with the
instruments unusual silene as to the efinite area allotte for eah omponent lot an the Seon Plan reveals a
deliberate attempt on the part of Atty. Tecson to conceal from Waldetrudes and the respondents the unequal division
of Lot 2189.

The necessity to conceal the disproportionate division of Lot 2189 can only be explained by Atty.
Tesons prior knowledge that such a partition is inherently defective for being contrary to the actual sharing
between Waldetrudes and Atty. Fausto. Atty. Tecson is clearly in bad faith.

Verily, Atty. Tecson cannot be considered as an innocent purchaser of the excess area of Lot 2189-
B. Based on the facts and circumstances prevailing in this case, Atty. Tecson may be charged with actual notice of
the defect plaguing the Second Partition Agreement. The respondents may, therefore, recover.

WHEREFORE, the petition is hereby DENIED. Accordingly, the appealed Court of Appeals decision
in CA-G.R. CV No. 70303 dated 12 December 2006 is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.


FREDCO MANUFACTURING G.R. No. 185917
CORPORATION,
Petitioner, Present:
C
ARPIO,
J.,
Chairper
son,
N
ACHUR
A,
- versus - PERALTA,
A
BAD,
and
M
ENDOZ
A, JJ.

PRESIDENT AND FELLOWS
OF HARVARD COLLEGE Promulgated:
(HARVARD UNIVERSITY),
Respondents. June 1, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N

CARPIO, J .:

The Case

Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January 2009 Resolution3
of the Court of Appeals in CA-G.R. SP No. 103394.


The Antecedent Facts

On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and existing
under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561 before the Bureau of
Legal Affairs of the Intellectual Property Office (IPO) against respondents President and Fellows of Harvard
College (Harvard University), a corporation organized and existing under the laws of Massachusetts, United States
of America. The case was docketed as Inter Partes Case No. 14-2005-00094.

Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the mark
Harvar Veritas Shiel Symol for eals tote ags serving trays sweatshirts t-shirts, hats and flying discs under
Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and Services. Fredco alleged that the
mark Harvar for t-shirts, polo shirts, sandos, briefs, jackets and slacks was first used in the Philippines on 2
January 1982 by New York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic
corporation and Freos preeessor-in-interest. On 24 January 1985, New York Garments filed for trademark
registration of the mark Harvar for goos uner Class The appliation mature into a registration an a
Certificate of Registration was issued on 12 December 1988, with a 20-year term subject to renewal at the end of the
term. The registration was later assigned to Romeo Chuateco, a member of the family that owned New York
Garments.

Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9 November
99 an ha sine then hanle the manufature promotion an marketing of Harvar lothing artiles Freo
alleged that at the time of issuance of Registration No. 56561 to Harvard University, New York Garments had
already registere the mark Harvar for goos uner Class Freo allege that the registration was anelle
on 30 July 1998 when New York Garments inadvertently failed to file an affidavit of use/non-use on the fifth
anniversary of the registration but the right to the mark Harvar remaine with its preeessor New York
Garments and now with Fredco.

Harvar University on the other han allege that it is the lawful owner of the name an mark Harvar in
numerous countries worldwide, including the Philippines. Among the countries where Harvard University has
registere its name an mark Harvar are:

1. Argentina 26. South Korea
2. Benelux4 27. Malaysia
3. Brazil 28. Mexico
4. Canada 29. New Zealand
5. Chile 30. Norway
6. China P.R. 31. Peru
7. Colombia 32. Philippines
8. Costa Rica 33. Poland
9. Cyprus 34. Portugal
10. Czech Republic 35. Russia
11. Denmark 36. South Africa
12. Ecuador 37. Switzerland
13. Egypt 38. Singapore
14. Finland 39. Slovak Republic
15. France 40. Spain
16. Great Britain 41. Sweden
17. Germany 42. Taiwan
18. Greece 43. Thailand
19. Hong Kong 44. Turkey
20. India 45. United Arab Emirates
21. Indonesia 46. Uruguay
22. Ireland 47. United States of America
23. Israel 48. Venezuela
24. Italy 49. Zimbabwe
25. Japan 50. European Community5

The name an mark Harvar was aopte in 9 as the name of Harvar College6 of Cambridge, Massachusetts,
USA The name an mark Harvar was allegely use in ommere as early as 1872. Harvard University is over
350 years old and is a highly regarded institution of higher learning in the United States and throughout the world.
Harvar University promotes uses an avertises its name Harvar through various puliations services, and
products in foreign countries, including the Philippines. Harvard University further alleged that the name and the
mark have been rated as one of the most famous brands in the world, valued between US $750,000,000 and US
$1,000,000,000.

Harvard University alleged that in March 2002, it discovered, through its international trademark watch program,
Freos wesite wwwharvar-usaom The wesite avertises an promotes the ran name Harvar Jeans
USA without Harvar Universitys onsent The wesites main page shows an olong logo earing the mark
Harvar Jeans USA Estalishe 9 an Camrige Massahusetts On April Harvar
University filed an administrative complaint against Fredco before the IPO for trademark infringement and/or unfair
competition with damages.

Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines are:

1. Traemark Registration No issue on Novemer 99 for Harvar Veritas Shiel Design
for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-
shirts, hats and flying discs) of the Nice International Classification of Goods and Services;
2. Trademark Registration No. 57526 issue on Marh 99 for Harvar Veritas Shiel Symol for
servies in Class ; Traemark Registration No 9 issue on Novemer 99 for Harvar for
services in Class 41; and
3. Trademark Registration No. 66677 issued on 8 December 199 for Harvar Graphis for goos in
Class 9. Harvard University further alleged that it filed the requisite affidavits of use for the mark
Harvar Veritas Shiel Symol with the IPO
Further, on 7 May
2003 Harvard
University filed
Trademark
Application No. 4-
2003-04090 for
Harvar Meial
International &
Shiel Design for
services in Classes
41 and 44. In 1989,
Harvard University
established the
Harvard Trademark
Licensing Program,
operated by the
Office for
Technology and
Trademark
Licensing, to
oversee and manage
the worldwide
licensing of the
Harvar name an
trademarks for
various goods and
services. Harvard
University stated
that it never
authorized or
licensed any person
to use its name and
mark Harvar in
connection with any
goods or services in
the Philippines.

In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs, IPO
anelle Harvar Universitys registration of the mark Harvar uner Class as follows:

WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED.
Consequently Traemark Registration Numer for the traemark HARVARD VE
RI TAS SHIELD SYMBOL issue on Novemer 99 to PRESIDENT AND
FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY) should be
CANCELLED only with respect to goods falling under Class 25. On the other hand,
considering that the goods of Respondent-Registrant falling under Classes 16, 18, 21 and 28
are not onfusingly similar with the Petitioners goos the Responent-Registrant has
acquired vested right over the same and therefore, should not be cancelled.


Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993
for the traemark HARVARD VE RI TAS SHIELD SYMBOL sujet matter of this
case together with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT)
for appropriate action.

SO ORDERED.8

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision9 dated 21
April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal Affairs, IPO.

The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be the
owner of the mark sought to be registered. The Director General ruled that the right to register a trademark is based
on ownership and when the applicant is not the owner, he has no right to register the mark. The Director General
note that the mark overe y Harvar Universitys Registration No is not only the wor Harvar ut also
the logo, emblem or symbol of Harvard University. The Director General ruled that Fredco failed to explain how its
preeessor New York Garments ame up with the mark Harvar In aition there was no evidence that Fredco
or New York Garments was licensed or authorized by Harvard University to use its name in commerce or for any
other use.

The dispositive portion of the decision of the Office of the Director General, IPO reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed
decision is hereby REVERSED and SET ASIDE. Let a copy of this Decision as well as the
trademark application and records be furnished and returned to the Director of Bureau of
Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of
Trademarks and the Administrative, Financial and Human Resources Development Services
Bureau, and the library of the Documentation, Information and Technology Transfer Bureau
be furnished a copy of this Decision for information, guidance, and records purposes.

SO ORDERED.10

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General.

The Decision of the Court of Appeals

In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the IPO.

The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter correctly set
aside the cancellation by the Diretor of the Bureau of Legal Affairs of Harvar Universitys traemark registration
under Class 25. The Court of Appeals ruled that Harvard University was able to substantiate that it appropriated and
use the marks Harvar an Harvar Veritas Shiel Symol in Class way ahea of Freo an its
predecessor New York Garments. The Court of Appeals also ruled that the records failed to disclose any explanation
for Freos use of the name an mark Harvar an the wors USA Estalishe 9 an Cambridge,
Massahusetts within an olong evie US Legen an Europes No Bran Citing Shangri-La
International Hotel Management, Ltd. v. Developers Group of Companies, Inc.,11 the Court of Appeals ruled:

One who has imitated the trademark of another cannot bring an action for infringement,
particularly against the true owner of the mark, because he would be coming to court with
unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order
to ensure that a second user may not merely take advantage of the goodwill established by
the true owner.12
The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the petition for review is DENIED. The Decision
dated April 21, 2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes
Case No. 14-2005-00094 is hereby AFFIRMED.

SO ORDERED.13

Fredco filed a motion for reconsideration.

In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit.

Hence, this petition before the Court.


The Issue

The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the
Office of the Director General of the IPO.


The Ruling of this Court

The petition has no merit.

There is no ispute that the mark Harvar use y Freo is the same as the mark Harvar in the Harvar
Veritas Shiel Symol of Harvar University It is also not ispute that Harvar University was named Harvard
College in 1639 and that then, as now, Harvard University is located in Cambridge, Massachusetts, U.S.A. It is also
unrefute that Harvar University has een using the mark Harvar in ommere sine It is also estalishe
that Harvar University has een using the marks Harvar an Harvar Veritas Shiel Symol for Class
goods in the United States since 1953. Further, there is no dispute that Harvard University has registered the name
an mark Harvar in at least ountries.

On the other han Freos preeessor-in-interest New York Garments starte using the mark Harvar in the
Philippines only in 1982. New York Garments filed an application with the Philippine Patent Office in 1985 to
register the mark Harvar whih appliation was approve in 9 Freo insists that the ate of atual use in
the Philippines should prevail on the issue of who has the better right to register the marks.

Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be registered, it
must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an
application for its registration. While Harvard University had actual prior use of its marks abroad for a long time, it
i not have atual prior use in the Philippines of the mark Harvar Veritas Shiel Symol efore its appliation
for registration of the mark Harvar with the then Philippine Patents Offie However Harvar Universitys
registration of the name Harvar is ase on home registration whih is allowe uner Setion of RA No
166.15 As pointed out by Harvard University in its Comment:

Although Section 2 of the Trademark law (R.A. 166) requires for the registration of
trademark that the applicant thereof must prove that the same has been actually in use in
commerce or services for not less than two (2) months in the Philippines before the
application for registration is filed, where the trademark sought to be registered has already
been registered in a foreign country that is a member of the Paris Convention, the
requirement of proof of use in the commerce in the Philippines for the said period is not
necessary. An applicant for registration based on home certificate of registration need not
even have used the mark or trade name in this country.16

Inee in its Petition for Canellation of Registration No Freo allege that Harvar Universitys
registration is ase on home registration for the mark Harvar Veritas Shiel for Class 17

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 [marks registere uner Repuli
Act No. 166 shall remain in force but shall be deemed to have been granted under this Act x x x whih oes
not require atual prior use of the mark in the Philippines Sine the mark Harvar Veritas Shiel Symol is now
deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the
Philippines has been cured by Section 239.2.19 In aition Freos registration was alreay anelle on July
1998 when it failed to file the required affidavit of use/non-use for the fifth anniversary of the marks registration
Hene at the time of Freos filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO,
Freo was no longer the registrant or presumptive owner of the mark Harvar

There are two ompelling reasons why Freos petition must fail

First Freos registration of the mark Harvar an its ientifiation of origin as Camrige Massahusetts
falsely suggest that Fredco or its goods are connected with Harvard University, which uses the same mark
Harvar an is also loate in Camrige Massahusetts This an easily e gleaned from the following oblong
logo of Fredco that it attaches to its clothing line:




Freos registration of the mark Harvar shoul not have een allowe eause Setion (a) of RA No
prohiits the registration of a mark whih may isparage or falsely suggest a connection with persons, living or
dead, institutions eliefs x x x Setion (a) of RA No provies:

Section 4. Registration of trade-marks, trade-names and service- marks on the principal
register There is herey established a register of trade-mark, trade-names and service-
marks which shall be known as the principal register. The owner of a trade-mark, a trade-
name or service-mark used to distinguish his goods, business or services from the goods,
business or services of others shall have the right to register the same on the principal
register, unless it:

(a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may
disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs,
or national symbols, or bring them into contempt or disrepute;

(b) x x x (emphasis supplied)
Freos use of the mark Harvar ouple with its laime origin in Camrige Massahusetts oviously
suggests a false connection with Harvar University On this groun alone Freos registration of the mark
Harvar shoul have een isallowe
Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge,
Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in the U.S.A. as
indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or to the IPO why it
use the mark Harvar on its olong logo with the wors Camrige Massahusetts Estalishe in 9 an
USA Freo now laims efore this Court that it use these wors to evoke a lifestyle or suggest a esirale
aura of petitioners lothing lines Freos elate justifiation merely onfirms that it sought to connect or
associate its products with Harvard University, riding on the prestige and popularity of Harvard University, and thus
appropriating part of Harvar Universitys goowill without the latters onsent
Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the United
States. These provisions are intended to protect the right of publicity of famous individuals and institutions from
commercial exploitation of their goodwill by others.21 What Freo has one in using the mark Harvar an the
wors Camrige Massahusetts USA to evoke a esirale aura to its prouts is preisely to exploit
ommerially the goowill of Harvar University without the latters onsent This is a lear violation of Section
4(a) of R.A. No. 166. Under Section 17(c)22 of RA No suh violation is a groun for anellation of Freos
registration of the mark Harvar eause the registration was otaine in violation of Setion of RA No 6.
Second, the Philippines and the United States of America are both signatories to the Paris Convention for the
Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris Convention on
27 September 1965. Articles 6bis and 8 of the Paris Convention state:

ARTICLE 6bis

(i) The countries of the Union undertake either administratively if their legislation so
permits, or at the request of an interested party, to refuse or to cancel the registration and to
prohibit the use of a trademark which constitutes a reproduction, imitation or translation,
liable to create confusion or a mark considered by the competent authority of the country as
being already the mark of a person entitled to the benefits of the present Convention
and used for identical or similar goods. These provisions shall also apply when the
essential part of the mark constitutes a reproduction of any such well-known mark or
an imitation liable to create confusion therewith.


ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of
filing or registration, whether or not it forms part of a trademark. (Emphasis supplied)


Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention
that they are afforded an effective protection against violation of their intellectual property rights in the Philippines
in the same way that their own countries are obligated to accord similar protection to Philippine nationals.23

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:

Section 37. Rights of foreign registrants. Persons who are nationals of, domiciled in, or
have a bona fide or effective business or commercial establishment in any foreign country,
which is a party to any international convention or treaty relating to marks or trade-names,
or the repression of unfair competition to which the Philippines may be a party, shall be
entitled to the benefits and subject to the provisions of this Act to the extent and under the
conditions essential to give effect to any such convention and treaties so long as the
Philippines shall continue to be a party thereto, except as provided in the following
paragraphs of this section.
x x x x

Trade-names of persons described in the first paragraph of this section shall be
protected without the obligation of filing or registration whether or not they form parts
of marks.24

x x x x (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or
not the trae name forms part of a traemark is protete without the oligation of filing or registration
Harvar is the trae name of the worl famous Harvar University an it is also a traemark of Harvar
University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is
entitle to protetion in the Philippines of its trae name Harvar even without registration of suh trae name in
the Philippines. This means that no euational entity in the Philippines an use the trae name Harvar without
the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through
the use of the name an mark Harvar that its products or services are authorized, approved, or licensed by, or
soure from Harvar University without the latters onsent

Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two
directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in several
cases.25 On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a Memorandum directing
the Director of Patents to reject, pursuant to the Paris Convention, all pending applications for Philippine registration
of signature and other world-famous trademarks by applicants other than their original owners.26 The Memorandum
states:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the
Philippines is a signatory, you are hereby directed to reject all pending applications for
Philippine registration of signature and other world-famous trademarks by applicants other
than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as
Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la
Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks
should be asked to surrender their certificates of registration, if any, to avoid suits for
amages an other legal ation y the traemarks foreign or loal owners or original users.

