1. [G.R. No. 128177.

August 15, 2001]

HEIRS OF ROMAN SORIANO, petitioners, vs. THE HONORABLE COURT OF APPEALS,
SPOUSES BRAULIO ABALOS and AQUILINA ABALOS, respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:
May a winning party in a land registration case effectively eject the possessor thereof, whose
security of tenure rights are still pending determination before the DARAB?
The instant petition for certiorari seeks to set aside the Decisioni[1] dated September 20, 1996 of
the Court of Appeals in CA-G.R. SP No. 34930 as well as its Resolutionii[2] dated January 15,
1997, denying petitioners Motion for Reconsideration.
We quote the undisputed facts as narrated by the Court of Appeals, to wit
The property subject of this case is a parcel of land containing an area of 24,550 square meters,
more or less, located in Lingayen, Pangasinan, and particularly described as follows:
A parcel of land (Nipa with an area of 8,410 square meters; fishpond with an area of 14,000
square meters; and residential land with an area of 1,740 square meters, more or less. Bounded
on the N, by river and Filemon Anselmo; on the South by Alejandro Soriano and Filemon
Anselmo; and on the West by Fortunata Soriano.
Originally owned by Adriano Soriano until his death in 1947, the above-described property
passed on to his heirs who leased the same to spouses David de Vera and Consuelo Villasista for
a period of fifteen (15) years beginning July 1, 1967 with Roman Soriano, one of the children of
Adriano Soriano, acting as caretaker of the property during the period of the lease. After
executing an extra judicial settlement among themselves, the heirs of Adriano Soriano
subsequently subdivided the property into two (2) lots, Lot No. 60052 and Lot No. 8459. Lot
No. 60052 was assigned to Lourdes, Candido and the heirs of Dionisia while Lot No. 8459 was
assigned to Francisca, Librada, Elocadio and Roman. In 1971, Lot No. 60052 was sold by
Lourdes, Candido and the heirs of Dionisia to petitioner spouses Braulio and Aquilina Abalos
(hereinafter referred to as petitioners), while, Elocadio, Francisca and Librada sold their three-
fourths shares in Lot No. 8459 also to petitioners.
On March 14, 1968, the de Vera spouses ousted Roman Soriano as caretaker and appointed
Isidro Verzosa and Vidal Verzosa as his substitutes. Thereafter, Roman Soriano filed CAR Case
No. 1724-P-68 for reinstatement and reliquidation against the de Vera spouses. The agrarian
court authorized the ejectment of Roman Soriano but on appeal, the decision was reversed by the
Court of Appeals, which decision became final and executory. However, prior to the execution
of the said decision, the parties entered into a post-decisional agreement wherein the de Vera
spouses allowed Roman Soriano to sub-lease the property until the termination of the lease in
1982. In an Order dated December 22, 1972, the post-decisional agreement was approved by the
agrarian court.
On August 16, 1976, petitioners filed with the Regional Trial Court of Lingayen, Pangasinan,
Branch 38, an application for registration of title over Lot No. 60052 and three-fourths (3/4) pro-
indiviso of Lot No. 8459, docketed as LRC Case No. N-3405. Said application for registration
was granted by the trial court, acting as a land registration court, per Decision dated June 27,
1983. On appeal, the Court of Appeals affirmed the decision of the land registration court. The
petition for review filed with the Supreme Court by Roman Soriano docketed as G.R. 70842, was
denied for lack of merit and entry of judgment was entered on December 16, 1985.
Meanwhile, it appears that on July 15, 1983, a day after the promulgation of the land registration
courts decision, Roman Soriano, together with Elocadio and Librada Soriano, filed before the
Regional Trial Court of Lingayen, Branch 37, and against petitioners, an action for annulment of
document and/or redemption, ownership and damages, docketed as Civil Case No. 159568 (sic;
should be 15958). Petitioners filed a motion to dismiss on the ground of res judicata, pendency
of another action, laches, misjoinder of parties and lack of jurisdiction, which was denied by the
trial court.
Thereafter, on August 22, 1984, or eleven (11) years after the approval of the post-decisional
agreement between Roman Soriano and the spouses de Vera in CAR Case No. 1724-P-68 for
reinstatement and reliquidation, petitioners filed with the agrarian court a motion for execution of
said post-decisional agreement which allowed Roman Soriano to sub-lease the property. The
motion prayed that petitioners be placed in possession of the subject property, jointly with
Roman Soriano, and to levy so much of Romans property to answer for the use and occupation
by Soriano of 6/7 share of the property. On October 25, 1984, Roman Soriano filed a motion to
suspend hearing on the rental demanded by petitioners, which, however, was denied by the
agrarian court. The agrarian court likewise authorized the substitution of the de Vera spouses by
petitioners. Sorianos motion for reconsideration was also denied, prompting Soriano to file a
petition for certiorari with the Court of Appeals.
In the meantime, Roman Soriano died on December 11, 1985. Thus, the complaint in Civil Case
No. 159568 (sic) for annulment of document and/or redemption, ownership and damages, was
amended to substitute Sorianos heirs, herein private respondents, as party-plaintiffs. The
complaint was again amended to include Juanito Ulanday as party-defendant for having
allegedly purchased part of the disputed property from petitioners. On motion of petitioners, the
re-amended complaint was dismissed by the trial court on the ground that the re-amended
complaint altered the cause of action. Upon reconsideration, the dismissal was set aside and
petitioners were ordered to file their Answer, in view of which petitioners filed a petition for
certiorari and prohibition with the Court of Appeals, docketed as C.A. GR SP No. 22149.
On April 25, 1990, the Court of Appeals denied the petition filed by Roman Soriano (substituted
by private respondents) impugning the denial of their motion to suspend hearing on the rental
demanded by petitioners, and authorizing the substitution of the de Vera spouses by petitioners,
on the ground that no grave abuse of discretion was committed by the agrarian court. Thus,
private respondents filed a petition for review on certiorari with the Supreme Court, docketed as
G.R. 93401.
Meanwhile, on December 7, 1990, the Court of Appeals in C.A. GR SP No. 22149, also denied
the petition for certiorari and prohibition filed by petitioners, ruling that the land registration
court committed no error when it refused to adhere to the rule of res judicata. Petitioners then
filed with the Supreme Court a petition for review on certiorari, docketed as G.R. 99843.
On June 26, 1991, the Supreme Court promulgated its decision in G.R. 93401, and granted the
petition filed by private respondents. Thus, the decision of the Court of Appeals denying the
petition of private respondents was set aside, and the motion for execution filed by petitioners in
CAR Case No. 1724-P-48 was denied.
On June 22, 1993, the Supreme Court, in G.R. 99843, reversed and set aside the denial of the
Court of Appeals in C.A. GR SP No. 22149, and consequently, Civil Case No. 15958 for
annulment of document and/or redemption, ownership and damages, was ordered dismissed.
On October 18, 1993, private respondents filed with the Department of Agrarian Adjudication
Board (sic), a complaint against petitioners for Security of Tenure with prayer for Status Quo
Order and Preliminary Injunction docketed as DARAB Case No. 528-P-93.
Meanwhile, it appears that the decision of the land registration court in LRC Case No. N-3405
was partially executed with the creation of a Committee on Partition per Order dated March 25,
1987. On July 27, 1988, the land registration court approved the partition of Lot No. 8459, with
Lot No. 8459-A assigned to private respondent, and Lot No. 8459-B assigned to petitioners. For
Lot No. 60052, O.C.T. No. 22670 was issued in the name of petitioners; for Lot No. 8459-B,
O.C.T. No. 22687 was issued, also in the name of petitioner; and for Lot No. 8459-A, O.C.T. No.
22686 was issued in the name of Roman Soriano. Dissatisfied with said partition, private
respondents appealed to the Court of Appeals, docketed as CA G.R. SP No. 119497. The
appellate court affirmed the partition but reversed the order of the land registration court
directing the issuance of a writ of possession on the ground of pendency of Civil Case No.
15958.
On November 15, 1993, the trial court in compliance with the decision of the Supreme Court in
G.R. No. 99843, dismissed Civil Case No. 15958, in view of which, petitioner, on November 25,
1993, in LRC Case No. N-3405, moved for the issuance of an alias writ of execution and/or writ
of possession to place them in possession of Lot No. 60052 and Lot No. 8459-B. Per Resolution
dated January 21, 1994, said motion was held in abeyance by the land registration court until and
after DARAB Case No. 528-P-93 for security of tenure with prayer for status quo, has been
resolved.
Their motion for reconsideration having been denied on April 5, 1984, petitioners interposed an
appeal to the Supreme Court, docketed as G.R. 115073. In a Resolution dated July 27, 1994
issued by the Supreme Court, petitioners appeal, which was treated as a petition for certiorari,
was referred to this Court [of Appeals] for determination and disposition.iii[3]
The Court of Appeals annulled and set aside the Resolution of the land registration court and
ordered instead the issuance of the corresponding writ of possession in favor of private
respondents. With the denial of their Motion for Reconsideration, petitioners are now before us
raising the following grounds:
1. THE DECISION AND RESOLUTION OF THE RESPONDENT COURT OF
APPEALS ARE CONTRARY TO THE PROVISIONS OF THE AGRARIAN REFORM LAWS
AND JURISPRUDENCE ON THE SECURITY OF TENURE OF TENANT-CARETAKER.
2. THE DECISION AND RESOLUTION OF THE RESPONDENT COURT OF
APPEALS ARE VIOLATIVE OF THE PROVISION ON RIGHT TO DUE PROCESS.
3. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION
IN GIVING DUE COURSE TO THE PETITION CONSIDERING THAT PRIVATE
RESPONDENTS HAD EARLIER PERFECTED AN APPEAL OF THE RESOLUTION
SUBJECT OF THEIR PETITION.iv[4]
Possession and ownership are distinct legal concepts. There is ownership when a thing
pertaining to one person is completely subjected to his will in a manner not prohibited by law
and consistent with the rights of others. Ownership confers certain rights to the owner, among
which are the right to enjoy the thing owned and the right to exclude other persons from
possession thereof. On the other hand, possession is defined as the holding of a thing or the
enjoyment of a right. Literally, to possess means to actually and physically occupy a thing with
or without right. Possession may be had in one of two ways: possession in the concept of an
owner and possession of a holder.v[5] A person may be declared owner but he may not be entitled
to possession. The possession may be in the hands of another either as a lessee or a tenant. A
person may have improvements thereon of which he may not be deprived without due hearing.
He may have other valid defenses to resist surrender of possession. A judgment for ownership,
therefore, does not necessarily include possession as a necessary incident.vi[6]
There is no dispute that private respondents (petitioners below) title over the land under
litigation has been confirmed with finality. As explained above, however, such declaration
pertains only to ownership and does not automatically include possession, especially so in the
instant case where there is a third party occupying the said parcel of land, allegedly in the
concept of an agricultural tenant.
While the issue of ownership of the subject land has been laid to rest in the final judgment of the
land registration court, the right of possession thereof is, as yet, controverted. This is precisely
what is put in issue in the security of tenure case filed by petitioners (private respondents below)
before the DARAB.
It is important to note that although private respondents have been declared titled owners of the
subject land, the exercise of their rights of ownership are subject to limitations that may be
imposed by law.vii[7] The Tenancy Act provides one such limitation. Agricultural lessees are
entitled to security of tenure and they have the right to work on their respective landholdings
once the leasehold relationship is established. Security of tenure is a legal concession to
agricultural lessees which they value as life itself and deprivation of their landholdings is
tantamount to deprivation of their only means of livelihood.viii[8] The exercise of the right of
ownership, then, yields to the exercise of the rights of an agricultural tenant.
However, petitioners status as tenant has not yet been declared by the DARAB. In keeping with
judicial order, we refrain from ruling on whether petitioners may be dispossessed of the subject
property. As ratiocinated in Nona v. Planix[9]
It is to the credit of respondent Judge that he has shown awareness of the recent Presidential
Decrees which are impressed with an even more solicitous concern for the rights of the tenants.
If, therefore, as he pointed out in his order granting the writ of possession, there is a
pending case between the parties before the Court of Agrarian Relations, ordinary
prudence, let alone the letter of the law, ought to have cautioned him against granting the
plea of private respondents that they be placed in possession of the land in controversy. x x
x. At the time the challenged orders were issued, without any showing of how the tenancy
controversy in the Court of Agrarian Relations was disposed of, respondent Judge could not by
himself and with due observance of the restraints that cabin and confine his jurisdiction pass
upon the question of tenancy. (Emphasis ours)
In its challenged Decision, the Court of Appeals relied heavily on the principle of finality of
judgments. It applied the legal doctrine that once a judgment has become final, the issuance of a
writ of execution becomes ministerial. The appellate court held that petitioners situation does
not fall under any of the exceptions to this rule since his occupation of the subject land did not
transpire after the land registration courts adjudication became final.
In so ruling, however, the Court of Appeals loses sight of the fact that petitioners claim of
possession as a tenant of the litigated property, if proven, entitles him to protection against
dispossession.
Private respondents argue that petitioners tenancy claim is barred by res judicata, having been
ruled upon in G.R. Nos. 99843 and 93401. However, not being an issue in the case before us,
this question should properly be resolved in DARAB Case No. 528-P-93. To restate, the only
issue before us is whether or not a winning party in a land registration case can effectively eject
the possessor thereof, whose security of tenure rights are still pending determination before the
DARAB.
A judgment in a land registration case cannot be effectively used to oust the possessor of the
land, whose security of tenure rights are still pending determination before the DARAB. Stated
differently, the prevailing party in a land registration case cannot be placed in possession of the
area while it is being occupied by one claiming to be an agricultural tenant, pending a declaration
that the latters occupancy was unlawful.
WHEREFORE, the instant petition for certiorari is hereby GRANTED. The Decision of
respondent Court of Appeals in CA-G.R. SP No. 34930 dated September 20, 1996, as well as its
Resolution dated January 15, 1997 are SET ASIDE. The Resolution of the Regional Trial Court
of Lingayen, Pangasinan in LRC Case No. N-3405 dated January 21, 1994 is ordered
REINSTATED.
SO ORDERED.
2. G.R. No. L-13298 November 19, 1918
CORNELIO RAMOS, petitioner-appellant,
vs.
THE DIRECTOR OF LANDS, objector-appellee.
Basilio Aromin for appellant.
Office of the Solicitor-General Paredes for appellee.

MALCOLM, J .:
This is an appeal by the applicant and appellant from a judgment of the Court of First Instance of
Nueva Ecija, denying the registration of the larger portion of parcel No. 1 (Exhibit A of the
petitioner), marked by the letters A, B, and C on the plan, Exhibit 1, of the Government.
One Restituto Romero y Ponce apparently gained possession of a considerable tract of land
located in the municipality of San Jose, Province of Nueva Ecija, in the year 1882. He took
advantage of the Royal Decree of February 13, 1894, to obtain a possessory information title to
the land, registered as such on February 8, 1896. Parcel No. 1, included within the limits of the
possessory information title of Restituto Romero, was sold in February, 1907, to Cornelio
Ramos, the instant petitioner, and his wife Ambrosia Salamanca.
Ramos instituted appropriate proceedings to have his title registered. Opposition was entered by
the Director of Lands on the ground that Ramos had not acquired a good title from the Spanish
government and by the Director of Forestry on the ground that the first parcel was forest land.
The trial court agreed with the objectors and excluded parcel No. 1 from registration. So much
for the facts.
As to the law, the principal argument of the Solicitor-General is based on the provisions of the
Spanish Mortgage Law and of the Royal Decree of February 13, 1894, commonly known as the
Maura Law. The Solicitor-General would emphasize that for land to come under the protective
gis of the Maura Law, it must have been shown that the land was cultivated for six years
previously, and that it was not land which pertained to the "zonas forestales." As proof that the
land was, even as long ago as the years 1894 to 1896, forestal and not agricultural in nature is the
fact that there are yet found thereon trees from 50 to 80 years of age.
We do not stop to decide this contention, although it might be possible, following the doctrine
laid down by the United States Supreme Court with reference to Mexican and Spanish grantes
within the United States, where some recital is claimed to be false, to say that the possessory
information, apparently having taken cognizance of the requisites for title, should not now be
disturbed. (Hancock vs. McKinney [1851], 7 Tex., 192; Hornsby and Roland vs. United States
[1869], 10 Wall., 224.) It is sufficient, as will later appear, merely to notice that the predecessor
in interest to the petitioner at least held this tract of land under color of title.
Subsection 6 of section 54, of Act No. 926, entitled The Public Land Law, as amended by Act
No. 1908, reads as follows:
6. All persons who by themselves or their predecessors and interest have been in the
open, continuous, exclusive, and notorious possession and occupation of agricultural
public lands, as defined by said Act of Congress of July first, nineteen hundred and two,
under a bona fide claim of ownership except as against the Government, for a period of
ten years next preceding the twenty-sixth day of July, nineteen hundred and four, except
when prevented by war or force majeure, shall be conclusively presumed to have
performed all the conditions essential to a government grant and to have received the
same, and shall be entitled to a certificate of title to such land under the provisions of this
chapter.
There are two parts to the above quoted subsection which must be discussed. The first relates to
the open, continuous, exclusive, and notorious possession and occupation of what, for present
purposes, can be conceded to be agricultural public land, under a bona fide claim of ownership.
Actual possession of land consists in the manifestation of acts of dominion over it of such a
nature as a party would naturally exercise over his own property. Relative to actuality of
possession, it is admitted that the petitioner has cultivated only about one fourth of the entire
tract. This is graphically portrayed by Exhibit 1 of the Government, following:

The question at once arises: Is that actual occupancy of a part of the land described in the
instrument giving color of title sufficient to give title to the entire tract of land?lawphil.net
The doctrine of constructive possession indicates the answer. The general rule is that the
possession and cultivation of a portion of a tract under claim of ownership of all is a constructive
possession of all, if the remainder is not in the adverse possession of another. (Barr vs. Gratz's
Heirs [1819], 4 Wheat., 213; Ellicott vs. Pearl [1836], 10 Pet., 412; Smith vs. Gale [1892], 144
U. S., 509.) Of course, there are a number of qualifications to the rule, one particularly relating to
the size of the tract in controversy with reference to the portion actually in possession of the
claimant. It is here only necessary to apply the general rule.
The claimant has color of title; he acted in good faith; and he has had open, peaceable, and
notorious possession of a portion of the property, sufficient to apprise the community and the
world that the land was for his enjoyment. (See arts. 446, 448, Civil Code.) Possession in the
eyes of the law does not mean that a man has to have his feet on every square meter of ground
before it can be said that he is in possession. Ramos and his predecessor in interest fulfilled the
requirements of the law on the supposition that he premises consisted of agricultural public land.
The second division of the law requires consideration of the term "agricultural public land." The
law affirms that the phrase is denied by the Act of Congress of July 1st, 1902, known as the
Philippine bill. Turning to the Philippine Bill, we find in sections 13 to 18 thereof that three
classes of land are mentioned. The first is variously denominated "public land" or "public
domain," the second "mineral land," and the third "timber land." Section 18 of the Act of
Congress comes nearest to a precise definition, when it makes the determination of whether the
land is more valuable for agricultural or for forest uses the test of its character.
Although these sections of the Philippine Bill have come before the courts on numerous
occasions, what was said in the case of Jones vs. Insular Government ([1906], 6 Phil., 122), is
still true, namely: "The meaning of these sections is not clear and it is difficult to give to them a
construction that will be entirely free from objection." In the case which gave most serious
consideration to the subject (Mapa vs. Insular Government [1908], 10 Phil., 175), it was found
that there does exist in the Act of Congress a definition of the phrase "agricultural public lands."
It was said that the phrase "agricultural public lands" as used in Act No. 926 means "those public
lands acquired from Spain which are not timber or mineral lands."
The idea would appear to be to determine, by exclusion, if the land is forestal or mineral in
nature and, if not so found, to consider it to be agricultural land. Here, again, Philippine law is
not very helpful. For instance, section 1820 of the Administrative Code of 1917 provides: "For
the purposes of this chapter, 'public forest' includes, except as otherwise specially indicated, all
unreserved public land, including nipa and mangrove swamps, and all forest reserves of
whatever character." This definition of "public forest," it will be noted, is merely "for the
purposes of this chapter." A little further on, section 1827 provides: "Lands in public forests, not
including forest reserves, upon the certification of the Director of Forestry that said lands are
better adapted and more valuable for agricultural than for forest purposes and not required by the
public interests to be kept under forest, shall be declared by the Department Head to be
agricultural lands." With reference to the last section, there is no certification of the Director of
Forestry in the record, as to whether this land is better adapted and more valuable for agricultural
than for forest purposes.
The lexicographers define "forest" as "a large tract of land covered with a natural growth of trees
and underbrush; a large wood." The authorities say that he word "forest" has a significant, not an
insignificant meaning, and that it does not embrace land only partly woodland. It is a tract of
land covered with trees, usually of considerable extent. (Higgins vs. Long Island R. Co. [1908],
114 N. Y. Supp., 262; People vs. Long Island R. Co. [1908], 110 N. Y. Supp., 512.)
The foresters say that no legal definition of "forest" is practicable or useful. B. H. Baden-Powell,
in his work on Forest Law of India, states as follows:
Every definition of a forest that can be framed for legal purposes will be found either to
exclude some cases to which the law ought to apply, or on the other hand, to include
some with which the law ought not to interfere. It may be necessary, for example, to take
under the law a tract of perfectly barren land which at present has neither trees,
brushwood, nor grass on it, but which in the course f time it is hoped will be "reboise;"
but any definition wide enough to take in all such lands, would also take in much that was
not wanted. On the other hand, the definition, if framed with reference to tree-growth,
might (and indeed would be almost sure to) include a garden, shrubbery, orchard, or
vineyard, which it was not designed to deal with.
B. E. Fernow, in his work on the Economics of Forestry, states as follows:
A forest in the sense in which we use the term, as an economic factor, is by no means a
mere collection of trees, but an organic whole in which all parts, although apparently
heterogeneous, jumbled together by accident as it were and apparently unrelated, bear a
close relation to each other and are as interdependent as any other beings and conditions
in nature.
The Director of Forestry of the Philippine Islands has said:
During the time of the passage of the Act of Congress of July 1, 1902, this question of
forest and agricultural lands was beginning to receive some attention and it is clearly
shown in section 18 of the above mentioned Act; it leaves to the Bureau of Forestry the
certification as to what lands are for agricultural or forest uses. Although the Act states
timber lands, the Bureau has in its administration since the passage of this act construed
this term to mean forest lands in the sense of what was necessary to protect, for the public
good; waste lands without a tree have been declared more suitable for forestry in many
instances in the past. The term 'timber' as used in England and in the United States in the
past has been applied to wood suitable for construction purposes but with the increase in
civilization and the application of new methods every plant producing wood has some
useful purpose and the term timber lands is generally though of as synonymous with
forest lands or lands producing wood, or able to produce wood, if agricultural crops on
the same land will not bring the financial return that timber will or if the same land is
needed for protection purposes.
x x x x x x x x x
The laws in the United States recognize the necessity of technical advice of duly
appointed boards and leave it in the hands of these boards to decide what lands are more
valuable for forestry purposes or for agricultural purposes.
In the Philippine Islands this policy is follows to as great an extent as allowable under the
law. In many cases, in the opinion of the Bureau of Forestry, lands without a single tree
on them are considered as true forest land. For instance, mountain sides which are too
steep for cultivation under ordinary practice and which, if cultivated, under ordinary
practice would destroy the big natural resource of the soil, by washing, is considered by
this bureau as forest land and in time would be reforested. Of course, examples exist in
the Mountain Province where steep hillsides have been terraced and intensive cultivation
practiced but even then the mountain people are very careful not to destroy forests or
other vegetative cover which they from experience have found protect their water supply.
Certain chiefs have lodged protests with the Government against other tribes on the
opposite side of the mountain cultivated by them, in order to prevent other tribes from
cutting timber or destroy cover guarding their source of water for irrigation.
Dr. M. S. Shaler, formerly Dean of the Lawrence Scientific School, remarked that if
mankind could not devise and enforce ways dealing with the earth, which will preserve
this source of like "we must look forward to the time, remote it may be, yet equally
discernible, when out kin having wasted its great inheritance will fade from the earth
because of the ruin it has accomplished."
The method employed by the bureau of Forestry in making inspection of lands, in order
to determine whether they are more adapted for agricultural or forest purposes by a
technical and duly trained personnel on the different phases of the conservation of natural
resources, is based upon a previously prepared set of questions in which the different
characters of the land under inspection are discussed, namely:
Slope of land: Level; moderate; steep; very steep.
Exposure: North; South; East; West.
Soil: Clay; sandy loam; sand; rocky; very rocky.
Character of soil cover: Cultivated, grass land, brush land, brush land and timber mixed,
dense forest.
If cultivated, state crops being grown and approximate number of hectares under
cultivation. (Indicate on sketch.)
For growth of what agricultural products is this land suitable?
State what portion of the tract is wooded, name of important timber species and estimate
of stand in cubic meters per hectare, diameter and percentage of each species.
If the land is covered with timber, state whether there is public land suitable for
agriculture in vicinity, which is not covered with timber.
Is this land more valuable for agricultural than for forest purposes? (State reasons in full.)
Is this land included or adjoining any proposed or established forest reserve or communal
forest? Description and ownership of improvements.
If the land is claimed under private ownership, give the name of the claimant, his place of
residence, and state briefly (if necessary on a separate sheet) the grounds upon which he
bases his claim.
When the inspection is made on a parcel of public land which has been applied for, the
corresponding certificate is forwarded to the Director of Lands; if it is made on a
privately claimed parcel for which the issuance of a title is requested from the Court of
Land Registration, and the inspection shows the land to be more adapted for forest
purposes, then the Director of Forestry requests the Attorney-General to file an
opposition, sending him all data collected during the inspection and offering him the
forest officer as a witness.
It should be kept in mind that the lack of personnel of this Bureau, the limited time
intervening between the notice for the trial on an expediente of land and the day of the
trial, and the difficulties in communications as well as the distance of the land in question
greatly hinder the handling of this work.
In the case of lands claimed as private property, the Director of Forestry, by means of his
delegate the examining officer, submits before the court all evidence referring to the
present forest condition of the land, so that the court may compare them with the alleged
right by the claimant. Undoubtedly, when the claimant presents a title issued by the
proper authority or evidence of his right to the land showing that he complied with the
requirements of the law, the forest certificate does not affect him in the least as such land
should not be considered as a part of the public domain; but when the alleged right is
merely that of possession, then the public or private character of the parcel is open to
discussion and this character should be established not simply on the alleged right of the
claimant but on the sylvical condition and soil characteristics of the land, and by
comparison between this area, or different previously occupied areas, and those areas
which still preserve their primitive character.
Either way we look at this question we encounter difficulty. Indubitably, there should be
conservation of the natural resources of the Philippines. The prodigality of the spendthrift who
squanders his substance for the pleasure of the fleeting moment must be restrained for the less
spectacular but surer policy which protects Nature's wealth for future generations. Such is the
wise stand of our Government as represented by the Director of Forestry who, with the Forester
for the Government of the United States, believes in "the control of nature's powers by man for
his own good." On the other hand, the presumption should be, in lieu of contrary proof, that land
is agricultural in nature. One very apparent reason is that it is for the good of the Philippine
Islands to have the large public domain come under private ownership. Such is the natural
attitude of the sagacious citizen.
If in this instance, we give judicial sanction to a private claim, let it be noted that the
Government, in the long run of cases, has its remedy. Forest reserves of public land can be
established as provided by law. When the claim of the citizen and the claim of the Government
as to a particular piece of property collide, if the Government desires to demonstrate that the land
is in reality a forest, the Director of Forestry should submit to the court convincing proof that the
land is not more valuable for agricultural than for forest purposes. Great consideration, it may be
stated, should, and undoubtedly will be, paid by the courts to the opinion of the technical expert
who speaks with authority on forestry matters. But a mere formal opposition on the part of the
Attorney-General for the Director of Forestry, unsupported by satisfactory evidence will not stop
the courts from giving title to the claimant.
We hold that the petitioner and appellant has proved a title to the entire tract of land for which he
asked registration, under the provisions of subsection 6, of section 54, of Act No. 926, as
amended by Act No. 1908, with reference to the Philippine Bill and the Royal Decree of
February 13, 1894, and his possessory information.
Judgment is reversed and the lower court shall register in the name of the applicant the entire
tract in parcel No. 1, as described in plan Exhibit A, without special finding as to costs. So
ordered.
3. G.R. No. 82680 August 15, 1994
NICANOR SOMODIO, petitioner,
vs.
COURT OF APPEALS, EBENECER PURISIMA, and FELOMINO AYCO, respondents.
Jose V. Panes for petitioner.
Vencer, Purisima & Associates for private respondents.

QUIASON, J .:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse and set aside the Decision dated September
29, 1987 and the Resolution dated February 2, 1988 of the Court of Appeals in CA-G.R. SP No. 11602.
I
On October 21, 1974, Jose Ortigas executed an instrument designated as a Transfer of Rights, conveying to Wilfredo Mabugat the
possession of a residential lot situated at Rajah Muda, Bula, General Santos City and described in the said instrument as:
Lot No. (Unnumbered), bounded on the North by Temporary Road, on the South by Customs Zone (Sarangani Bay),
on the East by Public Land, and on the West by Public Land.
Nicanor Somodio, herein petitioner, contributed one-half of the purchase price. On October 22, 1974, Mabugat executed an Affidavit of Trust
expressly recognizing the right of petitioner over one-half undivided portion of the lot. Later, petitioner discovered in the District Land Office
that the lot was numbered "6328-X, Csd 2281-D." Thereafter, petitioner and Mabugat partitioned the property into two portions, with
petitioner taking the western part. Immediately after the partition, petitioner took possession of his portion and planted thereon ipil-ipil trees,
coconut trees and other fruit-bearing trees.
In 1976, petitioner began construction of a structure with a dimension of 22-by-18 feet on his lot. His employment, however, took him to
Kidapawan, North Cotabato, and he left the unfinished structure to the case of his uncle. He would visit the property every three months or
on weekened when he had time.
Sometime in October 1977, petitioner allowed respondent Felomino Ayco, to transfer his hut to petitioner's lot. About six years later,
petitioner demanded that Ayco vacate the premises but such demand proved futile. Hence, on August 23, 1983, petitioner filed an action for
unlawful detainer with damages against respondent Ayco before the Municipal Trial Court, Branch I, General Santos, docketed as Civil Case
No. 2032-II.
Meanwhile, on June 26, 1983, respondent Ebenecer Purisima entered the land and constructed a house thereon. Four days later, petitioner
filed against respondent Purisima a complaint for forcible entry before the same court docketed as Civil Case No. 2013-I. Said case was later
consolidated with Civil Case No. 2032-II.
In his answer, respondent Purisima averred that the lot was a portion of the land subject of his application for miscellaneous sales patent with
the Bureau of Lands. Purisima described the lot in question as:
Lot No. 6328-Y, CSD-2281-D, Bula, General Santos, Cotabato. Bounded on the North by 6328-X; on the South by
Sarangani Bay; on the East by a Municipal Road; and on the West by Lot No. 6328-W, containing an area of 1,095
square meters and covered by Tax Declaration No. 9647 (Rollo, p. 36; Emphasis supplied).
Respondent Purisima contended that his father, a geodetic engineer, had surveyed the parcel of land comprising of Lots Nos. 6427 and 6328
for the Small Farmers Fishpond Association, Inc. in February 1958, and that his father's survey plan was approved by the Director of Lands
in 1960. Respondent Ayco, on the other hand, did not present any evidence but merely anchored his right to possess the property on the
evidence of Purisima.
On April 30, 1986, the trial court rendered a decision finding that respondent Purisima built his house "almost on the spot where Somodio's
unfinished house" stood "thru stealth and strategy," not knowing that the house was built on Lot No. 6328-X and not on Lot No. 6328-Y, the
lot said respondent was claiming (Rollo, p. 43). The court went on to state that:
. . . . He (private respondent Purisima) was a frequent visitor in Rajah Muda and had sometimes stayed with Mrs.
Maturan in Judge Purisima's house on the adjoining lots, and could not have remained unaware of the possession of
Somodio. He must have depended on the thought that it was his father who made the subdivision survey and had
fenced an area which he had claimed. He did not exactly verify that the area fenced by his father had an area of only
1,095 square meters, which did not include the are Lot No. 6328-X could eventually be standing on his property, for Lot
No. 6328-X is not claimed by him and has not been applied for even by his father. His father has been abroad and has
not taken steps to apply for Lot No. 6328-X. This lot is not declared for taxation purposes in the name of any claimant-
applicant. Unless and until there would be an administrative proceedings and the title ultimately issued in favor of an
applicant, the possession of the actual claimant and occupant has to be respected and maintained in the interest of
public order . . . (Rollo, pp. 43-44).
The Municipal Trial Court further held that petitioner was the actual possessor of Lot No. 6328-X. The court did not believe respondent
Ayco's claim that the administratrix of the estate of respondent Purisima's father authorized him to build a hut on Lot No. 6328-X in 1976. At
any rate, the court said that respondent Ayco was willing to vacate the premises provided he be given financial assistance to do so (Rollo,
pp. 43-44).
Nothing that the ocular inspection of the area showed that the houses of respondents Purisima and Ayco were "inside Lot No. 6328-X" and
not on Lot No. 6328-Y, the Municipal Trial Court held that the case became one which entailed mere removal of the houses from the lot in
question. Accordingly, the court ordered private respondents to remove their respective houses, to deliver the land to petitioner, and to pay
attorney's fees and litigation expenses.
On appeal, the Regional Trial Court, Branch 22, General Santos City, affirmed in toto the decision of the Municipal Trial Court. Respondent
then elevated the cases on a petition for review to the Court of Appeals, which, in its decision dated September 27, 1987, set aside the
decisions of the two trial courts and ordered the dismissal of the two complaints filed by petitioner.
The Court of Appeals held that herein petitioner had not "clearly and conclusively established physical, prior possession over Lot No. 6328-
X."
Petitioner's motion for the reconsideration of the decision of the Court of Appeals having been denied, he filed the instant petition for review
on certiorari.
We grant the petition.
II
The procedural issue raised by private respondents should first be resolved. The issue is whether the instant petition is proper considering
that petitioner "merely touch(es) upon questions of fact which had been carefully considered" by the Court of Appeals (Rollo, p. 92). As a
general rule, the findings of fact of the Court of Appeals are binding on this Court. This rule, however, is not without exceptions, one of which
is when the factual findings of the Court of Appeals and the trial court are contrary to each other. In such a case, this Court may scrutinize
the evidence on record in order to arrive at the correct findings based on the record (Valenzuela v. Court of Appeals, 191 SCRA 1 [1990];
Roman Catholic Bishop of Malolos, Inc. v. Intermediate Appellate Court, 191 SCRA 411 [1990]).
Upon a review of the records, we are convinced that petitioner indeed enjoyed priority of possession over Lot No. 6328-X, notwithstanding
respondent Purisima's claim to the contrary.
In ejectment cases, the only issue for resolution is who is entitled to the physical or material possession of the property involved, independent
of any claim of ownership set forth by any of the party-litigants. Anyone of them who can prove prior possession de facto may recover such
possession even from the owner himself. This rule holds true regardless of the character of a party's possession, provided, that he has in his
favor priority of time which entitles him to stay on the property until he is lawfully ejected by a person having a better right by either accion
publiciana or accion reivindicatoria (De Luna v. Court of Appeals, 212 SCRA 276 [1992]).
Petitioner took possession of the property sometime in 1974 when he planted the property to coconut trees, ipil- ipil trees and fruit trees. In
1976, he started the construction of a building on the property. It is immaterial that the building was unfinished and that he left for Kidapawan
for employment reasons and visited the property only intermittently. Possession in the eyes of the law does not mean that a man has to have
his feet on every square meter of ground before it can be said that he is in possession (Ramos v. Director of Lands, 39 Phil. 175 [1918]). It is
sufficient that petitioner was able to subject the property to the action of his will.
Article 531 of the Civil Code of the Philippines provides:
Possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to
the action of our will, or by the proper acts and legal formalities established for acquiring such right.
Even if the Court of Appeals is correct in its finding that petitioner started introducing improvements on the land only in 1981, he still enjoyed
priority of possession because respondent Purisima entered the premises only in 1983.
It should be emphasized that the Court of Appeals noted that none of the parties had produced tax declarations or applications as public land
claimants. As such, what should have been scrutinized is who between the claimants had priority of possession.
Moreover, neither is the fact that respondent Purisima's father surveyed the property of help to his cause. As the Court of Appeals found,
respondent Purisima's father surveyed the land for the Small Farmers Fishpond Association, Inc., not for himself. Although respondent
Purisima now claims that Lot No. 6328-X was in payment of his fee for the services of his father and that he caused the construction of a
perimeter wall in the area, these facts do not mean that respondent Purisima himself had prior possession. He did not present any proof that
his father had authorized him to enter the land as his successor-in-interest. Neither did he present proof that between 1958, when his father
allegedly took possession of the land, and 1983, when said respondent himself entered the land, his father ever exercised whatever right of
possession he should have over the property. Under these circumstances, priority in time should be the pivotal cog in resolving the issue of
possession.
The Court of Appeals opined that petitioner had not properly identified the lot he had occupied. The matter of identification of the land,
however, had been resolved by respondent Purisima's admission in his pleadings, as well as by two ocular inspections.
In his answer to the complaint, respondent Purisima claimed possession over Lot No. 6328-Y, while petitioner identified the lot adjacent to it,
Lot
NO. 6328-X, as the area where private respondents built their houses. That these two lots are distinct from one another was resolved by the
ocular inspection conducted by a Senior Geodetic Engineer of the Office of the City Engineer, who found that "south of lot 6328-H across a
10 meter wide road is lot 6328-Y and from thence to the south is lot 6328-X." On June 13, 1985, the Municipal Trial Court judge himself went
to the premises in question and discovered that aside from the houses of respondents Purisima and Ayco, five other houses had been built
on Lot No. 6328-X.
Petitioner's prior possession over the property, however, is not synonymous with his right of ownership over the same. As earlier stated,
resolution of the issue of possession is far from the resolution of the issue of ownership. Forcible entry is merely a quieting process and
never determines the actual title to an estate (German Management & Services, Inc. v. Court of Appeals, 177 SCRA 495 [1989]; Manuel v.
Court of Appeals, 199 SCRA 603 [1991].
WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE and that of the trial courts REINSTATED. Costs against
private respondents.
SO ORDERED.
4. G.R. No. L-42859 March 17, 1938
GABRIEL LASAM, applicant-appellee,
vs.
THE DIRECTOR OF LANDS and JOSE CHAN HONG HIN, ET AL., opponents-
appellants.
Acting Solicitor-General Melencio and B. Pobre for appellants.
Alfredo Catolico for appellee.
LAUREL, J .:
On January 24, 1930, Gabriel Lasam filed with the Court of First Instance of Cagayan an
application for the registration of 152 parcels of land containing a total area of 24,723,436 square
meters, situated in the municipality of Solana, Province of Cagayan, described in the plan
Exhibit K attached to the application. These 152 parcels include the parcel No. 9 here involved.
According to the lower court, the portions of said parcel No. 9 which opposed during the time of
survey were delimited and marked on its plan Psu-67516 attached to the record as lots A to Z,
AA to HH, MM to ZZ, AAA to ZZZ, AAAA to ZZZZ, AAAAA, to FFFFF, NNNNN, 35 to 38,
and 111 to 143, all inclusive. (Decision of the lower court, Bill of Exception of the Government,
p. 35.)
The Director of Lands opposed the application on the ground that it is not supported by any title
fit for registration and that the land sought to be registered is public land. The brothers Felipe,
Jose and Salvador, all surnamed Narag, who are first cousin to the applicant Lasam, also filed
opposition on the ground that they are the owners of parcels No. 9. Opposition were also filed by
Tomas Furigay and 35 other persons as homesteaders; by the provincial fiscal, representing the
Directors of Forestry, on the ground that portions thereof are public forest; by Francisco Caronan
and some 71 others parties, claiming the parcels occupied by them as their exclusive properties;
by Jose Chan Hong Hin, on the ground that the applicant includes his property of about 22
hectares and 50 ares; and by Mauro Antonio, on the ground that the applicant includes the
portion occupied by him and belonging to him. Pablo Soriano succeeded in having the order of
general default set aside as to him and was allowed to registered his opposition at a latter date.
Amendede applications and oppositions by the parties were subsequently permitted to be filed.
After a protracted hearing, the lower court rejected and the oppositions filed, declaring the
applicant, Gabriel Lasam, the owner of parcel No. 9 as indicated in the plan Psu-67516 (Exhibit
K), and decreed the registration of said parcel in his favor.
On September 10, 1934, counsel for various oppositors, after excepting to the decision, filed a
motion for new trial which was denied, and the case was brought before this court by bill of
exceptions.
The Narag brothers and the Directors of Forestry appear to have abandoned their opposition.
They made no attempt to substantiate their claims at the trial.
Counsel for the Director of Lands, et al. and for Jose Chan Hong Hin, et al. make various
assignments of error in their respective briefs. It is not believe necessary however, to consider
each and every assignment made as the questions presented may, in our opinion, be reduced to
the following propositions: (a) Whether or not the applicant, Gabriel Lasam, is entitled to the
registered of parcel No. 9 on the basis of the document presented as Exhibit L, hereinafter to be
referred to, or in the alternative, whether or not he is entitled to registered on the basis of public,
continuous, and adverse possession under a claim of ownership during the time prescribed by
law (par. 9, application); and the negative, (b) whether or not the numerous oppositors
excluding the homesteader are entitled to the parcels which they allege are included in the
controverted parcel No. 9. The rights of the homesteader necessarily depend on the resolution of
these two propositions.
Exhibit L purports to be an application dated June 27, 1873 addressed by Domingo Narag 1. to
the Alcalde Mayor, in which the former stated that he had been in possession of the land above
described and asked that informacion testifical be admitted. The informacion testifical was had
before the Alcalde Mayor and appears to have been approved by the Judge of the Court of First
Instance without objection on the part of the fiscal. It is the theory of the applicant that Domingo
Narag 1. the original owner of parcel No. 5, described in Exhibit L, owned P1,000 from the
applicant's which amount Narag needed for his candidacy gobernadorcillo of Tuguegarao,
Cagayan, in 1880; that the original of Exhibit L was turned over by the applicant to his lawyer,
Vicente Marasigan, who lost it, and for this reason, only a certificate copy of the document
marked Exhibit L presented; and that the fifth parcel mentioned in the document, Exhibit L, is
the parcel No. 9 described in the plan, Exhibit K. The Government contends that Exhibit L is not
a valid titled and does not confer ownership that even if it were valid, it does not cover so
extensive an area as that appearing on the plan, Exhibit K.
The land designated as the fifth parcel is described in Exhibit L as follows:
5. Un terreno o pasto de ganados vacunos llamado Marguirig o Cagguban que linda al
poniente con el estero Pagul, oriente con el pueblo de la Solana al norte con el sitio
llamado y Calabbacao y al sur con el sitio llamado Atayo el cual tiene un cabida de siete
mil brazaz y herede de mis Padres hace viente y dos aos y en la actualidad es donde mis
granados de procreacion.
Parcel No. 9, the registration of which is applied for in these proceedings, is described thus (brief
of claimant-appellee p. 61):
Por el norte con barrios de Iraga, Bauan y Bangag;
Por el este con el Centro y los barrios de Basi, Natapian y Lanna;
Por el sur con la carretera provincial; y
Por el oeste barrios de Maguirig, Cagguban y estero Pangul.
We are of the opinion that the court below committed no error in receiving Exhibit L as evidence
for the claimant, but its admission by the court does not necessarily entitled the applicant Gabriel
Lasam, to the registration of the parcel claimed by him in these proceedings. It is apparent that
parcel No. 9, as indicated in the plan, Exhibit K, is not the same parcel No. 5 described in
document Exhibit L. Whereas Exhibit L gives as boundaries on the north the sitios of Maasin
and Calabbacao, Exhibit K gives the barrios of Iraga, Bauan, and Bangag; on the east Exhibit L
gives the pueblo of Solana, whereas Exhibit K gives "el Centro y los barrios de Basi, Natappian
y Lanna"; on the west Exhibit L gives estero Pangul, whereas Exhibit K gives the barrios of
Maguirig, Cagguban and estero Pangul; on the south Exhibit L gives the sitio of Atayao, whereas
Exhibit K gives the carretera provincial. While there may be partial indentity as to boundaries
on the east and west, such indentity is lacking as to the boundaries on the north and south. This
discrepancy is accentuated by the admmission of the applicant that the parcel whose registered is
sought is much smaller than that described in paragraph 5 of Exhibit L. The explanation given by
the surveyors Jose Mallanao, presented as witness by the claimant, is a follows:
Because on the north side when we went around the lot and I asked for the barrios of
Maasin and Calabacao the applicant pointed to me a place very far from where he was at
the time and where he actually occupied the land, and on the south side he indicated to
me the provincial road. I asked why he should not take the actual land indicated by this
title and he told me that he was not occupying that portion . That is the reason why I took
up the boundary on the south as provincial road. On the east side he indicated to me the
center of the municipality of Solana, barrios of Basi, Nangalisan and Lanna, and on the
west is a public land party bounded by the barrios of Maguirig, and Cagguban and estero
Pangul.
An applicant for registration of land, if he relies on a document evidencing his title thereto, must
prove not only the genuiness of his title but the indentity of the land therein referred to. The
document in such a case is either a basis of his claim for registration or not at all. If as in this
case, he only claims a portion of what is included in his title, he must clearly prove that the
property sought to be registered is included in that title. The surveyor, Jose Mallannao, did not
actually check up the boundaries of parcel No. 5, as described in Exhibit L, and in testifying that
parcel No. 9, in Exhibit K, is smaller than that described as parcel No. 5 in Exhibit L, he relied
on hearsay. For instance, when asked whether north of barrios Iraga, Bauan and Bangag of the
land described in plan Exhibit K, he would locate the sitios of Maasin and Calabacao, he replied:
"They said that Calabbacao is north of that barrio Iraga yet." (Emphasis ours.)
Aside from what has been said with reference to discrepanies in the boundaries, we cannot
overlook the fact that the area in Exhibit L is vaguely given as 7,000 brazas. The surveyor for the
applicant, Jose Mallannao, calculated the area of the property described in paragraph 5 of Exhibit
L on the basis of 7,000 square brazas or 49,000,00 square as 15,695,500 hectares more or less
(s.n. pp. 820-822). The area claimed here according to the amended application of February 26,
1930, and the plan Exhibit K is 24,723,437 square meters. According to the applicant before his
occupation of the land ceded by Domingo Narag 1., only about 2 hectares were cultivated. (s.n.
p. 56, Gabriel Lasam.) And, with reference to the payment of the land tax, the Solicitor-General
in his brief (p. 12) makes the following observation:
The property appears to have been declared for taxation purposes as evidenced by
revisions of tax declarations, Exhibit G-20 and G-21 (pp. 136, 137, record). There had
been previous declarations with an area of about 294 hectares (id.) but, according to
Exhibit G-22 (p. 138, record), the area which was not previously declared contains 1,685
hectares.
With the exception of a statement in which it appears that tax was paid in 1902 (p. 140,
id.) there appears in the record no tax receipts evidencing the payment of taxes
continuously from 1902 up to this time.
It is not necessary to pass upon the contention of the Solicitor-General that the informacion
testifical (Exhibit L) is no legal effect because of failure subsequently to solicit composition title
pursuant to the Royal Decree of June 25, 19880 (Fuster vs. Director of Lands, G.R. No. 40129,
Dec. 29, 1934), or to convert possession into a registration of ownership in accordance with
article 393 of the Mortgage law (Fernandez Hermanos vs. Director of Lands, 57 Phil., 929), for
even if we were to accord all the legal force to this document (Exhibit L), it would not serve as a
basis for the registration of 24,723,437 square meters.
Having arrived at this conclusion as to Exhibit L, is the applicant entitled to registration because
of the required possession during the time prescribed by law? We have examined the evidence
on this point both testimonial and documentary, and while there is evidence showing that the
claimant might have possessed a portion of the parcel claimed by him and the registration of
which is sought, we find the evidence lacking in certainly as to the particular portion occupied
and the extend thereof. Counsel for the applicant invokes the doctrine laid down by us in Ramos
vs. Director of Lands (39 Phil., 175, 180). (See also Roales vs. Director of Lands, 51 Phil., 302,
304.) But it should be observed that the applicant of the doctrine of constructive possession in
that case is subject to certain qualifications, and this court was careful to observe that among
these qualifications is "one particularly relating to the size of the tract in controversy with
reference to the portion actually in possession of the claimant." While, therefore, "possession in
the eyes of the law does not mean that a man has to have his feet on every square meter of
ground before it can be said that he is in possession", possession under paragraph 6 of section 54
of Act No. 926, as amended by paragraph (b) of section 45 of Act No. 2874, is not gained by
mere nominal claim. The mere planting of a sign or symbol of possession cannot justify a
Magellan like claim of dominion over an immense tract of territory. Possession as a means of
acquiring ownership, while it may be constructive, is not a mere fiction. In the present case, upon
the description of 7,000 brazas as the area of the land said have been originally possessed by
Domingo Narag 1. and conveyed to the applicant, only two hectares of which were according to
the applicant cultivated at the time of such transfer, the applicant would on the basis of the
computation hereinabove referred to and given at the trial by surveyor Jose Mallannao, be
entitled under Exhibit L to more than 13,000 hectares, although only 2,432 odd hectares are now
being sought for registration in these proceedings. The fact, however, that he is claiming only a
portion of the land claimed by him to be included in his title, the further fact that according to his
own testimony he has given up more than 1,000 hectares to the Bureau of Forestry, the
discrepancies in the boundaries, his tax declarations, and the existence of numerous
homesteaders and claimants are significant and tend to show that his possession over the entire
portion of the land sought to be registered is not "such as to apprise the community and the world
that the entire land was for his enjoyment." (Ramos vs. Director of Lands, supra.)
Our attention is next directed to the decision of this court in Pamittan vs. Lasam and Mallonga
(60 Phil., 908) which according to counsel for the claimant Lasam, is determinative of the
ownership of the property now sought to be registered. Said case refers to an action for partition
between the heirs of Sofia Pamittan, wife of Gabriel Lasam, originally brought in the Court of
First Instance and appealed to this court. The trial court in that case found that parcel No. 7
which is said to correspond to parcel No. 9 sought to be registered in these proceedings
"although during the existence of the conjugal partnership, was proven to be the exclusive
property of the husband Gabriel Lasam". This court not have passed upon the question whether
parcel No. 7 was the same parcel No. 9 in these proceedings; nor could it have passed upon the
conflicting claims with reference to parcel No. 9, now sought to be registered. Whatever was said
in that case could not bind the oppositors in the present case, who were not parties thereto.
The grounds for opposition of the various oppositors are divergent and are based on (a)
possession from time immemorial: (b) acquisition by inheritance, purchase and donations
propters nuptias and inter vivos; (c) payment of land taxes from 1906, 1915 and 1918 up to the
filing of oppositions; and (d) acquisition "a titulo de composicion" with the State. These
oppositors denied tenants of the applicant Lasam. After persual of the evidence presented by
them, we are constrained to accept the conclusion of the lower court that none of the portions or
lots claimed by them or any one of them has been sufficiently identified, either by the oral or
documentary evidence which they presented. In view thereof, and because of the insufficiency of
the evidence presented, we are of the opinion that the lower court committed no error in
dismissing their oppositions.
In view of the foregoing, the judgement of the lower court is reserved, without prejudice to the
filing by the applicant. Gabriel Lasam, of a new application and plan covering the portion of the
land actually occupied by him since July 25, 1894. Upon the determination of that portion by the
lower court, let judgement be rendered accordingly. The remaining portion or portions of lot No.
9 as indicated on plan Psu-67516 (Exhibit K) are hereby declared public lands, to be disposed of
or otherwise death with in accordance with law. Without pronouncement as to costs. So ordered.