You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier
Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement measures
neessary to omply with the Philippines oligations uner the Paris Convention thus:

1. Whether the trademark under consideration is well-known in the
Philippines or is a mark already belonging to a person entitled to the
benefits of the CONVENTION, this should be established, pursuant
to Philippine Patent Office procedures in inter partes and ex parte
cases, according to any of the following criteria or any
combination thereof:

(a) a declaration by the Minister of Trade and Industry that the trademark being considered
is already well-known in the Philippines such that permission for its use by other than its
original owner will constitute a reproduction, imitation, translation or other infringement;

(b) that the trademark is used in commerce internationally, supported by proof that goods
bearing the trademark are sold on an international scale, advertisements, the establishment of
factories, sales offices, distributorships, and the like, in different countries, including volume
or other measure of international trade and commerce;

(c) that the trademark is duly registered in the industrial property office(s) of another
country or countries, taking into consideration the dates of such registration;

(d) that the trademark has been long established and obtained goodwill and general
international consumer recognition as belonging to one owner or source;

(e) that the trademark actually belongs to a party claiming ownership and has the right to
registration under the provisions of the aforestated PARIS CONVENTION.

2. The word trademark, as used in this MEMORANDUM, shall include tradenames,
service marks, logos, signs, emblems, insignia or other similar devices used for
identification and recognition by consumers.
3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of,
trademarks which constitute a reproduction, translation or imitation of a trademark owned
by a person, natural or corporate, who is a citizen of a country signatory to the PARIS
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

x x x x28 (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that the
traemark to e protete must e well-known in the ountry where protetion is sought29 The Court declared
that the power to determine whether a trademark is well-known lies in the competent authority of the country of
registration or use.30 The Court then stated that the competent authority would either be the registering authority if
it has the power to decide this, or the courts of the country in question if the issue comes before the courts.31

To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be
registered or used in the Philippines.32 All that is required is that the mark is well-known internationally and in the
Philippines for identical or similar goods, whether or not the mark is registered or used in the Philippines. The Court
ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33

The fact that respondents marks are neither registered nor used in the Philippines is
of no moment. The scope of protection initially afforded by Article 6bis of the Paris
Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions
on the Protection of Well-Known Marks, wherein the World Intellectual Property
Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding
recommendation that a well-known mark should be protected in a country even if the
mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides:

(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a
condition for determining whether a mark is a well-known mark:

(i) that the mark has been used in, or that the mark has been registered or that an
application for registration of the mark has been filed in or in respect of, the Member State:

(ii) that the mark is well known in, or that the mark has been registered or that an application
for registration of the mark has been filed in or in respect of, any jurisdiction other than the
Member State; or

(iii) that the mark is well known by the public at large in the Member State.34 (Italics in the
original decision; boldface supplied)

Inee Setion (e) of RA No 9 now ategorially states that a mark whih is onsiere y the
competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it
is registered here annot e registere y another in the Philippines Setion (e) oes not require that the
well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines.
Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or
Stamped Containers, which implement R.A. No. 8293, provides:

Rule 102. Criteria for determining whether a mark is well-known. In determining whether a
mark is well-known, the following criteria or any combination thereof may be taken into
account:

(a) the duration, extent and geographical area of any use of the mark, in particular, the
duration, extent and geographical area of any promotion of the mark, including advertising
or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to
which the mark applies;

(b) the market share, in the Philippines and in other countries, of the goods and/or services to
which the mark applies;

(c) the degree of the inherent or acquired distinction of the mark;
(d) the quality-image or reputation acquired by the mark;

(e) the extent to which the mark has been registered in the world;

(f) the exclusivity of registration attained by the mark in the world;

(g) the extent to which the mark has been used in the world;

(h) the exclusivity of use attained by the mark in the world;

(i) the commercial value attributed to the mark in the world;

(j) the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known
mark; and

(l) the presence or absence of identical or similar marks validly registered for or used on
identical or similar goods or services and owned by persons other than the person claiming
that his mark is a well-known mark. (Emphasis supplied)





Sine any combination of the foregoing riteria is suffiient to etermine that a mark is well-known, it is clearly
not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a
mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are
the exceptions to this rule.

In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that:

Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than
Harvard University, a recognized and respected institution of higher learning located in
Camrige Massahusetts USA Initially referre to simply as the new ollege the
institution was name Harvard College on Marh 9 after its first prinipal onor a
young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in
England, John Harvard bequeathed about four hundred books in his will to form the basis of
the college library collection, along with half his personal wealth worth several hundred
pounds. The earliest known official reference to Harvar as a university rather than
ollege ourre in the new Massahusetts Constitution of

Records also show that the first use of the name HARVARD was in 1638 for educational
services, policy courses of instructions and training at the university level. It has a Charter.
Its first commercial use of the name or mark HARVARD for Class 25 was on 31 December
1953 covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that
the Appellate may have used the mark HARVARD in the Philippines ahead of the
Appellant it still annot e enie that the Appellants use thereof was eaes even
enturies ahea of the Appellees More importantly the name HARVARD was the name
of a person whose deeds were considered to be a cornerstone of the university. The
Appellants logos emlems or symols are owne y Harvar University The name
HARVARD and the logos, emblems or symbols are endemic and cannot be separated from
the institution.35

Finally, in its assailed Decision, the Court of Appeals ruled:

Records show that Harvard University is the oldest and one of the foremost educational
institutions in the United States, it being established in 1636. It is located primarily in
Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to
the college his books and half of his estate.

The mark Harvar College was first use in ommere in the Unite States in for
educational services, specifically, providing courses of instruction and training at the
university level (Class 41). Its application for registration with the United States Patent and
Trademark Office was filed on September 20, 2000 and it was registered on October 16,
The marks Harvar an Harvar Ve ri tas Shiel Symol were first used in
commerce in the the United States on December 31, 1953 for athletic uniforms, boxer
shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather
jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class
25). The applications for registration with the USPTO were filed on September 9, 1996, the
mark Harvar was registere on Deemer 9 99 an the mark Harvar Ve ri tas
Shiel Symol was registere on Septemer 9936

We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard University
and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO rule that the mark Harvar is a
well-known mark This Deision which cites among others the numerous trademark registrations of Harvard
University in various countries, has become final and executory.

There is no question then an this Court so elares that Harvar is a well-known name and mark not only in the
Unite States ut also internationally inluing the Philippines The mark Harvar is rate as one of the most
famous marks in the world. It has been registered in at least 50 countries. It has been used and promoted extensively
in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of
Harvard University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard
University of Cambridge, Massachusetts, U.S.A., internationally known as one of the leading educational
institutions in the worl As suh even efore Harvar University applie for registration of the mark Harvar in
the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again,
even without applying the Paris Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which
prohiits the registration of a mark whih may isparage or falsely suggest a connection with persons, living or
dead, institutions eliefs x x x

WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009
Resolution of the Court of Appeals in CA-G.R. SP No. 103394.
SO ORDERED.

THIRD DIVISION

[G.R. No. 168335 : June 06, 2011]

REPUBLIC OF THE PHILIPPINES, PETITIONER, VS. NESTOR GALANG,
RESPONDENT.

D E C I S I O N

BRION, J.:

We resolve the Petition for Review on Certiorari
[1]
filed by the Republic of the Philippines
(petitioner), challenging the decision
[2]
dated November 25, 2004 and the resolution
[3]

dated May 9, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 70004. The challenged
decision affirmed the decision
[4]
of the Regional Trial Court (RTC), Branch 62, Angeles City,
declaring the marriage of Nestor Galang (respondent) and Juvy Salazar null and void on the
ground of the latter's psychological incapacity. The assailed resolution denied the
petitioner's motion for reconsideration.

Antecedent Facts

On March 9, 1994, the respondent and Juvy contracted marriage in Pampanga. They resided
in the house of the respondent's father in San Francisco, Mabalacat, Pampanga. The
respondent worked as an artist-illustrator at the Clark Development Corporation, earning
P8,500.00 monthly. Juvy, on the other hand, stayed at home as a housewife. They have
one child, Christopher.

On August 4, 1999, the respondent filed with the RTC a petition for the declaration of nullity
of his marriage with Juvy, under Article 36 of the Family Code, as amended. The case was
docketed as Civil Case No. 9494. He alleged that Juvy was psychologically incapacitated to
exercise the essential obligations of marriage, as she was a kleptomaniac and a swindler.
He claimed that Juvy stole his ATM card and his parents' money, and often asked money
from their friends and relatives on the pretext that Christopher was confined in a hospital.
According to the respondent, Juvy suffers from "mental deficiency, innate immaturity,
distorted discernment and total lack of care, love and affection [towards him and their]
child." He posited that Juvy's incapacity was "extremely serious" and "appears to be
incurable."
[5]


The RTC ordered the city prosecutor to investigate if collusion existed between the parties.
Prosecutor Angelito I. Balderama formally manifested, on October 18, 1999, that he found
no evidence of collusion between the parties. The RTC set the case for trial in its Order of
October 20, 1999. The respondent presented testimonial and documentary evidence to
substantiate his allegations.

In his testimony, the respondent alleged that he was the one who prepared their breakfast
because Juvy did not want to wake up early; Juvy often left their child to their neighbors'
care; and Christopher almost got lost in the market when Juvy brought him there.
[6]


The respondent further stated that Juvy squandered the P15,000.00 he entrusted to her.
He added that Juvy stole his ATM card and falsified his signature to encash the check
representing his (the respondent's) father's pension. He, likewise, stated that he caught
Juvy playing "mahjong" and "kuwaho" three (3) times. Finally, he testified that Juvy
borrowed money from their relatives on the pretense that their son was confined in a
hospital.
[7]


Aside from his testimony, the respondent also presented Anna Liza S. Guiang, a
psychologist, who testified that she conducted a psychological test on the respondent.
According to her, she wrote Juvy a letter requesting for an interview, but the latter did not
respond.
[8]
In her Psychological Report, the psychologist made the following findings:

Psychological Test conducted on client Nestor Galang resembles an emotionally-matured
individual. He is well-adjusted to the problem he meets, and enable to throw-off major
irritations but manifest[s] a very low frustration tolerance which means he has a little ability
to endure anxiety and the client manifests suppressed feelings and emotions which resulted
to unbearable emotional pain, depression and lack of self-esteem and gained emotional
tensions caused by his wife's behavior.