5. [G.R. No. 109595. April 27, 2000]
CRISTETA CHUA-BURCE, petitioner, vs. COURT OF APPEALS AND
PEOPLE OF THE PHILIPPINES, respondents.
D E C I S I O N
QUISUMBING, J .:
Subject of the present appeal by certiorari is the decision dated November 27, 1992 of
the Court of Appeals in CA-G.R. CR No. 12037, (a) affirming in toto the trial courts
decision finding petitioner guilty of estafa, and (b) denying her Motion for
Reconsideration in a Resolution dated March 25, 1993. The Regional Trial Court,
Calapan, Oriental Mindoro, Branch 40, rendered a joint decision finding petitioner guilty
of estafa under Article 315, par. 1 (b) of the Revised Penal Code, in Criminal Case No.
C-2313, and likewise found petitioner liable for the amount of P150,000.00 in Civil Case
No. R-3733. Only the criminal case is before us for review. h Y
The uncontroverted facts, as found by the Court of Appeals, are as follows:
On August 16, 1985, Ramon Rocamora, the Manager (of Metropolitan Bank and Trust
Company, Calapan Branch, Oriental Mindoro) requested Fructuoso Peaflor, Assistant
Cashier, to conduct a physical bundle count of the cash inside the vault, which should
total P4,000,000.00, more or less. During this initial cash count, they discovered a
shortage of fifteen bundles of One Hundred Pesos denominated bills totalling
P150,000.00. The One Hundred Peso bills actually counted was P3,850,000.00 as
against the balance of P4,000,000.00 in the Cash in Vault (CIV) Summary Sheet, or a
total shortage of P150,000.00. The next day, to determine if there was actually a
shortage, a re-verification of the records and documents of the transactions in the bank
was conducted. There was still a shortage of P150,000.00.
The bank initiated investigations totalling four (4) in all. The first was by Ramon
Rocamora, the Manager. The second was by the banks internal auditors headed by
Antonio Batungbakal. Then, the banks Department of Internal Affairs conducted an
independent investigation. Thereafter, the National Bureau of Investigation (NBI) came
in to investigate. All of these investigations concluded that there was a shortage of
P150,000.00, and the person primarily responsible was the banks Cash Custodian,
Cristeta Chua-Burce, the herein accused. Jksm
On November 4, 1985, unable to satisfactorily explain the shortage of P150,000.00, the
accuseds service with the bank was terminated.
To recover the missing amount, Metropolitan Bank and Trust Company (Metrobank)
filed a Civil Case for Sum of Money and Damages with Preliminary Attachment and
Garnishment docketed as Civil Case No. R-3733 against petitioner and her husband,
Antonio Burce. Esm
Prior to the filing of the Answer, the following Information for Estafa was filed against
petitioner:
"That on or about the 16th day of August 1985, and for a period prior and
subsequent thereto, the above-named accused, with unfaithfulness or
abuse of confidence, and with intent to defraud, did then and there wilfully,
unlawfully, and feloniously, in her capacity as Cash Custodian of the
Metrobank, Calapan Branch, take from the Banks Vault the amount of
ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS, which is
under her direct custody and/or accountability, misappropriate and convert
to her own personal use and benefit, without the knowledge and consent
of the offended party, despite repeated demands for her to account and/or
return the said amount, she refused and failed, and still fails and refuses
to the damage and prejudice of the Metrobank, Calapan Branch, in the
aforementioned amount of ONE HUNDRED FIFTY THOUSAND
(P150,000.00) PESOS.
Contrary to Article 315 of the Revised Penal Code.
Calapan, Oriental Mindoro, November 27, 1985."1[1]
Both civil and criminal cases were raffled to the same branch of the Regional Trial Court
of Calapan, Oriental Mindoro, Branch 40. Esmsc
Thereafter, petitioner moved for the suspension of the criminal case on the ground of
the existence of a prejudicial question, viz., that the resolution of the civil case was



determinative of her guilt or innocence in the criminal case.2[2] The trial court, over the
vehement opposition of the private and public prosecutors, granted the motion and
suspended the trial of the criminal case.3[3] On petition for certiorari to the Court of
Appeals, the appellate court ruled that there was no prejudicial question.4[4]
Petitioner was arraigned and assisted by counsel de parte, entered a plea of not
guilty.5[5] While the trial of the criminal case was suspended, the trial of the civil case
continued. At the time of arraignment, the civil case was already submitted for decision.
Hence, during the pre-trial conference of the criminal case, the parties agreed to adopt
their respective evidence in the civil case as their respective evidence in the criminal
case.6[6] The trial court ordered the parties to submit their written agreement pursuant to
Section 4 of Rule 118 of the Rules of Court.7[7] Thereafter, petitioner, duly assisted by
her counsel, with the conforme of the public prosecutor, entered into the following pre-
trial agreement:8[8]
"COMES NOW, the accused, assisted by counsel, and unto this
Honorable Court most respectfully submits this Pre-Trial agreement:















1. That the evidence already adduced by the plaintiff in Civil Case No. R-
3733 will be adopted by the prosecution as its evidence in Criminal Case
No. C-2313;
2. That the evidence to be adduced by the defendant in Civil Case No. R-
3733 will also be adopted as evidence for the defense in Criminal Case
No. C-2313.
WHEREFORE, premises considered, it is prayed that the foregoing pre-
trial agreement be admitted in compliance with the Order of this Court
dated April 19, 1988.
RESPECTFULLY SUBMITTED.
Calapan, Oriental Mindoro, August 20, 1990.
CRISTETA CHUA-BURCE (sgd.)
Accused
Assisted By:
RODRIGO C. DIMAYACYAC (sgd.)
Defense Counsel
San Vicente, Calapan
Oriental Mindoro
IBP O.R. No. 292575
May 11, 1990
Quezon City
With Conformity:
EMMANUEL S. PANALIGAN (sgd.)
Prosecuting Fiscal
Pursuant to the pre-trial agreement, the public prosecutor filed a Motion to Adopt
Evidence.9[9] Both the pre-trial agreement and said Motion were granted by the trial
court.10[10]
On March 18, 1991, the trial court rendered a consolidated decision11[11] finding
petitioner (a) guilty of estafa under Article 315 (1) (b) of the Revised Penal Code in the
criminal case, and (b) liable for the amount of P150,000.00 in the civil case. The
dispositive portion of decision provides -
- In Criminal Case No. C-2313 -
WHEREFORE, the Court hereby finds the accused Cristeta Chua-Burce
guilty beyond reasonable doubt of the crime of Estafa, punishable under
Art. 315, paragraph 1 (b) of the Revised Penal Code, which imposes a
penalty of prision correccional in its maximum period to prision mayor in its
minimum period but considering that the amount involved exceeds
P22,000.00, the penalty provided for shall be imposed in its maximum
period, adding one year for each additional P10,000.00, but the total
amount not to exceed twenty years. Esmmis
Applying the Indeterminate Sentence Law, the imposable penalty shall be
one degree lower as minimum of arresto mayor with a penalty range of
One Month and One Day to Six Months, as minimum to prision mayor in
its maximum period, as maximum, or a penalty of Six years to Twelve
Years. Considering the mitigating circumstance of voluntary surrender, the
court hereby imposes upon the accused to suffer imprisonment from SIX
(6) MONTHS of arresto mayor in its maximum period, as minimum, to
EIGHT (8) YEARS of prision mayor, in its minimum period, as maximum.
The civil liability shall not be imposed in this case due to a separate civil
action. Esmso
- In Civil Case No. R-3733 -







WHEREFORE, judgment is hereby rendered in favor of the plaintiff
Metrobank, ordering defendants Cristeta Chua-Burce and Antonio Burce,
spouses, to pay Metrobank the amount of P150,000.00 representing the
amount misappropriated with the legal rate of six percent (6%) per annum
from August 15, 1985 until fully paid and to pay the costs of suit.
SO ORDERED."
Petitioner seasonably appealed her conviction in the criminal case to the Court of
Appeals. Petitioner filed a separate appeal in the civil case.
In a decision dated November 27, 1992,12[12] the Court of Appeals affirmed the trial
courts decision in toto. Petitioners Motion for Reconsideration was likewise denied.13[13]
Hence, the recourse to this Court. Msesm
Petitioner raises the following issues:14[14]
1. IS THE RESULT OF POLYGRAPH EXAMINATION ADMISSIBLE IN
EVIDENCE?
2. CAN THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT
ADMIT IN EVIDENCE THE EVIDENCE WHICH WAS ALREADY DENIED
ADMISSION IN THE ORDER OF THE FORMER JUDGE OF THE SAME
COURT?
3. DOES PRIMA FACIE PRESUMPTION OF MISAPPROPRIATION OR
CONVERSION EXISTS (sic) AGAINST THE PETITIONER WHEN THERE
WERE OTHER PERSONS WHO HAD DIRECT AND GREATER ACCESS
IN THE CASH-IN-VAULT?
4. IS RULE 111 SECTION 2 (a) OF THE REVISED RULES ON
CRIMINAL PROCEDURE APPLICABLE IN (sic)THE CASE AT BAR?







5. WAS THERE A VALID PROCEEDING WHEN THE FISCAL WAS NOT
ACTUALLY PRESENT AND DID NOT CONTROL AND SUPERVISE THE
PROSECUTION OF THE CASE? Exsm
In gist, (1) petitioner contends that the trial court erred in taking into account the results
of the polygraph examination as circumstantial evidence of guilt considering the
inherent unreliability of such tests, and the fact that the previous trial judge who handled
the case already ruled such evidence as inadmissible; (2) petitioner insists that there
can be no presumption of misappropriation when there were other persons who had
access to the cash in vault; and (3) petitioner questions the validity of the trial of criminal
case considering that the pre-trial agreement dispensed with the intervention of the
public prosecutor in a full-blown trial of the criminal case. Kyle
The Office of the Solicitor General, for the State, contends that the guilt of petitioner has
been proven beyond reasonable doubt by the following facts which were duly
established during trial - first, petitioner was the cash custodian who was directly
responsible and accountable for the cash-in-vault. Second, the other persons who had
access to the vault facilities never used the duplicate keys to open the safety deposit
boxes and the cash safe from where the P100.00 bill denominations were located. In
fact, the duplicate keys were offered in evidence still in their sealed envelopes. Third,
alterations and superimposition on the cash-in-vault summary sheet were made by
petitioner to cover the cash shortage. Lastly, there was a valid joint trial of the civil and
criminal cases.
The crucial issues, in our mind, are (1) whether there was a valid trial of the criminal
case, and (2) whether the elements of the crime of estafa under Article 315 (1) (b) of the
Revised Penal Code were duly proven beyond reasonable doubt. Kycalr
First, petitioner assails the validity of the proceedings in the trial court on the ground that
the public prosecutor did not intervene and present any evidence during the trial of the
criminal case. The records clearly show that the pre-trial agreement was prepared by
petitioner with the conforme of the public prosecutor. Thereafter, petitioner filed a
consolidated memorandum for both civil and criminal cases. Section 5 of Rule 11015[15]
requires that all criminal actions shall be prosecuted under the direction and control of
the public prosecutor. The rationale behind the rule is "to prevent malicious or
unfounded prosecutions by private persons."16[16] The records show that the public
prosecutor actively participated in the prosecution of the criminal case from its inception.
It was during pre-trial conference when the parties agreed to adopt their respective





evidence in the civil case to the criminal case. This is allowed under Section 2 (e) of
Rule 118 of the Rules of Court17[17] which provides that during pre-trial conference, the
parties shall consider "such other matters as will promote a fair and expeditious trial."
The parties, in compliance with Section 4 of Rule 118,18[18] reduced to writing such
agreement. Petitioner, her counsel, and the public prosecutor signed the agreement.
Petitioner is bound by the pre-trial agreement, and she cannot now belatedly disavow its
contents.19[19]
On the second issue. Petitioner was charged with the crime of estafa under Article 315
(1) (b) of the Revised Penal Code.20[20] In general, the elements of estafa are: (1) that
the accused defrauded another (a) by abuse of confidence or (b) by means of deceit;
and (2) that damage or prejudice capable of pecuniary estimation is caused to the
offended party or third person.21[21] Deceit is not an essential requisite of estafa with
abuse of confidence, since the breach of confidence takes the place of the fraud or
deceit, which is a usual element in the other estafas.22[22]
The elements of estafa through conversion or misappropriation under Art. 315 (1) (b) of
the Revised Penal Code are:23[23]















(1) that personal property is received in trust, on commission, for
administration or under any other circumstance involving the duty to make
delivery of or to return the same, even though the obligation is guaranteed
by a bond;
(2) that there is conversion or diversion of such property by the person
who has so received it or a denial on his part that he received it;
(3) that such conversion, diversion or denial is to the injury of another and
(4) that there be demand for the return of the property.
Have the foregoing elements been met in the case at bar? We find the first element
absent. When the money, goods, or any other personal property is received by the
offender from the offended party (1) in trust or (2) on commission or (3) for
administration, the offender acquires both material or physical possession and juridical
possession of the thing received.24[24] Juridical possession means a possession which
gives the transferee a right over the thing which the transferee may set up even against
the owner.25[25] In this case, petitioner was a cash custodian who was primarily
responsible for the cash-in-vault. Her possession of the cash belonging to the bank is
akin to that of a bank teller, both being mere bank employees. Calrky
In People v. Locson,26[26] the receiving teller of a bank misappropriated the money
received by him for the bank. He was found liable for qualified theft on the theory that
the possession of the teller is the possession of the bank. We explained in Locson that -
"The money was in the possession of the defendant as receiving teller of
the bank, and the possession of the defendant was the possession of the
bank. When the defendant, with grave abuse of confidence, removed the
money and appropriated it to his own use without the consent of the bank,
there was the taking or apoderamiento contemplated in the definition of
the crime of theft."27[27]








In the subsequent case of Guzman v. Court of Appeals,28[28] a travelling sales agent
misappropriated or failed to return to his principal the proceeds of things or goods he
was commissioned or authorized to sell. He was, however, found liable for estafa under
Article 315 (1) (b) of the Revised Penal Code, and not qualified theft. In the Guzman
case, we explained the distinction between possession of a bank teller and an agent for
purposes of determining criminal liability -
"The case cited by the Court of Appeals (People vs. Locson, 57 Phil. 325),
in support of its theory that appellant only had the material possession of
the merchandise he was selling for his principal, or their proceeds, is not
in point. In said case, the receiving teller of a bank who misappropriated
money received by him for the bank, was held guilty of qualified theft on
the theory that the possession of the teller is the possession of the bank.
There is an essential distinction between the possession by a receiving
teller of funds received from third persons paid to the bank, and an agent
who receives the proceeds of sales of merchandise delivered to him in
agency by his principal. In the former case, payment by third persons to
the teller is payment to the bank itself; the teller is a mere custodian or
keeper of the funds received, and has no independent right or title to
retain or possess the same as against the bank. An agent, on the other
hand, can even assert, as against his own principal, an independent,
autonomous, right to retain money or goods received in consequence of
the agency; as when the principal fails to reimburse him for advances he
has made, and indemnify him for damages suffered without his fault
(Article 1915, [N]ew Civil Code; Article 1730, old)." Mesm
Petitioner herein being a mere cash custodian had no juridical possession over the
missing funds. Hence, the element of juridical possession being absent, petitioner
cannot be convicted of the crime of estafa under Article 315, No. 1 (b) of the Revised
Penal Code.29[29]
WHEREFORE, the petition is hereby granted and petitioner is ACQUITTED of the crime
of estafa under Article 315 (1) (b) of the Revised Penal Code. Petitioner is ordered
RELEASED from custody unless she is being held for some other lawful cause. No
costs. Slx