The incapacity of the defendant is manifested [in] such a manner that the defendant-wife:
(1) being very irresponsible and very lazy and doesn't manifest any sense of responsibility;
(2) her involvement in gambling activities such as mahjong and kuwaho; (3) being an
estafador which exhibits her behavioral and personality disorders; (4) her neglect and show
no care attitude towards her husband and child; (5) her immature and rigid behavior; (6)
her lack of initiative to change and above all, the fact that she is unable to perform her
marital obligations as a loving, responsible and caring wife to her family. There are just few
reasons to believe that the defendant is suffering from incapacitated mind and such
incapacity appears to be incorrigible.

x x x

The following incidents are the reasons why the couple separated:

1. After the marriage took place, the incapacity of the defendant was manifested on such
occasions wherein the plaintiff was the one who prepared his breakfast, because the
defendant doesn't want to wake up early; this became the daily routine of the
plaintiff before reporting to work;
2. After reporting from work, the defendant was often out gambling, as usual, the plaintiff
was the one cooking for supper while the defendant was very busy with her gambling
activities and never attended to her husband's needs;
3. There was an occasion wherein their son was lost in the public market because of the
irresponsible attitude of the defendant;
4. That the defendant suffers from personality and behavioral disorders, there was an
occasion wherein the defendant [would] steal money from the plaintiff and use them
for gambling;
5. Defendant, being an estafador had been manifested after their marriage took place,
wherein the defendant would come with stories so that people [would] feel pity
on her and give her money. Through false pretenses she [would] be able to
deceive and take money from neighbors, relatives and other people.
6. That the plaintiff convinced the defendant to stop her unhealthy lifestyle (gambling), but
the defendant never listened to his advices;
7. That the plaintiff was the one who [was] taking care of their son, when the plaintiff will
leave for work, the defendant [would] entrust their son to their neighbor and go [to]
some place. This act reflects the incapacity of the defendant by being an
irresponsible mother;
8. That the defendant took their son and left their conjugal home that resulted into the
couple's separation.
Psychological findings tend to confirm that the defendant suffers from personality and
behavioral disorders. These disorders are manifested through her grave dependency on
gambling and stealing money. She doesn't manifest any sense of responsibility and loyalty
and these disorders appear to be incorrigible.

The plaintiff tried to forget and forgive her about the incidents and start a new life again and
hoping she would change. Tried to get attention back by showing her with special care,
treating her to places for a weekend vacation, cook[ing] her favorite food, but the
defendant didn't care to change, she did not prepare meals, wash clothes nor clean up. She
neglected her duties and failed to perform the basic obligations as a wife.

So in the view of the above-mentioned psychological findings, it is my humble opinion that
there is sufficient reason to believe that the defendant wife is psychologically incapacitated
to perform her marital duties as a wife and mother to their only son.
[9]


The RTC Ruling

The RTC nullified the parties' marriage in its decision of January 22, 2001. The trial court
saw merit in the testimonies of the respondent and the psychologist, and concluded that:

After a careful perusal of the evidence in the instant case and there being no controverting
evidence, this Court is convinced that as held in Santos case, the psychological incapacity of
respondent to comply with the essential marital obligations of his marriage with petitioner,
which Dr. Gerardo Veloso said can be characterized by (a) gravity because the subject
cannot carry out the normal and ordinary duties of marriage and family shouldered by any
average couple existing under ordinary circumstances of life and work; (b) antecedence,
because the root cause of the trouble can be traced to the history of the subject before
marriage although its overt manifestations appear over after the wedding; and (c)
incurability, if treatments required exceed the ordinary means or subject, or involve time
and expense beyond the reach of the subject - are all obtaining in this case.

x x x x

WHEREFORE, premises considered, the instant petition is granted and the marriage
between petitioner and defendant is hereby declared null and void pursuant to Article 36
of the Family Code of the Philippines.
[10]


The CA Decision

The petitioner, through the Office of the Solicitor General, appealed the RTC decision to the
CA. The CA, in its decision dated November 25, 2004, affirmed the RTC decision in toto.

The CA held that Juvy was psychologically incapacitated to perform the essential marital
obligations. It explained that Juvy's indolence and lack of sense of responsibility, coupled
with her acts of gambling and swindling, undermined her capacity to comply with her
marital obligations. In addition, the psychologist characterized Juvy's condition to be
permanent, incurable and existing at the time of the celebration of her marriage with the
respondent.
[11]


The petitioner moved to reconsider this Decision, but the CA denied his motion in its
resolution dated May 9, 2005.
[12]


The Petition and the Issues

The petitioner claims in the present petition that the totality of the evidence presented by
the respondent was insufficient to establish Juvy's psychological incapacity to perform her
essential marital obligations. The petitioner additionally argues that the respondent failed to
show the juridical antecedence, gravity, and incurability of Juvy's condition.
[13]
The
respondent took the exact opposite view.

The issue boils down to whether there is basis to nullify the respondent's marriage to Juvy
on the ground that at the time of the celebration of the marriage, Juvy suffered from
psychological incapacity that prevented her from complying with her essential marital
obligations.

The Court's Ruling

After due consideration, we resolve to grant the petition, and hold that no sufficient
basis exists to annul the marriage on the ground of psychological incapacity under the
terms of Article 36 of the Family Code.

Article 36 of the Family Code
and Related Jurisprudence

Article 36 of the Family Code provides that "a marriage contracted by any party who, at the
time of the celebration, was psychologically incapacitated to comply with the essential
marital obligations of marriage, shall likewise be void even if such incapacity becomes
manifest only after its solemnization."
[14]


In Leouel Santos v. Court of Appeals, et al.,
[15]
the Court first declared that psychological
incapacity must be characterized by (a) gravity; (b) juridical antecedence; and (c)
incurability. The defect should refer to "no less than a mental (not physical) incapacity
that causes a party to be truly incognitive of the basic marital covenants that concomitantly
must be assumed and discharged by the parties to the marriage." It must be confined to
"the most serious cases of personality disorders clearly demonstrative of an utter
insensitivity or inability to give meaning and significance to the marriage."
[16]
We laid down
more definitive guidelines in the interpretation and application of Article 36 of the Family
Code in Republic of the Philippines v. Court of Appeals and Roridel Olaviano Molina, whose
salient points are footnoted below.
[17]
These guidelines incorporate the basic requirements
we established in Santos.
[18]


In Brenda B. Marcos v. Wilson G. Marcos,
[19]
we further clarified that it is not absolutely
necessary to introduce expert opinion in a petition under Article 36 of the Family Code if the
totality of evidence shows that psychological incapacity exists and its gravity, juridical
antecedence, and incurability can be duly established. Thereafter, the Court promulgated
A.M. No. 02-11-10-SC (Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages)
[20]
which provided that "the complete facts should allege
the physical manifestations, if any, as are indicative of psychological incapacity at the time
of the celebration of the marriage but expert opinion need not be alleged."

Our 2009 ruling in Edward Kenneth Ngo Te v. Rowena Ong Gutierrez Yu-Te
[21]
placed some
cloud in the continued applicability of the time-tested Molina
[22]
guidelines. We stated in
this case that instead of serving as a guideline, Molina unintentionally became a
straightjacket; it forced all cases involving psychological incapacity to fit into and be bound
by it. This is contrary to the intention of the law, since no psychological incapacity case can
be considered as completely on "all fours" with another.

Benjamin G. Ting v. Carmen M. Velez-Ting
[23]
and Jocelyn M. Suazo v. Angelito Suazo,
[24]

however, laid to rest any question regarding the continued applicability of Molina.
[25]
In
these cases, we clarified that Ngo Te
[26]
did not abandon Molina.
[27]
Far from abandoning
Molina,
[28]
Ngo Te
[29]
simply suggested the relaxation of its stringent requirements. We
also explained that Suazo
[30]
that Ngo Te
[31]
merely stands for a more flexible approach in
considering petitions for declaration of nullity of marriages based on psychological
incapacity.
[32]


The Present Case

In the present case and using the above guidelines, we find the totality of the respondent's
evidence - the testimonies of the respondent and the psychologist, and the latter's
psychological report and evaluation -insufficient to prove Juvy's psychological incapacity
pursuant to Article 36 of the Family Code.

a. The respondent's testimony

The respondent's testimony merely showed that Juvy: (a) refused to wake up early to
prepare breakfast; (b) left their child to the care of their neighbors when she went out of
the house; (c) squandered a huge amount of the P15,000.00 that the respondent entrusted
to her; (d) stole the respondent's ATM card and attempted to withdraw the money
deposited in his account; (e) falsified the respondent's signature in order to encash a check;
(f) made up false stories in order to borrow money from their relatives; and (g) indulged in
gambling.

These acts, to our mind, do not per se rise to the level of psychological incapacity that the
law requires. We stress that psychological incapacity must be more than just a "difficulty,"
"refusal" or "neglect" in the performance of some marital obligations. In Republic of the
Philippines v. Norma Cuison-Melgar, et al.,
[33]
we ruled that it is not enough to
prove that a spouse failed to meet his responsibility and duty as a married person; it is
essential thathe or she must be shown to be incapable of doing so because of some
psychological, not physical, illness. In other words, proof of a natal or supervening
disabling factor in the person - an adverse integral element in the personality structure that
effectively incapacitates the person from really accepting and thereby complying with the
obligations essential to marriage - had to be shown.
[34]
A cause has to be shown and linked
with the manifestations of the psychological incapacity.

The respondent's testimony failed to show that Juvy's condition is a manifestation of a
disordered personality rooted in some incapacitating or debilitating psychological condition
that rendered her unable to discharge her essential marital obligation. In this light, the acts
attributed to Juvy only showed indications of immaturity and lack of sense of responsibility,
resulting in nothing more than the difficulty, refusal or neglect in the performance of
marital obligations. In Ricardo B. Toring v. Teresita M. Toring,
[35]
we emphasized that
irreconcilable differences, sexual infidelity or perversion, emotional immaturity and
irresponsibility, and the like do not by themselves warrant a finding of psychological
incapacity, as these may only be due to a person's difficulty, refusal or neglect to undertake
the obligations of marriage that is not rooted in some psychological illness that Article 36 of
the Family Code addresses.

In like manner, Juvy's acts of falsifying the respondent's signature to encash a check, of
stealing the respondent's ATM, and of squandering a huge portion of the P15,000.00 that
the respondent entrusted to her, while no doubt reprehensible, cannot automatically be
equated with a psychological disorder, especially when the evidence shows that these were
mere isolated incidents and not recurring acts. Neither can Juvy's penchant for playing
mahjong and kuwaho for money, nor her act of soliciting money from relatives on the
pretext that her child was sick, warrant a conclusion that she suffered from a mental malady
at the time of the celebration of marriage that rendered her incapable of fulfilling her marital
duties and obligations. The respondent, in fact, admitted that Juvy engaged in these
behaviors (gambling and what the respondent refers to as "swindling") only two (2) years
after their marriage, and after he let her handle his salary and manage their finances. The
evidence also shows that Juvy even tried to augment the family's income during the early
stages of their marriage by putting up a sari-sari store and by working as a manicurist.

b. The Psychologist's Report

The submitted psychological report hardly helps the respondent's cause, as it glaringly failed
to establish that Juvy was psychologically incapacitated to perform her essential marital
duties at the material time required by Article 36 of the Family Code.