SO ORDERED.
6. [G.R. No. 116220. December 6, 2000]
SPOUSES ROY PO LAM and JOSEFA ONG PO LAM, petitioners, vs. COURT OF
APPEALS and FELIX LIM now JOSE LEE, respondents.
R E S O L U T I O N
MELO, J.:
On October 13, 1999, this Division, under the ponencia of Mr. Justice Purisima handed
down a decision declaring petitioners, the spouses Roy Po Lam and Josefa Ong Po
Lam, as transferees pendente lite and not purchasers in good faith of Lots No. 1557
and 1558 and ordering them to reconvey said lots to private respondent Jose Lee.
Forthwith, petitioners filed a motion for reconsideration which was received hereat on
November 15, 1999. Respondents thereupon filed their opposition, as well as a
separate comment, to which petitioners submitted a reply.
Regrettably, however, for one reason or another, the motion for reconsideration
remained unacted upon until the retirement of Justice Purisima in October, 2000,
notwithstanding the fact that it was calendared or placed in the Courts agenda a
number of times, as well as the urgings of both parties to have the matter resolved.
Thus, with Justice Purisima leaving the Court and, in accordance with A.M. No. 99-8-99
promulgated by the Court En Banc on February 15, 2000, the matter of the motion for
reconsideration was assigned by raffle to herein ponente for study and the preparation
of the appropriate action.
A review of the facts, uncontroverted though they are, is in order.
Lots No. 1557 and 1558 are prime commercial lots located in the heart of Legaspi Citys
commercial district. These were sold by Lim Kok Chiong to the Legaspi Avenue
Hardware Company (hereafter referred to as LAHCO) sometime in the early 60s. On
December 4, 1964, however, Felix Lim, Lim Kok Chiongs brother, filed a complaint with
the then Court of First Instance of Albay against his brother and LAHCO to annul the
deeds of sale covering said lots on the ground that the sale included the
3
/14 pro-indiviso
portion of the lots which Felix Lim had inherited from his foster parents. The complaint
was docketed as Civil Case No. 2953 of the Court of First Instance of Albay.
On January 27, 1965, Felix Lim filed with the Register of Deeds of Albay a notice of lis
pendens over the two lots. The same was inscribed on Transfer Certificates of Title
No. 2580 and 2581, covering Lots No. 1557 and 1558, respectively. Later, the trial
court, on motion of Felix Lim, dropped the case against Lim Kok Chiong. On March 15,
1969, the trial court rendered a decision declaring LAHCO to be the absolute owner of
the two above-mentioned lots. As a consequence of its decision, the trial court ordered
the cancellation of the notice of lis pendens inscribed on the titles of the two lots.
Pursuant to this order, the notice of lis pendens inscribed on TCT No. 2580 was
cancelled. However, the notice of lis pendens annotated on TCT No. 2581 remained
uncancelled, allegedly because the duplicate owners copy of said TCT was with the
Continental Bank, Lot No. 1558 having been mortgaged by LAHCO to said bank.
Aggrieved, Felix Lim appealed to the Court of Appeals. On May 28, 1970, and during
the pendency of the appeal, CA-G.R. No. 44770-R, LAHCO sold the two lots to herein
petitioners, the spouses Roy Po Lam and Josefa Ong Po Lam. On May 20, 1974,
petitioners, by virtue of the court order adverted to earlier, had the notice of lis pendens
still inscribed on TCT No. 2581 cancelled. Felix Lim did not move for the reinstatement
of the cancelled notices of lis pendens on TCT No. 2580 and 2581. Thereafter, said
certificates of title were themselves cancelled and replaced by TCT No. 8102 and
13711, respectively, in the name of petitioners.
On April 29, 1980, the Court of Appeals affirmed the decision of the trial court in Civil
Case No. 2953, appellant Felix Lims counsel receiving a copy of thereof on May 16,
1980. On May 23, 1980, counsel for Felix Lim filed a motion for extension of time to file
a motion for reconsideration. The appellate court gave Felix Lim up to June 20, 1980 to
file one. On June 17, 1980, he filed a motion for reconsideration, which was, however,
denied. Without leave of court, Felix Lim filed, on July 14, 1980, a second motion for
reconsideration. This was acted upon favorably by the Court of Appeals on March 11,
1981, with the appellate court declaring that Felix Lim, by returning P20,000.00 to
LAHCO, could exercise the right of redemption over the two lots sold by Lim Kok
Chiong to LAHCO. Although LAHCO asked this Court for an extension of time to file a
petition for review, none was ever filed, for which reason the Court remanded the case
to the trial court for execution.
On November 12, 1981, Felix Lim moved, in Civil Case No. 2953, to have the March 11,
1981 resolution of the Court of Appeals annotated on TCT No. 8102 and 13711. He
also moved for the issuance of a writ of execution to enforce said resolution. Likewise,
he filed a motion praying that the Clerk of Court execute a deed of conveyance over the
disputed lots in his favor. All these motions were denied by the trial court on the ground
that the Po Lam spouses could not be bound thereby since they were not impleaded as
party-litigants in Civil Case No. 2953 or CA-G.R. No. 44770-R. However, the trial court
reserved to Felix Lim the right to institute an action on whether or not the acquisition of
the properties in question by spouses Roy Po Lam and Josefa Ong Po Lam were made
in good faith or bad faith.
In consonance with this ruling, Felix Lim filed a complaint for reconveyance and
annulment of the sale and titles of said lots with the Regional Trial Court of Legaspi City,
which was docketed therein as Civil Case No. 6767.
On September 19, 1985, Felix Lim filed with the trial court, in the old case, Civil Case
No. 2953, a motion to include as defendants the Po Lam spouses, as well as to execute
the March 11, 1981 resolution of the Court of Appeals. Both motions were denied. On
appeal (CA-G.R. No. 08533-CV), the Court of Appeals upheld the denial. Felix Lim
appealed the decision to this Court.
In the meantime, in June, 1970, or one month after the Po Lam spouses had purchased
the two lots from LAHCO, they leased the commercial building erected on Lot No. 1557
to private respondent Jose Lee for one year. After the contract expired, Jose Lee
continued to occupy the same, paying monthly rentals therefor. However, after
September 15, 1981, Jose Lee refused to pay rentals to the Po Lam spouses, informing
them that he would deposit the same in court since Felix Lim had promised to sell the
property to him. Lees failure to pay rentals prompted the Po Lam spouses to file an
unlawful detainer case against him with the Metropolitan Trial Court of Legaspi City.
On October 29, 1990, Felix Lim assigned all his rights to and interests in the disputed
lots to Jose Lee, who then substituted Felix Lim as party plaintiff, now private
respondent.
On December 19, 1993, the Metropolitan Trial Court of Legaspi City declared the Po
Lam spouses to be the lawful owners of Lot No. 1557. On appeal, said judgment was
affirmed by the regional trial court and thereafter, by the Court of Appeals in CA-G.R.
No. 12316-SP. Aggrieved, Jose Lee filed an appeal with this Court, which consolidated
the case with the appeal filed in CA-G.R. No. 08533-CV where the trial court in the
original 1965 case refused to have petitioners impleaded as defendants, and to execute
the March 11, 1981 resolution of the Court of Appeals, were upheld by the appellate
court.
It must be mentioned that in both CA-G.R. No. 12316-SP and CA-G.R. No. 08533-CV,
the appellate court ruled that the March 11, 1981 resolution of the Court of Appeals in
CA-G.R. No. 44770-R was null and void on the ground that the decision it had issued
earlier on April 29, 1980 had already become final and executory when the above-said
resolution was promulgated. The appellate court ruled that Felix Lims counsel should
not have filed a motion for extension of time to file a motion for reconsideration, the
same being a prohibited pleading under the rule laid down in Habaluyas v. Japson (138
SCRA 46 [1985]). Being a prohibited pleading, it was held that the extension granted
to Lim did not arrest the running of the 15-day period. Thus, when Lim filed his motion
for reconsideration on June 17, 1980, the same was already filed out of time, he having
received a copy of the judgment of affirmance on May 16, 1980.
The above finding of the appellate court was, however, debunked by this Court in G.R.
No. 84145-55 (Lim v. Court of Appeals, 188 SCRA 23 [1988]) where we held that
Habaluyas v. Japson (supra) must be applied prospectively so that when petitioner Lim
filed thru registered mail on May 23, 1980 his motion for extension of time to file a
motion for reconsideration, the motion was deemed properly filed contrary to the
respondent courts ruling that it was a prohibited pleading.
Ruling on the appeals filed from CA-G.R. No. 12316-SP and CA-G.R. No. 08533-CV,
this Court thus declared, on February 18, 1988, in Lim vs. CA cited in the immediately
preceding paragraph that:
ACCORDINGLY, the decisions appealed from are modified. The portions of the
appealed decisions dealing with the March 11, 1981 resolution in CA-G.R. No. 44770-R
are reversed and set aside and the said resolution is ordered reinstated. The decisions
are affirmed in all other respects. Costs against private respondents.
SO ORDERED.
In the interim, Civil Case No. 6767 for reconveyance and annulment of sale and titles
filed by Felix Lim (now Jose Lee) went on until, on January 14, 1992, the Regional Trial
Court of Legaspi City rendered a decision declaring the spouses Roy Po Lam and
Josefa Ong Po Lam as transferees pendente lite and not purchasers in good faith. It
held that the Po Lam spouses were bound by the March 11, 1981 resolution rendered in
CA-G.R. No. 44770-R. The Po Lam spouses forthwith appealed to the Court of
Appeals (CA-G.R. CV No. 37452) but said Court, on June 30, 1993, affirmed the trial
courts decision.
The Po Lam spouses thus filed a petition for certiorari with this Court. On October 13,
1999, we denied the petition and affirmed in toto the decision of the Court of Appeals in
CA-G.R. CV No. 37452. We held that the Po Lam spouses could not be deemed
buyers in good faith, ratiocinating in the process:
As to Lot 1558, there is no question that they (petitioners) cannot be deemed buyers in
good faith. The annotation of lis pendens on TCT No. 2581 which covers Lot 1558,
served as notice to them that the said lot is involved in a pending litigation. Settled is
the rule that one who deals with property subject of a notice of lis pendens cannot
invoke the right of a purchaser in good faith. Neither can he acquire better rights than
those of his predecessor in interest. A transferee pendente lite stands in the shoes of
the transferor and is bound by any judgment or decree which may be rendered for or
against the transferor. It is thus beyond cavil that the herein petitioners, who purchased
Lot 1558 subject of a notice of lis pendens, are not purchasers in good faith and are
consequently bound by the Resolution dated March 11, 1981 of the Court of Appeals.
Can petitioners then be treated purchasers in good faith of Lot 1557 covered by TCT
No. 2580 considering that the notice of lis pendens thereon had been already cancelled
at the time of the sale? We rule in the negative. It is a firmly settled jurisprudence that
a purchaser cannot close his eyes to facts which should put a reasonable man on guard
and claim that he acted in good faith in the belief that there was no defect in the title of
the vendor. His mere refusal to believe that such a defect exist, or his willful closing of
his eyes to the possibility of the existence of a defect on his vendors title, will not make
him innocent purchaser for value, if it develops afterwards that the title was in fact
defective, and it appears that he had notice of such defect as would have led to its
discovery had he acted with that measure of precaution which may reasonably be
required of a prudent man in like situation.
In the case under consideration, there exist circumstances which should have placed
the herein petitioners on guard. As aptly stressed upon by the respondent court, while it
is true that when the petitioners purchased Lot 1557, the notice of lis pendens affecting
said lot had been cancelled, it could not be denied that such inscription appears on the
Transfer Certificate of Title of the said lot together with the cancellation of the notice of
lis pendens. This fact coupled with the non-cancellation of the notice of lis pendens on
Transfer Certificate of Title No. 2581 covering Lot 1558, should have sufficiently alerted
the petitioners vis--vis a possible defect in the title of LACHO, especially so that Lots
1557 and 1558 were simultaneously sold to the petitioners in a single deed of sale
executed on May 28, 1969.
Undeterred, the Po Lam spouses filed a motion for reconsideration, alleging, inter alia,
that it was error to hold them as purchasers in bad faith.
The motion for reconsideration is impressed with merit.
It must be stressed that the sole basis for finding petitioners to be purchasers in bad
faith was the subsistence of the notice of lis pendens inscribed on TCT No. 2581, which
covered Lot No. 1558, at the time petitioners-spouses purchased the lots in dispute.
And since Lot No. 1558 was sold simultaneously with Lot No. 1557, even if the notice of
lis pendens on Lot No. 1557 had already been cancelled, petitioners were held to be
purchasers in bad faith even in regard to Lot No. 1557.
However, it must be pointed out that even if a notice of lis pendens on TCT No. 2581
(Lot No. 1558) was still subsisting at the time petitioners bought the property from
LAHCO, there also was a court order ordering that the annotation be cancelled, as in
fact, it was cancelled on May 20, 1974.
A possessor in good faith has been defined as one who is unaware that there exists a
flaw which invalidates his acquisition of the thing (See Article 526, Civil Code). Good
faith consists in the possessors belief that the person from whom he received the thing
was the owner of the same and could convey his title (Pio v. CA, 198 SCRA 434
[1991]). In this case, while petitioners bought Lot No. 2581 from LAHCO while a notice
of lis pendens was still annotated thereon, there was also existing a court order
canceling the same. Hence, petitioners cannot be considered as being aware of a flaw
which invalidates their acquisition of the thing since the alleged flaw, the notice of lis
pendens, was already being ordered cancelled at the time of the purchase. On this
ground alone, petitioners can already be considered buyers in good faith.
More importantly, however, the notice of lis pendens inscribed on TCT No. 2581 was
cancelled on May 20, 1974, pursuant to the order of the trial court in Civil Case No.
2953. Felix Lim did not move for the reinstatement of the cancelled notices of lis
pendens. What is the effect of this cancellation? To follow the prior ruling of the Court
in the instant case, the cancellation of the notice of lis pendens would have no effect.
Regardless of the cancellation of the notice of lis pendens, the Po Lam spouses are still
considered as having notice of a possible defect in the title of LAHCO, making them
purchasers in bad faith.
As we shall elucidate, hewing to such an interpretation misunderstands the nature and
effect of a notice of lis pendens. The meaning, nature, recording, and effects of a notice
of lis pendens are clearly stated in Section 14, Rule 13 of the 1997 Rules of Civil
Procedure, thus:
SEC. 14. Notice of lis pendens. In an action affecting the title or the right of
possession of real property, the plaintiff and the defendant, when affirmative relief is
claimed in his answer, may record in the office of the registry of deeds of the province in
which the property is situated a notice of the pendency of the action. Said notice shall
contain the names of the parties and the object of the action or defense, and a
description of the property in that province affected thereby. Only from the time of filing
such notice for record shall a purchaser, or encumbrancer of the property affected
thereby, be deemed to have constructive notice of the pendency of the action, and only
of its pendency against the parties designated by their real names.
The notice of lis pendens hereinabove mentioned may be cancelled only upon order of
the court, after proper showing that the notice is for the purpose of molesting the
adverse party, or that it is not necessary to protect the right of the party who caused it to
be recorded.
Lis pendens literally means a pending suit or a pending litigation; and the doctrine of lis
pendens has been defined as the jurisdiction, power, or control which a court acquires
over property involved in a suit, pending the continuance of the action, and until final
judgment therein (54 C.J.S. Lis Pendens 1). A notice of lis pendens is an
announcement to the whole world that a particular real property is in litigation, serving
as a warning that one who acquires an interest over said property does so at his own
risk, or that he gambles on the result of the litigation over the said property (AFPMBAI v.
CA, G.R. No. 104769, March 3, 2000). The filing of a notice of lis pendens charges all
strangers with a notice of the particular litigation referred to therein and, therefore, any
right they may thereafter acquire on the property is subject to the eventuality of the suit
(Laroza v. Guia, 134 SCRA 341 [1985]). Notice of lis pendens has been conceived and,
more often than not, availed of, to protect the real rights of the registrant while the case
involving such rights is pending resolution or decision. With the notice of lis pendens
duly recorded, and while it remains uncancelled, the registrant could rest secure that he
would not lose the property or any part of it during the litigation (People v. Regional Trial
Court of Manila, 178 SCRA 299 [1989]).
The filing of a notice of lis pendens in effect (1) keeps the subject matter of the litigation
within the power of the court until the entry of the final judgment so as to prevent the
defeat of the latter by successive alienations; and (2) binds a purchaser of the land
subject of the litigation to the judgment or decree that will be promulgated thereon
whether such a purchaser is a bona fide purchaser or not; but (3) does not create a
non-existent right or lien (Somes v. Government, 62 Phil. 432 [1935]).
The doctrine of lis pendens is founded upon reason of public policy and necessity, the
purpose of which is to keep the subject matter of the litigation within the power of the
court until the judgment or decree shall have been entered; otherwise by successive
alienations pending the litigation, its judgment or decree shall be rendered abortive and
impossible of execution (Laroza v. Guia, supra; People v. Regional Trial Court of
Manila, supra). The doctrine of lis pendens is based on considerations of public policy
and convenience, which forbid a litigant to give rights to others, pending the litigation, so
as to affect the proceedings of the court then progressing to enforce those rights, the
rule being necessary to the administration of justice in order that decisions in pending
suits may be binding and may be given full effect, by keeping the subject matter in
controversy within the power of the court until final adjudication, that there may be an
end to litigation, and to preserve the property that the purpose of the pending suit may
not be defeated by successive alienations and transfers of title (54 C.J.S. Lis Pendens,
supra).
From the above, it can be seen that the basis of the doctrine of lis pendens is public
policy and convenience, under the view that once a court has taken cognizance of a
controversy, it should be impossible to interfere with consummation of the judgment by
any ad interim transfer, encumbrance, or change of possession (51 Am Jur 2d, Lis
Pendens, 3).
However, to hold that the Po Lam spouses are still bound by the results of the litigation
over the property, despite and notwithstanding the cancellation of the notices of lis
pendens prior to the termination of litigation, would consider the doctrine of lis pendens
as one of implied or constructive notice. This view is erroneous.
While the doctrine of lis pendens is frequently spoken of as one of implied or
constructive notice, according to many authorities, the doctrine is not founded on any
idea of constructive notice, since its true foundation rests, as has already been stated,
on principles of public policy and necessity. The lis pendens annotation, although
considered a general notice to all the world, . . . it is not correct to speak of it as part of
the doctrine of notice; the purchaser pendente lite is affected, not by notice, but
because the law does not allow litigating parties to give to others, pending the litigation,
rights to the property in dispute as to prejudice the opposite party. The doctrine rests
upon public policy, not notice (Tirado v. Sevilla, 188 SCRA 321 [1990]). The doctrine
of lis pendens, as generally understood and applied by the courts of this country, is not
based upon presumption of notice, but upon a public policy, imperatively demanded by
a necessity which can be met and overcome in no other way. It is careless use of
language which has led judges to speak of it as notice, because it happens to have in
some instance similar effect with notice (Smith v. Kimball, 13 P. 801, 36 Kan. 474).
And since the doctrine rests on public policy, not notice, upon the cancellation of the
notice of lis pendens, the Po Lam spouses cannot then be considered as having
constructive notice of any defect in the title of LAHCO as to make them transferees
pendente lite and purchasers in bad faith of Lots No. 1557 and 1558. To hold otherwise
would render nugatory the cancellation of the notices of lis pendens inscribed on TCT
Nos. 2580 and 2581. Differently stated, to hold the Po Lam spouses still bound by the
notice of lis pendens inscribed on TCT No. 2581 despite its subsequent cancellation on
May 20, 1974, would render said cancellation an empty, unavailing, and purposeless
act, which could not have been the intent of the law. Lex neminem cogit ad van seu
inutilia peragenda. The law will not compel one to do useless things.
As adverted to earlier, while the notice of lis pendens is duly recorded and as long as it
remains uncancelled, the litigant can rest secure that he would not lose the property or
any part of it during litigation. Conversely, cancellation of the notice of pendency
terminates the effects of such notice. Therefore, with the cancellation of the notices of
lis pendens on TCT No. 2580 and 2581, the effects of such notice were terminated,
resulting in the Po Lam spouses not being bound thereby. In fine, they cannot be
considered transferees pendente lite and purchasers in bad faith of the property.
Moreover, since its operation is arbitrary and it may be harsh in particular instances, the
doctrine of lis pendens is to be strictly construed and applied. It should not be extended
without strict necessity (54 C.J.S. Lis Pendens 1). To consider the Po Lam spouses
still bound by the notice of lis pendens even after the same had been cancelled would
be extending the doctrine when there is no reason therefor.
Lastly, Felix Lims claim is barred by the equitable principle of laches. At the time the
notices of lis pendens were cancelled in 1969 and 1974, Felix Lim did not move to
reinstate the same. Nor did he act when TCT No. 2580 and 2581 were replaced by
TCT No. 8102 and 13711. Instead, he waited seven years, or until 1981, to have his
claim on the disputed pieces of property recognized. Felix Lims long inaction and
passivity in asserting his rights over the disputed property precludes him from
recovering them from petitioners-spouses.
WHEREFORE, premises considered, the Motion for Reconsideration of petitioners-
spouses Roy Po Lam and Josefa Ong Po Lam is hereby GRANTED. Consequently, the
decision dated October 13, 1999, is VACATED and SET ASIDE. A new judgment is
hereby entered declaring petitioners-spouses to be PURCHASERS IN GOOD FAITH
and Transfer Certificates of Title No. 8102 and 13711 in their name valid, without
prejudice on the part of private respondent Jose Lee to file a separate action for
reimbursement for the value of said property from the Legaspi Avenue Hardware
Company.
SO ORDERED.
7. [G.R. No. 115548. March 5, 1996]
STATE INVESTMENT HOUSE INC., petitioner, vs. COURT OF APPEALS, ET AL.,
respondents.
D E C I S I O N
FRANCISCO, J.:
The factual background of the case, aptly summarized in the decision of the Office of the
President and cited by respondent Court of Appealsx[1] in its assailed decision, and which we
have verified to be supported by the record is herein reproduced as follows:
The uncontroverted facts of the case as recited in the decision of the Office of the President are
as follows:
Records show that, on October 15, 1969, Contract to Sell No. 36 was executed by the Spouses
Canuto and Ma. Aranzazu Oreta, and the Solid Homes, Inc. (SOLID), involving a parcel of land
identified as Block No. 8, Lot No. 1, Phase I of the Capitol Park Homes Subdivision, Quezon
City, containing 511 square meters for a consideration of P39,347.00. Upon signing of the
contract, the spouses Oreta made payment amounting to P7,869.40, with the agreement that the
balance shall be payable in monthly installments of P45 1.70, at 12% interest per annum.
On November 4, 1976, SOLID executed several real estate mortgage contracts in favor of State
Investment Homes, (sic) Inc. (STATE) over its subdivided parcels of land, one of which is the
subject lot covered by Transfer Certificate of Title No. 209642.
For Failure of SOLID to comply with its mortgage obligations contract, STATE extra-judicially
foreclosed the mortgaged properties including the subject lot on April 6, 1983, with the
corresponding certificate of sale issued therefor to STATE annotated at the back of the titles
covering the said properties on October 13, 1983.
On June 23, 1984, SOLID thru a Memorandum of Agreement negotiated for the deferment of
consolidation of ownership over the foreclosed properties by committing to redeem the
properties from STATE.
On August 15, 1988, the spouses filed a complaint before the Housing and Land Use Regulatory
Board, HLRB, against the developer SOLID and STATE for failure on the part of SOLID to
execute the necessary absolute deed of sale as well as to deliver title to said property x x x in
violation of the contract to sell x x x, despite full payment of the purchase price as of January 7,
1981. In its Answer, SOLID, by way of alternative defense, alleged that the obligations under the
Contract to Sell has become so difficult x x x the herein respondents be partially released from
said obligation by substituting subject lot with another suitable residential lot from another
subdivision which respondents own/operates. Upon the other hand, STATE, to which the
subject lot was mortgaged, averred that unless SOLID pays the redemption price of
P125,1955.00, (sic) it has a right to hold on and not release the foreclosed properties.
On May 23, 1989, the Office of Appeals, Adjudication and Legal Affairs (OAALA) rendered a
decision the decretal portion of which reads:
1. Ordering respondent, State Investment House, Inc. to execute a Deed of Conveyance of Lot 1,
B lock 8, in Capital Park Homes Subdivision in favor of complainants and to deliver to the latter
the corresponding certificate of title;
2. Ordering respondent, Solid Homes, Inc. to pay State Investment House, Inc. that portion of its
loan which corresponds to the value of the lot as collateral;
3. Ordering respondent, Solid Homes, Inc. to pay to this Board the amount of Six Thousand
Pesos (P6,000.00) as administrative fine in accordance with Section 25 in relation to Section 38
of P.D. 957.
Both the STATE and SOLID appealed to the Board of Commissioners, HLRB, which affirmed
on June 5, 1990 the OAALAs decision (Annex C of the Petition; ibid., p. 34). Again, both
STATE and SOLID appealed the decision of the Board of Commissioners, HLRB, to the Office
of the President which dismissed the twin appeals on February 26, 1993.
Petitioner filed with the Supreme Court this petition for review of decision of the Office of the
President where it was docketed as G.R. No. 109364. However, in a resolution dated May 13,
1993, the Supreme Court referred this case to this Court for proper disposition. On the other
hand, SOLID does not appear to have joined herein petitioner in this petition for review.xi[2]
[Italics added.]
In a decision dated May 19, 1994, respondent court sustained the judgment of the Office of the
President. Hence, this petition substantially anchored on these two alleged errors, namely: (1)
error in ruling that private respondent spouses Oretas unregistered rights over the subject
property are superior to the registered mortgage rights of petitioner State Investment House, Inc.
(STATE); and (2) error in not applying the settled rule that that persons dealing with property
covered by torrens certificate of title are not required to go beyond what appears on the face of
the title.
At the outset, we note that herein petitioner argues more extensively on the second assigned
issue, than on the first. In fact, petitioner admits the superior rights of respondents-spouses Oreta
over the subject property as it did not pray for the nullification of the contract between
respondents-spouses and SOLID, but instead asked for the payment of the release value of the
property in question, plus interest, attorneys fees and costs of suit against SOLID or, in case of
the latters inability to pay, against respondents-spouses before it can be required to release the
title of the subject property in favor of the respondent spouses.xii[3] And even if we were to pass
upon the first assigned error, we find respondent courts ruling on the matter to be well-founded.
STATEs registered mortgage right over the property is inferior to that of respondents-spouses
unregistered right. The unrecorded sale between respondents-spouses and SOLID is preferred
for the reason that if the original owner (SOLID, in this case) had parted with his ownership of
the thing sold then he no longer had ownership and free disposal of that thing so as to be able to
mortgage it again.xiii[4] Registration of the mortgage is of no moment since it is understood to be
without prejudice to the better right of third parties.xiv[5]
Anent the second issue, petitioner asserts that a purchaser or mortgagee of land/s covered under
the Torrens System is not required to do more than rely upon the certificate of title [for] it is
enough that the [purchaser or mortgagee] examines the pertinent certificate of title [without]
need [of] look[ing] beyond such title.xv[6]
As a general rule, where there is nothing in the certificate of title to indicate any cloud or vice in
the ownership of the property, or any encumbrance thereon, the purchaser is not required to
explore further than what the Torrens Title upon its face indicates in quest for any hidden defect
or inchoate right that may subsequently defeat his right thereto. This rule, however, admits of an
exception as where the purchaser or mortgagee, has knowledge of a defect or lack of title in his
vendor, or that he was aware of sufficient facts to induce a reasonably prudent man to inquire
into the status of the title of the property in litigation.xvi[7] In this case, petitioner was well aware
that it was dealing with SOLID, a business entity engaged in the business of selling subdivision
lots. In fact, the OAALA found that at the time the lot was mortgaged, respondent State
Investment House, Inc., [now petitioner] had been aware of the lots location and that said lot
formed part of Capital Park/Homes Subdivision.xvii[8] In Sunshine Finance and investment Corp.
v. Intermediate Appellate Court,xviii[9] the Court, noting petitioner therein to be a financing
corporation, deviated from the general rule that a purchaser or mortgagee of a land is not
required to look further than what appears on the face of the Torrens Title. Thus:
Nevertheless, we have to deviate from the general rule because of the failure of the
petitioner in this case to take the necessary precautions to ascertain if there was any flaw in
the title of the Nolascos and to examine the condition of the property they sought to
mortgage. The petitioner is an investment and financing corporation. We presume it is
experienced in its business. Ascertainment of the status and condition of properties offered
to it as security for the loans it extends must be a standard and indispensable part of its
operations. Surely, it cannot simply rely on an examination of a Torrens certificate to
determine what the subject property looks like as its condition is not apparent in the
document. The land might be in a depressed area. There might be squatters on it. It might be
easily inundated. It might be an interior lot, without convenient access. These and other similar
factors determine the value of the property and so should be of practical concern to the
petitioner.
xxx xxx xxx
Our conclusion might have been different if the mortgagee were an ordinary individual or
company without the expertise of the petitioner in the mortgage and sale of registered land or if
the land mortgaged were some distance from the mortgagee and could not be conveniently
inspected. But there were no such impediments in this case. The facilities of the petitioner were
not so limited as to prevent it from making a more careful examination of the land to assure itself
that there were no unauthorized persons in possession.xix[10]
[Emphasis supplied.]
The above-enunciated rule should apply in this case as petitioner admits of being a financing
institution.xx[11] We take judicial notice of the uniform practice of financing institutions to
investigate, examine and assess the real property offered as security for any loan application
especially where, as in this case, the subject property is a subdivision lot located at Quezon City,
M.M. It is a settled rule that a purchaser or mortgagee cannot close its eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor or mortgagor.xxi[12] Petitioners constructive
knowledge of the defect in the title of the subject property, or lack of such knowledge due to its
negligence, takes the place of registration of the rights of respondents-spouses. Respondent
court thus correctly ruled that petitioner was not a purchaser or mortgagee in good faith; hence
petitioner can not solely rely on what merely appears on the face of the Torrens Title.
ACCORDINGLY, finding no reversible error in the assailed judgment, the same is hereby
AFFIRMED
SO ORDERED.
8. [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 Appealsxxii[1] in
CA-G.R. CV No. 28549 entitled SPOUSES TIMOTEO PIEDA, ET. AL. vs.
DEVELOPMENT BANK OF THE PHILIPPINES which affirmed the decision of the Regional
Trial Court (RTC), Branch 16xxiii[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 corresponding Certificate of Sale, the sheriff indicated 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 case. 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 Deed of Sale was executed in DBPs favor,
which was registered 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 1978xxiv[3] which
declared that lands covered by P.D. No. 27xxv[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.xxvi[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.xxvii[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 1529xxviii[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 Certificate of Sale had not yet
lapsed and that their offer to redeem the foreclosed property was made well within said period of
redemption.xxix[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 119xxx[9] of CA No. 141xxxi[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; P20,000.00 as attorneys fees; P5,000.00 as litigation expenses and
costs.
SO ORDERED.xxxii[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 and defied what was written on the Sheriffs Certificate of Sale,
the PIEDAS were entitled to recover 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. 2653xxxiii[12] on February 22, 1982. Thus, the right of the PIEDAS to redeem the
property has become moot and academic. Finally, the award of attorneys fees amounting to
P10,000.00xxxiv[13] was justified considering that the PIEDAS were compelled to protect
their interests.xxxv[14]
DBPs Motion for Reconsiderationxxxvi[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.xxxvii[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. 7xxxviii[17] of Act No.
3135xxxix[18] allows the mortgagee-buyer to take possession of the mortgaged property even
during the redemption period. Third, DBPs act of consolidating 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. 44xl[19] and 46xli[20] of Presidential Decree No.
1529xlii[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 could not have been in bad faith when it denied the PIEDAS offer to redeem the
property since 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. xxxxliii[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 and find DBPs contentions 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.xliv[23] Good faith is always presumed, and upon him
who alleges bad faith on the part of a possessor rests the burden of proof.xlv[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.
Respondent PIEDAS argue that DBPs bad faith stems from the fact that DBP consolidated
title over the disputed property despite the statement in the Sheriffs Certificate of Sale to the
effect that said land 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
Procedurexlvi[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
consolidatexlvii[26] and to possessxlviii[27] the property.xlix[28] Accordingly, DBPs act of
consolidating 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 acts cannot therefore be tainted with bad faith.
The right of DBP to consolidate its title and take possession of the subject property is not
affected by the PIEDAS right to repurchase said property within five years from the date of
conveyance granted by Section 119 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.l[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.li[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 conveyed to him or that he
consolidated his title thereto by reason of a redemptioners failure to exercise his right of
redemption.lii[31] It is also settled 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 period of repurchase allowed in an extrajudicial
foreclosure.liii[32] Thus DBPs consolidation of title did 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.liv[33]
In the case of Maneclang vs. Baun,lv[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.lvi[35] In the present case, DBP was
served summons on June 30, 1982.lvii[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 delete the award for attorneys fees. Although attorneys fees may be awarded if the
claimant 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 soughtlviii[37], we hold that
DBPs acts were clearly not unjustified.
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; P20,000.00 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.
9. G.R. No. 57667 May 28, 1990
SAN MIGUEL CORPORATION, petitioner,
vs.
COURT OF APPEALS and DIRECTOR OF LANDS, respondents.
Ciriaco Lopez, Jr. & Associates for petitioner.

FERNAN, C.J .:
In this petition for review on certiorari, San Miguel Corporation seeks the reversal of the decision of the Court of Appeals
1
denying its
application for registration of a parcel of land in view of its failure to show entitlement thereto.
On December 23, 1975, petitioner San Miguel Corporation (SMC for brevity) purchased from Silverio
Perez Lot 684, a 14,531 square-meter parcel of land located in Sta. Anastacia, Sto. Tomas, Batangas, in
consideration of the sum of P133,084.80.
2
On February 21,1977, claiming ownership in fee simple of the
land, SMC filed before the then Court of First Instance, now Regional Trial Court of Batangas an
application for its registration under the Land Registration Act.
The Solicitor General, appearing for the Republic of the Philippines, opposed the application for
registration contending that SMC's claim of ownership in fee simple on the basis of a Spanish title or grant
could no longer be availed of by the applicant as the six-month period from February 16, 1976 prescribed
by Presidential Decree No. 892 had elapsed; that the parcel of land in question is part of the public
domain, and that SMC, being a private corporation, is disqualified under Section 11, Article XIV of the
Constitution from holding alienable lands of the public domain. The Solicitor General thereafter authorized
the Provincial Fiscal of Batangas to appear in said case, subject to his supervision and control.
At the initial and only hearing held on October 12, 197 7, the Court, upon motion of SMC and there being
no opposition to the application except that of the Republic of the Philippines, issued an order of general
default. SMC was allowed to mark documentary evidence to establish jurisdictional facts and to present
additional evidence before the Clerk of Court who was appointed Commissioner for that purpose.
On December 12, 1977, the lower court, presided by Judge Eduardo C. Abaya, rendered a decision
granting the application for registration and adjudicating the property in favor of SMC.
The Solicitor General appealed to the Court of Appeals. In its decision of March 23, 1981, said court
reversed the decision of the lower court and declared the parcel of land involved as public land. Hence,
the instant petition with SMC submitting the following alleged "grave errors" of the Court of Appeals for
this Court's resolution: (1) the Court of Appeals' failure to hold that "prescription is a mode of acquiring
title or ownership of land and that the title thus acquired is registrable"; (2) the Court of Appeals' disregard
of SMC's evidence "not on the basis of controverting evidence but on the basis of unfounded suppositions
and conjectures," and (3) the Court of Appeals' reversal of the factual findings of the trial court which had
the opportunity of observing the demeanor and sincerity of the witnesses.
3

We need not dwell lengthily on the third "error" assigned by petitioner. Suffice it to state that while trial
courts may have the opportunity to observe the demeanor of witnesses, their factual findings may
nonetheless be reversed by the Court of Appeals, the appellate court vested by law to resolve both legal
and factual issues, if, by the evidence on record, it appears that the trial court involved erred. What is of
primary concern to us in this case is the issue of whether or not the evidence presented by the petitioner
is sufficient to warrant a ruling that SMC and/or its predecessor-in-interest has a registrable right over Lot
684.
Open, exclusive and undisputed possession of alienable public land for the period prescribed by law
creates the legal fiction whereby the land, upon completion of the requisite period ipso-jure and without
the need of judicial or other sanction, ceases to be public land and becomes private property.
4
Such
open, continuous, exclusive and notorious occupation of the disputed properties for more than 30 years
must, however, be conclusively established.
6
This quantum of proof is necessary to avoid the erroneous
validation of actually fictitious claims of possession over the property in dispute.
In this case, petitioner's claim that its predecessor-in-interest had open, exclusive and undisputed
possession of Lot 684 for more than thirty years is anchored on certain documentary and testimonial
evidence. Its documentary evidence consist of tax declaration No. 923 wherein it appears that in 1974,
Silverio Perez declared as his own for taxation purposes, a certain riceland with an area of 1.5657
hectares located in Sta. Anastacia, Sto. Tomas, Batangas,
6
and a certification of the Office of the
Treasurer of Sto. Tomas to the effect that in 1977, Silverio Perez paid realty taxes for the land subject of
tax declaration no. 923.
7

Tax declarations and receipts are not conclusive evidence of ownership or right of possession over a
piece of land.
8
They are merely indicia of a claim of ownership.
9
Tax declarations only become strong
evidence of ownership of land acquired by prescription, a mode of acquisition of ownership relied upon by
petitioner in this case, when accompanied by proof of actual possession.
10

Such proof of actual possession was sought to be provided by the testimony of vendor Silverio Perez that
he had been in possession of the property since 1933 until he sold it to SMC in 1975; that the property
was given to him by his parents when he got married; that no document evidenced that transfer; that it
had been in the possession of his parents since 1925; that he had declared the property in his name for
taxation purposes; that he had paid taxes therefor, and that he was in peaceful, continuous and exclusive
possession of the property until its sale to SMC.
11

Petitioner did not present other witnesses to corroborate Perez' testimony. Its other witness, Antonio M.
de las Alas, Jr., a lawyer of the petitioner, simply testified that he handled the negotiations for the
purchase of the property; that SMC was authorized to own and acquire property as shown by its articles
of incorporation and by-laws; that since its acquisition in 1975, the property had been used as a hatchery
farm of SMC; that SMC's possession in the concept of an owner had been continuous, adverse and
against the whole world, and that the land was declared for taxation purposes still in the name of Silverio
Perez .
12

We hold that there is paucity of evidence of actual, notorious and exclusive possession of the property on
the part of vendor Silverio Perez so as to attach to it the character of an express grant from the
govemment.
13
Indeed, as correctly held by the Court of Appeals, Silverio Perez's testimony, being
uncorroborated, is simply self-serving and hence, undeserving of any weight.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.
10. G.R. No. 106063 November 21, 1996
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, INC., petitioners,
vs.
MAYFAIR THEATER, INC., respondent.

HERMOSISIMA, JR., J .:
Before us is a petition for review of the decision
1
of the Court of
Appeals
2
involving questions in the resolution of which the respondent appellate court analyzed
and interpreted particular provisions of our laws on contracts and sales. In its assailed decision,
the respondent court reversed the trial court
3
which, in dismissing the complaint for specific
performance with damages and annulment of contract,
4
found the option clause in the lease
contracts entered into by private respondent Mayfair Theater, Inc. (hereafter, Mayfair) and
petitioner Carmelo & Bauermann, Inc. (hereafter, Carmelo) to be impossible of performance and
unsupported by a consideration and the subsequent sale of the subject property to petitioner
Equatorial Realty Development, Inc. (hereafter, Equatorial) to have been made without any
breach of or prejudice to, the said lease contracts.
5

We reproduce below the facts as narrated by the respondent court, which narration, we note, is
almost verbatim the basis of the statement of facts as rendered by the petitioners in their
pleadings:
Carmelo owned a parcel of land, together with two 2-storey buildings constructed thereon
located at Claro M Recto Avenue, Manila, and covered by TCT No. 18529 issued in its
name by the Register of Deeds of Manila.
On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the latter's
lease of a portion of Carmelo's property particularly described, to wit:
A PORTION OF THE SECOND FLOOR of the two-storey building,
situated at C.M. Recto Avenue, Manila, with a floor area of 1,610 square
meters.
THE SECOND FLOOR AND MEZZANINE of the two-storey building,
situated at C.M. Recto Avenue, Manila, with a floor area of 150 square
meters.
for use by Mayfair as a motion picture theater and for a term of twenty (20) years. Mayfair
thereafter constructed on the leased property a movie house known as "Maxim Theatre."
Two years later, on March 31, 1969, Mayfair entered into a second contract of lease with
Carmelo for the lease of another portion of Carmelo's property, to wit:
A PORTION OF THE SECOND FLOOR of the two-storey building,
situated at C.M. Recto Avenue, Manila, with a floor area of 1,064 square
meters.
THE TWO (2) STORE SPACES AT THE GROUND FLOOR and
MEZZANINE of the two-storey building situated at C.M. Recto Avenue,
Manila, with a floor area of 300 square meters and bearing street
numbers 1871 and 1875,
for similar use as a movie theater and for a similar term of twenty (20) years. Mayfair put
up another movie house known as "Miramar Theatre" on this leased property.
Both contracts of lease provides (sic) identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the
LESSEE shall be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other
than the LESSEE, the LESSOR is bound and obligated, as it hereby
binds and obligates itself, to stipulate in the Deed of Sale hereof that the
purchaser shall recognize this lease and be bound by all the terms and
conditions thereof.
Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry Yang,
President of Mayfair, through a telephone conversation that Carmelo was desirous of
selling the entire Claro M. Recto property. Mr. Pascal told Mr. Yang that a certain Jose
Araneta was offering to buy the whole property for US Dollars 1,200,000, and Mr. Pascal
asked Mr. Yang if the latter was willing to buy the property for Six to Seven Million Pesos.
Mr. Yang replied that he would let Mr. Pascal know of his decision. On August 23, 1974,
Mayfair replied through a letter stating as follows:
It appears that on August 19, 1974 your Mr. Henry Pascal informed our
client's Mr. Henry Yang through the telephone that your company desires
to sell your above-mentioned C.M. Recto Avenue property.
Under your company's two lease contracts with our client, it is uniformly
provided:
8. That if the LESSOR should desire to sell the leased premises the
LESSEE shall be given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other
than the LESSEE, the LESSOR is bound and obligated, as it is (sic)
herebinds (sic) and obligates itself, to stipulate in the Deed of Sale
thereof that the purchaser shall recognize this lease and be bound by all
the terms and conditions hereof (sic).
Carmelo did not reply to this letter.
On September 18, 1974, Mayfair sent another letter to Carmelo purporting to express
interest in acquiring not only the leased premises but "the entire building and other
improvements if the price is reasonable. However, both Carmelo and Equatorial
questioned the authenticity of the second letter.
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue land and
building, which included the leased premises housing the "Maxim" and "Miramar"
theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum of
P11,300,000.00.
In September 1978, Mayfair instituted the action a quo for specific performance and
annulment of the sale of the leased premises to Equatorial. In its Answer, Carmelo
alleged as special and affirmative defense (a) that it had informed Mayfair of its desire to
sell the entire C.M. Recto Avenue property and offered the same to Mayfair, but the latter
answered that it was interested only in buying the areas under lease, which was
impossible since the property was not a condominium; and (b) that the option to purchase
invoked by Mayfair is null and void for lack of consideration. Equatorial, in its Answer,
pleaded as special and affirmative defense that the option is void for lack of consideration
(sic) and is unenforceable by reason of its impossibility of performance because the
leased premises could not be sold separately from the other portions of the land and
building. It counterclaimed for cancellation of the contracts of lease, and for increase of
rentals in view of alleged supervening extraordinary devaluation of the currency.
Equatorial likewise cross-claimed against co-defendant Carmelo for indemnification in
respect of Mayfair's claims.
During the pre-trial conference held on January 23, 1979, the parties stipulated on the
following:
1. That there was a deed of sale of the contested premises by the
defendant Carmelo . . . in favor of defendant Equatorial . . .;
2. That in both contracts of lease there appear (sic) the stipulation
granting the plaintiff exclusive option to purchase the leased premises
should the lessor desire to sell the same (admitted subject to the
contention that the stipulation is null and void);
3. That the two buildings erected on this land are not of the condominium
plan;
4. That the amounts stipulated and mentioned in paragraphs 3 (a) and
(b) of the contracts of lease constitute the consideration for the plaintiff's
occupancy of the leased premises, subject of the same contracts of
lease, Exhibits A and B;
xxx xxx xxx
6. That there was no consideration specified in the option to buy
embodied in the contract;
7. That Carmelo & Bauermann owned the land and the two buildings
erected thereon;
8. That the leased premises constitute only the portions actually
occupied by the theaters; and
9. That what was sold by Carmelo & Bauermann to defendant Equatorial
Realty is the land and the two buildings erected thereon.
xxx xxx xxx
After assessing the evidence, the court a quo rendered the appealed decision, the
decretal portion of which reads as follows:
WHEREFORE, judgment is hereby rendered:
(1) Dismissing the complaint with costs against the plaintiff;
(2) Ordering plaintiff to pay defendant Carmelo & Bauermann
P40,000.00 by way of attorney's fees on its counterclaim;
(3) Ordering plaintiff to pay defendant Equatorial Realty P35,000.00 per
month as reasonable compensation for the use of areas not covered by
the contract (sic) of lease from July 31, 1979 until plaintiff vacates said
area (sic) plus legal interest from July 31, 1978; P70,000 00 per month
as reasonable compensation for the use of the premises covered by the
contracts (sic) of lease dated (June 1, 1967 from June 1, 1987 until
plaintiff vacates the premises plus legal interest from June 1, 1987;
P55,000.00 per month as reasonable compensation for the use of the
premises covered by the contract of lease dated March 31, 1969 from
March 30, 1989 until plaintiff vacates the premises plus legal interest
from March 30, 1989; and P40,000.00 as attorney's fees;
(4) Dismissing defendant Equatorial's crossclaim against defendant
Carmelo & Bauermann.
The contracts of lease dated June 1, 1967 and March 31, 1969 are
declared expired and all persons claiming rights under these contracts
are directed to vacate the premises.
6

The trial court adjudged the identically worded paragraph 8 found in both aforecited lease
contracts to be an option clause which however cannot be deemed to be binding on Carmelo
because of lack of distinct consideration therefor.
The court a quo ratiocinated:
Significantly, during the pre-trial, it was admitted by the parties that the option in the
contract of lease is not supported by a separate consideration. Without a consideration,
the option is therefore not binding on defendant Carmelo & Bauermann to sell the C.M.
Recto property to the former. The option invoked by the plaintiff appears in the contracts
of lease . . . in effect there is no option, on the ground that there is no consideration.
Article 1352 of the Civil Code, provides:
Contracts without cause or with unlawful cause, produce no effect
whatever. The cause is unlawful if it is contrary to law, morals, good
custom, public order or public policy.
Contracts therefore without consideration produce no effect whatsoever. Article 1324
provides:
When the offeror has allowed the offeree a certain period to accept, the
offer may be withdrawn at any time before acceptance by communicating
such withdrawal, except when the option is founded upon consideration,
as something paid or promised.
in relation with Article 1479 of the same Code:
A promise to buy and sell a determine thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determine thing for a
price certain is binding upon the promissor if the promise is supported by
a consideration distinct from the price.
The plaintiff cannot compel defendant Carmelo to comply with the promise unless the
former establishes the existence of a distinct consideration. In other words, the promisee
has the burden of proving the consideration. The consideration cannot be presumed as in
Article 1354:
Although the cause is not stated in the contract, it is presumed that it
exists and is lawful unless the debtor proves the contrary.
where consideration is legally presumed to exists. Article 1354 applies to contracts in
general, whereas when it comes to an option it is governed particularly and more
specifically by Article 1479 whereby the promisee has the burden of proving the
existence of consideration distinct from the price. Thus, in the case of Sanchez vs. Rigor,
45 SCRA 368, 372-373, the Court said:
(1) Article 1354 applies to contracts in general, whereas the second
paragraph of Article 1479 refers to sales in particular, and, more
specifically, to an accepted unilateral promise to buy or to sell. In other
words, Article 1479 is controlling in the case at bar.
(2) In order that said unilateral promise may be binding upon the
promissor, Article 1479 requires the concurrence of a condition, namely,
that the promise be supported by a consideration distinct from the price.
Accordingly, the promisee cannot compel the promissor to comply with
the promise, unless the former establishes the existence of said distinct
consideration. In other words, the promisee has the burden of proving
such consideration. Plaintiff herein has not even alleged the existence
thereof in his complaint.
7

It follows that plaintiff cannot compel defendant Carmelo & Bauermann to sell the C.M.
Recto property to the former.
Mayfair taking exception to the decision of the trial court, the battleground shifted to the
respondent Court of Appeals. Respondent appellate court reversed the court a quo and rendered
judgment:
1. Reversing and setting aside the appealed Decision;
2. Directing the plaintiff-appellant Mayfair Theater Inc. to pay and return to Equatorial the
amount of P11,300,000.00 within fifteen (15) days from notice of this Decision, and
ordering Equatorial Realty Development, Inc. to accept such payment;
3. Upon payment of the sum of P11,300,000, directing Equatorial Realty Development,
Inc. to execute the deeds and documents necessary for the issuance and transfer of
ownership to Mayfair of the lot registered under TCT Nos. 17350, 118612, 60936, and
52571; and
4. Should plaintiff-appellant Mayfair Theater, Inc. be unable to pay the amount as
adjudged, declaring the Deed of Absolute Sale between the defendants-appellants
Carmelo & Bauermann, Inc. and Equatorial Realty Development, Inc. as valid and
binding upon all the parties.
8

Rereading the law on the matter of sales and option contracts, respondent Court of Appeals
differentiated between Article 1324 and Article 1479 of the Civil Code, analyzed their application
to the facts of this case, and concluded that since paragraph 8 of the two lease contracts does
not state a fixed price for the purchase of the leased premises, which is an essential element for a
contract of sale to be perfected, what paragraph 8 is, must be a right of first refusal and not an
option contract. It explicated:
Firstly, the court a quo misapplied the provisions of Articles 1324 and 1479, second
paragraph, of the Civil Code.
Article 1324 speaks of an "offer" made by an offeror which the offeree may or may not
accept within a certain period. Under this article, the offer may be withdrawn by the
offeror before the expiration of the period and while the offeree has not yet accepted the
offer. However, the offer cannot be withdrawn by the offeror within the period if a
consideration has been promised or given by the offeree in exchange for the privilege of
being given that period within which to accept the offer. The consideration is distinct from
the price which is part of the offer. The contract that arises is known as option. In the
case of Beaumont vs. Prieto, 41 Phil. 670, the Supreme court, citing Bouvier, defined an
option as follows: "A contract by virtue of which A, in consideration of the payment of a
certain sum to B, acquires the privilege of buying from or selling to B, certain securities or
properties within a limited time at a specified price," (pp. 686-7).
Article 1479, second paragraph, on the other hand, contemplates of an "accepted
unilateral promise to buy or to sell a determinate thing for a price within (which) is binding
upon the promisee if the promise is supported by a consideration distinct from the price."
That "unilateral promise to buy or to sell a determinate thing for a price certain" is called
an offer. An "offer", in laws, is a proposal to enter into a contract (Rosenstock vs. Burke,
46 Phil. 217). To constitute a legal offer, the proposal must be certain as to the object, the
price and other essential terms of the contract (Art. 1319, Civil Code).
Based on the foregoing discussion, it is evident that the provision granting Mayfair "30-
days exclusive option to purchase" the leased premises is NOT AN OPTION in the
context of Arts. 1324 and 1479, second paragraph, of the Civil Code. Although the
provision is certain as to the object (the sale of the leased premises) the price for which
the object is to be sold is not stated in the provision Otherwise stated, the questioned
stipulation is not by itself, an "option" or the "offer to sell" because the clause does not
specify the price for the subject property.
Although the provision giving Mayfair "30-days exclusive option to purchase" cannot be
legally categorized as an option, it is, nevertheless, a valid and binding stipulation. What
the trial court failed to appreciate was the intention of the parties behind the questioned
proviso.
xxx xxx xxx
The provision in question is not of the pro-forma type customarily found in a contract of
lease. Even appellees have recognized that the stipulation was incorporated in the two
Contracts of Lease at the initiative and behest of Mayfair. Evidently, the stipulation was
intended to benefit and protect Mayfair in its rights as lessee in case Carmelo should
decide, during the term of the lease, to sell the leased property. This intention of the
parties is achieved in two ways in accordance with the stipulation. The first is by giving
Mayfair "30-days exclusive option to purchase" the leased property. The second is, in
case Mayfair would opt not to purchase the leased property, "that the purchaser (the new
owner of the leased property) shall recognize the lease and be bound by all the terms
and conditions thereof."
In other words, paragraph 8 of the two Contracts of lease, particularly the stipulation
giving Mayfair "30-days exclusive option to purchase the (leased premises)," was meant
to provide Mayfair the opportunity to purchase and acquire the leased property in the
event that Carmelo should decide to dispose of the property. In order to realize this
intention, the implicit obligation of Carmelo once it had decided to sell the leased
property, was not only to notify Mayfair of such decision to sell the property, but, more
importantly, to make an offer to sell the leased premises to Mayfair, giving the latter a fair
and reasonable opportunity to accept or reject the offer, before offering to sell or selling
the leased property to third parties. The right vested in Mayfair is analogous to the right of
first refusal, which means that Carmelo should have offered the sale of the leased
premises to Mayfair before offering it to other parties, or, if Carmelo should receive any
offer from third parties to purchase the leased premises, then Carmelo must first give
Mayfair the opportunity to match that offer.
In fact, Mr. Pascal understood the provision as giving Mayfair a right of first refusal when
he made the telephone call to Mr. Yang in 1974. Mr. Pascal thus testified:
Q Can you tell this Honorable Court how you made the
offer to Mr. Henry Yang by telephone?
A I have an offer from another party to buy the property
and having the offer we decided to make an offer to
Henry Yang on a first-refusal basis. (TSN November 8,
1983, p. 12.).
and on cross-examination:
Q When you called Mr. Yang on August 1974 can you
remember exactly what you have told him in connection
with that matter, Mr. Pascal?
A More or less, I told him that I received an offer from
another party to buy the property and I was offering him
first choice of the enter property. (TSN, November 29,
1983, p. 18).
We rule, therefore, that the foregoing interpretation best renders effectual the intention of
the parties.
9

Besides the ruling that paragraph 8 vests in Mayfair the right of first refusal as to which the
requirement of distinct consideration indispensable in an option contract, has no application,
respondent appellate court also addressed the claim of Carmelo and Equatorial that assuming
arguendo that the option is valid and effective, it is impossible of performance because it covered
only the leased premises and not the entire Claro M. Recto property, while Carmelo's offer to sell
pertained to the entire property in question. The Court of Appeals ruled as to this issue in this
wise:
We are not persuaded by the contentions of the defendants-appellees. It is to be noted
that the Deed of Absolute Sale between Carmelo and Equatorial covering the whole
Claro M. Recto property, made reference to four titles: TCT Nos. 17350, 118612, 60936
and 52571. Based on the information submitted by Mayfair in its appellant's Brief (pp. 5
and 46) which has not been controverted by the appellees, and which We, therefore, take
judicial notice of the two theaters stand on the parcels of land covered by TCT No. 17350
with an area of 622.10 sq. m and TCT No. 118612 with an area of 2,100.10 sq. m. The
existence of four separate parcels of land covering the whole Recto property
demonstrates the legal and physical possibility that each parcel of land, together with the
buildings and improvements thereof, could have been sold independently of the other
parcels.
At the time both parties executed the contracts, they were aware of the physical and
structural conditions of the buildings on which the theaters were to be constructed in
relation to the remainder of the whole Recto property. The peculiar language of the
stipulation would tend to limit Mayfair's right under paragraph 8 of the Contract of Lease
to the acquisition of the leased areas only. Indeed, what is being contemplated by the
questioned stipulation is a departure from the customary situation wherein the buildings
and improvements are included in and form part of the sale of the subjacent land.
Although this situation is not common, especially considering the non-condominium
nature of the buildings, the sale would be valid and capable of being performed. A sale
limited to the leased premises only, if hypothetically assumed, would have brought into
operation the provisions of co-ownership under which Mayfair would have become the
exclusive owner of the leased premises and at the same time a co-owner with Carmelo of
the subjacent land in proportion to Mayfair's interest over the premises sold to it.
10

Carmelo and Equatorial now comes before us questioning the correctness and legal basis for the
decision of respondent Court of Appeals on the basis of the following assigned errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT THE OPTION
CLAUSE IN THE CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST
REFUSAL PROVISO. IN DOING SO THE COURT OF APPEALS DISREGARDED THE
CONTRACTS OF LEASE WHICH CLEARLY AND UNEQUIVOCALLY PROVIDE FOR
AN OPTION, AND THE ADMISSION OF THE PARTIES OF SUCH OPTION IN THEIR
STIPULATION OF FACTS.
II
WHETHER AN OPTION OR RIGHT OF FIRST REFUSAL, THE COURT OF APPEALS
ERRED IN DIRECTING EQUATORIAL TO EXECUTE A DEED OF SALE EIGHTEEN
(18) YEARS AFTER MAYFAIR FAILED TO EXERCISE ITS OPTION (OR, EVEN ITS
RIGHT OF FIRST REFUSAL ASSUMING IT WAS ONE) WHEN THE CONTRACTS
LIMITED THE EXERCISE OF SUCH OPTION TO 30 DAYS FROM NOTICE.
III
THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DIRECTED
IMPLEMENTATION OF ITS DECISION EVEN BEFORE ITS FINALITY, AND WHEN IT
GRANTED MAYFAIR A RELIEF THAT WAS NOT EVEN PRAYED FOR IN THE
COMPLAINT.
IV
THE COURT OF APPEALS VIOLATED ITS OWN INTERNAL RULES IN THE
ASSIGNMENT OF APPEALED CASES WHEN IT ALLOWED THE SAME DIVISION XII,
PARTICULARLY JUSTICE MANUEL HERRERA, TO RESOLVE ALL THE MOTIONS IN
THE "COMPLETION PROCESS" AND TO STILL RESOLVE THE MERITS OF THE
CASE IN THE "DECISION STAGE".
11


We shall first dispose of the fourth assigned error respecting alleged irregularities in the raffle of
this case in the Court of Appeals. Suffice it to say that in our Resolution,
12
dated December 9,
1992, we already took note of this matter and set out the proper applicable procedure to be the
following:
On September 20, 1992, counsel for petitioner Equatorial Realty Development, Inc. wrote
a letter-complaint to this Court alleging certain irregularities and infractions committed by
certain lawyers, and Justices of the Court of Appeals and of this Court in connection with
case CA-G.R. CV No. 32918 (now G.R. No. 106063). This partakes of the nature of an
administrative complaint for misconduct against members of the judiciary. While the
letter-complaint arose as an incident in case CA-G.R. CV No. 32918 (now G.R. No.
106063), the disposition thereof should be separate and independent from Case G.R. No.
106063. However, for purposes of receiving the requisite pleadings necessary in
disposing of the administrative complaint, this Division shall continue to have control of
the case. Upon completion thereof, the same shall be referred to the Court En Banc for
proper disposition.
13

This court having ruled the procedural irregularities raised in the fourth assigned error of Carmelo
and Equatorial, to be an independent and separate subject for an administrative complaint based
on misconduct by the lawyers and justices implicated therein, it is the correct, prudent and
consistent course of action not to pre-empt the administrative proceedings to be undertaken
respecting the said irregularities. Certainly, a discussion thereupon by us in this case would entail
a finding on the merits as to the real nature of the questioned procedures and the true intentions
and motives of the players therein.
In essence, our task is two-fold: (1) to define the true nature, scope and efficacy of paragraph 8
stipulated in the two contracts of lease between Carmelo and Mayfair in the face of conflicting
findings by the trial court and the Court of Appeals; and (2) to determine the rights and obligations
of Carmelo and Mayfair, as well as Equatorial, in the aftermath of the sale by Carmelo of the
entire Claro M. Recto property to Equatorial.
Both contracts of lease in question provide the identically worded paragraph 8, which reads:
That if the LESSOR should desire to sell the leased premises, the LESSEE shall be
given 30-days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than the
LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to
stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be
bound by all the terms and conditions thereof.
14

We agree with the respondent Court of Appeals that the aforecited contractual stipulation
provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option
contract. It is a contract of a right of first refusal.
As early as 1916, in the case of Beaumont vs. Prieto,
15
unequivocal was our characterization of
an option contract as one necessarily involving the choice granted to another for a distinct and
separate consideration as to whether or not to purchase a determinate thing at a predetermined
fixed price.
It is unquestionable that, by means of the document Exhibit E, to wit, the letter of
December 4, 1911, quoted at the beginning of this decision, the defendant Valdes
granted to the plaintiff Borck the right to purchase the Nagtajan Hacienda belonging to
Benito Legarda, during the period of three months and for its assessed valuation, a grant
which necessarily implied the offer or obligation on the part of the defendant Valdes to
sell to Borck the said hacienda during the period and for the price mentioned . . . There
was, therefore, a meeting of minds on the part of the one and the other, with regard to the
stipulations made in the said document. But it is not shown that there was any cause or
consideration for that agreement, and this omission is a bar which precludes our holding
that the stipulations contained in Exhibit E is a contract of option, for, . . . there can be no
contract without the requisite, among others, of the cause for the obligation to be
established.
In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the
following language:
A contract by virtue of which A, in consideration of the payment of a
certain sum to B, acquires the privilege of buying from, or selling to B,
certain securities or properties within a limited time at a specified price.
(Story vs. Salamon, 71 N.Y., 420.)
From vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs.
Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been
taken:
An agreement in writing to give a person the option to purchase lands
within a given time at a named price is neither a sale nor an agreement
to sell. It is simply a contract by which the owner of property agrees with
another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then
agree to sell it; but he does sell something; that is, the right or privilege to
buy at the election or option of the other party. The second party gets in
praesenti, not lands, nor an agreement that he shall have lands, but he
does get something of value; that is, the right to call for and receive lands
if he elects. The owner parts with his right to sell his lands, except to the
second party, for a limited period. The second party receives this right,
or, rather, from his point of view, he receives the right to elect to buy.
But the two definitions above cited refer to the contract of option, or, what amounts to the
same thing, to the case where there was cause or consideration for the obligation, the
subject of the agreement made by the parties; while in the case at bar there was no such
cause or consideration.
16
(Emphasis ours.)
The rule so early established in this jurisdiction is that the deed of option or the option clause in a
contract, in order to be valid and enforceable, must, among other things, indicate the definite
price at which the person granting the option, is willing to sell.
Notably, in one case we held that the lessee loses his right to buy the leased property for a named price
per square meter upon failure to make the purchase within the time specified;
17
in one other case we
freed the landowner from her promise to sell her land if the prospective buyer could raise P4,500.00 in
three weeks because such option was not supported by a distinct consideration;
18
in the same vein in yet
one other case, we also invalidated an instrument entitled, "Option to Purchase" a parcel of land for the
sum of P1,510.00 because of lack of consideration;
19
and as an exception to the doctrine enumerated in
the two preceding cases, in another case, we ruled that the option to buy the leased premises for
P12,000.00 as stipulated in the lease contract, is not without consideration for in reciprocal contracts, like
lease, the obligation or promise of each party is the consideration for that of the other.
20
In all these
cases, the selling price of the object thereof is always predetermined and specified in the option clause in
the contract or in the separate deed of option. We elucidated, thus, in the very recent case of Ang Yu
Asuncion vs. Court of Appeals
21
that:
. . . In sales, particularly, to which the topic for discussion about the case at bench
belongs, the contract is perfected when a person, called the seller, obligates himself, for
a price certain, to deliver and to transfer ownership of a thing or right to another, called
the buyer, over which the latter agrees. Article 1458 of the Civil Code provides:
Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
When the sale is not absolute but conditional, such as in a "Contract to Sell" where
invariably the ownership of the thing sold in retained until the fulfillment of a positive
suspensive condition (normally, the full payment of the purchase price), the breach of the
condition will prevent the obligation to convey title from acquiring an obligatory force. . . .
An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted.
An accepted unilateral promise which specifies the thing to be sold and the price to be
paid, when coupled with a valuable consideration distinct and separate from the price, is
what may properly be termed a perfected contract of option. This contract is legally
binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil
Code, viz:
Art. 1479. . . .
An accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promisor if the promise is supported by
a consideration distinct from the price. (1451a).
Observe, however, that the option is not the contract of sale itself. The optionee has the
right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is
accepted before a breach of the option, a bilateral promise to sell and to buy ensues and
both parties are then reciprocally bound to comply with their respective undertakings.
Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect
promise (policitacion) is merely an offer. Public advertisements or solicitations and the
like are ordinarily construed as mere invitations to make offers or only as proposals.
These relations, until a contract is perfected, are not considered binding commitments.
Thus, at any time prior to the perfection of the contract, either negotiating party may stop
the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective
immediately after its manifestation, such as by its mailing and not necessarily when the
offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given
to the offeree within which to accept the offer, the following rules generally govern:
(1) If the period is not itself founded upon or supported by a consideration, the offeror is
still free and has the right to withdraw the offer before its acceptance, or if an acceptance
has been made, before the offeror's coming to know of such fact, by communicating that
withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua,
102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art.
1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil.
249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc. vs. Remolado, 135
SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not
be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim
under Article 19 of the Civil Code which ordains that "every person must, in the exercise
of his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of "option" deemed perfected,
and it would be a breach of that contract to withdraw the offer during the agreed period.
The option, however, is an independent contract by itself; and it is to be distinguished
from the projected main agreement (subject matter of the option) which is obviously yet to
be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance
(exercise of the option) by the optionee-offeree, the latter may not sue for specific
performance on the proposed contract ("object" of the option) since it has failed to reach
its own stage of perfection. The optioner-offeror, however, renders himself liable for
damages for breach of the opinion. . .
In the light of the foregoing disquisition and in view of the wording of the questioned provision in
the two lease contracts involved in the instant case, we so hold that no option to purchase in
contemplation of the second paragraph of Article 1479 of the Civil Code, has been granted to
Mayfair under the said lease contracts.
Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right of first
refusal to Mayfair and is not an option contract. It also correctly reasoned that as such, the
requirement of a separate consideration for the option, has no applicability in the instant case.
There is nothing in the identical Paragraphs "8" of the June 1, 1967 and March 31, 1969 contracts
which would bring them into the ambit of the usual offer or option requiring an independent
consideration.
An option is a contract granting a privilege to buy or sell within an agreed time and at a
determined price. It is a separate and distinct contract from that which the parties may enter into
upon the consummation of the option. It must be supported by consideration.
22
In the instant
case, the right of first refusal is an integral part of the contracts of lease. The consideration is built
into the reciprocal obligations of the parties.
To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is
governed by Article 1324 on withdrawal of the offer or Article 1479 on promise to buy and sell
would render in effectual or "inutile" the provisions on right of first refusal so commonly inserted in
leases of real estate nowadays. The Court of Appeals is correct in stating that Paragraph 8 was
incorporated into the contracts of lease for the benefit of Mayfair which wanted to be assured that
it shall be given the first crack or the first option to buy the property at the price which Carmelo is
willing to accept. It is not also correct to say that there is no consideration in an agreement of right
of first refusal. The stipulation is part and parcel of the entire contract of lease. The consideration
for the lease includes the consideration for the right of first refusal. Thus, Mayfair is in effect
stating that it consents to lease the premises and to pay the price agreed upon provided the
lessor also consents that, should it sell the leased property, then, Mayfair shall be given the right
to match the offered purchase price and to buy the property at that price. As stated in Vda. De
Quirino vs. Palarca,
23
in reciprocal contract, the obligation or promise of each party is the
consideration for that of the other.
The respondent Court of Appeals was correct in ascertaining the true nature of the aforecited
paragraph 8 to be that of a contractual grant of the right of first refusal to Mayfair.
We shall now determine the consequential rights, obligations and liabilities of Carmelo, Mayfair
and Equatorial.
The different facts and circumstances in this case call for an amplification of the precedent in Ang
Yu Asuncion vs. Court of Appeals.
24

First and foremost is that the petitioners acted in bad faith to render Paragraph 8 "inutile".
What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that Mayfair will
have the right of first refusal in the event Carmelo sells the leased premises. It is undisputed that
Carmelo did recognize this right of Mayfair, for it informed the latter of its intention to sell the said
property in 1974. There was an exchange of letters evidencing the offer and counter-offers made
by both parties. Carmelo, however, did not pursue the exercise to its logical end. While it initially
recognized Mayfair's right of first refusal, Carmelo violated such right when without affording its
negotiations with Mayfair the full process to ripen to at least an interface of a definite offer and a
possible corresponding acceptance within the "30-day exclusive option" time granted Mayfair,
Carmelo abandoned negotiations, kept a low profile for some time, and then sold, without prior
notice to Mayfair, the entire Claro M Recto property to Equatorial.
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in
question rescissible. We agree with respondent Appellate Court that the records bear out the fact
that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.
. . . Contract of Sale was not voidable but rescissible. Under Article 1380 to 1381(3) of
the Civil Code, a contract otherwise valid may nonetheless be subsequently rescinded by
reason of injury to third persons, like creditors. The status of creditors could be validly
accorded the Bonnevies for they had substantial interests that were prejudiced by the
sale of the subject property to the petitioner without recognizing their right of first priority
under the Contract of Lease.
According to Tolentino, rescission is a remedy granted by law to the contracting parties
and even to third persons, to secure reparation for damages caused to them by a
contract, even if this should be valid, by means of the restoration of things to their
condition at the moment prior to the celebration of said contract. It is a relief allowed for
the protection of one of the contracting parties and even third persons from all injury and
damage the contract may cause, or to protect some incompatible and preferent right
created by the contract. Rescission implies a contract which, even if initially valid,
produces a lesion or pecuniary damage to someone that justifies its invalidation for
reasons of equity.
It is true that the acquisition by a third person of the property subject of the contract is an
obstacle to the action for its rescission where it is shown that such third person is in
lawful possession of the subject of the contract and that he did not act in bad faith.
However, this rule is not applicable in the case before us because the petitioner is not
considered a third party in relation to the Contract of Sale nor may its possession of the
subject property be regarded as acquired lawfully and in good faith.
Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. Moreover,
the petitioner cannot be deemed a purchaser in good faith for the record shows that it
categorically admitted it was aware of the lease in favor of the Bonnevies, who were
actually occupying the subject property at the time it was sold to it. Although the Contract
of Lease was not annotated on the transfer certificate of title in the name of the late Jose
Reynoso and Africa Reynoso, the petitioner cannot deny actual knowledge of such lease
which was equivalent to and indeed more binding than presumed notice by registration.
A purchaser in good faith and for value is one who buys the property of another without
notice that some other person has a right to or interest in such property and pays a full
and fair price for the same at the time of such purchase or before he has notice of the
claim or interest of some other person in the property. Good faith connotes an honest
intention to abstain from taking unconscientious advantage of another. Tested by these
principles, the petitioner cannot tenably claim to be a buyer in good faith as it had notice
of the lease of the property by the Bonnevies and such knowledge should have cautioned
it to look deeper into the agreement to determine if it involved stipulations that would
prejudice its own interests.
The petitioner insists that it was not aware of the right of first priority granted by the
Contract of Lease. Assuming this to be true, we nevertheless agree with the observation
of the respondent court that:
If Guzman-Bocaling failed to inquire about the terms of the Lease
Contract, which includes Par. 20 on priority right given to the Bonnevies,
it had only itself to blame. Having known that the property it was buying
was under lease, it behooved it as a prudent person to have required
Reynoso or the broker to show to it the Contract of Lease in which Par.
20 is contained.
25

Petitioners assert the alleged impossibility of performance because the entire property is
indivisible property. It was petitioner Carmelo which fixed the limits of the property it was leasing
out. Common sense and fairness dictate that instead of nullifying the agreement on that basis,
the stipulation should be given effect by including the indivisible appurtenances in the sale of the
dominant portion under the right of first refusal. A valid and legal contract where the ascendant or
the more important of the two parties is the landowner should be given effect, if possible, instead
of being nullified on a selfish pretext posited by the owner. Following the arguments of petitioners
and the participation of the owner in the attempt to strip Mayfair of its rights, the right of first
refusal should include not only the property specified in the contracts of lease but also the
appurtenant portions sold to Equatorial which are claimed by petitioners to be indivisible. Carmelo
acted in bad faith when it sold the entire property to Equatorial without informing Mayfair, a clear
violation of Mayfair's rights. While there was a series of exchanges of letters evidencing the offer
and counter-offers between the parties, Carmelo abandoned the negotiations without giving
Mayfair full opportunity to negotiate within the 30-day period.
Accordingly, even as it recognizes the right of first refusal, this Court should also order that
Mayfair be authorized to exercise its right of first refusal under the contract to include the entirety
of the indivisible property. The boundaries of the property sold should be the boundaries of the
offer under the right of first refusal. As to the remedy to enforce Mayfair's right, the Court
disagrees to a certain extent with the concluding part of the dissenting opinion of Justice Vitug.
The doctrine enunciated in Ang Yu Asuncion vs. Court of Appeals should be modified, if not
amplified under the peculiar facts of this case.
As also earlier emphasized, the contract of sale between Equatorial and Carmelo is characterized
by bad faith, since it was knowingly entered into in violation of the rights of and to the prejudice of
Mayfair. In fact, as correctly observed by the Court of Appeals, Equatorial admitted that its
lawyers had studied the contract of lease prior to the sale. Equatorial's knowledge of the
stipulations therein should have cautioned it to look further into the agreement to determine if it
involved stipulations that would prejudice its own interests.
Since Mayfair has a right of first refusal, it can exercise the right only if the fraudulent sale is first
set aside or rescinded. All of these matters are now before us and so there should be no
piecemeal determination of this case and leave festering sores to deteriorate into endless
litigation. The facts of the case and considerations of justice and equity require that we order
rescission here and now. Rescission is a relief allowed for the protection of one of the contracting
parties and even third persons from all injury and damage the contract may cause or to protect
some incompatible and preferred right by the contract.
26
The sale of the subject real property by
Carmelo to Equatorial should now be rescinded considering that Mayfair, which had substantial
interest over the subject property, was prejudiced by the sale of the subject property to Equatorial
without Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day stipulated
period.
27

This Court has always been against multiplicity of suits where all remedies according to the facts
and the law can be included. Since Carmelo sold the property for P11,300,000.00 to Equatorial,
the price at which Mayfair could have purchased the property is, therefore, fixed. It can neither be
more nor less. There is no dispute over it. The damages which Mayfair suffered are in terms of
actual injury and lost opportunities. The fairest solution would be to allow Mayfair to exercise its
right of first refusal at the price which it was entitled to accept or reject which is P11,300,000.00.
This is clear from the records.
To follow an alternative solution that Carmelo and Mayfair may resume negotiations for the sale
to the latter of the disputed property would be unjust and unkind to Mayfair because it is once
more compelled to litigate to enforce its right. It is not proper to give it an empty or vacuous
victory in this case. From the viewpoint of Carmelo, it is like asking a fish if it would accept the
choice of being thrown back into the river. Why should Carmelo be rewarded for and allowed to
profit from, its wrongdoing? Prices of real estate have skyrocketed. After having sold the property
for P11,300,000.00, why should it be given another chance to sell it at an increased price?
Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that there was
nothing to execute because a contract over the right of first refusal belongs to a class of
preparatory juridical relations governed not by the law on contracts but by the codal provisions on
human relations. This may apply here if the contract is limited to the buying and selling of the real
property. However, the obligation of Carmelo to first offer the property to Mayfair is embodied in a
contract. It is Paragraph 8 on the right of first refusal which created the obligation. It should be
enforced according to the law on contracts instead of the panoramic and indefinite rule on human
relations. The latter remedy encourages multiplicity of suits. There is something to execute and
that is for Carmelo to comply with its obligation to the property under the right of the first refusal
according to the terms at which they should have been offered then to Mayfair, at the price when
that offer should have been made. Also, Mayfair has to accept the offer. This juridical relation is
not amorphous nor is it merely preparatory. Paragraphs 8 of the two leases can be executed
according to their terms.
On the question of interest payments on the principal amount of P11,300,000.00, it must be borne
in mind that both Carmelo and Equatorial acted in bad faith. Carmelo knowingly and deliberately
broke a contract entered into with Mayfair. It sold the property to Equatorial with purpose and
intend to withhold any notice or knowledge of the sale coming to the attention of Mayfair. All the
circumstances point to a calculated and contrived plan of non-compliance with the agreement of
first refusal.
On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with
notice and full knowledge that Mayfair had a right to or interest in the property superior to its own.
Carmelo and Equatorial took unconscientious advantage of Mayfair.
Neither may Carmelo and Equatorial avail of considerations based on equity which might warrant
the grant of interests. The vendor received as payment from the vendee what, at the time, was a
full and fair price for the property. It has used the P11,300,000.00 all these years earning income
or interest from the amount. Equatorial, on the other hand, has received rents and otherwise
profited from the use of the property turned over to it by Carmelo. In fact, during all the years that
this controversy was being litigated, Mayfair paid rentals regularly to the buyer who had an
inferior right to purchase the property. Mayfair is under no obligation to pay any interests arising
from this judgment to either Carmelo or Equatorial.
WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23,
1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between
petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby
deemed rescinded; petitioner Carmelo & Bauermann is ordered to return to petitioner Equatorial
Realty Development the purchase price. The latter is directed to execute the deeds and
documents necessary to return ownership to Carmelo and Bauermann of the disputed lots.
Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for
P11,300,000.00.
SO ORDERED.


EFFECTS OF POSSESSION
1.


SECOND DIVISION

[G.R. No. L-63277. November 29, 1983.]

PETRA VDA. DE BORROMEO, Petitioner, v. HON. JULIAN B. POGOY, Municipality/City Trial Court of
Cebu City, and ATTY. RICARDO REYES, Respondents.

Antonio T. Uy for Petitioner.

Numeriano G. Estenzo for Respondents.


SYLLABUS



1. CIVIL LAW; ACTIONS FOR FORCIBLE ENTRY AND DETAINER; PRESCRIPTIVE PERIOD; ACTION NOT
BARRED IN THE CASE AT BAR. Under Article 1147 of the Civil Code, the period for filing actions for
forcible entry and detainer is one year, and this period is counted from demand to vacate the premises.
(Desbarat v. Vda. de Laureano, 18 SCRA 116, Calubayan v. Pascual, 21 SCRA 146, Development Bank of
the Philippines v. Canonoy, 35 SCRA 197) In the case at bar, the letter-demand was dated August 28, 1982,
while the complaint for ejectment was filed in court on September 16, 1982. Between these two dates, less
than a month had elapsed, thereby leaving at least eleven (11) full months of the prescriptive period
provided for in Article 1147 of the Civil Code. Under the procedure outlined in Section 4 of PD 1508, the time
needed for the conciliation proceeding before the Barangay Chairman and the Pangkat should take no more
than 60 days. Giving private respondent nine (9) months-ample time indeed- within which to bring his case
before the proper court should conciliation efforts fail. Thus, it cannot be truthfully asserted, as private
respondent would want Us to believe, that his case would be barred by the Statute of Limitations if he had
to course his action to the Barangay Lupon.

2. REMEDIAL LAW; SECTION 4 (A) OF P.D. No. 1508; CONSTRUED. Under Section 4(a) of PD 1508,
referral of a dispute to the Barangay Lupon is required only where the parties thereto are "individuals." An
"individual" means "a single human being as contrasted with a social group or institution." Obviously, the
law applies only to cases involving natural persons, and not where any of the parties is a juridical person
such as a corporation, partnership, corporation sole, testate or intestate, estate, etc.

3. ID.; JURIDICAL PERSON; REAL PARTY IN INTEREST; REFERRAL TO BARANGAY LUPON, NOT REQUIRED.
In Civil Case No. R-239l5, plaintiff Ricardo Reyes is a mere nominal party who is suing in behalf of the
Intestate Estate of Vito Borromeo. while it is true that Section 3, Rule 3 of the Rules of Court allows the
administrator of an estate to sue or be sued without joining the party for whose benefit the action is
presented or defended, it is indisputable that the real party in interest in Civil Case No. R-23915 is the
intestate estate under administration. Since the said estate is a juridical person (Limjoco v. Intestate of
Fragante, 80 Phil. 776) plaintiff administrator may file the complaint directly in court, without the same
being coursed to the Barangay Lupon for arbitration.


D E C I S I O N


ESCOLIN, J.:


Petitioner herein seeks to stop respondent Judge Julian B. Pogoy of the Municipal Trial Court of Cebu City
from taking cognizance of an ejectment suit for failure of the plaintiff to refer the dispute to the Barangay
Lupon for conciliation.

The intestate estate of the late Vito Borromeo is the owner of a building bearing the deceaseds name,
located at F. Ramos St., Cebu City. Said building has been leased and occupied by petitioner Petra Vda. de
Borromeo at a monthly rental of P500.00 payable in advance within the first five days of the month.

On August 28, 1982, private respondent Atty. Ricardo Reyes, administrator of the estate and a resident of
Cebu City, served upon petitioner a letter demanding that she pay the overdue rentals corresponding to the
period from March to September 1982, and thereafter to vacate the premises. As petitioner failed to do so,
Atty. Reyes instituted on September 16, 1982 an ejectment case against the former in the Municipal Trial
Court of Cebu City. The complaint was docketed as Civil Case No. R-23915 and assigned to the sala of
respondent judge.

On November 12, 1982, petitioner moved to dismiss the case, advancing, among others, the want of
jurisdiction of the trial court. Pointing out that the parties are residents of the same city, as alleged in the
complaint, petitioner contended that the court could not exercise jurisdiction over the case for failure of
respondent Atty. Reyes to refer the dispute to the Barangay Court, as required by PD No. 1508, otherwise
known as Katarungang Pambarangay Law.chanroblesvi rtualawlibrary

Respondent judge denied the motion to dismiss. He justified the order in this wise:jgc:chanrobles. com.ph


"The Clerk of Court when this case was filed accepted for filing same. That from the acceptance from (sic)
filing, with the plaintiff having paid the docket fee to show that the case was docketed in the civil division of
this court could be considered as meeting the requirement or precondition for were it not so, the Clerk of
Court would not have accepted the filing of the case especially that there is a standing circular from the
Chief Justice of the Supreme Court without even mentioning the Letter of Instruction of the President of the
Philippines that civil cases and criminal cases with certain exceptions must not be filed without passing the
barangay court." (Order dated December 14, 1982, Annex "c", P. 13, Rollo).

Unable to secure a reconsideration of said order, petitioner came to this Court through this petition
forcertiorari. In both his comment and memorandum, private respondent admitted not having availed
himself of the barangay conciliation process, but justified such omission by citing paragraph 4, section 6 of
PD 1508 which allows the direct filing of an action in court where the same may otherwise be barred by the
Statute of Limitations, as applying to the case at bar.

The excuse advanced by private respondent is unsatisfactory. Under Article 1147 of the Civil Code, the
period for filing actions for forcible entry and detainer is one year, 1 and this period is counted from demand
to vacate the premises. 2

In the case at bar, the letter-demand was dated August 28, 1982, while the complaint for ejectment was
filed in court on September 16, 1982. Between these two dates, less than a month had elapsed, thereby
leaving at least eleven (11) full months of the prescriptive period provided for in Article 1147 of the Civil
Code. Under the procedure outlined in Section 4 of PD 1508, 3 the time needed for the conciliation
proceeding before the Barangay Chairman and the Pangkat should take no more than 60 days. Giving
private respondent nine (9) months ample time indeed within which to bring his case before the proper
court should conciliation efforts fail. Thus, it cannot be truthfully asserted, as private respondent would want
Us to believe, that his case would be barred by the Statute of Limitations if he had to course his action to
the Barangay Lupon.

With certain exceptions, PD 1508 makes the conciliation process at the Barangay level a condition precedent
for filing of actions in those instances where said law applies. For this reason, Circular No. 22 addressed to
"ALL JUDGES OF THE COURTS OF FIRST INSTANCE, CIRCUIT CRIMINAL COURTS, JUVENILE AND DOMESTIC
RELATIONS COURT, COURTS OF AGRARIAN RELATIONS, CITY COURTS, MUNICIPAL COURTS AND THEIR
CLERKS OF COURT" was issued by Chief Justice Enrique M. Fernando on November 9, 1979. Said Circular
reads:chanrobles.com:cralaw:red

"Effective upon your receipt of the certification by the Minister of Local Government and Community
Development that all the barangays within your respective jurisdictions have organized their Lupons
provided for in Presidential Decree No. 1508, otherwise known as the Katarungang Pambarangay Law, in
implementation of the barangay system of settlement of disputes, you are hereby directed to desist from
receiving complaints, petitions, actions or proceedings in cases falling within the authority of said Lupons."cralaw virtua1aw
library

While respondent acknowledged said Circular in his order of December 14, 1982, he nevertheless chose to
overlook the failure of the complaint in Civil Case No. R-23915 to allege compliance with the requirement of
PD 1508. Neither did he cite any circumstance as would place the suit outside the operation of said law.
Instead, he insisted on relying upon the pro tanto presumption of regularity in the performance by the clerk
of court of his official duty, which to Our mind has been sufficiently overcome by the disclosure by the Clerk
of Court that there was no certification to file action from the Lupon or Pangkat secretary attached to the
complaint. 4

Be that as it may, the instant petition should be dismissed. Under Section 4(a) of PD No. 1508, referral of a
dispute to the Barangay Lupon is required only where the parties thereto are "individuals." An "individual"
means "a single human being as contrasted with a social group or institution." 5 Obviously, the law applies
only to cases involving natural persons, and not where any of the parties is a juridical person such as a
corporation, partnership, corporation sole, testate or intestate, estate, etc.

In Civil Case No. R-23915, plaintiff Ricardo Reyes is a mere nominal party who is suing in behalf of the
Intestate Estate of Vito Borromeo. While it is true that Section 3, Rule 3 of the Rules of Court allows the
administrator of an estate to sue or be sued without joining the party for whose benefit the action is
presented or defended, it is indisputable that the real party in interest in Civil Case No. R-23915 is the
intestate estate under administration. Since the said estate is a juridical person 6 plaintiff administrator may

file the complaint directly in court, without the same being coursed to the Barangay Lupon for arbitration.

ACCORDINGLY, the petition is hereby dismissed. Respondent judge is ordered to try and decide Civil Case
No. R-23915 without unnecessary delay. No costs.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Guerrero, Abad Santos and De Castro, JJ., concur.

Aquino J., concurs in the result.

2. G.R. No. 97637 April 10, 1992
WILMON AUTO SUPPLY CORPORATION, ILOILO MULTI PARTS SUPPLY CORP., VIRGILIO
ANG, SOUTHERN SALES CORP. and CHANG LIANG, JR., petitioners,
vs.
HON. COURT OF APPEALS and STAR GROUP RESOURCES AND DEVELOPMENT,
INC., respondents.
G.R. Nos. 98700-01 April 10, 1992
RAMON QUE, SOUTHERN SALES CORP. and HENRY TAN, petitioners,
vs.
HON. RICARDO M. ILARDE, Judge, RTC of Iloilo (Br. 26), and STAR GROUP RESOURCES
AND DEVELOPMENT, INC., respondents.

NARVASA, C.J .:
The principal question in the proceedings at bar is whether or not an action of unlawful detainer filed
in the Municipal Trial Court against a lessee grounded on the expiration of the latter's lease
should be abated or suspended by an action filed in the Regional Trial Court by the defendant
lessee on the claim that he is entitled to a right of preemption (or prior purchase) of the premises
in question and wishes to have said right judicially enforced.
The question arises from facts not disputed and now briefly narrated.
Wilmon Auto Supply Corporation (or Ramon Que), Iloilo, Multi Parts Supply Corporation (or Ramon
Que), Virgilio Ang, Henry Tan, Southern Sales Corporation, and Chang Liang, Jr. were lessees of a
commercial building and bodegas standing on registered land in Iloilo City owned in common by
Lucy A. Solinap, Fr. Jerry R. Locsin, Lourdes C. Locsin, Manuel C. Locsin and Ester L.
Jarantilla.
1
The leases were embodied in uniformly worded deeds executed by the individual petitioners,
as lessees, and Lourdes C. Locsin, representing the lessors-co-owners.
2
The lease contracts, among
others
1) stipulated fixed terms or periods (September 1, 1987 to August 30, 1989);

2) provided for a deposit of an amount equal to two months' rents;
3) provided that the lessee should give the lessor 30 days prior notice of the intention to terminate or
renew the contract, and that if no such written notice were given, the lessor would consider the
contract terminated on the expiration of the term; and
4) contained a "reservation of lights" reading as follows:
3

Reservation of rights. LESSOR reserves the rights to sell, mortgage, hypothecate
or encumber the property so long as it requires the purchase(r) or mortgage creditors
to respect the terms of this lease contract; provided further that LESSEE shall be
duly informed about LESSOR's plan to sell the property.
On September 18, 1989, after the expiration of the period fixed in the lease agreements, the lessors
executed a public instrument entitled "Deed of Absolute Sale,"
4
in virtue of which they sold the leased
property to Star Group Resources and Development Inc. (hereafter, simply referred to as Star Group).
The deed provided inter alia that the "Vendee shall henceforth deal with the lessees and occupants of the
properties herein sold without any further warranty or obligation on the part of the Vendors."
On November 22, 1989, the buyer, Star Group, brought separate actions of unlawful detainer in the
Municipal Trial Court In Cities of Iloilo City against the lessees, which were docketed as follows:
1) that filed against Virgilio Ang: Civil Case No. 227 (89), assigned to Branch 3;
2) that instituted against Chang Liang, Jr.: Civil Case No. 230 (89), raffled to Branch 2;
3) that filed against Henry Tan and Southers Sales Corporation: Civil Case No. 232 (89), assigned to
Branch 2:
4) that filed against Ramon Que "(for the premises occupied by WILMON AUTO SUPPLY
CORPORATION):" Civil Case No. 233, assigned to Branch 2; and
5) that commenced against Ramon Que "(for the premises occupied by ILOILO MULTI PARTS
SUPPLY CORPORATION):" Civil Case No. 234, raffled to Branch 2.
The lessees refused to concede, and indeed impugned, Star Group's right to eject them. They
argued that in so selling the properties and seeking their ejectment therefrom, the lessors and
their buyer had violated their leasehold rights because (i) they (the lessees) were not accorded
the right of preemption, (b) the buyer was not required to honor the leases, and (c) the lessees were
denied the option to renew their leases upon the expiration thereof.
These propositions they set forth in their answers with counterclaims in the unlawful detainer actions
against them in the Municipal Trial Courts (Branches 2 and 3).
The same propositions were also set out as causes of action in a complaint filed on December 1,
1989 by some of them Wilmon, Iloilo Multi Parts, Virgilio Ang (doing business under the name and
style of "Iloilo Rightway Marketing"), Southern Sales and Chang Liang, Jr. (doing business under the
name and style of "Iloilo Bright Construction Supply")
5
in the Regional Trial Court of Iloilo.
Impleaded as defendants in the complaint were the Star Group Resources and Development, Inc. and its
President, Juanito Sio alias Juanito Sio Soy Liong, and the co-owners-vendors, namely: Lucy A. Solinap,

Lourdes C. Locsin, Manuel C. Locsin, Ester Locsin Jarantila, and Fr. Jerry R. Locsin, the latter as
Administrator of the Estate of the deceased Jose C. Locsin.
6
The action thus commenced was docketed
as Civil Case No. 18931 and raffled to Branch 28. In their complaint, the plaintiffs-lessees prayed chiefly
that
1) the sale of the building, bodegas and the land on which they stand be declared
null and void ab initio;
2) they be allowed to exercise their right of pre-emption or redemption, and to
recover their two-month deposits;
3) the titles to the properties be conveyed to them;
4) they be paid by the defendants jointly and severally moral damages in the sum of
1.5 million pesos, exemplary damages in the amount of P10,000.00, and attormey's
fees in the sum of P200,000.00.
In the unlawful detainer actions, position papers were required by the courts and submitted by the
parties on the issue of whether or not the unlawful detainer actions should be covered by the rules of
summary procedure. The courts ruled that Cases Numbered 227 (against Virgilio Ang), 230 (against
Chang Liang, Jr.) and 234 (against Iloilo Multi Parts Supply Corporation), must be so tried, but not
Civil Cases Numbered 232 (against Henry Tan and Southern Sales Corporation ) and 233 (against
Wilmon Auto Supply Corporation), as to which the summary procedure rules were inapplicable. The
lessees moved for reconsideration of the order and additionally prayed for dismissal of the ejectment
suits on the grounds of litis pendentia (adverting no doubt to Civil Case No. 18931 instituted by them
in the RTC) and lack of jurisdiction over the nature of the actions. Their pleas were denied.
Thereupon three of the lessees Ramon Que, Southern Sales Corporation, and Henry T. Tan
quite precipitately and improperly, filed petitions for certiorari with this Court for the annulment and
setting aside of the orders of the Municipal Trial Court (Branch 2), which were docketed
as G.R. Nos. 94855 and 94856. Another lessee, Antonio Chua also instituted a similar action
of certiorari in this Court, docketed as G.R. No. 95371.
7
Predictably, the Court refused to take
cognizance of their petitions. G.R. No. 9537l was referred to the Court of Appeals by Resolution of the
Second Division dated October 15, 1990 "for proper determination and disposition" that Court's
jurisdiction being concurrent with this Court's. G.R. Nos. 94855 and 94856 were referred to the Regional
Trial Court of Iloilo City,
8
to which the lessees should have gone for relief in the first place.
9
In the
Regional Trial Court, the cases were docketed as Civil Cases Numbered 19420 (Ramon Que v. Hon.
Honrado, etc., et al.) and 19421 (Southern Sales Corporation and Henry T. Tan v. Hon. Honrado, etc., et
al.).
The Executive Judge of the Trial Court (Hon. Ricardo M. Ilarde) issued a restraining order dated
October 18, 1990 enjoining proceedings in the unlawful detainer cases. However, on March 11,
1991, His Honor promulgated judgment on the merits dismissing the petitions and dissolving the
preliminary injunction of October 18, 1990. Judge Ilarde ruled that the unlawful detainer cases fall
within the jurisdiction of the Municipal Trial Court in Cities, Iloilo City, and that the pendency of Civil
Case No. 18931 in the RTC did not warrant suspension of the unlawful detainer cases, "the only
issue in the . . . (the latter suits being) physical possession or possession de facto while the issue
involved in Civil Case No. 18931 . . . is basically one of ownership," and it being "settled rule that the
pendency of an action involving ownership and annulment of sale . . . does not stay the proceedings
in the ejectment case."
10
The lessees filed a motion for reconsideration, but this was denied by Judge
Ilarde, by Order dated April 22, 1991.

From the decision of March 11, 1991, Ramon Que, Southern Sales Corporation and Henry Tan have
appealed to this Court on the legal issue of "whether or not . . . (Judge Ilarde) erred in finding that
the Municipal Trial Court in Cities did not abuse its discretion in denying the petitioners' motion to
dismiss or to hold in abeyance the proceedings in the subject unlawful detainer cases." (Rollo, G.R.
No. 98700-01, p. 5) Their appeal was docketed asG.R. Nos. 98700-01.
11

On the other hand, two (2) of the lessees, Wilmon Auto Supply Corporation (represented by Ramon
Que) and Chang Liang who are among the plaintiffs in Civil Case No. 18931 pending in Branch
28 of the Regional Trial Court, Iloilo City took a different tack. They filed a motion in said Court
praying for a writ of preliminary injunction to stop the Municipal Trial Court from hearing their
ejectment cases. They argued that the decision in Civil Case No. 18931 would be decisive of the
rights of the parties, particularly on the question of the lessees' claimed option to renew their leases.
The Trial Court however denied their motion. To nullify the Trial Court's denial of their plea for
injunctive relief, they repaired to the Court of Appeals by way of a petition for certiorari. Their action
was docketed as CA-G.R. SP No. 23750. The Court of Appeal ruled adversely to them. In its
Decision promulgated on February 28, 1991, the Appellate Tribunal pointed out (a) that "the issues .
. (the petitioners) are raising in the Regional Trial Court are the very same issues they, as
defendants in the ejectment cases, are raising" . . and (considering that "the Municipal Trial Court's
jurisdiction is not in question") there is no reason why simply because the same issues are raised in
the action brought in the Regional Trial Court the ejectment proceedings should be suspended, and
(b) that in truth," questions pertaining to the relation between landlord and tenant, the period or life of
the lease or tenancy, the reasonableness, of the rental, the right of the tenant (to remain in
occupancy) against the will of the landlord, etc. are (precisely) the sort of questions which should be
decided in the ejectment case."
12
From this judgment, the lessees have taken an appeal to this Court.
Their appeal was docketed as G.R. No 97637.
13

The issues raised in G.R. No. 97637 and G.R. Nos. 98700-01, are substantially the same, viz.:
14

a) whether or not, in light of Vda. de Murga v. Chan, 25 SCRA 441 and Valderama
Lumber Manufacturers Co., Inc. v. L.S. Sarmiento Co., 5 SCRA 287, the Municipal
Trial Court has jurisdiction over the actions which are real in nature and involve
interpretation of lease contracts over immovables;
b) whether or not the Court of Appeals deviated from the doctrine laid down
in Vda. de Legaspi v.Avendao, 79 SCRA 135, 145;
c) whether or not, pursuant to Quiambao v. Osorio, 158 SCRA 674, and Orellano
v. Alvestir, 76 SCRA 536, the actions in the Municipal Trial Court for the ejectment of
the lessees from the property occupied by them should be suspended until
adjudgment of the cases in the RTC involving the sale, ownership and physical
possession of said property; and
d) whether or not Dante v. Sison, 174 SCRA 517 and other precedents invoked by
the petitioners should apply.
As stated in this opinion's opening paragraph, the crucial question, at bottom, is whether or not Star
Group's unlawful detainer suits in the Municipal Trial Court against petitioner lessees for the reason
that their leases had expired, should be abated by the actions filed in the Regional Trial Court by
said petitioner lessees based on the contention that they are entitled to a right of preemption or prior
purchase of the leased premises. It is a question that is far from novel, one that has been passed

upon and resolved by this Court in numerous cases, and one to which a negative answer has
invariably been given. The relevant precedents are hereunder outlined.
1. Injunction suits instituted in the RTC by defendants in ejectment actions in the municipal trial
courts or other courts of the first level (Nacorda v. Yatco, 17 SCRA 920 [1966] do not abate the
latter; and neither do proceedings on consignation of rentals (Lim Si v. Lim, 98 Phil. 868 [1956],
citing Pue, et al. v. Gonzales, 87 Phil. 81 [1950]).
2. An "accion publiciana" does not suspend an ejectment suit against the plaintiff in the former
(Ramirez v. Bleza, 106 SCRA 187 [1981]).
3. A "writ of possession case" where ownership is concededly the principal issue before the Regional
Trial Court does not preclude nor bar the execution of the judgment in an unlawful detainer suit
where the only issue involved is the material possession or possession de facto of the premises
(Heirs of F. Guballa, Sr. v. C.A., et al.; etc., 168 SCRA 518 [l988]).
4. An action for quieting of title to property is not a bar to an ejectment suit involving the same
property (Quimpo v. de la Victoria, 46 SCRA 139 [1972]).
5. Suits for specific performance with damages do not affect ejectment actions (e.g., to compel
renewal of a lease contract) (Desamito v. Cuyegkeng. 18 SCRA 1184 [1966], Pardo de Tavera v.
Encarnacion, 22 SCRA 632 [1968], Rosales v. CFI, 154 SCRA 153 [1987]; Commander Realty, Inc.
v. C.A., 161 SCRA 264 [1988]).
6. An action for reformation of instrument (e.g., from deed of absolute sale to one of sale with pacto
de retro) does not suspend an ejectment suit between the same parties (Judith v. Abragan, 66
SCRA 600 [1975]).
7. An action for reconveyance of property or "accion reivindicatoria" also has no effect on ejectment
suits regarding the same property (Del Rosario v. Jimenez, 8 SCRA 549 [1963]; Salinas v. Navarro,
126 SCRA 167; De la Cruz v. C.A., 133 SCRA 520 [1984]; Drilon v. Gaurana, 149 SCRA 352 [1987];
Ching v. Malaya, 153 SCRA 412 [1987]; Philippine Feeds Milling Co., Inc. v. C.A., 174 SCRA 108;
Dante v. Sison, 174 SCRA 517 [1989]; Guzman v. C.A. [annulment of sale and reconveyance], 177
SCRA 604 [1989]; Demamay v. C.A., 186 SCRA 608 [1990]; Leopoldo Sy v. C.A., et al., [annulment
of sale and reconveyance], G.R. No. 95818, Aug. 2, 1991).
8. Neither do suits for annulment of sale, or title, or document affecting property operate to abate
ejectment actions respecting the same property (Salinas v. Navarro [annulment of deed of sale with
assumption of mortgage and/or to declare the same an equitable mortgage], 126 SCRA 167 [1983];
Ang Ping v. RTC [annulment of sale and title], 154 SCRA 153 [1987]; Caparros v. C.A. [annullment
of title], 170 SCRA 758 [1989]; Dante v. Sison [annulment of sale with damages], 174 SCRA 517;
Galgala v. Benguet Consolidated, Inc. [annulment of document], 177 SCRA 288 [1989]).
The underlying reasons for the above rulings were that the actions in the Regional Trial Court did not
involve physical or de facto possession and, on not a few occasions, that the case in the Regional
Trial Court was merely a ploy to delay disposition of the ejectment proceeding, or that the issues
presented in the former could quite as easily be set up as defenses in the ejectment action and there
resolved. This is specially true in the cases at bar, where the petitioners-lessees' claims that the
lessors (and the buyer of the leased premises) had violated their leasehold rights because (a) they
(the lessees) were not accorded the right of preemption, (b) the buyer was not required to respect
their leases, and (c) the lessees were denied the option to renew their leases upon the expiration

thereof constituted their causes of action in the suits commenced by them in the Regional
Court.
15

In Leopoldo Sy v. Court of Appeals, et al., G.R. No. 95818, August 2, 1991,
16
for instance, the
following pronouncements were made:
Private respondents insist that the Rule on Summary Procedure does not apply since
there is a question of ownership involved albeit in another case pending in another
court, that is, the aforesaid Civil Case No. 88-47264 in the Regional Trial Court of
Manila. We apprehend that if this theory is adopted, the applicability of the Rule on
Summary Procedure in ejectment cases could easily be thwarted by the defendant
through the simple expedient of filing an action in the regional trial court contesting
the plaintiff's ownership over the property from which defendant is sought to be
evicted. Hence, the obvious intimation of private respondents that the regular
procedure, and not the summary procedure, should be followed . . . does not impress
us as being endowed with legal or logical support.
xxx xxx xxx
Thus, the fact that the tenant had previously filed a separate action in the former
Court of First Instance involving the ownership of the land is not a valid reason to
frustrate the summary remedy of ejectment. Such action filed by the tenant only
lends credence to the fact that the ejectment case filed by plaintiffs against the
former does not involve the question of title. (Lozada vs. Abragan, et al., 66 SCRA
600 [1975]). This is so because the judgment rendered in an ejectment case shall not
bar an action between the same parties respecting title to the land nor building nor
shall it be held conclusive of the facts therein found in a case between the same
parties upon a different cause of action involving possession. (Ang Ping, et al. vs.
Regional Trial Court of Manila, Branch 40, et al., 154 SCRA 77 [1987]). Furthermore,
in ejectment cases the jurisdiction of the court is determined by the allegations of the
complaint, not by the defense raised by defendant. (Ramirez v. Chit, 21 SCRA 1364
[1967]).
. . . The pendency of the action for reconveyance does not constitute a compelling
reason to delay the termination of an ejectment case for it gives rise merely to an
expectnacy that the documents assailed therein may be nullified and the subject
properties may be ordered reconveyed to private respondents, as compared to the
clear, actual and existing legal right of petitioner to the possession of the subject
property as the registered owner. (Galgala, et al. vs. Benguet Consolidated, Inc. et
al., 177 SCRA 288 [1989]).
The precedents invoked by the petitioners
17
do not represent current and prevailing doctrine; they
might at most be deemed exceptions justifying the general rule. Moreover, the facts in the rulings invoked
by them are quite readily distinguishable from the numerous precedents upholding said general rule.
Thus, as regards the seemingly contrary ruling in Vda. de Legaspi v. Avendao, 79 SCRA 135
(1977), this Court observed, in Salinas v. Navarro, 126 SCRA, 167, 172-173 (1983), that "the
exception to the rule in this case of Vda.de Legaspi is based on strong reasons of equity not found in
the present petition. The right of the petitioners is not so seriously placed in issue in the annulment
case as to warrant a deviation, on equitable grounds, from the imperative nature of the rule. In

the Vda. de Legaspi case, execution of the decision in the ejectment case would also have meant
demolition of the premises, a factor not present in this petition."
Vda. de Murga v. Chan, 25 SCRA. 441 (1968) is not in point. In that case, the essential requisite of
an unequivocal demand to vacate and surrender the premises had not been fulfilled, as the demand
actually made on the lessee was in the alternative: either pay rentals at an increased rate, or if this
be unacceptable, to surrender the leased property. Furthermore, it appeared that the defendant's
lease had not been legitimately ended but, on the contrary, had been automatically renewed in virtue
of a special clause in this lease contract. It was for these reasons that this Court held that the case
was "outside the jurisdiction of the municipal court . . ."
18

Neither is Valderrama Lumber Manufacturer's Co., Inc. v. L.S. Sarmiento, Co., 5 SCRA 287 (1962),
also relied upon by the petitioners, in point. Here, the ejectment complaint was also found to be
fatally defective in that it failed to allege that the plaintiff had been in prior possession of the
premises in question, or had been deprived thereof by any of the means set forth in Section 1, Rule
72 of the Rules of Court or that possession was being unlawfully withheld from said plaintiff.
The facts in Quiambao vs. Osorio, 158 SCRA 674 (1988) are also quite peculiar and differ from
those in the cases at bar. Quiambao v. Osorio originated from a complaint for forcible entry filed
against Quiambao in the Malabon Municipal Court by persons claiming to be legitimate possessors
of a 30,835-square-meter lot by virtue of Agreement to Sell No. 3482 executed in their favor by the
former Land Tenure Administration (later, the Land Authority, then the Department of Agrarian
Reform). Quiambao moved to dismiss the action, alleging that the agreement had been impugned in
an administrative case before the Land Authority and said case constituted a "prejudicial question."
The motion was denied, and Quiambao instituted a special action of certiorari in the Court of First
Instance to nullify the order of denial and cause dismissal of the ejectment suit. In this certiorari suit,
the Land Authority, by leave of court, intervened "praying that the petition for certiorari be granted
and . . . (it, the Land Authority) be allowed to decide the matter exclusively." It further appears that
subsequently, the Land Authority promulgated judgment in the administrative case "affirming the
cancellation of Agreement to Sell No. 3482" thus making more apparent "the folly of allowing the
ejectment case to proceed . . ." Upon these facts, it appearing that the contract on which the
plaintiff's cause of action for ejectment was founded had been cancelled by the proper administrative
authority, this Court ordered dismissal of the ejectment case.
Orellano v. Alvestir, 76 SCRA 536 (1977), another precedent cited by the petitioners, originated from
an action instituted by Alvestir in the Court of First Instance praying that he be adjudged to have the
right to continue in possession of a parcel of land despite the sale thereof by the Archbishop of
Manila to Orellano because said sale had been executed in violation of "Republic Act 1162 as
amended by Republic Act No. 1599 to the effect that: 'That no lot or portion thereof actually occupied
by a tenant or occupant shall be sold by the landowner to any other persons than such tenant or
occupant unless the latter renounces in a public instrument his right under this Act.'" What Orellano
did was to file a suit of unlawful detainer against Alvestir in the city court invoking his superior right of
possession in virtue of said sale to him by the Archbishop of Manila of the premises in question.
Upon these facts, this Court held:
19

. . . Orellano's claim of better right of possession in his complaint for ejecment is
already in issue in Alvestir's action for recission pending in the Court of First
Instance. It does not matter that Orellano is defendant in that case whereas he is
plaintiff in the city court, as long as the issues raised in the pleadings by either of the
parties require the resolution of the same cause. There is no question here that the
same parties are involved in both cases, albeit in Civil Case No. 53664, there are

other parties who are not parties in the ejectment suit. (Alzua vs. Johnson, 21 Phil
308; Juan vs. Go Cotay, 26 Phil. 328). The subject matter is possession of the
identical land in dispute. And the cause of Alvestir in the Court of First Instance case
is the same cause he alleged as affirmative defense in the detainer case. In any
event, it is beyond cavil of doubt that until the question of whether or not Alvestir has
a right of priority, under the laws invoked by him, over Orellano to purchase the land
in dispute is decided, the matter of who between appellant and appellee has the
better right of possession over it cannot be determined. We are not in any way
suggesting that appellee's action for recission is clearly meritorious. What is apparent
is that it is not on its face groundless. The contention of appellant that Alvestir cannot
have any standing in law, even under the provisions of Republic Act 1162, as
amended, invoked by him is a matter that We cannot resolve here. It is but proper,
therefore, from any point of view, that Civil Case No. 63664 be allowed to follow its
course and the ejectment suit be dismissed.
As will be seen, a special law was a necessary factor in the controversy, which is a feature that may
well serve to distinguish the case from the precedents relied upon by the Trial Court and the Court of
Appeals in their adjudication of the cases at bar. In any event, even assuming that there is
irreconcilable conflict between Orellano and the other precedents listed and outlined in this opinion,
there is no difficulty whatever in concluding that the overwhelming weight of authority is decidedly
contrary to Orellano, precluding application thereof to the present cases.
It may well be stressed in closing that as the law now stands, even when, in forcible entry and lawful
detainer cases, "the defendant raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding that issue of ownership," the Metropolitan Trial
Courts, Municipal Trial courts, and Municipal Trial Courts nevertheless have the undoubted
competence to resolve "the issue of ownership . . . only to determine the issue of possession."
20

WHEREFORE, the challenged decision of the Court of Appeals, being entirely in accord with the
facts on record and applicable law and jurisprudence, the same is AFFIRMED in toto, and the
petitions are DISMISSED. Costs against petitioners.
SO ORDERED.

3. G.R. No. 76031 March 2, 1994
MIGUEL SEMIRA, petitioner,
vs.
COURT OF APPEALS and BUENAVENTURA AN, respondents.
Antonio M. Chavez for petitioner.
Onofre K. Quizon for private respondent.

BELLOSILLO, J .:

Juana Gutierrez owned a parcel of land, later designated as Lot 4221, situated in Sto. Nio, Taysan,
Batangas which she sold to private respondent Buenaventura An for P850.00 by means of a
"Kasulatan ng Bilihan ng Lupa" executed on 4 January 1961.
1
Aside from the estimated area of 822.5
square meters appearing in the deed of sale, the following boundaries of the lot are also stated: on the
north, by Taysan-Lobo-Sto. Nio-Pinagbayanan and Sto. Nio-Dagatan Road (Junction or Intersection
road); on the east, by Sto. Nio-Pinagbayanan Road and Juana Gutierrez; on the south, by Sto. Nio
School site; and, on the west, by Sto. Nio-Dagatan Road.
Thereafter, private respondent entered the premises observing thereby the boundaries of the
property and not the area given.
2

Subsequently, he acquired two (2) other parcels of land, Lot 4215 with an area of 8,606-square
meters located on the east of Lot 4221 from the spouses Pascual Hornilla and Gliceria Ilao on 30
June 1964, and another lot with an area of 11,000-square meters from Santiago Asi. Pascual
Hornilla is the son of Juana Gutierrez.
On 18 October 1972, private respondent sold Lot 4221 to his nephew, Cipriano Ramirez, and
spouse by means of another "Kasulatan ng Bilihan ng Lupa" for P2,500.00,
3
where the lot was
described with the same area and boundaries mentioned in the 4 January 1961 "Kasulatan ng Bilihan ng
Lupa" with the exception of the boundary on the east; which was changed from "Juana Gutierrez" to
"Buenaventura An" to reflect the acquisition by private respondent of the adjoining Lot 4215.
Like his uncle before him, Cipriano Ramirez occupied the lot by observing the boundaries stated in
the document of sale. Subsequently, he applied for a new tax declaration to replace the one in the
name of his uncle but was denied in view of an existing mortgage executed by Buenaventura An in
favor of the Taysan Rural Bank, which was only settled in 1979.
On 12 March 1979, Cipriano Ramirez sold the lot to petitioner Miguel Semira for P20,000.00.
However, the area stated in the "Kasulatan ng Bilihan ng Lupa"
4
was 2,200 square meters and not
822.5 appearing in the previous document. As delimited by its boundaries, the lot is actually much bigger
than 822.5 square meters. This was confirmed by the Taysan Cadastral Mapping Survey conducted in
1974 where it is definitely stated that the area of Lot 4221 is 2,200 square meters; hence, the reason for
the change.
On 17 March 1979, Miguel Semira entered the very same premises previously occupied by Ramirez
and began the construction of a new rice-mill. However, on 18 April 1979, a complaint for forcible
entry was filed against him by private respondent in the Municipal Circuit Trial Court of Taysan-
Lobo.
5
The latter claimed that the area of Lot 4221 was 822.5 square meters only and that the excess of
1,377 square meters forcibly occupied by petitioner formed part of Lot 4215 which he acquired from the
Hornillas in 1964.
Petitioner admits having entered the disputed portion on 17 March 1979, but denies having illegally
done so. In his answer, petitioner claims ownership over the property by invoking the 1979 deed of
sale in his favor by Cipriano Ramirez.
Meanwhile, during the pendency of the case, private respondent applied for and was issued original
Certificate of Title No. P-12694 over the lots he purchased from the Hornillas and that from Santiago
Asi with a combined area of 19,606 square meters. However, the title was issued for 2 hectares, 8
ares and 33 centares or 20,833 square meters. No explanation was given for the difference.

The case was initially dismissed for lack of jurisdiction.
6
The municipal court of Taysan-Lobo ruled that
since the issue of prior physical possession could not be resolved without first deciding on the ownership,
dismissal was proper since forcible entry cases involve the sole issue of prior physical possession.
However, upon motion, and in view of the passage of B.P. Blg. 129, which took effect 14 August 1981,
providing that "[m]etropolitan trial courts, municipal trial courts, and municipal circuit trial courts, without
distinction, may try cases of forcible entry and detainer even if the question of ownership is raised in the
pleadings and possession could not be resolved without deciding the ownership,"
7
the trial court modified
its earlier resolution and adjudged petitioner the rightful and lawful owner and possessor of the area in
question and cannot therefore be ejected therefrom.
8

Private respondent appealed to the Regional Trial Court which reversed the Municipal Circuit Trial
Court, ruling that it was not necessary to delve on the issue of ownership since the question of prior
physical possession could be resolved independently, and that since petitioner admitted having
possessed the disputed area on 12 March 1979 while the possession of private respondent began
way back in 1964, the latter clearly had prior possession.
9
Since petitioner did not specifically deny the
allegation of forcible deprivation of property in his Answer, the averment in that regard was deemed
admitted under Sec. 1, Rule 9, of the Rules of Court.
10
As a final word, the RTC held that "no matter how
righteous defendant's claim of ownership over the property may be, he has not the right to take the law
into his own hands by forcibly depriving plaintiff of his prior actual possession of the property."
11

Petitioner appealed to the Court of Appeals, but without success.
12
In its Decision of 22 April 1986,
respondent appellate court dismissed the petition for review and affirmed the RTC decision in toto.
13

Petitioner contends that the Court of Appeals erred: (1) in upholding this ejectment from the disputed
area despite the absence of clear and indubitable proof that private respondent had prior physical
possession and that he was deprived of the same by force, intimidation, strategy or stealth; and, (2)
in not holding that the question of ownership is so necessarily involved that it would be impossible to
decide the question of bare possession without first setting that of ownership.
14

We agree with the position of petitioner and sustain the Municipal Circuit Trial Court in holding that in
the case at bench the issue of possession cannot be decide independently of the question of
ownership. Hence, we reverse the Court of Appeals as well as the Regional Trial Court.
In his complaint in the MCTC, private respondent claims constructive possession of the disputed
portion since 30 June 1964 when he bought the same as part of Lot 4215 of the Hornilla spouses.
Likewise, petitioner bases his occupancy of the disputed portion on the 1979 sale of Lot 4221 in his
favor, which he contends is separate and distinct from Lot 4215 of private respondent. Clearly, the
question of who has prior possession hinges on the question of who the real owner of the disputed
portion is. And the latter, in turn, depends on whether such portion is part of Lot 4215 of private
respondent or of Lot 4221 of petitioner.
It is not disputed that Lot 4221 of petitioner was once owned by private respondent; that the latter
sold the same to his nephew, Cipriano Ramirez, in 1972 for the lump sum of P2,500.00; that the
"Kasulatan ng Bilihan ng Lupa" incorporated both the estimated area and the definite boundaries of
the land; and, that private respondent's nephew in turn sold the lot to petitioner in 1979 with the very
same boundaries mentioned in the deed of sale executed in his favor by his uncle Buenaventura An.
Petitioner claims that owns the entire 2,200 square meters since it is the size of Lot 4221 following
its established boundaries. On the other hand, private respondent insists that he only sold 822.5
square meters, hence, his nephew could not have transferred a bigger area to petitioner.

We sustain petitioner as did the Municipal Circuit Trial Court. We have repeatedly ruled that where
land is sold for a lump sum and not so much per unit of measure or number, the boundaries of the
land stated in the contract determine the effects and scope of the sale, not the area
thereof.
15
Hence, the vendors are obligated to deliver all the land included within the boundaries,
regardless of whether the real area should be greater or smaller than that recited in the deed. This is
particularly true where the area is described as "humigit kumulang," that is, more or less.
16
These
conclusions are drawn from Art. 1542 of the Civil code which states
In the sale of real estate, made for a lump sum and not at the rate of a certain sum
for a unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or less are or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single
price; but if, besides mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be designated in the contract,
the vendor shall be bound to deliver all that is included within said boundaries, even
when it exceeds the area or number specified in the contract; and, should he not be
able to do so, he shall suffer a reduction in the price, in proportion to what is lacking
in the area or number, unless the contract is rescinded because the vendee does not
accede to the failure to deliver what has been stipulated.
Hence, when private respondent Buenaventura An sold Lot 4221 to his nephew Cipriano Ramirez by
means of a "Kasulatan ng Bilihan ng Lupa" which incorporated both the area and the definite
boundaries of the lot, the former transferred not merely the 822.5 square meters stated in their
document of sale but the entire area circumscribed within its boundaries.
The fact that the area turned out to be 2,200 square meters; instead of only 822.5 square meters, is
of no moment and does not entitle private respondent to the difference because the definite object
sold was Lot 4221 in its entirety and not just any unit of measure or number.
17
That the sale resulted
in a disadvantage to private respondent does not confer on him any cause of action against petitioner.
18

Besides, we are hardly convinced that Buenaventura An entered into the sale unaware that Lot 4221
actually had a much bigger area than it purported to be. Even as early as the sale between him and
his nephew, private respondent was already aware of the difference between the stated area of Lot
4221 and its actual size. His nephew Cipriano Ramirez testified, and private respondent did not
dispute, that when asked why the area of Lot 4221 stated in their deed of sale was much smaller
than the actual size, private respondent explained that it was to minimize taxes.
19
Private respondent
likewise did not deny that his nephew merely transferred to petitioner the very same area which he
himself had acquired and possessed in 1961 when he bought the same from Juana Gutierrez, the original
owner of the lot.
Considering the foregoing, it is not difficult to sustain petitioner over private respondent when the
latter failed even to prove prior possession in his favor. Absent such element, it cannot be said that
he was forcibly deprived of the disputed portion. Hence, his action for forcible entry must fail.
It should be emphasized, however, that the case before us is merely an action for forcible entry and
that the issue of ownership was decided for the sole purpose of resolving priority of possession.
Hence, any pronouncement made affecting ownership of the disputed portion is to be regarded
merely as provisional, hence, does not bar nor prejudice an action between the same parties
involving title to the land.
20


WHEREFORE, the Decision of the Intermediate Appellate Court (now Court of Appeals) dated 22
April 1986 affirming that of the Regional Trial Court of 13 January 1984 in toto is REVERSED and
SET ASIDE and another one entered REINSTATING, AFFIRMING and REITERATING the Decision
of 4 May 1983 of the Municipal Circuit Trial Court of Taysan-Lobo, Batangas, with costs against
private respondent Buenaventura An.
SO ORDERED.







4. G.R. No. L-50264 October 21, 1991
IGNACIO WONG, petitioner,
vs.
HON. LUCAS D. CARPIO, as Presiding Judge, Court of First Instance of Davao del Sur,
Branch V and MANUEL MERCADO, respondents.
Rodolfo B. Quiachon for petitioner.
Jose M. Ilagan for private respondent.

BIDIN, J .:p
This is a petition for review on certiorari, certified to this Court by the Court of Appeals as it involves
purely question of law, seeking the annulment of the September 29, 1978 decision of the then Court
of First Instance ** of Davao del Sur, Branch V, in Civil Case No. 1258 which reversed the February
20, 1978 decision of the Municipal Court of Sta. Maria, *** Davao del Sur in an action for Forcible
Entry (Civil Case No. 13) ordering the dismissal of the complaint as well as the counterclaim.
The undisputed facts of this case, as found by both the trial court and the then Court of First
Instance of Davao del Sur, are as follows:
On the basis of the admission of parties in their respective pleadings, the oral
testimonies of all witnesses for both plaintiff and defendants and the documentary
evidence offered and admitted this Court finds that plaintiff Manuel Mercado acquired

his rights to possess the land in litigation, particularly lot 3 (LRC) Pcs-295, (situated
at Colonga, Sta. Maria, Davao del Sur) and which is particularly described and
embraced in Transfer Certificate of title No. (T-4244) T-972 from William Giger by
virtue of a deed of sale with right to repurchase which was executed in 1972 for a
consideration of P3,500.00 (testimony of plaintiff, T.S.N., p. 3, hearing of January 7,
1977). Then, in 1973, William Giger again asked an additional amount of P2,500.00
from plaintiff and so he required William Giger to sign a new deed of Pacto de
Retro Sale (Exhibit "A") on November 5,1973 at Davao City before Notary Public
Gregorio C. Batiller (T.S.N., p. 5, hearing of January 7, 1977). In 1972, plaintiff began
harvesting only the coconut fruits and he paid the taxes on the land (Exhibits B to E)
for Mr. Giger. He went periodically to the land to make copra but he never placed any
person on the land in litigation to watch it. Neither did he reside on the land as he is a
businessman and storekeeper by occupation and resides at Lower Sta. Maria, Davao
del Sur while the land in litigation is at Colongan, Sta. Maria. Neither did he put any
sign or hut to show that he is in actual possession (p. 8, T.S.N., p. 7, hearing of
January 14, 1978). He knew defendants' laborers were in the land in suit as early as
August, 1976 and that they have a hut there but he did not do anything to stop them.
Instead plaintiff was happy that there were people and a hut on the land in suit (p. 14,
T.S.N., hearing of January 14, 1978).
Before July, 1976, defendant Ignacio Wong went to the land in litigation to find out if
there were other people residing there or claiming it besides the owner and he found
none. So, in July, 1976, defendant Ignacio Wong bought the parcel of land in
litigation from William Giger and his wife Cecilia Valenzuela (Exhibit 5). After the
execution of Exhibit 5, defendant Ignacio Wong asked for the delivery of the title to
him and so he has in his possession TCT No. (T-4244) T-974 (Exhibit 6) in the name
of William Giger. Mr. Wong declared the land in suit for taxation purposes in his
name (Exhibit 7). He tried to register thepacto de retro sale with the Register of
Deeds by paying the registration fee (Exhibit 8) but due to some technicalities,
the pacto de retro sale could not be registered. The defendant Wong placed laborers
on the land in suit, built a small farm house after making some clearings and fenced
the boundaries. He also placed signboards (T.S.N., pp. 14-15, hearing of September
15, 1977). On September 27, 1976, plaintiff Manuel Mercado again went to the land
in suit to make copras. That was the time the matter was brought to the attention of
the police of Sta. Maria, Davao del Sur and the incident entered in the police blotter
(Exhibit 11). Then on November 18, 1976, defendant Wong ordered the hooking of
the coconuts from the land in litigation and nobody disturbed him. But on November
29, 1976, defendant received a copy of plaintiff's complaint for forcible entry with
summons to answer which is the case now before the Court. During the pendency of
this instant complaint for forcible entry, spouses William Giger and Cecilia
Valenzuela filed a case for reformation of instrument with the Court of First Instance
of Digos, Davao del Sur against plaintiff Mercado (Exhibit 4). The case pertains to
Exhibit "A" of plaintiff. (pp. 1-3, CA Decision, pp. 82-84, Rollo).
On the basis of the aforestated undisputed facts, the Municipal Court of Sta. Maria, Davao del Sur in
its February 20, 1978 Decision found that herein petitioner (defendant Ignacio Wong) had prior,
actual and continuous physical possession of the disputed property and dismissed both the
complaint and the counter-claim.
On appeal, the then Court of First Instance of Davao del Sur, in its September 29, 1978 Decision
drew a completely different conclusion from the same set of facts and ruled in favor of herein private
respondent (plaintiff Manuel Mercado). The decretal portion of the said decision, reads:

WHEREFORE, the Court finds the plaintiff to have taken possession of the property
earlier in point of time and defendant is an intruder and must, as he is hereby
ordered to return, the possession of the land in question for the plaintiff, paying a
monthly rental of P400.00 from August, 1976, till the property is returned with costs
against the defendant. Judgment is reversed.
Petitioner filed the instant petition with the Court of Appeals. But the Court of Appeals, in its March 1,
1979 Resolution **** found that the only issue is a pure question of law the correctness of the conclusion drawn from the
undisputed facts and certified the case to this Court.
In its April 4, 1979 Resolution, the Second Division of this Court docketed the case in this Court and
considered it submitted for decision.
Petitioner alleged two (2) errors committed by respondent judge, to wit:
A) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER IS AN INTRUDER
IS WITHOUT FACTUAL AND LEGAL BASIS FOR PURPOSES OF A FORCIBLE ENTRY.
B) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER MUST PAY A
MONTHLY RENTAL OF P400.00 FROM AUGUST, 1976 TILL THE PROPERTY IS RETURNED
HAS NO LEGAL AND FACTUAL BASIS.
The petition is without merit.
Petitioner, in claiming that the private respondent has not established prior possession, argues that
private respondent's periodic visit to the lot to gather coconuts may have been consented to
and allowed or tolerated by the owner thereof for the purposes of paying an obligation that may be
due to the person gathering said nuts and that a person who enters a property to gather coconut
fruits and convert the same to copras may only be a hired laborer who enters the premises every
harvest season to comply with the contract of labor with the true owner of the property.
The argument is untenable.
It should be stressed that "possession is acquired by the material occupation of a thing or the
exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and
legal formalities for acquiring such right." (Art. 531, Civil Code; Rizal Cement Co., Inc. vs. Villareal,
135 SCRA 15 [1985]); and that the execution of a sale thru a public instrument shall be equivalent to
the delivery of the thing, unless there is stipulation to the contrary . . . . If, however, notwithstanding
the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of
the thing and make use of it herself, because such tenancy and enjoyment are opposed by another,
then delivery has not been effected. (Paras, Civil Code of the Philippines, Vol. II, 1989 Ed., p. 400).
Applying the above pronouncements on the instant case, it is clear that possession passed from
vendor William Giger to private respondent Manuel Mercado by virtue of the first sale a retro (Exhibit
A), and accordingly, the later sale a retro (Exhibit 5) in favor of petitioner failed to pass the
possession of the property because there is an impediment the possession exercised by private
respondent. Possession as a fact cannot be recognized at the same time in two different
personalities except in the cases of co-possession. Should a question arise regarding the fact of
possession, the present possessor shall be preferred; if there are two possessions, the one longer in
possession, if the dates of possession are the same, the one who presents a title; and if these

conditions are equal, the thing shall be placed in judicial deposit pending determination of its
possession or ownership through proper proceedings (Art. 538, Civil Code).
As to petitioner's query that "Is the entry of petitioner to the property characterized by force,
intimidation, threat, strategy, or stealth in order to show that private respondent has had possession
so that the case is within the jurisdiction of the inferior court?" (p. 15, Petition; p. 16, Rollo). The
same is answered in the affirmative.
The act of entering the property and excluding the lawful possessor therefrom necessarily implies
the exertion of force over the property, and this is all that is necessary. Under the rule, entering upon
the premises by strategy or stealth is equally as obnoxious as entering by force. The foundation of
the action is really the forcible exclusion of the original possessor by a person who has entered
without right. The words "by force, intimidation, threat, strategy, or stealth" include every situation or
condition under which one person can wrongfully enter upon real property and exclude another who
has had prior possession therefrom. If a trespasser enters upon land in open daylight, under the very
eyes of person already clothed with lawful possession, but without the consent of the latter, and
there plants himself and excludes such prior possessor from the property, the action of forcible entry
and detainer can unquestionably be maintained, even though no force is used by the trespasser
other than such as is necessarily implied from the mere acts of planting himself on the ground and
excluding the other party. (Tolentino, Civil Code of the Philippines, Vol. II, 1983 Ed., pp. 243-244;
Drilon vs. Gaurana, 149 SCRA 342 [1987]).
Anent the award of rentals in favor of private respondent, the same is in order. Petitioner's argument
that there is no legal or factual basis for the payment of monthly rentals because bad faith on the
part of petitioner was never proved deserves no merit.
It should be noted that possession acquired in good faith does not lose this character except in the
case and from the moment facts exist which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully. (Art. 528, Civil Code).
Possession in good faith ceases from the moment defects in the title are made known to the
possessors, by extraneous evidence or by suit for recovery of the property by the true owner.
Whatever may be the cause or the fact from which it can be deduced that the possessor has
knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show
bad faith. (Tolentino, Civil Code of the Philippines, Vol. II, p. 226). Such interruption takes place
upon service of summons (Manotok Realty vs. Judge Tecson, 164 SCRA 587 [1988] citing
Mindanao Academy, Inc. v. Yap (13 SCRA 190 [1965]). In the latter case, this Court held:
. . . Although the bad faith of one party neutralizes that of the other and hence as
between themselves their rights would be as if both of them had acted in good faith
at the time of the transaction, this legal fiction of Yap's good faith ceased when the
complaint against him was filed, and consequently the court's declaration of liability
for the rents thereafter is correct and proper. A possessor in good faith is entitled to
the fruits only so long as his possession is not legally interrupted, and such
interruption takes place upon service of judicial summons (Arts. 544 and 1123, Civil
Code).
A perusal of the records of the case shows that petitioner received private respondent's complaint for
forcible entry with summons on November 29, 1976 (Rollo, p. 46). His good faith therefore ceased
on November 29,1976. Accordingly, the computation of the payment of monthly rental should start
from December, 1976, instead of August, 1976.

WHEREFORE, with the modification that the computation of the monthly rental should start from
December, 1976 instead of August, 1976, the September 29, 1978 decision of respondent judge is
Affirmed in all other respects, with costs against petitioner.
SO ORDERED.











5. G.R. No. L-48050 October 10, 1994
FELICIDAD JAVIER, petitioner,
vs.
HON. REGINO T. VERIDIANO II, Presiding Judge, Branch I, Court of First Instance of
Zambales and REINO ROSETE, respondents.
Cesar E. Palma for petitioner.
Saturnino V. Bactad for private respondent.

BELLOSILLO, J .:
Petitioner Felicidad Javier questions before us the order of a regional trial court citing the final
decision of the city court previously dismissing her complaint for forcible entry, and on the basis
thereof, dismissed her petition to quiet title on the ground of res judicata. We summon the time-
honored remedies accion interdictal, accion publiciana andaccion reivindicatoria or accion de
reivindicacion to resolve the issues presented in the petition.

It appears that on 25 January 1963, petitioner filed a Miscellaneous Sales Application for Lot No.
1641, Ts-308 of the Olongapo Townsite Subdivision, Lower Kalaklan, Olongapo City, with the
District Land Officer, Bureau of Lands, Olongapo City. Sometime in December 1970, alleging that
she was forcibly dispossessed of a portion of the land by a certain Ben Babol, she instituted a
complaint for forcible entry before the City Court of Olongapo City, docketed as Civil Case No. 926,
stating in pars. 2 and 3 therein that
. . . plaintiff is the true, lawful and in actual, prior physical possession of a certain
parcel of land situated at Lower Kalaklan, City of Olongapo, said lot being designated
as Lot No. 1641, Ts-308 of the Olongapo Townsite Subdivision since 1961 and up to
the present time, until the day and incidents hereinafter narrated. . . . Sometime on
December 12, 1970, the defendant, without express consent of plaintiff and without
lawful authority, through scheme, strategy and stealth, forcibly entered a portion on
the southwestern part of Lot No. 1641, Ts-308, with the assistance of hired helpers,
started construction of riprap along the Kalaklan River perimeter of said portion of
land; said entry was further augmented by removing plaintiff's chain link, fence with
galvanized iron posts embedded in concrete, likewise destroying plants introduced
by plaintiff by removing existing BL (Bureau of Lands) monuments thereon, and by
these actions, defendant started exercising illegal possession of said portion of land
which contains an area of 200 square meters, more or less.
1

On 7 November 1972 the City Court of Olongapo City, Br. 4,
2
dismissed Civil Case No. 926 on the
ground that "it appears to the Court that the Bureau of Lands has considered the area in question to be
outside Lot 1641 of the plaintiff. . . ."
3
The Decision of the City Court of Olongapo City became final and
executory on 30 April 1973 when the then Court of First Instance of Zambales and Olongapo City, Br.
3,
4
dismissed the appeal and affirmed the findings and conclusions of the City Court holding that
appellant (herein petitioner) failed to give sufficient evidence to prove that the area in question was within
the boundaries of Lot No. 1641.
5

Subsequently, on 17 December 1973, petitioner was granted Miscellaneous Sales Patent No. 5548
and issued Original Certificate of Title No. P-3259 covering Lot No. 1641. Meanwhile, Ben Babol
who was the defendant and appellee in the complaint for forcible entry had sold the property he was
occupying, including the portion of about 200 square meters in question, to a certain Reino Rosete.
Thus petitioner demanded the surrender of the same area in dispute from Reino Rosete who
repeatedly refused to comply with the demand.
On 29 June 1977, or after about four (4) years from the finality of the dismissal of Civil Case No.
926, petitioner instituted a complaint for quieting of title and recovery of possession with damages
against Ben Babol and Reino Rosete before the then Court of First Instance of Zambales and
Olongapo City, docketed as Civil Case No. 2203-0, alleging in pars. 2 and 3 therein that
. . . plaintiff is the absolute owner in fee simple of a parcel of land identified as Lot
No. 1641, Ts-308, Olongapo Townsite Subdivision . . . covered by Original Certificate
of Title No. P-3259, issued by the Register of Deeds for the province of Zambales. . .
. Sometime in December,
1970, and until present, defendants, relying on an application filed on December 23,
1969, with the Bureau of Lands, however have squatted, illegally occupied and
unlawfully possessed the southwestern portion of plaintiff's above-described property
of about 200 square meters, then by defendant BEN BABOL and now by defendant
REINO ROSETE, the former having sold the entirety of his property to the latter,
including the portion in question. . . .
6


Instead of filing a responsive pleading, therein defendant Reino Rosete (private respondent herein)
moved to dismiss the complaint on the ground of res judicata. Defendant Ben Babol did not file any
pleading.
In its Order dated 27 January 1978,
7
the then Court of First Instance of Zambales, Br. 1,
8
sustained the
argument of Rosete and granted his motion to dismiss. Thereafter, petitioner's motion for reconsideration
was denied.
9
Hence, this petition for review on certiorari.
Petitioner contends that res judicata cannot apply in the instant case since there is no identity of
parties and causes of action between her complaint for forcible entry, which had long become final
and executory, and her subsequent petition for quieting of title. She argues that private respondent
Reino Rosete, who invokes the defense or res judicata, was never impleaded in the forcible entry
case, which is an action in personam; neither was he a purchaserpendente lite who, perhaps, could
have validly invoked the defense of res judicata. With regard to the cause of action, she maintains
that there is no identity of causes of action since the first case was for forcible entry, which is merely
concerned with the possession of the property, whereas the subsequent case was for quieting of
title, which looks into the ownership of the disputed land.
Private respondent however submits that there is identity of parties in the two cases since he is a
successor in interest by title of the defendant in the first case after the commencement of the first
action. On the issue of identity of causes of action, he simply states that neither of the two cases,
i.e., the complaint for forcible entry and the subsequent petition for quieting of title, alleges a cause
of action. Thus, private respondent continues, both cases have to be dismissed.
Time and again it has been said that for res judicata to bar the institution of a subsequent action the
following requisites must concur: (1) There must be a final judgment or order; (2) The court
rendering the judgment must have jurisdiction over the subject matter; (3) The former judgment is a
judgment on the merits; and, (4) There is between the first and second actions identity of parties, of
subject matter and of causes of action.
10
The presence of the first three requirements and the identity
of subject matter in the fourth requirement are not disputed. Hence, the only issues remaining are
whether as between Civil Case No. 926 and Civil Case No. 2203-0 there is identity of parties and of
causes of action which would bar the institution of Civil Case No. 2203-0.




Petitioner's argument that there is no identity of parties between the two actions is without merit. We
have repeatedly ruled that for res judicata to apply, what is required is not absolute but only
substantial identity of parties.
11
It is fundamental that the application of res judicata may not be evaded
by simply including additional parties in a subsequent litigation. In fact we have said that there is still
identity of parties although in the second action there is one party who was not joined in the first action, if
it appears that such party is not
a necessary party either in the first or second action,
12
or is a mere nominal party.
13
Thus, Sec. 49, par.
(b), Rule 39, Rules of Court, provides that ". . . 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 the action or
special proceeding, litigating for the same thing and under the same title and in the same capacity."
In the case at bench, it is evident that private respondent Reino Rosete is a successor in interest of
Ben Babol by title subsequent to the commencement and termination of the first action. Hence, there
is actual, if not substantial, identity of the parties between the two actions. But, there is merit in
petitioner's argument that there is no identity of causes of action between Civil Case
No. 926 and Civil Case No. 2203-0.
Civil Case No. 926 is a complaint for forcible entry, where what is at issue is prior possession,
regardless of who has lawful title over the disputed property.
14
Thus, "[t]he only issue in an action for
forcible entry is the physical or material possession of real property, that is, possession de facto and not
possession de jure. The philosophy underlying this remedy is that irrespective of the actual condition of
the title to the property, the party in peaceable quiet possession shall not be turned out by strong hand,
violence or terror."
15
And, a judgment rendered in a case for recovery of possession is conclusive only on
the question of possession and not on the ownership. It does not in any way bind the title or affect the
ownership of the land or building.
16

On the other hand, Civil Case No. 2203-0 while inaccurately captioned as an action for "Quieting of
Title and Recovery of Possession with Damages" is in reality an action to recover a parcel of land or
an accion reivindicatoriaunder Art. 434
17
of the Civil Code, and should be distinguished from Civil Case
No. 926, which is an accion interdictal. From the averments of the complaint in Civil Case No. 2203-0,
plaintiff therein (petitioner herein) clearly sets up title to herself and prays that respondent Rosete be
ejected from the disputed land and that she be declared the owner and given possession thereof.
Certainly, the allegations partake of the nature of an accion reivindicatoria.
18

The doctrine in Emilia v. Bado,
19
, decided more than twenty-five years ago, is still good law and has
preserved the age-old remedies available under existing laws and jurisprudence to recover possession of
real property, namely accion interdictal, which is the summary action for forcible entry (detentacion) where
the defendant's possession of the property is illegal ab initio, or the summary action for unlawful detainer
(desahuico) where the defendant's possession was originally lawful but ceased to be so by the expiration
of his right to possess, both of which must be brought within one year from the date of actual entry on the
land, in case of forcible entry, and from the date of last demand, in case of unlawful detainer, in the
proper municipal trial court or metropolitan trial court;
20
accion publiciana which is a plenary action for
recovery of the right to possess and which should be brought in the proper regional trial court when the
dispossession has lasted for more than one year; and, accion reivindicatoria or accion de
reivindicacion which seeks the recovery of ownership and includes thejus utendi and the jus
fruendi brought in the proper regional trial court.
Accion reivindicatoria or accion de reivindicacion is thus an action whereby plaintiff alleges
ownership over a parcel of land and seeks recovery of its full possession.
21
It is different from accion
interdictal or accion publiciana where plaintiff merely alleges proof of a better right to possess without
claim of title.
22

In Civil Case No. 926 petitioner merely claimed a better right or prior possession over the disputed
area without asserting title thereto. It should be distinguished from Civil Case No. 2203-0 where she
expressly alleged ownership, specifically praying that she be declared the rightful owner and given
possession of the disputed portion. Hence, in Civil Case No. 926 petitioner merely alleged that she
was "the true, lawful (possessor) and in actual, prior physical possession" of the subject parcel of
land, whereas in Civil Case
No. 2203-0 she asserted that she was "the absolute owner in fee simple" of the parcel of land
"covered by Original Transfer Certificate of Title No. P-3259." The complaint in Civil Case No. 2203-

0 definitely raises the question of ownership and clearly gives defendants therein notice of plaintiff's
claim of exclusive and absolute ownership, including the right to possess which is an elemental
attribute of such ownership. Thus, this Court has ruled that a judgment in forcible entry or detainer
case disposes of no other issue than possession and declares only who has the right of possession,
but by no means constitutes a bar to an action for determination of who has the right or title of
ownership.
23

And, applying the ruling of the Court En Banc in Quimpo v. De la Victoria,
24
even if we treat Civil
Case No. 2203-0 as a petition to quiet title, as its caption suggests, still it has a cause of action different
from that for ejectment. Consequently, there being no identity of causes of action between Civil Case No.
926 and Civil Case No. 2203-0, the prior complaint for ejectment cannot bar the subsequent action for
recovery, or petition to quiet title.
WHEREFORE, the petition is GRANTED. The Order dated 27 January 1978 of the then Court of
First Instance of Zambales, Br. I, with station in Olongapo City, dismissing Civil Case No. 2203-0,
and its subsequent Order denying reconsideration of the dismissal are REVERSED and SET ASIDE.
The Clerk of Court is directed to remand the records immediately to the court of a quo and the latter
to proceed with the trial of Civil Case No. 2203-0 with deliberate dispatch. This decision is
immediately executory.
SO ORDERED.


6. G.R. No. 93451 March 18, 1991
LIM KIEH TONG, INC., petitioner,
vs.
THE COURT OF APPEALS, HON. JUDGE ROGELIO M. PIZARRO, Presiding Judge of Branch
16 of the Metropolitan Trial Court of Manila, and REGINALDO Y. LIM, respondents.
Balgos & Perez for petitioner.
Madamba, Lim & Tan for private respondent.

GANCAYCO, J .:p
The issue of whether a complaint filed in the Metropolitan Trial Court of Manila is one for forcible
entry and detainer or one for specific performance is the center of this litigation.
The facts are not disputed as related by the respondent Court of Appeals in its questioned decision
dated December 7, 1988

The record reveals that on October 23, 1987, the appellee, Reginaldo Y. Lim, had
filed a complaint before the Metropolitan Trial Court of Manila, in part, alleging, as
follows:
3. Plaintiff and his family had for some time resided in Room 301 of
the building adverted to in the next preceding paragraph, until they
transferred to their present residence at No. 3 Igdalig Street, Quezon
City;
4. The said room 301 has thereafter been utilized by plaintiff as a
place where he keeps some of his important belongings, such as his
law books, important documents, appliances, etc.;
5. The aforementioned building has only one common main door
through which all the occupants of the various rooms therein,
including that of plaintiff, can get in and out therefrom;
6. Accordingly, each and every occupant of any and all of the rooms
of the building including plaintiff has been given a key or a duplicate
key to the doorlock by Rafael Lim, the Officer-in-Charge of defendant
corporation;
7. When plaintiff wanted to go inside his room in the following
morning of September 30, 1987 to fetch three (3) of his law books,
which he needed to read in connection with a case he is handling, he
was surprised to find out that the key given him could no longer fit the
door lock which was then already changed;
8. Consequently, plaintiff had to buy three (3) new law books for
which he incurred expenses in the sum of Pl,253.00, if only to be able
to prepare for his cases;
9. Plaintiff was only able to contact defendant through its Officer-in-
Charge, Mr. Rafael Lim, the following day, October 1, 1987, but his
request for him to be provided with the appropriate key produced
negative result, hence, this suit where plaintiff incurred expenses in
the form of attorney's fees and costs of suit.
ALLEGATIONS IN SUPPORT OF PRAYER FOR PRELIMINARY
MANDATORY INJUNCTION/RESTRAINING ORDER
10. Plaintiff repleads all the foregoing allegations by way of reference
to form part of the prayer for the issuance of a writ of preliminary
mandatory injunction;
11. The failure and/or refusal of defendant to furnish plaintiff the
appropriate key, above-cited, constitutes a violation of the substantial
rights of plaintiff, who has a clear and unmistakable right to the use
and enjoyment of Room 301 of the building owned by defendant
corporation, such that there is an urgent and paramount necessity for

the issuance of the writ of preliminary injunction/restraining order
commanding defendant to furnish plaintiff the appropriate key in order
to prevent great and and/or irreparable damages and injury upon
plaintiff.
In conclusion, the said appellee prayed, as follows:
PREMISES CONSIDERED, it is most respectfully prayed of the
Honorable Court that a writ of preliminary mandatory
injunction/restraining order commanding defendant to provide plaintiff
the appropriate key or a duplicate key to the lock of the main door of
the building be immediately issued, and, after hearing the case on its
merits, judgment be rendered in favor of plaintiff and against
defendant ordering:
l. the injunction prayed for in the complaint;
2. defendant to pay plaintiff the sum of Pl,253.00 as actual
compensatory damages;
3. defendant to pay plaintiff the sum of P5,000.00 as and for
attorney's fees; and
4. the cost of suit.
Plaintiff prays for such other reliefs and/or remedies which the
Honorable Court may deem just and proper in the premises. (p. 13,
orig. rec.)
The opening paragraphs of the questioned decision relate what had happened in the
courts below:
This is a special civil action for certiorari under Rule 65, grounded on
pure questions of law.
The case is simplicity itself.
The undisputed facts are as follows:
Petitioner is a duly organized domestic corporation and is the owner
of a building located at 1231 Piedad Street corner Benavidez Street,
Manila;
Public respondent is the Presiding Judge of the Metropolitan Trial
Court, Branch 16;
For sometime prior to the filing of this petition, Lim Eng Piao, father of
private respondent, occupied said premises as a dwelling unit at the
above given address together with all the members of his family. Lim
Eng Piao subsequently died. Said occupancy was continued by

private respondent. Later, the latter was able to acquire a house and
lot at No. 3 Igdalig Street, Quezon (sic). In spite of having transferred
residence, private respondent did not vacate Room 301 of the
building in question. Instead, he utilized the same as a place where
he keeps some of his important belongings, papers, books,
documents and appliances . . .
On or about September 1987, petitioner changed the lock of the
common main door of the building.
On the morning of September 30, 1987, private respondent tried to
go to Room 301 but found that the key given him could not fit and
open the main door. As one of the occupants of the building in
question, private respondent demanded from petitioner's officer-in-
charge the delivery to him of the appropriate keys to the said
common main door so that he could enter the premises and be
restored to possession of said Room No. 301 of the building, but his
efforts proved futile as the officer in charge did not heed his
demand . . .
On October 2, 1987, by reason of the unjustifiable ouster of private
respondent from said premises, he instituted Civil Case No. 122546
entitled Reginaldo Y. Lim vs. Rafael Lim and Lim Kieh Tong & Co.,
Inc. before the Metropolitan Trial Court which was raffled to Branch
25. Said complaint was denominated as an action for damages with
injunction despite the allegations contained therein . . .. The aforesaid
case was subsequently dismissed for lack of jurisdiction . . .
On October 23, 1987, private respondent again instituted another
action at the Metropolitan Trial Court docketed as Civil Case No.
122775 which was raffled to Branch 16. The complaint reiterated the
same allegations . . .
On November 2, 1987, a temporary restraining order was issued by
respondent judge pending trial on the merits, commanding petitioner
to deliver the appropriate keys to private respondent and allow him to
enter the premises and occupancy of Room No. 301 of the building . .
.
On November 3, 1987, petitioners instituted the instant petition;
On the same date after an ex-parte hearing, the Executive Judge of
this Court, in order to obviate any possible injustice pending the
determination of the issuance of the injunctive writ, issued a
temporary restraining order, enjoining the enforcement of the
temporary restraining order earlier issued by respondent judge and
from further taking cognizance of said Civil Case No. 122775; . . .
In ruling in favor of the private appellee, the appellee judge, in part, stated:

In this case force was used by petitioner to deprive private
respondent of the physical possession of Room 301 when the lock of
the main door was changed without his knowledge and consent.
The issued (sic) involved is mere physical possession (possession de
facto) and not juridical possession (possession de jure) nor
ownership (Mercado vs. Go Bio, 78 Phil. 279; Masallo, vs. Cesar, 39
Phil. 134).
The purpose of forcible entry is that regardless of the actual condition
of the title to property, the party in peaceable and quiet possession
shall not be turned out by strong hand, violence or terror . . . In
affording this remedy, breaches of the peace and criminal disorder
would be minimized. A party out of possession must respect and
resort to the law alone to obtain what he claims is his. (Supia and
Batioco vs. Quintero and Ayala, 59 Phil. 312).
Considering that respondent judge found the applicability of the Rule
in Summary Procedure, the motion to dismiss was correctly denied. A
motion to dismiss being one of the prohibited pleadings and motions
under Section 15 of the 1983 Rules on Summary Procedure.
Hence, the petition must fail on this score alone.
Anent the second issue, petitioner contended that when the amount
of damages claimed is not specifically alleged in the complaint,
jurisdiction over the case would fall under the Regional Trial Courts,
as the failure to so allege would characterize the subject matter as
one which is incapable of pecuniary estimation.
Petitioner's contentions is (sic) not well-taken.
In Singson vs. Aragon, 92 Phil. 514, the Supreme Court held that
exemplary damages must be specified and if not, the municipal trial
court could still grant it, if together with the other money claims, the
amount of the total claim does not exceed P10,000.00 (now
P20,000.00).
As to moral damages, the aforesaid ruling can likewise be made to
apply.
What confers jurisdiction on the inferior court in forcible entry and
illegal detainer cases is NOT the amount of unpaid rentals or
damages involved, but rather the nature of the action because the
rents or damages are only incidental to the main action (Vichanco vs.
Laurilla, L-13935, June 30, 1960).
1

An appeal was taken to the Court of Appeals. The appeal was dismissed for lack of merit.
2
A motion
for reconsideration filed by petitioner was denied in a resolution dated May 9, 1990.
3


Hence, this petition for review the main thrust of which is that the action being one for specific
performance the jurisdiction thereof is vested in the Regional Trial Court.
The petition must fail.
A reading of the allegations of the complaint show that private respondent and his family resided in
Room 301 of the building of petitioner until they transferred to their present residence at No. 3
Igdalig St., Quezon City. However, private respondent retained possession of said room to keep his
important belongings, such as his law books, important documents, appliances, etc. The building
has only one common main door through which all the occupants of the various rooms therein can
get in and out. Accordingly, all occupants including private respondent were given a key to the main
doorlock by petitioner.
However, when private respondent wanted to go inside his room on September 30, 1987 to get three
(3) of his lawbooks which he needed to read in connection with a case he was then handling, he
found that the key he possessed was no longer compatible with the lock, i.e., the same was
changed. Private respondent had to buy three (3) new lawbooks for Pl,253.00 to prepare for his
cases. He requested private respondent to provide him the appropriate key but his request was
denied. Petitioner also alleges that he has a clear and unmistakable right to the use of said room
entitling him to the writ of preliminary mandatory injunction to command petitioner to provide him the
appropriate key to the lock of the main building; and to pay damages in the amount of Pl,253.000,
P5,000.00 attorney's fees and costs of the suit.
From the foregoing facts alleged in the complaint, the Court holds that the suit is one for forcible
entry and detainer under Rule 70 of the Rules of Court. Private respondent retained the possession
of Room 301 of petitioner's building which he claimed to have the right to use and enjoy, but
petitioner prevented him from enjoying his right by depriving him of the right of egress and ingress
through the main door of the building. Through stealth, petitioner changed the key to the main door
thus depriving private respondent of the possession of his rented room.
Any person deprived of possession of any land or building or part thereof, may file an action for
forcible entry and detainer in the proper inferior court against the person unlawfully depriving or
withholding possession from him
4
This relief is not only available to a landlord, vendor, or vendee, but
also to a lessee or tenant or any other person against whom the possession of any land or building, or a
part thereof, is unlawfully withheld, or is otherwise unlawfully deprived possession thereof, within one (1)
year after such unlawful deprivation or withholding of possession.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.


7. G.R. No. 112734 July 7, 1994
SPOUSES NAZARIO P. PENAS, JR. represented by ELPIDIO R. VIERNES, ATTORNEY-IN-
FACT, petitioners,

vs.
COURT OF APPEALS and LUPO CALAYCAY, respondents.
Mark Anthony B. Plotea for petitioners.
David B. Agoncillo for private respondent.

PADILLA, J .:
The only issue to be resolved in this ejectment case is whether or not the Metropolitan Trial Court
had jurisdiction over the complaint filed by herein petitioner-spouses represented by their attorney-
in-fact Elpidio R. Viernes.
The undisputed facts of the case as summed up by the trial court and adopted by respondent Court
of Appeals are as follows:
Subject of this controversy [are the] premises identified as 24-B Scout Santiago
Street, Barangay Laging Handa, Quezon City, also identified as 26-B [South] D
Street, Quezon City. It was the object of a written lease contract executed by the late
Nazario Penas in favor of [private respondent] Lupo Calaycay on June 26, 1964, at
an agreed monthly rental of One Hundred Ten (P110.00) Pesos, Philippine Currency.
The written lease contract was on a month to month basis. Nazario Penas, Sr. died
on February 5, 1976 and, thereafter, on June 15, 1976, an extra-judicial settlement of
his estate was executed by his surviving heirs, one of whom is his son, Nazario
Penas, Jr. Likewise, after the death of plaintiff's mother Concepcion P. Penas on
March 2, 1985, her children including [petitioner] Nazario Penas, Jr. executed an
extra judicial settlement of her estate. As time [went] on, the monthly rental on the
subject premises had been gradually increased by the [petitioners], the latest of
which was Six Hundred Ninety One and 20/100 (P691.20) Pesos, Philippine
Currency.
In a letter of January 18, 1990, [petitioner]-spouses Penas, through counsel notified
the [private respondent] that effective March 1990, they were terminating the written
month to month lease contract as they were no longer interested to renew the same
and demanded from the latter to vacate the premises in question on or before
February 28, 1990. In the same letter, [petitioners] opted to allow the defendant to
continue occupying the leased premises provided he will agree to execute a new
lease contract for a period of one (1) year at an increased monthly rental of Two
Thousand Five Hundred Pesos (P2,500.00) Pesos, Philippine Currency, plus two (2)
months deposit and, further, gave the [private respondent] up to February 28, 1990
to decide, otherwise judicial action for unlawful detainer against the [private
respondent] shall ensue. [Petitioners] later finally reduced the monthly rental to Two
Thousand (P2,000.00) Pesos, Philippine Currency, only.
[Private respondent] failed to abide by the demand of the [petitioners]. However, he
continued staying on the leased premises and effective March 1990, he deposited
the monthly rentals in the subject premises with the PNB in his name ITF (in trust for)
spouses Lucila and Nazario Penas, Jr. under Account No. 688930. Prior to such
deposit, [private respondent] together with others, in a letter of March 26, 1990,

informed the [petitioners], inter alia, that since [petitioners'] representative refused to
accept the rentals, he will deposit the same with a reputable bank and he will [hold]
the same intact for the [petitioners]. There was no instance that [petitioners]
manifested any desire to withdraw the same deposit in the bank.
On August 10, 1992, plaintiffs through counsel sent another letter to the defendant to
vacate the subject premises and to pay back rental arrearages in the sum of Two
Thousand (P2,000.00) Pesos, Philippine Currency, per month from March 1990 in
the total sum of Sixty Thousand (P60,000.00) Pesos, Philippine Currency, which
defendant failed to satisfy.
Accordingly, on September 25, 1992, after the corresponding Certification to File
Action was issued by Barangay Laging Handa, Quezon City, [petitioners] filed the
present suit for unlawful detainer on the grounds of termination of the month to
month lease contract and failure of the defendant to execute a new lease agreement
with increased rentals. [Petitioners] tried to impress the Court that after they [had]
agreed [to] a new monthly rental of Two Thousand (P2,000.00) Pesos, Philippine
Currency, [private respondent] refused to enter into a new contract and insisted in
paying at a lower rate; that they gave defendant allowance of more than one (1) year
within which to sign a new contract of lease but still he refused to do so; that even if
conciliation before the barangay is unnecessary as [petitioners] reside abroad, their
attorney-in-fact referred the case to the barangay level. (reference to Annexes
omitted)
1

The parties were required to submit their respective position papers after which the Metropolitan
Trial Court, Branch 33 of Quezon City rendered a decision dated 16 March 1993 dismissing herein
petitioners' complaint for lack of jurisdiction. The trial court based its decision on the finding that the
complaint was filed more than one (1) year after private respondent began unlawfully occupying the
premises.
On appeal to the Regional Trial Court, the trial court decision was upheld, the RTC ruling that herein
petitioners' remedy was converted from an actio de mero hecho to an accion publiciana since more
than one (1) year had elapsed from the demand upon defendants to vacate. The Regional Trial
Court concluded that herein petitioners could initiate a proper complaint with the Regional Trial
Court.
Respondent Court of Appeals in a decision * in CA G.R. SP No. 31480 dated 19 November 1993 upheld the RTC. The
Court of Appeals ruled that since herein petitioners were not collecting the rentals being deposited by private respondent, there no longer
was any lease contract between the parties for two (2) years since the first letter of petitioners to private respondent. The Court of Appeals
thus agreed that the proper remedy of the petitioners is to file an action for recovery of possession in the Regional Trial Court.
We do not agree with the decision of the Court of Appeals, and hence set it aside.
Petitioners correctly cite our ruling in Sy Oh v. Garcia
2
upholding the established rule that the one (1)
year period provided for in section 1, Rule 70 of the Rules of Court within which a complaint for unlawful
detainer can be filed should be counted from the LAST letter of demand to vacate, the reason being that
the lessor has the right to waive his right of action based on previous demands and let the lessee remain
meanwhile in the premises.
3

In the present case, it is of note that the first demand letter addressed by petitioners to private
respondent gave the latter the option to either vacate the premises on or before 28 February 1990 or

agree to execute a new lease contract for one (1) year at an increased rental rate of P2,500 per
month. In Vda. de Murga v. Chan
4
we held that:
The notice giving the lessee the alternative either to pay the increased rental or
otherwise vacate the land is not the demand contemplated by the Rules of Court in
unlawful detainer cases. When after such notice, the lessee elects to stay, he
thereby merely assumes the new rental and cannot be ejected until he defaults in
said obligation and necessary demand is first made.
The facts of this case do not warrant a departure from said settled doctrine. It should be noted that
even if the private respondent was depositing rentals in trust for the petitioners, what was being
deposited were rentals at the old rate, which petitioners were not bound to accept or withdraw. When
private respondent elected to remain in the premises after petitioners had sent him the letter of 18
January 1990 giving him the option to vacate by 28 February 1990 or to sign a new lease contract
for one (1) year at an increased rental rate of P2,500.00 (later reduced to P2,000.00) a month, he
assumed the new rental rate and could be ejected from the premises only upon default and by a
proper demand from the petitioners. The demand was made on 10 August 1992, followed by the
action for unlawful detainer on 25 September 1992.
WHEREFORE, based on the foregoing, the decision of the Court of Appeals in CA G.R. SP No.
31480 is hereby SET ASIDE and a new decision rendered:
1. Ordering private respondent Lupo Calaycay to immediately vacate the premises located at 24-B
Scout Santiago Street, Barangay Laging Handa, Quezon City.
2. Ordering private respondent Lupo Calaycay to pay back rentals in the amount of Two Thousand
(P2,000.00) Pesos per month from March 1990 until he finally vacates the leased premises.
3. Ordering private respondent to pay Ten Thousand (P10,000.00) Pesos as attorney's fees.
Costs against private respondent.
SO ORDERED
8. [G.R. No. 117051. January 22, 1996]
FRANCEL REALTY CORPORATION, petitioner, vs. COURT OF
APPEALS and FRANCISCO T. SYCIP,respondents.
D E C I S I O N
MENDOZA, J .:

Petitioner Francel Realty Corporation filed a complaint for unlawful
detainer against private respondent Francisco T. Sycip. The case was filed in
the Municipal Trial Court (MTC) of Bacoor, Cavite.
In its complaint, petitioner alleged that it had executed a Contract to Sell to
private respondent Lot 16, Building No. 14 of the Francel Townhomes, at 22
Real Street, Maliksi, Bacoor, Cavite, for P451,000.00. The Contract to Sell
provides inter alia that in case of default in the payment of two or more
installments, the whole obligation will become due and demandable and the
seller will then be entitled to rescind the contract and take possession of the
property; the buyer will vacate the premises without the necessity of any court
action and the downpayment will be treated as earnest money or as rental for
the use of the premises. Petitioner alleged that private respondent failed to
pay the monthly amortization of P9,303.00 since October 30, 1990 despite
demands to update his payments and to vacate the premises, the latest of
which was the demand made in the letter dated September 26, 1992, and that
because of private respondents unjust refusal to vacate, petitioner was
constrained to engage the services of counsel. Petitioner prayed that private
respondent be ordered to vacate the premises and pay a monthly rental of
P9,303.00 beginning October 30, 1990 until he shall have vacated the
premises, and P25,000.00 as attorneys fees plus appearance fee of P
1,000.00 per hearing and expenses of litigation.
On November 9, 1992, private respondent moved to dismiss the complaint
but his motion was denied by the MTC. On January 20, 1993 he filed his
answer,
[1]
in which he alleged that he had stopped paying the monthly
amortizations because the townhouse unit sold to him by petitioner was of
defective construction. He alleged that he had in fact filed a complaint for
unsound real estate business practice in the Housing and Land Use
Regulatory Board (HLURB Case No. REM-07-9004-80) against
petitioner. Private respondent prayed that petitioner be ordered to pay
P500,000.00 as moral damages, P500,000.00 as exemplary damages,
P75,000.00 as attorneys fees and that he be given all other remedies just
and equitable.
In its resolution dated February 24, 1993, the MTC ruled that the answer
was filed out of time on the ground that it was filed more than ten days after
the service of summons.
[2]
On March 17, 1993, however, it dismissed the
complaint for lack of jurisdiction. The MTC held that the case was cognizable
by the HLURB. But it also ordered petitioner to pay private respondent
P10,000.00 as moral damages, P10,000.00 as exemplary damages,
P3,000.00 as attorneys fees, and to pay costs.

On appeal the Regional Trial Court affirmed the decision of the MTC. It
held that the case was exclusively cognizable by the HLURB which had
jurisdiction not only over complaints of buyers against subdivision developers
but also over actions filed by developers for the unpaid price of the lots or
units.
Petitioner filed a petition for review in the Court of Appeals, alleging that:
(a) The amounts of damages prayed for by the private respondent in his Answer are
enormous and way beyond the jurisdiction of the inferior court; and
(b) Since the inferior court and the respondent court ruled that it has no jurisdiction
over this case, then it has no reason, much more jurisdiction to award damages in
excess of the P20,000.00 jurisdiction of the inferior Court.
[3]

The appellate court dismissed the petition, holding that the MTC had
jurisdiction over cases of forcible entry and unlawful detainer, regardless of
the amount of damages on unpaid rentals sought to be recovered in view of
1A(1) of the Revised Rule on Summary Procedure.
[4]

Petitioner moved for reconsideration. It contended that since the MTC had
ruled that it had no jurisdiction over this case, then it had no jurisdiction either
to grant the counterclaim for damages in the total sum of P23,000.00. Its
motion was, however, denied for lack of any cogent reason to reverse the
appellate courts resolution of June 15, 1994.
[5]

Hence this petition for review on certiorari.
It is important to first determine whether the MTC has jurisdiction over
petitioners complaint. For if it has no jurisdiction, then the award of damages
made by it in its decision is indeed without any basis. It is only if the MTC has
jurisdiction of the subject matter of the action that it is necessary to determine
the correctness of the award of damages, including attorneys fees.
Petitioners complaint is for unlawful detainer. While generally speaking
such action falls within the original and exclusive jurisdiction of the MTC, the
determination of the ground for ejectment requires a consideration of the
rights of a buyer on installment basis of real property. Indeed private
respondent claims that he has a right under P.D. No. 957, 23 to stop paying
monthly amortizations after givingdue notice to the owner or developer of his
decision to do so because of petitioners alleged failure to develop the
subdivision or condominium project according to the approved plans and
within the time for complying with the same. The case thus involves a

determination of the rights and obligations of parties in a sale of real estate
under P.D. No. 957. Private respondent has in fact filed a complaint against
petitioner for unsound real estate business practice with the HLURB.
This is, therefore, not a simple case for unlawful detainer arising from the
failure of the lessee to pay the rents, comply with the conditions of a lease
agreement or vacate the premises after the expiration of the lease. Since the
determinative question is exclusively cognizable by the HLURB, the question
of the right of petitioner must be determined by the agency.
Petitioners cause of action against private respondent should instead be
filed as a counterclaim in HLURB Case No. REM-07-9004-80 in accordance
with Rule 6, 6 of the Rules of Court which is of suppletory application to the
1987 HLURB Rules of Procedure per 3 of the same. In the case of Estate
Developers and Investors Corporation v. Antonio Sarte and Erlinda Sarte
[6]
the
developer filed a complaint to collect the balance of the price of a lot bought
on installment basis, but its complaint was dismissed by the Regional Trial
Court for lack of jurisdiction. It appealed the order to this Court. In dismissing
the appeal, we held:
The action here is not a simple action to collect on a promissory note; it is a complaint
to collect amortization payments arising from or in connection with a sale of a
subdivision lot under PD. Nos. 957 and 1344, and accordingly falls within the
exclusive original jurisdiction of the HLURB to regulate the real estate trade and
industry, and to hear and decide cases of unsound real estate business
practices. Although the case involving Antonio Sarte is still pending resolution before
the HLURB Arbiter, and there is as yet no order from the HLURB authorizing
suspension of payments on account of the failure of plaintiff developer to make good
its warranties, there is no question to Our mind that the matter of collecting
amortizations for the sale of the subdivision lot is necessarily tied up to the complaint
against the plaintiff and it affects the rights and correlative duties of the buyer of a
subdivision lot as regulated by NHA pursuant to P.D. 957 as amended. It must
accordingly fall within the exclusive original jurisdiction of the said Board, and We
find that the motion to dismiss was properly granted on the ground that the regular
court has no jurisdiction to take cognizance of the complaint.
Accordingly, we hold that the MTC correctly held itself to be without
jurisdiction over petitioners complaint. But it was error for the MTC to grant
private respondents counterclaim for damages for expenses incurred and
inconveniences allegedly suffered by him as a result of the filing of the
ejectment case.
[7]


Pursuant to Rule 6, 8 a party may file a counterclaim only if the court has
jurisdiction to entertain the claim. Otherwise the counterclaim cannot be filed.
[8]

Even assuming that the MTC had jurisdiction, however the award of
damages to private respondent must be disallowed for the following reasons:
(1) The MTC decision itself stated that the answer with its counterclaim
was filed out of time or more than 10 days from private respondents receipt of
summons. In effect, therefore, private respondent did not make any
counterclaim.
(2) Moreover, a reading of the MTC decision showed no justification for
the award of moral and exemplary damages and attorneys fees. As held
in Buan v. Camaganacan,
[9]
an award of attorneys fees without justification is
a conclusion without a premise, its basis being improperly left to speculation
and conjecture. It should accordingly be stricken out. With respect to the
award of moral and exemplary damages, the record is bereft of any proof that
petitioner acted maliciously or in bad faith in filing the present action which
would warrant such an award.
[10]

WHEREFORE, the decision of the Court of Appeals is REVERSED and
the complaint against private respondent is DISMISSED. The private
respondents counterclaim is likewise DISMISSED.
SO ORDERED.




9.
G.R. No. L-11977 April 29, 1959
LEONARDO AZARCON, MANUEL AZARCON and ESTEBAN ABOBO, petitioner,
vs.
VICTOR EUSEBIO, respondent.
Leonardo N. Azarcon in his own behalf and for his co-petitioners.
Melion Pajarillaga for respondent.
LABRADOR, J .:

Appeal from an order of the Court of Appeals, Fourth Division, in CA-G.R. No. 15444-R,
promulgated September 5, 1956, finding Leonardo Azarcon, Manuel Azarcon and Esteban Abobo
guilty of contempt of court, ordering each of them to pay a fine of P100, to remove certain
improvements that they have constructed on the land, etc.
The record discloses that respondent Victor Eusebio and petitioners herein had a dispute over the
possession of a certain parcel of public land in the year 1954. Victor Eusebio had filed a lease
application, No. V-79, for a parcel of land known as lot No. 3807, containing an area of about 349
hectares. A portion thereof was occupied by petitioners herein, Leonardo L. Azarcon and his
companions, under a homestead application. The conflict between the lessee and the homesteaders
was ordered to be investigated on May 25, 1955 by the Director of Lands and again on August 3,
1955 by the Secretary of Agriculture and natural Resources.
Before the dispute could be settled and on April 28, 1954, Victor Eusebio filed a complaint in the
Court of First Instance of Nueva Ecija, alleging that he had acquired a big parcel of land, 349
hectares in area, by lease from the Bureau of Lands (lease application No. V-79); that while he was
in possession thereof defendants occupied a portion, known as lot No. 2807, containing an area of
six hectares more or less. He, therefore, prayed that defendants be ordered to vacate the six
hectares occupied by them and pay damages. Defendant Leonardo Azarcon answered the
complaint alleging that he is in actual possession of a portion of 24 hectares since 1941 by virtue of
a homestead application, No. V-42995; that the lease application of plaintiff is subsequent to said
homestead application of Leonardo Azarcon; that Azarcon had occupied the land since 1941 with
interruption during the war and again in 1950 up to the time of the filing of the action. He, therefore,
prayed that the action be dismissed. The answer was filed on June 2, 1954 and on motion of
plaintiffs dated March 15, 1955, the defendants were declared in default. A motion to set aside the
default was denied, and a judgment by default was entered by the court on April 26, 1955. It ordered
defendants to restore possession of the land to plaintiff. Having failed to obtain a reconsideration of
the above decision, defendants appealed to the Court of Appeals.
While the case was pending in the Court of Appeals, a writ for the execution of the judgment of the
lower court was issued on October 3, 1955. On October 8, 1955, defendants moved and the court
on October 21 ordered that the said writ of execution be stayed upon defendants' depositing of a
supersedeas bond of P1,000. The writ of execution was actually served on the defendants on
October 7, 1955. Various petitions were submitted by the parties, and among them was that of
defendants-appellants asking for the lifting of the writ of execution. This petition, dated October 14,
1955, was granted on November 1, 1955, and the court again fixed the supersedeas bond to stay
execution in the amount of P1,000 to be filed with and approved by the Court of First Instance of
Nueva Ecija as to its sufficiency. In the same order of November 7, the Court of Appeals denied a
petition of the plaintiff-appellee to file a counter-supersedeas bond as well as plaintiff appellee's
motion for injunction. In the meanwhile the defendants-appellants had presented on November 21,
1955 the supersedeas bond required for the approval of the Court of First Instance of Nueva Ecija
and the said bond was filed and approved on November 21, 1955. This fact was certified to by the
clerk of the Court of First Instance of Nueva Ecija on November 14, 1955.
On December 2, 1955 the Court of Appeals on motion of plaintiff, reconsidered its order or resolution
of November 7, 1955 authorizing the stay of execution upon the filing of the bond by the defendants-
appellants, on the ground that the defendants-appellants have not filed any supersedeas bond as
required. On January 19, 1956, the Court of Appeals denied a petition of defendants-appellants to
reconsider said order of December 2, 1955 on the ground that the writ of execution issued on
October 3, 1955 had already been executed.

The following appear to be clear: (a) the writ of execution dated October 3, 1955 was furnished the
defendants on October 7, 1955; (b) said order of execution was set aside in an order of October 21,
1955, which order authorized the defendants-appellants to file a supersedeas bond in the amount of
P1,000, the same to be approved by the Court of First Instance of Nueva Ecija; (c) said supersedeas
bond was filed with Court of First Instance on November 21, 1955, but the certificate showing such
filing of the bond was issued by the clerk of the Court of First Instance of Nueva Ecija only on
December 14, 1955; and the Court of Appeals, not having been notified of the fact that the
defendants have already secured the approval of their supersedeas bond, set aside the order to stay
execution on December 2, 1955.
The evidence shows that in spite of the receipt by the defendants of the notice of the writ of
execution of October 3, 1955, which writ of execution commanded defendants "to forthwith remove
from said premises and that plaintiff have restitution of the same," defendants-appellants
nevertheless entered the land to gather palay which was then pending harvest. We gather further
from the record that the rice found on the disputed land at the time of the service of the order of
execution had been planted by defendants-appellants, who appear to have been in possession of
the land from 1951. While the court order of October 3, 1955 ordered the defendant-appellant to
move out from the premises, it did not prohibit them from gathering the crop then existing thereon.
Under the law a person who is in possession and who is being ordered to leave a parcel of land
while products thereon are pending harvest, has the right to a part of the net harvest, as expressly
provided by Article 545 of the Civil Code.
ART. 545. If at the time the good faith ceases, there should be any natural or industrial fruits,
the possessor shall have a right to a part of the expenses of cultivation, and to a part of the
net harvest, both in proportion to the time of the possession.
x x x x x x x x x
As the order of execution did not expressly prohibit the defendants-appellants from gathering the
pending fruits, which fruits were the result of their possession and cultivation of the land, it cannot be
said that the defendants-appellants committed an act which is clear violation of the courts' order.
Besides, the defendants-appellants had presented, after receipt of the order of execution, a motion
to set aside the said order of execution, and this motion to stay execution was granted. Defendants
furthermore presented a bond in accordance with the order of the court and had it approved by the
Court of First Instance. It was perhaps in expectation of this resolution of the court setting aside the
order of execution that defendants-appellants may have felt justified in entering the land and
harvesting the fruits existing thereon.
Again the order of the court setting aside its order to stay execution was issued in the belief that the
defendants-appellants had not presented before the Court of First Instance of Nueva Ecija and
which said court actually approved). Under the circumstances above stated, we are not ready to
conclude that the defendants-appellants can be held to have committed a clear defiance of the order
of the court. Their act in harvesting the pending fruits was not only justified by law but was not
expressly prohibited by the court's order, and was even ratified when the court ordered the
suspension of the execution. There was, therefore, no open, clear and contumacious refusal to obey
a definite order of the court such as would constitute contempt. Furthermore, a person who has been
ordered to leave certain premises is ordinarily not prohibited from taking with him his own effects and
possession, unless there is an express prohibition to this effect. No such, prohibition was contained
in the order for the defendants to leave the land. There may have been a technical violation of an
order not to enter the premises, but not of one prohibiting them from removing anything therefrom.

Such technical violation of the order cannot be considered as one amounting to a defiance of the
court's authority, punishable as contempt.
For the foregoing considerations, the order appealed from should be, as it is hereby, set aside, and
the defendants-appellants acquitted of the charge against them. Without cost.

10. G.R. No. L-30402 January 28, 1980
MANGULON CALAGAN, FERNANDO CALAGAN, ASUNCION CALAGAN, MIRASOL CALAGAN,
ARSENIA CALAGAN, PAULA CALAGAN, CRISTITUTO CALAGAN, CANDELARIA CALAGAN
and CRISPINA CALAGAN,petitioners,
vs.
HON. COURT OF FIRST INSTANCE OF DAVAO (BRANCH II) and PETRA
SANDOVAL, respondents.
G. F. Vega for petitioners.
T Q. Osorio for private respondent.

MELENCIO-HERRERA, J .:
Sought to be reviewed herein is that portion of the judgment of the Court of First Instance of Davao,
Branch II, ordering the payment by petitioners to private respondent of the amount of P3,000.00
representing the value of the house constructed on the homestead in question by said private
respondent.
The antecedent facts show that in 1954, petitioner Mangulon Calagan and his wife, Takura, were
granted a Homesstead Patent over a 5.2905 hectares in Dawis Digos Davao, and were issued
Original Certificate of Title No. P-2388 therefor.
In 1955, Takura died. survived by her husband, Mangulan and their children, Fernando, Asuncion,
Mirasol, Arsenia, Paula, Cristituto, Candelaria and Crispina, all surnamed Calagan, all of whom are
petitioners herein.
On August 8, 1961, Mangulon and his daughter, Paula sold a portion of 9,230 square meters of their
homestead to private respondent, Petra Sandoval in consideration of the sum of P2,340.00.
Petitioners title to the land was borrowed by private respondent so that the latter could have the sale
annotated thereon. In 1963, Mangulon offered to the portion sold but private respondent refuse.
Petition subsequent offers to repurchase but private was adamant. The latter maintains that she was
to comply with petitioners' demands provided she was imbursed the value of the house that she had
constructed on the subject land
On April 15, 1966, petitioners brought this action for reconveyance against private respondent On
October 10, 1968, the trial Court rendered judgment, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING judgment is hereby entered for the plaintiffs and
against the defendant:
(1) That the defendant is ordered to reconvey unto the plaintiffs the piece of land
having an area of 9,230 described in the complaint upon returning of the sum of
P2,340.00 and payment of P3,000 as value of the house constructed in good faith by
the defendant on the said lot.
(2) To deliver to the plaintiffs the duplicate certificate of Title No. P-2388.
(3) To pay attorney's fees in the sum of P500.00.
(4) And to pay the costs.
SO ORDERED.
In this appeal petitioners maintain solely that the Court erred in ordering petitioners to pay the sum of
P3,000.00 "as value of the house constructed in good faith."
There is no dispute on the following basic points: 1) the subject land is a portion of a homestead
belonging to petitioners; 2) a repurchase is proper pursuant to Section 119 of the Public Land Act
(CA No. 141) providing that "every conveyance of land acquired under the free patent or homestead
provisions, when proper, shall be subject to repurchase by the applicant, his widow or legal heir
within a period of five years from the date of the conveyance"; and 3) this action for repurchase was
filed within the five-year period from the date of sale.
The controversy revolves around the legality of that portion of the judgment requiring petitioners to
pay private respondent another amount of P3,000.00 representing the value of the residential house
built by private respondent on the portion of the land which petitioners seek to repurchase.
Petitioner present their digest of arguments thus:
1. Only necessary expenses are subject to reimbursement. House constructed on a
coconut land is not necessary It is only useful,
2. In a repurchase under Section 119 of the Public Land Act,, a homesteader is only
supposed to tender the purchase price. To require him to pay for the value of the
house constructed on the land sought to be repurchased, in addition to the purchase
price, constitutes a circumvention of the Public Land Act.
3. A vendee who introduced a building on a land sought to be repurchased under the
Public Land Act, and during the time when the homesteader can validly repurchase
the same, cannot be considered a in good faith, because his possesion over the land
is of a precarious character:
1

Private respondent's counter-argument is that when she bought the land in dispute "she was not
merely a tenant nor a lessee or a possessor in good faith therein but the owner of the tenement
itself.
2
As she needed a house where she and her family could live, she constructed a modest house in
the lawful exercise of her rights as an owner.

There is no provision in the Public Land Act (CA No. 141) which provides for the terms and
conditions under which repurchase may be effected by a homesteader except that it should be made
within five years from the date of conveyance. That Act is silent as to the nature of expenses that
should be reimbursed by a repurchasing homesteader or his heir. Resort may, however, be had to
the general provisions of the Civil Code on the subject, particularly Article 1616 (formerly Article
1518), which provides:
Art. 1616. The vendor cannot avail himself of the right of repurchase without
returning to the vendee the price of the sale, and in addition:
1) The expenses of the contract, and any other ligitimate payments made by reason
of the sale;
2) The necessary and useful expenses made on the thing sold.
Under the above-quoted codal provision, the vendor a retro cannot avail himself of the right of
repurchase without returning to the vendee the price of the sale, the expenses of the contract and
other legitimate payments, and the necessary and useful expenses made on the thing sold.
There can be no question but that the house which private respondent constructed is a useful
expense, defined as that which increases the value or augments the income of the property, as
contrasted to a necessary expense which is incurred for the preservation of the thing.
3

We agree that the provision of Article 1616 of the Civil Code, supra, on redemption, is, in general,
the applicable law to a homesteader desirous to redeem his property. However, considering the
purpose of the law on homesteads, which is to conserve ownership in the hands of the homesteader
and his family Article 1616 of the Civil Code should be construed in conjunction with Articles 546 and
547 of the Civil Code prescribing the rules on refund of necessary and useful expenses, inasmuch
as a vendee a retro is, as a rule, considered in good faith. Said Articles read thus:
ART. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or of paying the increase in value
which the thing may have acquired by reason thereof.
ART. 547. If the useful improvements can be removed without damage to the
principal thing, the possessor in good faith may remove them unless the person who
recovers the possession exercises the option under paragraph 2 of the preceding
article.
Applying Article 547, therefore, the homesteader desiring to repurchase should be given the option
to require the vendee a retro to remove the useful improvements on the land subject of the sale a
retro, which option is not granted the vendor a retro under Article 1616. Under the latter Article, the
vendor a retro must pay for the useful improvements introduced by the vendee a retro, otherwise,
the latter may retain possession of the property until reimbursement is made.
4
To allow a vendee a
retro of a homestead, however, the right of retention until payment of useful expenses is made by the
redemptioner would be to render nugatory the right of repurchase granted by law to a homesteader
because all a vendee a retro can do to prevent repurchase is to build something on the homestead

beyond the capacity to pay of the homesteader who seeks to repurchase. Such a situation should not be
allowed to pass. To the same effect was our ruling in Philippine National Bank v. Landeta
5
where we held
that although the mortgagee-bank therein (after it had bought it at the foreclosure sale), had sold the
homestead to a third party within the five-year period, the homesteader should be allowed to repurchase
the mortgaged homestead from the bank and not from the third person for, otherwise, a vendee a
retro could make "conveyance of the property for amounts beyond the capacity of said owner to pay.
To recapitulate, it being obvious that petitioners are not exercising the option to refund the amount of
the expenses incurred by private respondent for the house that the latter built, not to pay the
increase in value acquired by the land by reason of such expenses as provided for in Article 546 of
the Civil Code, private respondent, as the vendeea retro, may remove her house since this can be
done without damage to the principal thing, as stipulated in Article 547 of the Civil Code. Petitioners
should not, as opined by the trial Court, be made to refund the value of that house to private
respondent, else, the salutary policy behind the Public Land Law would be thwarted and rendered
meaningless.
WHEREFORE, the judgment appealed from is modified by eliminating that portion requiring
petitioners to pay private respondent the amount of P3,000.00 representing the value of the house
constructed by her. Private respondent, however, is given the right to remove her house without
damage to the land on which it is built. In all other respects, the judgment of the trial Court is
affirmed.
No costs.
SO ORDERED.

11. Republic of the Philippines
SUPREME COURT
Manila
EN BANC
April 13, 1956
G.R. No. L-8257
JOSE R. CRUZ, plaintiff-appellant,
vs.
REYNALDO PAHATI, ET AL., defendants-appellees.
Panganiban Law Offices and Arsenio Roldan for appellant.
Carlos, Laurea, Fernando and Padilla for appellees.
BAUTISTA ANGELO, J .:

This is an action of replevin instituted by plaintiff in the Court of Firts Instance of
Manila to recover the possession of an automobile and certain amount as damages and
attorney's fees resulting from his illegal deprivation thereof.
The original defendants were Reynaldo Pahati and Felixberto Bulahan but, upon
amendment of the complaint, Jesusito Belizo was included as party defendant who
was summoned by publication because his whereabouts were not known. Belizo failed
to appear or answer the complaint and so he was declared default.
Pahati admitted having bought the automobile from Bulahan, for the sum of P4,900
which he paid in check. When the Manila Police Department impounded the
automobile, he cancelled the sale and stopped the payment of the check and as a result
he returned the automobile to Bulahan who in turned surrended the check for
cancellation. He set up a counterclaim for the sum of P2,000 as attorney's fees.
Bulahan on his part claims that he acquired the automobile from Jesusito Belizo for
value and without having any knowledge of any defect in the title of the latter; that
plaintiff had previously acquired title to said automobile by purchase from Belizo as
evidenced by a deed of sale executed to that effect; that later plaintiff delivered the
possession of the automobile to Belizo for resale and to facilitate it he gave the latter a
letter of authority to secure a new certificate of registration in his name (plaintiff's)
and that by having clothed Belizo with an apparent ownership or authority to sell the
automobile, plaintiff is now estopped to deny such ownership or authority. Bulahan
claims that between two innocent parties, he who gave occasion, through his conduct,
to the falsification committed by Belizo, should be the one to suffer the loss and this
one is the plaintiff. Bulahan also set up a counterclaim for P17,000 as damages and
attorney's fees.
After the presentation of the evidence, the court rendered judgment declaring
defendant Bulahan entitled to the automobile in question and consequently ordered
the plaintiff to return it to said defendant and, upon his failure to do so, to pay him the
sum of P4,900, with legal interest from the date of the decision. The claim for
damages and attorney's fees of Bulahan was denied. Defendant Belizo was however

ordered to indemnify the plaintiff in the amount of P4,900 and pay the sum of P5,000
as moral damages. The counterclaim of defendant Pahati was denied for lack of
evidence. The case was taken directly to this Court by the plaintiff.
The lower court found that the automobile in question was originally owned by the
Nothern Motors, Inc. which later sold it to Chinaman Lu Dag. This Chinaman sold it
afterwards to Jesusito Belizo and the latter in turn sold it to plaintiff. Belizo was then
a dealer in second hand cars. One year thereafter, Belizo offered the plaintiff to sell
the automobile for him claiming to have a buyer for it. Plaintiff agreed. At that time,
plaintiff's certificate of registration was missing and, upon the suggestion of Belizo,
plaintiff wrote a letter addressed to the Motor Section of the Bureau of Public Works
for the issuance of a new registration certificate alleging as reason the loss of the one
previously issued to him and stating that he was intending to sell his car. This letter
was delivered to Belizo on March 3, 1952. He also turned over Belizo the automobile
on the latter's pretext that he was going to show it to a prospective buyer. On March 7,
1952, the letter was falsified and converted into an authorized deed of sale in favor of
Belizo by erasing a portion thereof and adding in its place the words "sold the above
car to Mr. Jesusito Belizo of 25 Valencia, San Francisco del Monte, for Five
Thousand Pesos (P5,000)." Armed with this deed of sale, Belizo succeeded in
ontaining a certificate of registration in his name on the same date, March 7, 1952,
and also on the same date, Belizo sold the car to Felixberto Bulahan who in turn sold
it to Reynaldo Pahati, a second hand car dealer. These facts show that the letter was
falsified by Belizo to enable him to sell the car to Bulahan for a valuable
consideration.
This is a case which involves a conflict of rights of two persons who claim to be the
owners of the same property; plaintiff and defendant Bulahan. Both were found by the
lower court to be innocent and to have acted in good faith. They were found to be the
victims of Belizo who falsified the letter given him by plaintiff to enable him to sell
the car of Bulahan for profit. Who has, therefore, a better right of the two over the
car?
The law applicable to the case is Article 559 of the new Civil Code which provides:

ART. 559. The possession of movable property acquired in good faith is equivalent to
a title. Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
It appears that "one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same" and the only
defense the latter may have is if he "has acquired it in good faith at a public sale" in
which case "the owner cannot obtain its return without reimbursing the price paid
therefor." And supplementing this provision, Article 1505 of the same Code provides
that "where goods are sold by a person who is not the owner thereof, and who does
not sell them under authority or with the consent of the owner, the buyer acquires no
better title to the goods than the seller had, unless the owner of the goods is by his
conduct precluded from denying the seller's authority to sell.
Applying the above legal provisions to the facts of this case, one is inevitably led to
the conclusion that plaintiff has a better right to the car in question than defendant
Bulahan for it cannot be disputed that plaintiff had been illegally deprived thereof
because of the ingenious scheme utilized by Belizo to enable him to dispose of it as if
he were the owner thereof. Plaintiff therefore can still recover the possession of the
car even if defendant Bulahan had acted in good faith in purchasing it from Belizo.
Nor can it be pretended that the conduct of plaintiff in giving Belizo a letter to secure
the issuance of a new certificate of registration constitutes a sufficient defense that
would preclude recovery because of the undisputed fact that that letter was falsified
and this fact can be clearly seen by a cursory examination of the document. If Bulahan
had been more diligent he could have seen that the pertinent portion of the letter had
been erased which would have placed him on guard to make an inquiry as regards the
authority of Belizo to sell the car. This he failed to do.

The right of the plaintiff to the car in question can also be justified under the doctrine
laid down in U. S. vs. Sotelo, 28 Phil., 147. This is a case of estafa wherein one Sotelo
misappropriated a ring belonging to Alejandra Dormir. In the course of the decision,
the Court said that "Whoever may have been deprived of his property in consequence
of a crime is entitled to the recovery thereof, even if such property is in the possession
of a third party who acquired it by legal means other than those expressly stated in
Article 464 of the Civil Code" (p. 147), which refers to property pledged in the
"Monte de Piedad", an establishment organized under the authority of the
Government. The Court further said: It is a fundamental principle of our law of
personal property that no man can be divested of it without his own consent;
consequently, even an honest purchaser, under a defective title, cannot resist the claim
of the true owner. The maxim that 'No man can transfer a better title than he has
himself "obtain in the civil as well as in the common law." (p. 158).
Counsel for appellee places much reliance on the common law principle that "Where
one of two innocent parties must suffer by a fraud perpetrated by another, the law
imposes the loss upon the party who, by his misplaced confidence, has enabled the
fraud to be committed" (Sager vs. W. T. Rawleight Co. 153 Va. 514, 150 S. E. 244,
66 A.L.R. 305), and contends that, as between plaintiff and Bulahan, the former
should bear the loss because of the confidence he reposed in Belizo which enabled the
latter to commit the falsification. But this principle cannot be applied to this case
which is coverred by an express provision of our new Civil Code. Between a common
law principle and a statutory provision, the latter must undoubtedly prevail in this
jurisdiction. Moreover we entertain serious doubt if, under the circumstances
obtaining, Bulahan may be considered more innocent than the plaintiff in dealing with
the car in question. We prefer not to elaborate on this matter it being necessary
considering the conclusion we have reached.
Wherefore, the decision appealed from is reversed. The Court declares plaintiff to be
entitled to recover the car in question, and orders defendant Jesusito Belizo to pay him
the sum of P5,000 as moral damages, plus P2,000 as attorney's fees. The Court
absolves defendant Bulahan and Pahati from the complaint as regards the claim for

damages, reserving to Bulahan whatever action he may deem proper to take against
Jesusito Belizo. No costs.


12. G.R. No. L-18536 March 31, 1965
JOSE B. AZNAR, plaintiff-appellant,
vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.
REGALA, J .:
This is an appeal, on purely legal questions, from a decision of the Court of First Instance of Quezon
City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the possession of the
car in dispute.
The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in
two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28, 1959, a
certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to
answer the ad. However, Teodoro Santos was out during this call and only the latter's son, Irineo
Santos, received and talked with De Dios. The latter told the young Santos that he had come in
behalf of his uncle, Vicente Marella, who was interested to buy the advertised car.
On being informed of the above, Teodoro Santos instructed his son to see the said Vicente Marella
the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And so, in the
morning of May 29, 1959, Irineo Santos went to the above address. At this meeting, Marella agreed
to buy the car for P14,700.00 on the understanding that the price would be paid only after the car
had been registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a certain
Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's favor. The
parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City where the
registration of the car in Marella's name was effected. Up to this stage of the transaction, the
purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration
papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them until
Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then proceeded to
1642 Crisostomo Street, Sampaloc, Manila where the former demanded the payment from Vicente
Marella. Marella said that the amount he had on hand then was short by some P2,000.00 and
begged off to be allowed to secure the shortage from a sister supposedly living somewhere on

Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to the said sister and
suggested that Irineo Santos go with him. At the same time, he requested the registration papers
and the deed of sale from Irineo Santos on the pretext that he would like to show them to his lawyer.
Trusting the good faith of Marella, Irineo handed over the same to the latter and thereupon, in the
company of L. De Dios and another unidentified person, proceeded to the alleged house of Marella's
sister.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house
while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo Santos
to wait at the sala while he went inside a room. That was the last that Irineo saw of him. For, after a
considerable length of time waiting in vain for De Dios to return, Irineo went down to discover that
neither the car nor their unidentified companion was there anymore. Going back to the house, he
inquired from a woman he saw for L. De Dios and he was told that no such name lived or was even
known therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see Marella. He found the
house closed and Marella gone. Finally, he reported the matter to his father who promptly advised
the police authorities.
That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car in
question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the above
incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar
acquired the said car from Vicente Marella in good faith, for a valuable consideration and without
notice of the defect appertaining to the vendor's title.
While the car in question was thus in the possession of Jose B. Aznar and while he was attending to
its registration in his name, agents of the Philippine Constabulary seized and confiscated the same
in consequence of the report to them by Teodoro Santos that the said car was unlawfully taken from
him.
In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the
head of the Philippine Constabulary unit which seized the car in question Claiming ownership of the
vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos
moved and was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle to the
intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had been unlawfully
deprived of his personal property by Vicente Marella, from whom the plaintiff-appellant traced his
right. Consequently, although the plaintiff-appellant acquired the car in good faith and for a valuable
consideration from Vicente Marella, the said decision concluded, still the intervenor-appellee was
entitled to its recovery on the mandate of Article 559 of the New Civil Code which provides:
ART. 559. The possession of movable property acquired in good faith is equivalent to title.
Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.

The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant, Jose
B. Aznar, who has a better right to the possession of the disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally belonged to and was owned by the
intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the same by
Vicente Marella. However, the appellant contends that upon the facts of this case, the applicable
provision of the Civil Code is Article 1506 and not Article 559 as was held by the decision under
review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been
voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys
them in good faith, for value, and without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller
should have a voidable title at least. It is very clearly inapplicable where, as in this case, the seller
had no title at all.
Vicente Marella did not have any title to the property under litigation because the same was never
delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella
could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of
the car to him.
Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate succession, and in consequence of certain
contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is
not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights
to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing
the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631,
Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610;
Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition
of the thing is a necessary and indispensable requisite in the acquisition of said ownership by
virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.)
So long as property is not delivered, the ownership over it is not transferred by contract
merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition
of ownership, while delivery or tradition is the method of accomplishing the same, the title
and the method of acquiring it being different in our law. (Gonzales v. Roxas, 16 Phil. 51)
In the case on hand, the car in question was never delivered to the vendee by the vendor as to
complete or consummate the transfer of ownership by virtue of the contract. It should be recalled
that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the
former, as vendee, took possession of the subject matter thereof by stealing the same while it was in
the custody of the latter's son.

There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to
the car to the unidentified person who went with him and L. De Dios to the place on Azcarraga
where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery
contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he turned it
over to the unidentified companion only so that he may drive Irineo Santos and De Dios to the said
place on Azcarraga and not to vest the title to the said vehicle to him as agent of Vicente Marella.
Article 712 above contemplates that the act be coupled with the intent of delivering the thing. (10
Manresa 132)
The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it,
the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived of it,
he has a right to recover it, not only from the finder, thief or robber, but also from third persons who
may have acquired it in good faith from such finder, thief or robber. The said article establishes two
exceptions to the general rule of irrevindicability, to wit, when the owner (1) has lost the thing, or (2)
has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as
against the owner, who may recover it without paying any indemnity, except when the possessor
acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela
v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.)
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled
that
Under Article 559 of the new Civil Code, a person illegally deprived of any movable may
recover it from the person in possession of the same and the only defense the latter may
have is if he has acquired it in good faith at a public sale, in which case, the owner cannot
obtain its return without reimbursing the price paid therefor. In the present case, plaintiff has
been illegally deprived of his car through the ingenious scheme of defendant B to enable the
latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover
possession of the car even if it is in the possession of a third party who had acquired it in
good faith from defendant B. The maxim that "no man can transfer to another a better title
than he had himself" obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28
Phil. 147)
Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who had
caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella, he, the
intervenor-appellee, should be made to suffer the consequences arising therefrom, following the
equitable principle to that effect. Suffice it to say in this regard that the right of the owner to recover
personal property acquired in good faith by another, is based on his being dispossessed without his
consent. The common law principle that where one of two innocent persons must suffer by a fraud
perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence,
has enabled the fraud to be committed, cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between a common law principle and a
statutory provision, the latter must prevail in this jurisdiction. (Cruz v. Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the lower
court affirmed in full. Costs against the appellant.



13. G.R. No. L-20264 January 30, 1971
CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners,
vs.
HON. COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B. GUEVARA, respondents.
Deogracias T. Reyes and Jose M. Luison for petitioners.
Tolentino and Garcia and D.R. Cruz for private respondents.

FERNANDO, J .:
This petition for certiorari to review a decision of respondent Court of Appeals was given due course
because it was therein vigorously asserted that legal questions of gravity and of moment, there
being allegations of an unwarranted departure from and a patent misreading of applicable and
controlling decisions, called for determination by this Tribunal. The brief for petitioners-spouses,
however, failed to substantiate such imputed failings of respondent Court. The performance did not
live up to the promise. On the basis of the facts as duly found by respondent Court, which we are not
at liberty to disregard, and the governing legal provisions, there is no basis for reversal. We affirm.
The nature of the case presented before the lower court by private respondent Angelina D. Guevara,
assisted by her spouse, Juan B. Guevara, as plaintiffs, was noted in the decision of respondent
Court of Appeals thus: "Plaintiff seeks recovery of `one (1) lady's diamond ring 18 cts. white gold
mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4) brills 0.10 cts. total weight' which she
bought on October 27, 1947 from R. Rebullida, Inc."
1
Then came a summary of now respondent
Guevara of her evidence: "Plaintiff's evidence tends to show that around October 11, 1953 plaintiff while
talking to Consuelo S. de Garcia, owner of La Bulakea restaurant recognized her ring in the finger of
Mrs. Garcia and inquired where she bought it, which the defendant answered from her comadre. Plaintiff
explained that that ring was stolen from her house in February, 1952. Defendant handed the ring to
plaintiff and it fitted her finger. Two or three days later, at the request of plaintiff, plaintiff, her husband Lt.
Col. Juan Guevara, Lt. Cementina of Pasay PD, defendant and her attorney proceeded to the store of Mr.
Rebullida to whom they showed the ring in question. Mr. Rebullida a examined the ring with the aid of
high power lens and after consulting the stock card thereon, concluded that it was the very ring that
plaintiff bought from him in 1947. The ring was returned to defendant who despite a written request
therefor failed to deliver the ring to plaintiff. Hence, this case. Later on when the sheriff tried to serve the
writ of seizure (replevin), defendant refused to deliver the ring which had been examined by Mr.
Rebullida, claiming it was lost."
2

How the defendant, Consuelo S. de Garcia, the present petitioner before us, along with her husband
Anastacio Garcia, sought to meet plaintiff's claim was narrated thus: "On the other hand, defendant
denied having made any admission before plaintiff or Mr. Rebullida or the sheriff. Her evidence
tends to show that the ring (Exhibit 1) was purchased by her from Mrs. Miranda who got it from Miss
Angelita Hinahon who in turn got it from the owner, Aling Petring, who was boarding in her house;
that the ring she bought could be similar to, but not the same ring plaintiff purchased from Mr.
Rebullida which was stolen; that according to a pawn-shop owner the big diamond on Exhibit 1 was
before the trial never dismantled. When dismantled, defendant's diamond was found to weigh 2.57
cts."
3


Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with the
judgment of the lower court being reversed. It is this decision now under review.
These are the facts as found by respondent Court of Appeals: "That the ring brought by the parties
for examination by Rafael Rebullida on December 14, 1953 was the same ring purchased by plaintiff
from R. Rebullida, Inc. on October 27, 1947 and stolen in February, 1952 has been abundantly
established by plaintiff's evidence. Before plaintiff lost the ring, she had been wearing it for six years
and became familiar with it. Thus, when she saw the missing ring in the finger of defendant, she
readily and definitely identified it. Her identification was confirmed by Mr. Rafael Rebullida, whose
candid testimony is entitled to great weight, with his 30 years experience behind him in the jewelry
business and being a disinterested witness since both parties are his customers. Indeed, defendant
made no comment when in her presence Rebullida after examining the ring and stock card told
plaintiff that that was her ring, nor did she answer plaintiff's letter of demand, ... asserting ownership.
Further confirmation may be found in the extra-judicial admissions, contained in defendant's original
and first amended answers ..."
4

These further facts likewise appeal therein: "The foregoing proof is not counter-balanced by the
denial on the part of defendant or the presentation of the ring, Exhibit I, which has a diamond-
solitaire 2.57 cts., or much heavier than the lost diamond weighing 2.05 cts. only. It is noteworthy
that defendant gave a rather dubious source of her ring. Aling Petring from whom the ring
supposedly came turned out to be a mysterious and ephemeral figure. Miss Hinahon did not even
know her true and full name, nor her forwarding address. She appeared from nowhere, boarded
three months in the house of Miss Hinahon long enough to sell her diamond ring, disappearing from
the scene a week thereafter. Indeed, the case was terminated without any hearing on the third-party
and fourth-party complaints, which would have shown up the falsity of defendant's theory. Moreover,
Mrs. Baldomera Miranda, third-party defendant, who tried to corroborate defendant on the latter's
alleged attempt to exchange the ring defendant bought through her, is [belied] by her judicial
admission in her Answer that appellee `suggested that she would make alterations to the mounting
and structural design of the ring to hide the true identity and appearance of the original one'
(Cunanan vs. Amparo, 45 O.G. 3796). Finally, defendant is refuted by her own extra-judicial
admissions ... although made by defendant's counsel. For an attorney who acts as counsel of record
and is permitted to act such, has the authority to manage the cause, and this includes the authority
to make admission for the purpose of the litigation... Her proffered explanation that her counsel
misunderstood her is puerile because the liability to error as to the identity of the vendor and the
exchange of the ring with another ring of the same value, was rather remote."
5

It is in the light of the above facts as well as the finding that the discrepancy as to the weight
between the diamond-solitaire in Exhibit I and the lost diamond was due to defendant having
"substituted a diamond-solitaire of plaintiff with a heavier stone" that the decision was rendered,
respondent Court reversing the lower court and ordering defendant, now petitioner Consuelo S. de
Garcia, to return plaintiff's ring or fact value of P1,000.00 and costs, as well as to pay plaintiff
P1,000.00 as attorney's fee and P1,000.00 as exemplary damages. Hence this appeal.
To repeat, there is no occasion to reverse respondent Court. It correctly applied the law to the facts
as found.
1. The controlling provision is Article 559 of the Civil Code. It reads thus: "The possession of
movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any
movable or has been unlawfully deprived thereof may recover it from the person in possession of the
same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the

price paid therefor." Respondent Angelina D. Guevara, having been unlawfully deprived of the
diamond ring in question, was entitled to recover it from petitioner Consuelo S. de Garcia who was
found in possession of the same. The only exception the law allows is when there is acquisition in
good faith of the possessor at a public sale, in which case the owner cannot obtain its return without
reimbursing the price. As authoritative interpreted in Cruz v. Pahati,
6
the right of the owner cannot be
defeated even by proof that there was good faith by the acquisition by the possessor. There is a
reiteration of this principle in Aznar v. Yapdiangco.
7
Thus: "Suffice it to say in this regard that the right of
the owner to recover personal property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that where one of two innocent persons
must suffer by a fraud perpetrated by the another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is
covered by an express provision of the new Civil Code, specifically Article 559. Between a common law
principle and statutory provision, the latter must prevail in this jurisdiction."
8

2. It is thus immediately apparent that there is no merit to the contention raised in the first assigned
error that her possession in good faith, equivalent to title, sufficed to defeat respondent Guevara's
claim. As the above cases demonstrate, even on that assumption the owner can recover the same
once she can show illegal deprivation. Respondent Court of Appeals was so convinced from the
evidence submitted that the owner of the ring in litigation is such respondent. That is a factual
determination to which we must pay heed. Instead of proving any alleged departure from legal
norms by respondent Court, petitioner would stress Article 541 of the Civil Code, which provides: 'A
possessor in the concept of owner has in his favor the legal presumption that he possesses with a
just title and he cannot be obliged to show or prove it." She would accord to it a greater legal
significance than that to which under the controlling doctrines it is entitled.lwph1. t The brief for respondents
did clearly point out why petitioner's assertion is lacking in support not only from the cases but even
from commentators. Thus: "Actually, even under the first clause, possession in good faith does not
really amount to title, for the reason that Art. 1132 of the Code provides for a period of acquisitive
prescription for movables through `uninterrupted possession for four years in good faith' (Art. 1955 of
the old Spanish Code, which provided a period of three years), so that many Spanish writers,
including Manresa, Sanchez Roman, Scaevola, De Buen, and Ramos, assert that under Art. 464 of
the Spanish Code (Art. 559 of the New Civil Code), the title of the possessor is not that of ownership,
but is merely a presumptive title sufficient to serve as a basis of acquisitive prescription (II Tolentino,
Civil Code of the Phil. p. 258: IV Manresa, Derecho Civil Espaol, 6th Ed., p. 380). And it is for the
very reason that the title established by the first clause of Art. 559 is only a presumptive title
sufficient to serve as a basis for acquisitive prescription, that the clause immediately following
provides that `one who has lost any movable or has been unlawfully deprived thereof, may recover it
from the person in possession of the same.' As stated by the Honorable Justice Jose B. L. Reyes of
this Court in Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec. 1947: `Article 559 in fact assumes that
possessor is as yet not the owner; for it is obvious that where the possessor has come to acquire
indefeasible title by, let us say, adverse possession for the necessary period, no proof of loss or
illegal deprivation could avail the former owner of the chattel. He would no longer be entitled to
recover it under any condition.' "
9

The second assigned error is centered on the alleged failure to prove the identity of the diamond
ring. Clearly the question raised is one of the fact. What the Court of Appeals found is conclusive.
Again, petitioner could not demonstrate that in reaching such a conclusion the Court of Appeals
acted in an arbitrary manner. As made mention of in the brief for respondents two disinterested
witnesses, Mr. Rafael Rebullida as well as Lt. Col. Reynaldo Cementina of the Pasay City Police
Department, both of whom could not be accused of being biased in favor of respondent Angelina D.
Guevara, did testify as to the identity of the ring.

The third assigned error of petitioners would find fault with respondent Court relying "on the
weakness of the title or evidence" of petitioner Consuelo S. de Garcia. It is true, in the decision
under review, mention was made of petitioner Consuelo S. de Garcia making no comment when in
her presence Rebullida, after examining the ring the stock card, told respondent Angelina L.
Guevara that that was her ring, nor did petitioner answer a letter of the latter asserting ownership. It
was likewise stated in such decision that there were extra-judicial admissions in the original and first
amended answers of petitioner. In the appraisal of her testimony, respondent Court likewise spoke
of her giving a rather dubious source of her ring, the person from whom she allegedly bought it
turning out "to be a mysterious and ephemeral figure." As a matter of fact, as set forth a few pages
back, respondent Court did enumerate the flaws in the version given by petitioner. From the
weakness of the testimony offered which, as thus made clear, petitioner, did not even seek to refute,
she would raise the legal question that respondent Court relied on the "weakness of [her] title or
evidence" rather than on the proof justifying respondent Angelina D. Guevara's claim of ownership.
Petitioner here would ignore the finding of fact of respondent Court that such ownership on her part
"has been abundantly established" by her evidence. Again here, in essence, the question raised is
one of fact, and there is no justification for us to reverse respondent Court.
The legal question raised in the fourth assignment of error is that the matter of the substitution of the
diamond on the ring was a question raised for the first time on appeal as it was never put in issue by
the pleadings nor the subject of reception of evidence by both parties and not touched upon in the
decision of the lower court. Why no such question could be raised in the pleadings of respondent
Angelina D. Guevara was clarified by the fact that the substitution came after it was brought for
examination to Mr. Rebullida. After the knowledge of such substitution was gained, however, the
issue was raised at the trial according to the said respondent resulting in that portion of the decision
where the lower court reached a negative conclusion. As a result, in the motion for reconsideration,
one of the points raised as to such decision being contrary to the evidence is the finding that there
was no substitution. It is not necessary to state that respondent Court, exercising its appellate power
reversed the lower court. What was held by it is controlling. What is clear is that there is no factual
basis for the legal arguments on which the fourth assigned error is predicated.
What is said takes care of the fifth assigned error that respondent Court was mistaken in its finding
that there was such a substitution. Again petitioner would have us pass on a question of credibility
which is left to respondent Court of Appeals. The sixth assigned error would complain against the
reversal of the lower court judgment as well as petitioner Consuelo S. de Garcia being made to pay
respondent Angelina D. Guevara exemplary damages, attorney's fees and costs. The reversal is
called for in the light of the appraisal of the evidence of record as meticulously weighed by
respondent Court. As to the attorney's fees and exemplary damages, this is what respondent Court
said in the decision under review: "Likewise, plaintiff is entitled to recover reasonable attorney's fees
in the sum of P1,000, it being just and equitable under the circumstances, and another P1,000 as
exemplary damages for the public good to discourage litigants from resorting to fraudulent devices to
frustrate the ends of justice, as defendant herein tried to substitute the ring, Exhibit 1, for plaintiff's
ring."
10
Considering the circumstances, the cursory discussion of the sixth assigned error on the matter
by petitioner fails to demonstrate that respondent Court's actuation is blemished by legal defects.
WHEREFORE, the decision of respondent Court of Appeals of August 6, 1962 is hereby affirmed.
With costs.



14. G.R. No. L-30817 September 29, 1972
DOMINADOR DIZON, doing business under the firm name "Pawnshop of Dominador
Dizon", petitioner,
vs.
LOURDES G. SUNTAY, respondent.
Andres T. Velarde for petitioner.
Rafael G. Suntay for respondent.

FERNANDO, J .:p
In essence there is nothing novel in this petition for review of a decision of the Court of Appeals
affirming a lower court judgment sustaining the right of an owner of a diamond ring, respondent
Lourdes G. Suntay, as against the claim of petitioner Dominador Dizon, who owns and operates a
pawnshop. The diamond ring was turned over to a certain Clarita R. Sison, for sale on commission,
along with other pieces of jewelry of respondent Suntay. It was then pledged to petitioner. Since
what was done was violative of the terms of the agency, there was an attempt on her part to recover
possession thereof from petitioner, who refused. She had to file an action then for its recovery. She
was successful, as noted above, both in the lower court and thereafter in the Court of Appeals. She
prevailed as she had in her favor the protection accorded by Article 559 of the Civil
Code.
1
The matter was then elevated to us by petitioner. Ordinarily, our discretion would have been
exercised against giving due course to such petition for review. The vigorous plea however, grounded on
estoppel, by his counsel, Atty. Andres T. Velarde, persuaded us to act otherwise. After a careful perusal
of the respective contentions of the parties, we fail to perceive any sufficient justification for a departure
from the literal language of the applicable codal provision as uniformly interpreted by this Court in a
number of decisions. The invocation of estoppel is therefore unavailing. We affirm.
The statement of the case as well as the controlling facts may be found in the Court of Appeals
decision penned by Justice Perez. Thus: "Plaintiff is the owner of a three-carat diamond ring valued
at P5,500.00. On June 13, 1962, the plaintiff and Clarita R. Sison entered into a transaction wherein
the plaintiff's ring was delivered to Clarita R. Sison for sale on commission. Upon receiving the ring,
Clarita R. Sison executed and delivered to the plaintiff the receipt ... . The plaintiff had already
previously known Clarita R. Sison as the latter is a close friend of the plaintiff's cousin and they had
frequently met each other at the place of the plaintiff's said cousin. In fact, about one year before
their transaction of June 13, 1962 took place, Clarita R. Sison received a piece of jewelry from the
plaintiff to be sold for P500.00, and when it was sold, Clarita R. Sison gave the price to the plaintiff.
After the lapse of a considerable time without Clarita R. Sison having returned to the plaintiff the
latter's ring, the plaintiff made demands on Clarita R. Sison for the return of her ring but the latter
could not comply with the demands because, without the knowledge of the plaintiff, on June 15,
1962 or three days after the ring above-mentioned was received by Clarita R. Sison from the
plaintiff, said ring was pledged by Melia Sison, niece of the husband of Clarita R. Sison, evidently in
connivance with the latter, with the defendant's pawnshop for P2,600.00 ... ."
2
Then came this portion
of the decision under review: "Since the plaintiff insistently demanded from Clarita R. Sison the return of
her ring, the latter finally delivered to the former the pawnshop ticket ... which is the receipt of the pledge
with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out that Clarita R. Sison
pledged, she took steps to file a case of estafa against the latter with the fiscal's office. Subsequently
thereafter, the plaintiff, through her lawyer, wrote a letter ... dated September 22, 1962, to the defendant

asking for the delivery to the plaintiff of her ring pledged with defendant's pawnshop under pawnshop
receipt serial-B No. 65606, dated June 15, 1962 ... . Since the defendant refused to return the ring, the
plaintiff filed the present action with the Court of First Instance of Manila for the recovery of said ring, with
P500.00 as attorney's fees and costs. The plaintiff asked for the provisional remedy of replevin by the
delivery of the ring to her, upon her filing the requisite bond, pending the final determination of the action.
The lower court issued the writ of replevin prayed for by plaintiff and the latter was able to take
possession of the ring during the pendency of the action upon her filing the requisite bond."
3
It was then
noted that the lower court rendered judgment declaring that plaintiff, now respondent Suntay, had the
right to the possession of the ring in question. Petitioner Dizon, as defendant, sought to have the
judgment reversed by the Court of Appeals. It did him no good. The decision of May 19, 1969, now on
review, affirmed the decision of the lower court.
In the light of the facts as thus found by the Court of Appeals, well-nigh conclusive on use, with the
applicable law being what it is, this petition for review cannot prosper. To repeat, the decision of the
Court of Appeals stands.
1. There is a fairly recent restatement of the force and effect of the governing codal norm in De
Gracia v. Court of Appeals.
4
Thus: "The controlling provision is Article 559 of the Civil Code. It reads
thus: 'The possession of movable property acquired in good faith is equivalent to a title. Nevertheless,
one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in
possession of the same. If the possessor of a movable lost of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.' Respondent Angelina D. Guevara, having been unlawfully deprived
of the diamond ring in question, was entitled to recover it from petitioner Consuelo S. de Garcia who was
found in possession of the same. The only exception the law allows is when there is acquisition in good
faith of the possessor at a public sale, in which case the owner cannot obtain its return without
reimbursing the price. As authoritatively interpreted in Cruz v. Pahati, the right of the owner cannot be
defeated even by proof that there was good faith in the acquisition by the possessor. There is a reiteration
of this principle in Aznar v. Yapdiangco. Thus: 'Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another, is based on his being dispossessed without
his consent. The common law principle that were one of two innocent persons must suffer by a fraud
perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has
enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision
of the new Civil Code, specifically Article 559. Between a common law principle and a statutory provision,
the latter must prevail in this jurisdiction." "
5

2. It must have been a recognition of the compulsion exerted by the above authoritative precedents
that must have caused petitioner to invoke the principle of estoppel. There is clearly a
misapprehension. Such a contention is devoid of any persuasive force.
Estoppel as known to the Rules of Court
6
and prior to that to the Court of Civil Procedure,
7
has its roots
in equity. Good faith is its basis.
8
It is a response to the demands of moral right and natural justice.
9
For
estoppel to exist though, it is indispensable that there be a declaration, act or omission by the party who
is sought to be bound. Nor is this all. It is equally a requisite that he, who would claim the benefits of such
a principle, must have altered his position, having been so intentionally and deliberately led to comport
himself thus, by what was declared or what was done or failed to be done. If thereafter a litigation arises,
the former would not be allowed to disown such act, declaration or omission. The principle comes into full
play. It may successfully be relied upon. A court is to see to it then that there is no turning back on one's
word or a repudiation of one's act. So it has been from our earliest decisions. As Justice Mapa pointed out
in the first case, a 1905 decision, Rodriguez v. Martinez,
10
a party should not be permitted "to go against
his own acts to the prejudice of [another]. Such a holding would be contrary to the most rudimentary
principles of justice and law."
11
He is not, in the language of Justice Torres, in Irlanda v.
Pitargue,
12
promulgated in 1912, "allowed to gainsay [his] own acts or deny rights which [he had]

previously recognized."
13
Some of the later cases are to the effect that an unqualified and unconditional
acceptance of an agreement forecloses a claim for interest not therein provided.
14
Equally so the
circumstance that about a month after the date of the conveyance, one of the parties informed the other
of his being a minor, according to Chief Justice Paras, "is of no moment, because [the former's] previous
misrepresentation had already estopped him from disavowing the contract.
15
It is easily understandable
why, under the circumstances disclosed, estoppel is a frail reed to hang on to. There was clearly the
absence of an act or omission, as a result of which a position had been assumed by petitioner, who if
such elements were not lacking, could not thereafter in law be prejudiced by his belief in what had been
misrepresented to him.
16
As was put by Justice Labrador, "a person claimed to be estopped must have
knowledge of the fact that his voluntary acts would deprive him of some rights because said voluntary
acts are inconsistent with said rights."
17
To recapitulate, there is this pronouncement not so long ago,
from the pen of Justice Makalintal, who reaffirmed that estoppel "has its origin in equity and, being based
on moral right and natural justice, finds applicability wherever and whenever the special circumstances of
a case so demand."
18

How then can petitioner in all seriousness assert that his appeal finds support in the doctrine of
estoppel? Neither the promptings of equity nor the mandates of moral right and natural justice come
to his rescue. He is engaged in a business where presumably ordinary prudence would manifest
itself to ascertain whether or not an individual who is offering a jewelry by way of a pledge is entitled
to do so. If no such care be taken, perhaps because of the difficulty of resisting opportunity for profit,
he should be the last to complain if thereafter the right of the true owner of such jewelry should be
recognized. The law for this sound reason accords the latter protection. So it has always been
since Varela v.
Finnick,
19
a 1907 decision. According to Justice Torres: "In the present case not only has the ownership
and the origin of the jewels misappropriated been unquestionably proven but also that the accused,
acting fraudulently and in bad faith, disposed of them and pledged them contrary to agreement, with no
right of ownership, and to the prejudice of the injured party, who was thereby illegally deprived of said
jewels; therefore, in accordance with the provisions of article 464, the owner has an absolute right to
recover the jewels from the possession of whosoever holds them, ... ."
20
There have been many other
decisions to the same effect since then. At least nine may be cited.
21
Nor could any other outcome be
expected, considering the civil code provisions both in the former Spanish legislation
22
and in the present
Code.
23
Petitioner ought to have been on his guard before accepting the pledge in question. Evidently
there was no such precaution availed of. He therefore, has only himself to blame for the fix he is now in. It
would be to stretch the concept of estoppel to the breaking point if his contention were to prevail.
Moreover, there should have been a realization on his part that courts are not likely to be impressed with
a cry of distress emanating from one who is in a business authorized to impose a higher rate of interest
precisely due to the greater risk assumed by him. A predicament of this nature then does not suffice to
call for less than undeviating adherence to the literal terms of a codal provision. Moreover, while the
activity he is engaged in is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of
the necessities precisely of that element of our population whose lives are blighted by extreme poverty.
From whatever angle the question is viewed then, estoppel certainly cannot be justly invoked.
WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is affirmed, with costs against
petitioner.

15. G.R. No. 80298 April 26, 1990
EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style
of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents.

Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.
Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J .:
The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
particular question of when a person may be deemed to have been "unlawfully deprived" of movable
property in the hands of another. The article runs in full as follows:
Art. 559. The possession of movable property acquired in good faith is equivalent to
a title. Nevertheless, one who has lost any movable or has been unlawfully deprived
thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully
deprived has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
The movable property in this case consists of books, which were bought from the petitioner by an
impostor who sold it to the private respondents. Ownership of the books was recognized in the
private respondents by the Municipal Trial Court,
1
which was sustained by the Regional Trial
Court,
2
which was in turn sustained by the Court of Appeals.
3
The petitioner asks us to declare that all
these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz
placed an order by telephone with the petitioner company for 406 books, payable on
delivery.
4
EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz
issued a personal check covering the purchase price of P8,995.65.
5
On October 7, 1981, Cruz sold 120
of the books to private respondent Leonor Santos who, after verifying the seller's ownership from the
invoice he showed her, paid him P1,700.00.
6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a
dean and was informed that there was no such person in its employ. Further verification revealed
that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had
drawn the payment check.
7
EDCA then went to the police, which set a trap and arrested Cruz on
October 7, 1981. Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of the
books he had ordered from EDCA to the private
respondents.
8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN
Avenue, which forced their way into the store of the private respondents and threatened Leonor
Santos with prosecution for buying stolen property. They seized the 120 books without warrant,
loading them in a van belonging to EDCA, and thereafter turned them over to the petitioner.
9

Protesting this high-handed action, the private respondents sued for recovery of the books after
demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and the
petitioner, after initial refusal, finally surrendered the books to the private respondents.
10
As

previously stated, the petitioner was successively rebuffed in the three courts below and now hopes to
secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking
the law into its own hands and forcibly recovering the disputed books from the private respondents.
The circumstance that it did so with the assistance of the police, which should have been the first to
uphold legal and peaceful processes, has compounded the wrong even more deplorably. Questions
like the one at bar are decided not by policemen but by judges and with the use not of brute force
but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents have not established their ownership
of the disputed books because they have not even produced a receipt to prove they had bought the
stock. This is unacceptable. Precisely, the first sentence of Article 559 provides that "the possession
of movable property acquired in good faith is equivalent to a title," thus dispensing with further proof.
The argument that the private respondents did not acquire the books in good faith has been
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of the
books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling
them for a discount because he was in financial need. Private respondents are in the business of
buying and selling books and often deal with hard-up sellers who urgently have to part with their
books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers
she was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and
selling books to buy them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been unlawfully deprived of the books because
the check issued by the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has been
unlawfully deprived of personal property is entitled to its recovery except only where the property
was purchased at a public sale, in which event its return is subject to reimbursement of the purchase
price. The petitioner is begging the question. It is putting the cart before the horse. Unlike in the
cases invoked, it has yet to be established in the case at bar that EDCA has been unlawfully
deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to the books that he could
have validly transferred to the private respondents. Its reason is that as the payment check bounced
for lack of funds, there was a failure of consideration that nullified the contract of sale between it and
Cruz.
The contract of sale is consensual and is perfected once agreement is reached between the parties
on the subject matter and the consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold
shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that
effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the
actual or constructive delivery of the thing soldeven if the purchase price has not yet been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the
thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another.
In Asiatic Commercial Corporation v. Ang,
11
the plaintiff sold some cosmetics to Francisco Ang, who in
turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles
from Tan, who claimed he had validly bought them from Ang, paying for the same in cash. Finding that
there was no conspiracy between Tan and Ang to deceive Asiatic the Court of Appeals declared:
Yet the defendant invoked Article 464
12
of the Civil Code providing, among other things
that "one who has been unlawfully deprived of personal property may recover it from any
person possessing it." We do not believe that the plaintiff has been unlawfully deprived of
the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily
parted with them pursuant to a contract of purchase and sale. The circumstance that the
price was not subsequently paid did not render illegal a transaction which was valid and
legal at the beginning.
In Tagatac v. Jimenez,
13
the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to
Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff sued to
recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of
Feist's deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been
unlawfully deprived of her car. At first blush, it would seem that she was unlawfully
deprived thereof, considering that she was induced to part with it by reason of the
chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is
an illegal method of deprivation of property. In a manner of speaking, plaintiff-
appellant was "illegally deprived" of her car, for the way by which Warner L. Feist
induced her to part with it is illegal and is punished by law. But does this "unlawful
deprivation" come within the scope of Article 559 of the New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a
voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of
either ratification or annulment. If the contract is ratified, the action to annul it is
extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects
(Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored

to their respective situations before the contract and mutual restitution follows as a
consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that of annulment
or of ratification, the contract of sale remains valid and binding. When plaintiff-
appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable
contract of sale, the title to the car passed to Feist. Of course, the title that Feist
acquired was defective and voidable. Nevertheless, at the time he sold the car to
Felix Sanchez, his title thereto had not been avoided and he therefore conferred a
good title on the latter, provided he bought the car in good faith, for value and without
notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on
record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in
good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to
the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books which he
could then validly transfer to the private respondents. The fact that he had not yet paid for them to
EDCA was a matter between him and EDCA and did not impair the title acquired by the private
respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be
interpreted in the manner suggested by the petitioner. A person relying on the seller's title who buys
a movable property from him would have to surrender it to another person claiming to be the original
owner who had not yet been paid the purchase price therefor. The buyer in the second sale would
be left holding the bag, so to speak, and would be compelled to return the thing bought by him in
good faith without even the right to reimbursement of the amount he had paid for it.
It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the
books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed her
assured her that the books had been paid for on delivery. By contrast, EDCA was less than cautious
in fact, too trusting in dealing with the impostor. Although it had never transacted with him before,
it readily delivered the books he had ordered (by telephone) and as readily accepted his personal
check in payment. It did not verify his identity although it was easy enough to do this. It did not wait
to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by
the printed terms thereon, that the books had been paid for on delivery, thereby vesting ownership in
the buyer.
Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books
being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz was presumed
under Article 559 by his mere possession of the books, these being movable property, Leonor
Santos nevertheless demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private respondents bear the prejudice sustained by
EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the
Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz.
While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the
private respondents but against Tomas de la Pea, who has apparently caused all this trouble. The
private respondents have themselves been unduly inconvenienced, and for merely transacting a

customary deal not really unusual in their kind of business. It is they and not EDCA who have a right
to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against
the petitioner.


16. RHODORA M. LEDESMA, petitioner, vs. COURT OF APPEALS and
HON. MAXIMIANO C. ASUNCION, in his capacity as Presiding
Judge of RTC, Quezon City, respondents.
D E C I S I O N
PANGANIBAN, J .:
When confronted with a motion to withdraw an information on the ground
of lack of probable cause based on a resolution of the secretary of justice, the
bounden duty of the trial court is to make an independent assessment of the
merits of such motion. Having acquired jurisdiction over the case, the trial
court is not bound by such resolution but is required to evaluate it before
proceeding further with the trial. While the secretarys ruling is persuasive, it
is not binding on courts. A trial court, however, commits reversible error or
even grave abuse of discretion if it refuses/neglects to evaluate such
recommendation and simply insists on proceeding with the trial on the mere
pretext of having already acquired jurisdiction over the criminal action.
This principle is explained in this Decision resolving a petition for review
on certiorari of the Decision
[1]
of the Court of Appeals,
[2]
promulgated on
September 14, 1993 in CA-G.R. SP No. 30832 which in effect affirmed an
order of the Regional Trial Court of Quezon City denying the prosecutions
withdrawal of a criminal information against petitioner.
The Antecedent Facts
From the pleadings submitted in this case, the undisputed facts are as
follows:
Sometime in April 1992, a complaint for libel was filed by Dr. Juan F. Torres, Jr.
against Dr. Rhodora M. Ledesma, petitioner herein, before the Quezon City

Prosecutors Office, docketed as I.S. No. 92-5433A. Petitioner filed her counter-
affidavit to the complaint.
Finding sufficient legal and factual basis, the Quezon City Prosecutors Office filed
on July 6, 1992 an Information for libel against petitioner with the Regional Trial
Court of Quezon City, Branch 104.
[3]
The Information filed by Assistant City
Prosecutor Augustine A. Vestil reads:
[4]

That on or about the 27th day of June 1991, in Quezon City, Metro Manila,
Philippines, the said accused, acting with malice, did, then and there, wilfully,
unlawfully and feloniously send a letter addressed to Dr. Esperanza I. Cabral, Director
of Philippine Heart Center, East Avenue, this city, and furnished the same to other
officers of the said hospital, said letter containing slanderous and defamatory remarks
against DR. JUAN F. TORRES, JR., which states in part, to wit:
27June 1991
Dr. Esperanza I. Cabral
Director
Subject: Return of all professional fees due Dr. Rhodora M. Ledesma, Nuclear
Medicine Specialist/Consultant, Philippine Heart Center, from January 31, 1989 to
January 31, 1991.
Respondents: Dr. Juan F. Torres, Jr., Chief, Nuclear Medicine Section
Dr. Orestes P. Monzon,
Staff Consultant
Dear Dr. Cabral,
This is to demand the return of all professional fees due me as a consultant in Nuclear
Medicine, this Center, since January 31, 1989 until my resignation effective January
31, 1991, amounting to at least P100,000.00 for the year 1990 alone. Records in the
Nuclear Medicine Section will show that from January 1989 to January 1991, a total
of 2,308 patients were seen. Of these, I had officially supervised, processed, and
interpreted approximately a total of 1,551 cases as against approximately 684 and 73
cases done by Dr. Monzon and Dr. Torres respectively.

Until my resignation I had received a monthly share of professional fees averaging
P1,116.90/month supposedly representing 20% of the total monthly professional
fees. The rest were divided equally between Dr. Monzon and Dr. Torres. There was
never any agreement between us three consultants that this should be the arrangement
and I am certain that this was not with your approval. The burden of unfairness would
have been lesser if there was an equal distribution of labor and the schedule of duties
were strictly followed. As it was, the schedule of duties submitted monthly to the
office of the Asst. Director for Medical Services was simply a dummy to comply with
administrative requirements rather than a guideline for strict compliance. Both
consultants have complete daily time records even if they did not come regularly. Dr.
Torres came for an hour every week, Dr. Monzon came sporadically during the week
while I was left with everything from training the residents and supervising the Techs
to processing and interpreting the results on a regular basis. I had a part time
appointment just like Dr. Monzon and Dr. Torres.
In the interest of fairness and to set a precedent for the protection of future PHC
Nuclear Medicine Alumni I am calling your attention to the unfair and inhuman
conditions I went through as a Consultant in that Section. I trust that your sense of
professionalism will put a stop to this corruption.
I suggest that a committee be formed to make an audit of the distribution of
professional fees in this Section. At this point, let me stress that since professional
fees vary according to the type of procedure done and since there was no equity of
labor between us I am not settling for an equal percentage share. I demand that I be
indemnified of all professional fees due me on a case to case basis.
Let me make clear my intention of pursuing this matter legally should there be no
favorable action in my behalf. Let me state at this point6 that the actions of Dr.
Torres and Dr. Monzon are both unprofessional and unbecoming and are clearly
violating the code of ethics of the medical profession and the Philippine Civil Service
Rules and Regulations related to graft and corruption.
Thank you.
and other words of similar import, when in truth and in fact, as the accused very well
knew, the same are entirely false and untrue but were publicly made for no other
purpose than to expose said DR. JUAN F. TORRES, JR. to public ridicule, thereby
casting dishonor, discredit and contempt upon the person of the said offended party, to
his damage and prejudice.

A petition for review of the resolution of Assistant City Prosecutor Vestil
was filed by petitioner before the Department of Justice pursuant to P.D. No.
77 as amended by P.D. No. 911.
The Department of Justice gave due course to the petition and directed
the Quezon City prosecutor to move for deferment of further proceedings and
to elevate the entire records of the case.
[5]
Accordingly, a Motion to Defer
Arraignment dated September 7, 1992 was filed by Prosecutor Tirso M.
Gavero before the court a quo.
[6]
On September 9, 1992, the trial court granted
the motion and deferred petitioners arraignment until the final termination of
the petition for review.
[7]

Without the consent or approval of the trial prosecutor, private
complainant, through counsel, filed a Motion to Lift the Order dated
September 9, 1992 and to Set the Case for Arraignment/Trial.
[8]

On January 8, 1993, the trial court issued an Order setting aside its earlier
Order of September 9, 1992 and scheduling petitioners arraignment on
January 18, 1993 at two oclock in the afternoon.
[9]

In a resolution dated January 27, 1993, then Justice Secretary Franklin M.
Drilon reversed the Quezon City investigating prosecutor. Pertinent portions of
Drilons ruling read:
[10]

From the circumstances obtaining, the subject letter was written to bring to the
attention of the Director of the Philippine Heart Center for Asia and other responsible
authorities the unjust and unfair treatment that Dr. Ledesma was getting from
complainants. Since complainants and respondent are government employees, and the
subject letter is a complaint to higher authorities of the PHCA on a subject matter in
which respondent has an interest and in reference to which she has a duty to question
the same is definitely privileged (US vs. Bustos, 37 Phil. 131). Moreover, in Ang vs.
Castro, 136 SCRA 455, the Supreme Court, citing Santiago vs. Calvo, 48 Phil. 922,
ruled that A communication made in good faith upon any subject matter in which the
party making the communication has an interest or concerning which he has a duty is
privileged... although it contains incriminatory or derogatory matter which, without
the privilege, would be libelous and actionable.
The follow-up letter sent by respondent to the director of the PHCA, is a direct
evidence of respondents righteous disposition of following the rule of law and is a
clear indication that her purpose was to seek relief from the proper higher authority
who is the Director of PHCA.

The same interpretation should be accorded the civil and administrative complaints
which respondent filed against complainants. They are mere manifestations of her
earnest desire to pursue proper relief for the alleged injustice she got from
complainants. If she was motivated by malice and ill-will in sending the subject
communication to the Director of the PHCA, she would not have sent the second
letter and filed the administrative and civil cases against complainants.
Moreover, it is unbelievable that it took complainants one year to realize that the
questioned letter subjected them to public and malicious imputation of a vice or
omission. It is beyond the ordinary course of human conduct for complainants to start
feeling the effects of the alleged libelous letter - that of experiencing sleepless nights,
wounded feelings, serious anxiety, moral shock and besmirched reputation - one year
after they read the communication in question.
The claim that the case of Crespo vs. Mogul, 151 SCRA 462 is applicable to the
instant case is unfounded. In the first place, the instant cases are not being
reinvestigated. It is the resolutions of the investigating prosecutor that are under
review. Further, the record shows that the court has issued an order suspending the
proceedings pending the resolutions of the petitions for review by this Office. In the
issuance of its order, the court recognizes that the Secretary of Justice has the
power and authority to review the resolutions of prosecutors who are under his control
and supervision.
In view of the foregoing, the appealed resolutions are hereby reversed. You are
directed to withdraw the Informations which you filed in Court. Inform this Office of
the action taken within ten (10) days from receipt hereof.
In obedience to the above directive, Quezon City Trial Prosecutor Tirso M.
Gavero filed a Motion to Withdraw Information dated February
17,1993,
[11]
attaching thereto the resolution of Secretary Drilon. The trial judge
denied this motion in his Order dated February 22, 1993, as follows:
[12]

The motion of the trial prosecutor to withdraw the information in the above-entitled
case is denied. Instead, the trial prosecutor of this court is hereby directed to
prosecute the case following the guidelines and doctrine laid down by the Supreme
Court in the case of Crespo vs. Mogul, 151 SCRA 462.
Petitioners motion for reconsideration
[13]
was denied by the trial judge in
the Order dated March 5, 1993, as follows:
[14]


Finding no cogent reason to justify the reconsideration of the ruling of this Court
dated February 22, 1993, the Motion for Reconsideration dated March 1, 1993 filed
by the accused through counsel is hereby denied.
Aggrieved, petitioner filed a petition for certiorari and prohibition with the
Supreme Court. In a Resolution dated March 31, 1993, this Court referred the
case to the Court of Appeals for proper determination and disposition
pursuant to Section 9, paragraph 1 of B.P. 129.
[15]

Respondent Court dismissed the petition for lack of merit, holding that it
had no jurisdiction to overturn the doctrine laid down inCrespo vs. Mogul --
once a complaint or information has been filed in court, any disposition of the
case, i.e., dismissal, conviction or acquittal of the accused, rests on the sound
discretion of the trial court.
[16]

Hence, this recourse to this Court.
The Issues
For unexplained reasons, petitioner failed to make an assignment of errors
against the appellate court. Her counsel merely repeated the alleged errors of
the trial court:
[17]

I. The Orders, dated February 22, 1993 and March 5, 1993, of respondent Judge
Asuncion relied solely on the Crespo vs. Mogul (151 SCRA 462) decision. It is
respectfully submitted that said case is not applicable because:
1. It infringes on the constitutional separation of powers between the executive
and judicial branches of the government;
2. It constitutes or it may lead to misuse or misapplication of judicial power
as defined in the Constitution;
3. It goes against the constitutional proscription that rules of procedure should
not diminish substantive rights;
4. It goes against the principle of non-delegation of powers;
5. It sets aside or disregards substantive and procedural rules;
6. It deprives a person of his constitutional right to procedural due process;

7. Its application may constitute or lead to denial of equal protection of laws;
8. It deprives the secretary of justice or the president of the power to control or
review the acts of a subordinate official;
9. It will lead to, encourage, abet or promote abuse or even corruption among
the ranks of investigating fiscals;
10. It does not subserve the purposes of a preliminary investigation because -
(10.a) It subjects a person to the burdens of an unnecessary trial, specially in
cases where the investigating fiscal recommends no bail for the accused;
(10.b) It subjects the government, both the executive and the judiciary, to
unnecessary time and expenses attendant to an unnecessary trial;
(10.c) It contributes to the clogging of judicial dockets; and
11. It has no statutory or procedural basis or precedent.
II. On the assumption that Crespo vs. Mogul is applicable, it is submitted that -
1. Respondent Judge Asuncion committed grave abuse of discretion,
amounting to lack of jurisdiction, when he denied the Motion to Withdraw
Information since he had already deferred to, if not recognized, the authority of the
Secretary of Justice; and
2. The facts in Crespo vs. Mogul are different from the instant case. Hence,
respondent Judge Asuncion committed grave abuse of discretion, amounting to lack of
jurisdiction, when he relied solely on said case in denying the Motion to Withdraw
Information.
In sum, the main issue in this petition is: Did Respondent Court commit
any reversible error in affirming the trial courts denial of the prosecutions
Motion to Withdraw Information?
The Courts Ruling
The petition is impressed with merit. We answer the above question in the
affirmative.

Preliminary Matter
Before discussing the substance of this case, the Court will preliminarily
address a procedural matter. Prior to the effectivity of the 1997 Rules of Civil
Procedure on July 1, 1997, Section 2 of Rule 45, which governed appeals
from the Court of Appeals to the Supreme Court, provided:
SEC. 2. Contents of petition.The petition shall contain a concise statement of
x x x the assignment of errors made in the court below x x x.
A petition for review on certiorari under Rule 45 requires a concise
statement of the errors committed by the Court of Appeals, not of the trial
court. For failure to follow this Rule, the petition could have been dismissed
by this Court motu proprio, considering that under Section 4 of the same Rule,
review is not a matter of right but of sound discretion.
We take this occasion to stress the need for precision and clarity in the
assignment of errors. Review under this rule is unlike an appeal in a criminal
case where the death penalty, reclusin perpetua or life imprisonment is
imposed and where the whole case is opened for review. Under Rule 45, only
the issues raised therein by the petitioner will be passed upon by the Court,
such that an erroneous specification of the issues may cause the dismissal of
the petition. We stressed this in Circular No. 2-90, entitled Guidelines to be
Observed in Appeals to the Court of Appeals and to the Supreme Court, as
follows:
4. Erroneous Appeals. x x x x
e) Duty of counsel.It is therefore incumbent upon every attorney who would
seek review of a judgment or order promulgated against his client to make sure of the
nature of the errors he proposes to assign, whether these be of fact or of law; then
upon such basis to ascertain carefully which Court has appellate jurisdiction; and
finally, to follow scrupulously the requisites for appeal prescribed by law, ever aware
that any error or imprecision in compliance may well be fatal to his clients cause.
FOR STRICT COMPLIANCE.
Be that as it may, the Court noting the importance of the substantial
matters raised decided to overlook petitioners lapse and granted due
course to the petition per Resolution dated July 15, 1996, with a warning that

henceforth petitions which fail to specify an assignment of errors of the proper
lower court may be denied due course motu proprio by this Court.
Determination of Probable Cause Is an Executive Function
The determination of probable cause during a preliminary investigation is
judicially recognized as an executive function and is made by the
prosecutor. The primary objective of a preliminary investigation is to free a
respondent from the inconvenience, expense, ignominy and stress of
defending himself/herself in the course of a formal trial, until the reasonable
probability of his or her guilt has been passed upon in a more or less
summary proceeding by a competent officer designated by law for that
purpose. Secondarily, such summary proceeding also protects the state from
the burden of unnecessary expense and effort in prosecuting alleged offenses
and in holding trials arising from false, frivolous or groundless charges.
[18]

Such investigation is not a part of the trial. A full and exhaustive
presentation of the parties evidence is not required, but only such as may
engender a well-grounded belief that an offense has been committed and that
the accused is probably guilty thereof.
[19]
By reason of the abbreviated nature
of preliminary investigations, a dismissal of the charges as a result thereof is
not equivalent to a judicial pronouncement of acquittal. Hence, no double
jeopardy attaches.
In declaring this function to be lodged in the prosecutor, the Court
distinguished the determination of probable cause for the issuance of a
warrant of arrest or a search warrant from a preliminary investigation proper in
this wise:
[20]

xxx Judges and prosecutors alike should distinguish the preliminary inquiry which
determines probable cause for the issuance of a warrant of arrest from a preliminary
investigation proper which ascertains whether the offender should be held for trial or
released. xxx The determination of probable cause for the warrant of arrest is made
by the Judge. The preliminary investigation proper--whether xxx there is reasonable
ground to believe that the accused is guilty of the offense charged and, therefore,
whether xxx he should be subjected to the expense, rigors and embarrassment of trial-
-is the function of the prosecutor.
We reiterate that preliminary investigation should be distinguished as to whether it is
an investigation for the determination of a sufficient ground for the filing of the

information or it is an investigation for the determination of a probable cause for the
issuance of a warrant of arrest. The first kind of preliminary investigation is executive
in nature. It is part of the prosecutors job. The second kind of preliminary
investigation which is more properly called preliminary examination is judicial in
nature and is lodged with the judge.
Sound policy supports this distinction. Otherwise, judges would be unduly
laden with the preliminary examination and investigation of criminal
complaints instead of concentrating on hearing and deciding cases filed
before their courts. The Separate Opinion of Mr. Chief Justice Andres R.
Narvasa in Roberts, Jr. vs. Court of Appeals stressed that the determination of
the existence of probable cause properly pertains to the public prosecutor in
the established scheme of things, and that the proceedings therein are
essentially preliminary, prefatory and cannot lead to a final, definite and
authoritative judgment of the guilt or innocence of the persons charged with a
felony or a crime.
[21]

In Crespo vs. Mogul,
[22]
the Court emphasized the cardinal principle
that the public prosecutor controls and directs the prosecution of criminal
offenses thus:
It is a cardinal principle that all criminal actions either commenced by complaint or
by information shall be prosecuted under the direction and control of the fiscal. The
institution of a criminal action depends upon the sound discretion of the fiscal. He
may or may not file the complaint or information, follow or not follow that presented
by the offended party, according to whether the evidence in his opinion, is sufficient
or not to establish the guilt of the accused beyond reasonable doubt. The reason for
placing the criminal prosecution under the direction and control of the fiscal is to
prevent malicious or unfounded prosecution by private persons. It cannot be
controlled by the complainant. Prosecuting officers under the power vested in them
by law, not only have the authority but also the duty of prosecuting persons who,
according to the evidence received from the complainant, are shown to be guilty of a
crime committed within the jurisdiction of their office. They have equally the legal
duty not to prosecute when after an investigation they become convinced that the
evidence adduced is not sufficient to establish a prima facie case.
In the same case, the Court added that where there is a clash of views
between a judge who did not investigate and a fiscal who conducted a
reinvestigation, those of the prosecutor should normally prevail:
[23]


x x x x The Courts cannot interfere with the fiscals discretion and control of the
criminal prosecution. It is not prudent or even permissible for a Court to compel the
fiscal to prosecute a proceeding originally initiated by him on an information, if he
finds that the evidence relied upon by him is insufficient for conviction. Neither has
the Court any power to order the fiscal to prosecute or file an information within a
certain period of time, since this would interfere with the fiscals discretion and
control of criminal prosecutions. Thus, a fiscal who asks for the dismissal of the case
for insufficiency of evidence has authority to do so, and Courts that grant the same
commit no error. The fiscal may re-investigate a case and subsequently move for the
dismissal should the re-investigation show either that the defendant is innocent or that
his guilt may not be established beyond reasonable doubt. In a clash of views
between the judge who did not investigate and the fiscal who did, or between the
fiscal and the offended party or the defendant, those of the fiscals should normally
prevail. x x x x.
Appeal as an Exercise of the Justice Secretarys Power of Control Over
Prosecutors
Decisions or resolutions of prosecutors are subject to appeal to the
secretary of justice who, under the Revised Administrative Code, exercises
the power of direct control and supervision over said prosecutors; and who
may thus affirm, nullify, reverse or modify their rulings.
Section 39, Chapter 8, Book IV in relation to Section 5, 8, and 9, Chapter
2, Title III of the Code gives the secretary of justice supervision and control
over the Office of the Chief Prosecutor and the Provincial and City
Prosecution Offices. The scope of his power of supervision and control is
delineated in Section 38, paragraph 1, Chapter 7, Book IV of the Code:
(1) Supervision and Control. Supervision and control shall include authority to
act directly whenever a specific function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the commission of acts; review,
approve, reverse or modify acts and decisions of subordinate officials or units; xxxx.
Supplementing the aforequoted provisions are Section 3 of R.A. 3783 and
Section 37 of Act 4007, which read:
Section 3. x x x x

The Chief State Prosecutor, the Assistant Chief State Prosecutors, the Senior State
Prosecutors, and the State Prosecutors shall x x x perform such other duties as may be
assigned to them by the Secretary of Justice in the interest of public service.
xxx xxx
xxx
Section 37. The provisions of the existing law to the contrary notwithstanding,
whenever a specific power, authority, duty, function, or activity is entrusted to a chief
of bureau, office, division or service, the same shall be understood as also conferred
upon the proper Department Head who shall have authority to act directly in
pursuance thereof, or to review, modify, or revoke any decision or action of said chief
of bureau, office, division or service.
Supervision and control of a department head over his subordinates
have been defined in administrative law as follows:
[24]

In administrative law supervision means overseeing or the power or authority of an
officer to see that subordinate officers perform their duties. If the latter fail or neglect
to fulfill them, the former may take such action or step as prescribed by law to make
them perform such duties. Control, on the other hand, means the power of an officer
to alter or modify or nullify or set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of the former for that of the
latter.
Review as an act of supervision and control by the justice secretary over
the fiscals and prosecutors finds basis in the doctrine of exhaustion of
administrative remedies which holds that mistakes, abuses or negligence
committed in the initial steps of an administrative activity or by an
administrative agency should be corrected by higher administrative
authorities, and not directly by courts. As a rule, only after administrative
remedies are exhausted may judicial recourse be allowed.
Appeal to the Secretary of Justice Is Not Foreclosed by the Ruling
in Crespo
In Marcelo vs. Court of Appeals,
[25]
the Court clarified that Crespo
[26]
did not
foreclose the power or authority of the secretary of justice to review
resolutions of his subordinates in criminal cases. The Court recognized
in Crespo that the action of the investigating fiscal or prosecutor in the

preliminary investigation is subject to the approval of the provincial or city
fiscal or chief state prosecutor. Thereafter, it may be appealed to the
secretary of justice.
The justice secretarys power of review may still be availed of despite the
filing of an information in court. In his discretion, the secretary may affirm,
modify or reverse resolutions of his subordinates pursuant to Republic Act No.
5180, as amended,
[27]
specifically in Section 1 (d):
(d) x x x Provided, finally, That where the resolution of the Provincial or City
Fiscal or the Chief State Prosecutor is, upon review, reversed by the Secretary of
Justice, the latter may, where he finds that no prima facie case exists, authorize and
direct the investigating fiscal concerned or any other fiscal or state prosecutor to cause
or move for the dismissal of the case, or, where he finds a prima facie case, to cause
the filing of an information in court against the respondent, based on the same sworn
statements or evidence submitted without the necessity of conducting another
preliminary investigation.
Pursuant thereto, the Department of Justice promulgated Circular No. 7
dated January 25, 1990 governing appeals in preliminary
investigation. Appeals under Section 2 are limited to resolutions dismissing a
criminal complaint. However, Section 4 provides an exception: appeals from
resolutions finding probable cause upon a showing of manifest error or grave
abuse of discretion are allowed, provided the accused has not been
arraigned. In the present case, petitioners appeal to the secretary of justice
was given due course on August 26, 1992 pursuant to this Circular.
On June 30, 1993, Circular No. 7 was superseded by Department Order
No. 223; however, the scope of appealable cases remained unchanged:
SECTION 1. What May Be Appealed. -- Only resolutions of the Chief State
Prosecutor/Regional State Prosecutor/Provincial or City Prosecutor dismissing a
criminal complaint may be the subject of an appeal to the Secretary of Justice except
as otherwise provided in Section 4 hereof.
Appeals from the resolutions of provincial/city prosecutors where the penalty
prescribed for the offense charged does not exceed prisin correccional,regardless of
the imposable fine, shall be made to the Regional State Prosecutors who shall resolve
the appeals with finality, pursuant to Department Order No. 318 dated August 28,
1991 as amended by D.O. No. 34 dated February 4, 1992, D.O. No. 223 dated August
11, 1992 and D.O. No. 45 dated February 2, 1993. Such appeals shall also be
governed by these rules.

SEC. 4. Non-Appealable Cases; Exceptions.--No appeal may be taken from a
resolution of the Chief State Prosecutor/Regional State Prosecutor/Provincial or City
Prosecutor finding probable cause except upon showing of manifest error or grave
abuse of discretion. Notwithstanding the showing of manifest error or grave abuse of
discretion, no appeal shall be entertained where the appellant had already been
arraigned. If the appellant (is) arraigned during the pendency of the appeal, x x x
appeal shall be dismissed motu proprio by the Secretary of Justice.
An appeal/motion for reinvestigation from a resolution finding probable cause,
however, shall not hold the filing of the information in court.
Apart from the foregoing statutory and administrative issuances, the power
of review of the secretary of justice is recognized also by Section 4 of Rule
112 of the Rules of Court:
SEC. 4. Duty of investigating fiscal.--x x x x
xxx xxx
xxx
If upon petition by a proper party, the Secretary of Justice reverses the resolution of
the provincial or city fiscal or chief state prosecutor, he shall direct the fiscal
concerned to file the corresponding information without conducting another
preliminary investigation or to dismiss or move for dismissal of the complaint or
information.
This appeal rests upon the sound discretion of the secretary of justice
arising from his power of supervision and control over the prosecuting arm of
the government, not on a substantial right on the part of the accused as
claimed by petitioner.
Appeal Did Not Divest the Trial Court of Jurisdiction
Where the secretary of justice exercises his power of review only after an
information has been filed, trial courts should defer or suspend arraignment
and further proceedings until the appeal is resolved. Such deferment or
suspension, however, does not signify that the trial court is ipso facto bound
by the resolution of the secretary of justice. Jurisdiction, once acquired by the
trial court, is not lost despite a resolution by the secretary of justice to
withdraw the information or to dismiss the case.

Judicial Review of the Resolution of the Secretary of Justice
Judicial power is defined under the 1987 Constitution as the duty of courts
to settle actual controversies involving rights which are legally demandable
and enforceable. Such power includes the determination of whether there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the government.
[28]
Under this
definition, a court is without power to directly decide matters over which full
discretionary authority has been delegated to the legislative or executive
branch of the government. It is not empowered to substitute its judgment for
that of Congress or of the President. It may, however, look into the question
of whether such exercise has been made in grave abuse of discretion.
Judicial review of the acts of other departments is not an assertion of
superiority over them or a derogation of their functions. In the words of
Justice Laurel in Angara vs. Electoral Commission:
[29]

x x x [W]hen the judiciary mediates to allocate constitutional boundaries, it does not
in reality nullify or invalidate an act of the legislature, but only asserts the solemn and
sacred obligation assigned to it by the Constitution to determine conflicting claims of
authority under the Constitution and to establish for the parties in an actual
controversy the rights which that instrument sources and guarantees to them. This is in
truth all that is involved in what is termed judicial supremacy which properly is the
power of the judicial review under the Constitution. x x x.
It is not the purpose of this Court to decrease or limit the discretion of the
secretary of justice to review the decisions of the government prosecutors
under him. In Crespo, the secretary was merely advised to restrict such
review to exceptionally meritorious cases. Rule 112, Section 4 of the Rules of
Court, which recognizes such power, does not, however, allow the trial court
to automatically dismiss the case or grant the withdrawal of the information
upon the resolution of the secretary of justice. This is precisely the import
of Crespo, Marcelo, Martinez vs. Court of Appeals
[30]
and the recent case
of Roberts, Jr. vs. Court of Appeals, which all required the trial court to make
its own evaluation of the merits of the case, because granting the motion to
dismiss or to withdraw the information is equivalent to effecting a disposition
of the case itself.

The Marcelo and Martinez Cases Are Consistent
In Marcelo vs. Court of Appeals,
[31]
this Court ruled that, although it is more
prudent to wait for a final resolution of a motion for review or reinvestigation
from the secretary of justice before acting on a motion to dismiss or a motion
to withdraw an information, a trial court nonetheless should make its own
study and evaluation of said motion and not rely merely on the awaited action
of the secretary. The trial court has the option to grant or deny the motion to
dismiss the case filed by the fiscal, whether before or after the arraignment of
the accused, and whether after a reinvestigation or upon instructions of the
secretary who reviewed the records of the investigation; provided that such
grant or denial is made from its own assessment and evaluation of the merits
of the motion.
In Martinez vs. Court of Appeals,
[32]
this Court overruled the grant of the
motion to dismiss filed by the prosecuting fiscal upon the recommendation of
the secretary of justice because such grant was based upon considerations
other than the judges own assessment of the matter. Relying solely on the
conclusion of the prosecution to the effect that there was no sufficient
evidence against the accused to sustain the allegation in the information, the
trial judge did not perform his function of making an independent evaluation or
assessment of the merits of the case.
Despite the pronouncement in Marcelo that a final resolution of the appeal
to the Department of Justice is necessary, both decisions followed the rule
in Crespo vs. Mogul: Once a complaint or information is filed in court, any
disposition of the case such as its dismissal or its continuation rests on the
sound discretion of the court. Trial judges are thus required to make their own
assessment of whether the secretary of justice committed grave abuse of
discretion in granting or denying the appeal, separately and independently of
the prosecutions or the secretarys evaluation that such evidence is
insufficient or that no probable cause to hold the accused for trial exists. They
should embody such assessment in their written order disposing of the
motion.
The above-mentioned cases depict two extreme cases in complying with
this rule. In Marcelo, the dismissal of the criminal action upon the favorable
recommendation of the Review Committee, Office of the City Prosecutor, was
precipitate in view of the pendency of private complainants appeal to the
secretary of justice. In effect, the secretarys opinion was totally disregarded

by the trial court. In contrast, inMartinez the dismissal of the criminal action
was an erroneous exercise of judicial discretion as the trial court relied hook,
line and sinker on the resolution of the secretary, without making its own
independent determination of the merits of the said resolution.
No Grave Abuse of Discretion in theResolution of the Secretary of
J ustice
In the light of recent holdings in Marcelo and Martinez; and considering
that the issue of the correctness of the justice secretarys resolution has been
amply threshed out in petitioners letter, the information, the resolution of the
secretary of justice, the motion to dismiss, and even the exhaustive discussion
in the motion for reconsideration all of which were submitted to the court --
the trial judge committed grave abuse of discretion when it denied the motion
to withdraw the information, based solely on his bare and ambiguous reliance
onCrespo. The trial courts order is inconsistent with our repetitive calls for an
independent and competent assessment of the issue(s) presented in the
motion to dismiss. The trial judge was tasked to evaluate the secretarys
recommendation finding the absence of probable cause to hold petitioner
criminally liable for libel. He failed to do so. He merely ruled to proceed with
the trial without stating his reasons for disregarding the secretarys
recommendation.
Had he complied with his judicial obligation, he would have discovered
that there was, in fact, sufficient ground to grant the motion to withdraw the
information. The documents before the trial court judge clearly showed that
there was no probable cause to warrant a criminal prosecution for libel.
Under the established scheme of things in criminal prosecutions, this
Court would normally remand the case to the trial judge for his or her
independent assessment of the motion to withdraw the information. However,
in order not to delay the disposition of this case and to afford the parties
complete relief, we have decided to make directly the independent
assessment the trial court should have done. The petitioner has attached as
annexes to the present petition for review the information, which contains a
complete and faithful reproduction of the subject letter, the resolution of the
secretary of justice, the prosecutions motion for reconsideration of the trial
courts Order of February 22, 1993, and even the private complainants
opposition to said motion. The records below have been reproduced and

submitted to this Court for its appreciation. Thus, a remand to the trial court
serves no purpose and will only clog the dockets.
We thus proceed to examine the substance of the resolution of the
secretary of justice. The secretary reversed the finding of probable cause on
the grounds that (1) the subject letter was privileged in nature and (2) the
complaint was merely a countercharge.
In every case for libel, the following requisites must concur:
(a) it must be defamatory;
(b) it must be malicious;
(c) it must be given publicity; and
(d) the victim must be identifiable.
At the preliminary investigation stage, these requisites must show prima
facie a well-founded belief that a crime has been committed and that the
accused probably committed it. A cursory reading of the information
immediately demonstrates a failure on the part of the complainant to establish
the foregoing elements of libel.
Every defamatory imputation, even if true, is presumed malicious, if no
good intention or justifiable motive for making it is shown. There is malice
when the author of the imputation is prompted by personal ill will or spite and
speaks not in response to duty but merely to injure the reputation of the
person who claims to have been defamed.
[33]
In this case however, petitioners
letter was written to seek redress of proper grievance against the inaccurate
distribution and payment of professional fees and against unfair treatment in
the Nuclear Medicine Department of the Philippine Heart Center. It is a
qualified privileged communication under Article 354(1) of the Revised Penal
Code which provides:
ART. 354. Requirement of publicity. -- Every defamatory imputation is presumed to
be malicious, even if it be true, if no good intention and justifiable motive for making
it is shown, except in the following cases:
1. A private communication made by any person to another in the performance of any
legal, moral or social duty; and

xxx xxx
xxx
The rule on privileged communication is that a communication made in
good faith on any subject matter in which the communicator has an interest, or
concerning which he has a duty, is privileged if made to a person having a
corresponding interest or duty, although it contains incriminatory matter which,
without the privilege, would be libelous and actionable. Petitioners letter was
a private communication made in the performance of a moral duty on her
part. Her intention was not to inflict an unjustifiable harm on the private
complainant, but to present her grievance to her superior. The privileged
nature of her letter overcomes the presumption of malice. There is no malice
when justifiable motive exists; and in the absence of malice, there is no
libel. We note that the information itself failed to allege the existence of
malice.
Thus, we agree with the ruling of the secretary of justice:
[34]

x x x (T)he subject letter was written to bring to the attention of the Director of
the Philippine Heart Center for Asia and other responsible authorities the unjust and
unfair treatment that Dr. Ledesma was getting from government employees, and the
subject letter is a complaint x x x on a subject matter in which respondent has an
interest and in reference to which she has a duty to question the same is definitely
privileged (US vs. Bustos, 37 Phil. 131). Moreover, in Ang vs. Castro, 136 SCRA
455, the Supreme Court, citing Santiago vs. Calvo, 48 Phil. 922, ruled that a
communication made in good faith upon any subject matter in which the party making
the communication has an interest or concerning which he has a duty is privileged
although it contains incriminatory or derogatory matter which, without the privilege,
would be libelous and actionable.
The follow-up letter sent by respondent to the director of the PHCA, is a
direct evidence of respondents righteous disposition of following the rule of law and
is a clear indication that her purpose was to seek relief from the proper higher
authority xxx.
The same interpretation should be accorded the civil and administrative complaints
which respondent filed against complainants. They are mere manifestations of her
earnest desire to pursue proper relief for the alleged injustice she got
from complainants. If she was motivated by malice and ill-will in sending the subject
communication to the Director of the PHCA, she would not have sent the second
letter and filed the administrative and civil cases against complainants.

In Alonzo, the settled rule is that, when a public officer, in the discharge of
his or her official duties, sends a communication to another officer or to a body
of officers, who have a duty to perform with respect to the subject matter of
the communication, such communication does not amount to publication
within the meaning of the law on defamation.
[35]
Publication in libel means
making the defamatory matter, after it has been written, known to someone
other than the person to whom it has been written.
[36]
The reason for such rule
is that a communication of the defamatory matter to the person defamed
cannot injure his reputation though it may wound his self-esteem. A mans
reputation is not the good opinion he has of himself, but the estimation in
which others hold him.
[37]
In this case, petitioner submitted the letter to the
director of said hospital; she did not disseminate the letter and its contents to
third persons. Hence, there was no publicity and the matter is clearly
covered by paragraph 1 of Article 354 of the Penal Code.
Further, we note that the information against petitioner was filed only on
July 27, 1992 or one year after June 27, 1991, the date the letter was sent. It
is obviously nothing more than a countercharge to give Complainant Torres a
leverage against petitioners administrative action against him.
Ineluctably, Judge Asuncions denial of the motion to withdraw the
information and the reconsideration thereof was not only precipitate but
manifestly erroneous. This is further compounded by the fact that he did not
explain his grounds for his denial inasmuch as he did not make an
independent assessment of the motion or the arguments in the resolution of
the secretary of justice. All in all, such rash action did not do justice to the
sound ruling in Crespo vs. Mogul upon which, ironically, he supposedly rested
his action, or to the directive in Marceloand Martinez where this Court required
trial courts to make an independent assessment of the merits of the motion.
WHEREFORE, the assailed Decision is hereby REVERSED and SET
ASIDE. The Motion to Withdraw the Information dated February 17, 1993
filed before the trial court is GRANTED. No costs.
SO ORDERED.


17.