To begin with, the psychologist admitted in her report that she derived her conclusions
exclusively from the information given her by the respondent. Expectedly, the respondent's
description of Juvy would contain a considerable degree of bias; thus, a psychological
evaluation based on this one-sided description alone can hardly be considered as credible or
sufficient. We are of course aware of our pronouncement in Marcos
[36]
that the person
sought to be declared psychologically incapacitated need not be examined by the
psychologist as a condition precedent to arrive at a conclusion. If the incapacity can be
proven by independent means, no reason exists why such independent proof cannot be
admitted to support a conclusion of psychological incapacity, independently of a
psychologist's examination and report. In this case, however, no such independent evidence
has ever been gathered and adduced. To be sure, evidence from independent sources who
intimately knew Juvy before and after the celebration of her marriage would have made a
lot of difference and could have added weight to the psychologist's report.

Separately from the lack of the requisite factual basis, the psychologist's report simply
stressed Juvy's negative traits which she considered manifestations of Juvy's psychological
incapacity (e.g., laziness, immaturity and irresponsibility; her involvement in swindling and
gambling activities; and her lack of initiative to change), and declared that "psychological
findings tend to confirm that the defendant suffers from personality and behavioral
disorders x x x she doesn't manifest any sense of responsibility and loyalty, and these
disorders appear to be incorrigible."
[37]
In the end, the psychologist opined - without stating
the psychological basis for her conclusion - that "there is sufficient reason to believe that
the defendant wife is psychologically incapacitated to perform her marital duties as a wife
and mother to their only son."
[38]


We find this kind of conclusion and report grossly inadequate. First, we note that the
psychologist did not even identify the types of psychological tests which she
administered on the respondent and the root cause of Juvy's psychological condition.
We also stress that the acts alleged to have been committed by Juvy all occurred during
the marriage; there was no showing that any mental disorder existed at the inception of
the marriage. Second, the report failed to prove the gravity or severity of Juvy's alleged
condition, specifically, why and to what extent the disorder is serious, and how it
incapacitated her to comply with her marital duties. Significantly, the report did not even
categorically state the particular type of personality disorder found. Finally, the report failed
to establish the incurability of Juvy's condition. The report's pronouncements that Juvy
"lacks the initiative to change" and that her mental incapacity "appears incorrigible"
[39]
are
insufficient to prove that her mental condition could not be treated, or if it were otherwise,
the cure would be beyond her means to undertake.

c. The Psychologist's Testimony

The psychologist's court testimony fared no better in proving the juridical antecedence,
gravity or incurability of Juvy's alleged psychological defect as she merely reiterated what
she wrote in her report - i.e., that Juvy was lazy and irresponsible; played mahjong and
kuhawo for money; stole money from the respondent; deceived people to borrow cash; and
neglected her child - without linking these to an underlying psychological cause. Again,
these allegations, even if true, all occurred during the marriage. The testimony was totally
devoid of any information or insight into Juvy's early life and associations, how she acted
before and at the time of the marriage, and how the symptoms of a disordered personality
developed. Simply put, the psychologist failed to trace the history of Juvy's psychological
condition and to relate it to an existing incapacity at the time of the celebration of the
marriage.

She, likewise, failed to successfully prove the elements of gravity and incurability. In these
respects, she merely stated that despite the respondent's efforts to show love and affection,
Juvy was hesitant to change. From this premise, she jumped to the conclusion that Juvy
appeared to be incurable or incorrigible, and would be very hard to cure. These unfounded
conclusions cannot be equated with gravity or incurability that Article 36 of the Family
Code requires. To be declared clinically or medically incurable is one thing; to refuse or be
reluctant to change is another. To hark back to what we earlier discussed, psychological
incapacity refers only to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the
marriage.
[40]


The Constitution sets out a policy of protecting and strengthening the family as the basic
social institution, and marriage is the foundation of the family. Marriage, as an inviolable
institution protected by the State, cannot be dissolved at the whim of the parties. In
petitions for the declaration of nullity of marriage, the burden of proof to show the nullity of
marriage lies with the plaintiff.
[41]
Unless the evidence presented clearly reveals a situation
where the parties, or one of them, could not have validly entered into a marriage by reason
of a grave and serious psychological illness existing at the time it was celebrated, we are
compelled to uphold the indissolubility of the marital tie.
[42]


WHEREFORE, in view of these considerations, we GRANT the petition. We SET ASIDE the
Decision and the Resolution of the Court of Appeals, dated November 25, 2004 and May 9,
2005, respectively, in CA-G.R. CV No. 70004. Accordingly, we DISMISS respondent Nestor
Galang's petition for the declaration of nullity of his marriage to Juvy Salazar under Article
36 of the Family Code. Costs against respondent Nestor Galang.

SO ORDERED.

Carpio Morales, (Chairperson), Bersamin,
*
Abad, and Villarama, Jr. JJ., concur.
Sereno, J., sick leave.
Endnotes: