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G.R. No.

L-44546 January 29, 1988


RUSTICO
ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO,
DOMINGO ASEJO, JOSEFA ASEJO and SANTIAGO ASEJO, respondents.

SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of controversy and a wellspring
of enormous conflict that has led not only to protracted legal entanglements but to even more
bitter consequences, like strained relationships and even the forfeiture of lives. It is a question
that likewise reflects a tragic commentary on prevailing social and cultural values and institutions,
where, as one observer notes, wealth and its accumulation are the basis of self-fulfillment and
where property is held as sacred as life itself. "It is in the defense of his property," says this
modern thinker, that one "will mobilize his deepest protective devices, and anybody that threatens
his possessions will arouse his most passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the burden of
reconstructing the social order is shouldered by the political leadership-and the people
themselves.
The parties have come to this Court for relief and accordingly, our responsibility is to give them
that relief pursuant to the decree of law.
The antecedent facts are quoted from the decision 2 appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi
City with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as
her own private property; she married twice in her lifetime; the first, with one
Bernabe Adille, with whom she had as an only child, herein defendant Rustico
Adille; in her second marriage with one Procopio Asejo, her children were herein
plaintiffs, now, sometime in 1939, said Felisa sold the property in pacto de
retro to certain 3rd persons, period of repurchase being 3 years, but she died in
1942 without being able to redeem and after her death, but during the period of
redemption, herein defendant repurchased, by himself alone, and after that, he
executed a deed of extra-judicial partition representing himself to be the only heir
and child of his mother Felisa with the consequence that he was able to secure title
in his name alone also, so that OCT. No. 21137 in the name of his mother was
transferred to his name, that was in 1955; that was why after some efforts of
compromise had failed, his half-brothers and sisters, herein plaintiffs, filed present
case for partition with accounting on the position that he was only a trustee on an
implied trust when he redeemed,-and this is the evidence, but as it also turned out
that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant
counterclaimed for her to vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant in his position
that he was and became absolute owner, he was not a trustee, and therefore,
dismissed case and also condemned plaintiff occupant, Emeteria to vacate; it is
because of this that plaintiffs have come here and contend that trial court erred in:

I. ... declaring the defendant absolute owner of the property;


II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion of the property
to vacate the land, p. 1 Appellant's brief.
which can be reduced to simple question of whether or not on the basis of evidence and law,
judgment appealed from should be maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-appellants,
the private respondents herein. The petitioner now appeals, by way of certiorari, from the Court's
decision.
We required the private respondents to file a comment and thereafter, having given due course to
the petition, directed the parties to file their briefs. Only the petitioner, however, filed a brief, and
the private respondents having failed to file one, we declared the case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the
property held in common?
Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him
upon the failure of his co-heirs to join him in its redemption within the period required by law. He
relies on the provisions of Article 1515 of the old Civil Article 1613 of the present Code, giving the
vendee a retro the right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with aspect to his share alone. 5 While
the records show that the petitioner redeemed the property in its entirety, shouldering the
expenses therefor, that did not make him the owner of all of it. In other words, it did not put to end
the existing state of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his right to collect
reimbursement from the remaining co-owners. 6 There is no doubt that redemption of property
entails a necessary expense. Under the Civil Code:
ART. 488. Each co-owner shall have a right to compel the other co-owners to
contribute to the expenses of preservation of the thing or right owned in common
and to the taxes. Any one of the latter may exempt himself from this obligation by
renouncing so much of his undivided interest as may be equivalent to his share of
the expenses and taxes. No such waiver shall be made if it is prejudicial to the coownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a
retro, under Article 1613 of the Code, "may not be compelled to consent to a partial redemption,"
the redemption by one co-heir or co-owner of the property in its totality does not vest in him
ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendee a
retro to retain the property and consolidate title thereto in his name. 7But the provision does not
give to the redeeming co-owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over the parcel in his
name terminate the existing co-ownership. While his half-brothers and sisters are, as we said,

liable to him for reimbursement as and for their shares in redemption expenses, he cannot claim
exclusive right to the property owned in common. Registration of property is not a means of
acquiring ownership. It operates as a mere notice of existing title, that is, if there is one.
The petitioner must then be said to be a trustee of the property on behalf of the private
respondents. The Civil Code states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the registration of the
property. The petitioner's pretension that he was the sole heir to the land in the affidavit of
extrajudicial settlement he executed preliminary to the registration thereof betrays a clear effort
on his part to defraud his brothers and sisters and to exercise sole dominion over the property.
The aforequoted provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the property, did so either
on behalf of his co-heirs, in which event, he had constituted himself a negotiorum gestor under
Article 2144 of the Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and
must act as trustee, the private respondents being the beneficiaries, under the Article 1456. The
evidence, of course, points to the second alternative the petitioner having asserted claims of
exclusive ownership over the property and having acted in fraud of his co-heirs. He cannot
therefore be said to have assume the mere management of the property abandoned by his coheirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court
itself affirms, the result would be the same whether it is one or the other. The petitioner would
remain liable to the Private respondents, his co-heirs.
This Court is not unaware of the well-established principle that prescription bars any demand on
property (owned in common) held by another (co-owner) following the required number of years.
In that event, the party in possession acquires title to the property and the state of co-ownership
is ended . 8 In the case at bar, the property was registered in 1955 by the petitioner, solely in his
name, while the claim of the private respondents was presented in 1974. Has prescription then,
set in?
We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must
have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is
subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of
repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and
conclusive, and (4) he has been in possession through open, continuous, exclusive, and
notorious possession of the property for the period required by law. 9
The instant case shows that the petitioner had not complied with these requisites. We are not
convinced that he had repudiated the co-ownership; on the contrary, he had deliberately kept the
private respondents in the dark by feigning sole heirship over the estate under dispute. He cannot
therefore be said to have "made known" his efforts to deny the co-ownership. Moreover, one of
the private respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet,
the petitioner has not taken pains to eject her therefrom. As a matter of fact, he sought to recover
possession of that portion Emeteria is occupying only as a counterclaim, and only after the
private respondents had first sought judicial relief.
It is true that registration under the Torrens system is constructive notice of title, 10 but it has
likewise been our holding that the Torrens title does not furnish a shield for fraud. 11 It is therefore
no argument to say that the act of registration is equivalent to notice of repudiation, assuming

there was one, notwithstanding the long-standing rule that registration operates as a universal
notice of title.
For the same reason, we cannot dismiss the private respondents' claims commenced in 1974
over the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten
years, 12 reckoned from the date of the registration of the property, 13 we, as we said, are not
prepared to count the period from such a date in this case. We note the petitioner's sub
rosa efforts to get hold of the property exclusively for himself beginning with his fraudulent
misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir and
child of his mother Feliza with the consequence that he was able to secure title in his name
also." 14 Accordingly, we hold that the right of the private respondents commenced from the time
they actually discovered the petitioner's act of defraudation. 15 According to the respondent Court
of Appeals, they "came to know [of it] apparently only during the progress of the
litigation." 16 Hence, prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a
motion to dismiss or in the answer otherwise it is deemed waived, 17 and here, the petitioner
never raised that defense. 18 There are recognized exceptions to this rule, but the petitioner has
not shown why they apply.
WHEREFORE, there being no reversible error committed by the respondent Court of Appeals,
the petition is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No
pronouncement as to costs.
SO ORDERED,

[G.R. No. 124899. March 30, 2004]


RENATO C. SALVADOR, petitioner, vs. COURT OF APPEALS, MARIA ROMAYNE MIRANDA
and GILBERT MIRANDA, respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review[1] assailing the Decision[2] of 30 April 1996 of the Court
of Appeals in CA-G.R. CV No. 39661. The Court of Appeals set aside the Decision [3] of 18 August
1992 of the Regional Trial Court of San Mateo, Rizal, Branch 76, in Civil Case No. 754. The trial
court dismissed petitioners complaint and respondents counterclaims for insufficiency of basis.
The appellate court found for respondents, and directed petitioner to pay damages.
Antecedent Facts
Maria Romayne Miranda (Romayne) is the owner of a parcel of land (Property) with an area
of 17,748 square meters in Cabcaben, Mariveles, Bataan. The Property is registered with the
Register of Deeds of Bataan under TCT No. T-129442.
Romayne appointed her cousin, Gilbert Miranda (Gilbert), as her attorney-in-fact under a
General Power of Attorney[4] dated 15 April 1990. Romayne authorized Gilbert to execute
contracts on her behalf and to manage her properties, including the Property subject of the
present case, and to perform other acts in her place.

On 9 July 1990, Gilbert, as Romaynes agent, entered into a Development and Construction
Contract[5] (Contract) with Renato C. Salvador (Salvador), a duly licensed contractor and
proprietor of Montariza Construction. The Contract was for the development of the Property into
the Haven of Peace Memorial Park (Project) and the construction of several structures for that
purpose. Salvador agreed to undertake the Project for the consideration of P3,986,643.50
(Contract Price).
Salvador undertook to complete the Project within 180 working days from receipt of the down
payment, with a grace period of 45 working days. The Contract also contained the following
provisions:
17. In case of changes, alterations or deviations in the plans, specifications and bill of materials
hereinabove mentioned as may be necessary in the course of the implementation of the
development and construction, the same shall be mutually agreed upon by the herein parties in
writing;
18. In case of substantial increase/s of prices of the materials, like cement, G.I. corrugated
sheets, the said contract price shall be adjusted accordingly as to the particular item/s of (sic)
material/s involved in the increase/s of prices;
xxx
20. All other matters relating to the project not stipulated in this contract are deemed not included
herein unless the parties may agree on said matters in writing;
xxx.[6]
Work on the Project began sometime in July 1990 upon Gilberts payment of P797,328.70 as
twenty per cent (20%) down payment. Salvador periodically submitted progress billings, which
Gilbert promptly paid. The billings included work on the structures stipulated in the Contract, as
well as additional works and change orders.
In December 1990, however, Salvador demanded that Gilbert pay the following amounts in
addition to the Contract Price: (1) P39,000 or a 20% fee on P196,000 worth of filling materials
respondents themselves supplied for the Project; (2) a 20% escalation or adjustment of the
unpaid balance of the Contract Price in the amount of P637,862.96; and (3) billing for alleged
additional works in the amount of P399,190.46.
Salvador was particularly insistent on the escalation of the Contract Price. In his first letter
dated 18 December 1990, Salvador informed Gilbert that the prices of construction materials had
increased by about forty (40%) percent. [7] Two days later, Salvador wrote again to advise Gilbert
that although the Project was almost 90% completed, the latters failure to grant the escalation
would leave Salvador with no choice but to stop operation and wait for you (Gilbert) to initiate a
renegotiation.[8]
Gilbert responded by requesting for a detailed computation of the proposed escalation. On 25
December 1990, Salvador submitted a breakdown of the services and construction work done on
the Project. The breakdown included the total cost of each service and the portion of the Contract
Price still due for each service. To arrive at the proposed escalation of P637,862.96, the
computation merely imposed a uniform increase of 20% on the outstanding balance still payable
on each service.[9]
Dissatisfied with the computation, Gilbert required Salvador to submit receipts showing the
purchase of construction materials used in the Project, the dates of purchase of these materials,
and the increase in their prices. Gilbert pointed out that he had already paid a total

ofP3,775,804.80 for work on the Project and that the remaining balance due under the Contract
was P210,838.71. Salvador agreed to submit the required documents while Gilbert agreed to
release an additional P120,065.80. Thus, only P90,772.91 of the Contract Price remained
unpaid.
Gilbert also paid Salvador an additional P100,000[10] and P150,000[11] as advances on the
escalation of the Contract Price. However, citing paragraph 17 of the Contract, Gilbert contended
that further demands for additional costs and escalation were baseless and unreasonable.
On 11 January 1991, Salvador reiterated his last and final demand that Gilbert pay within 5
days a total of P1,076,253.32 representing the 20% charge on filling materials, the 20%
escalation of the Contract Price and the latest billing for additional works. Otherwise, Salvador
would stop work on the Project because he had no more funds and resources to continue the
operation.[12] Salvador ceased construction work on the Project on 14 January 1991.
In a letter dated 16 January 1991, Salvador informed Gilbert that his office had received a
notice of illegal construction (DPWH Notice) from the Balanga, Bataan district office of the
Department of Public Works and Highways. The DPWH Notice, [13] copy of which Salvador
attached to his letter, was dated 8 January 1991 and received by one of Salvadors engineers on
15 January 1991.[14] The DPWH Notice stated that the Project had no building permit and ordered
Salvador to stop immediately all building activities and to contact the district office within 3 days.
Salvador reminded Gilbert that it was the latters responsibility under the Contract to secure the
necessary permits and licenses for the Project.
A few days later, Gilbert received a demand letter from Salvadors counsel requiring the
payment of P1,076,253.32 and 10% attorneys fees within 3 days. On 31 January 1991, Salvador
filed before the trial court a complaint for collection of sum of money and damages or for
declaration of claim as lien against Romayne and Gilbert (respondents).
In March 1991, Gilbert replaced Salvador with a new contractor and ejected Salvadors crew
from the Project site.
The Ruling of the Trial Court
After trial on the merits, the trial court dismissed Salvadors complaint and respondents
counterclaims for insufficiency of basis.
The trial court observed that the escalation clause in the Contract required Salvador to
specify the materials the prices of which had increased. Since the documents submitted by
Salvador did not specify these materials, the trial court held that there was no basis for an
adjustment or escalation of the Contract Price.
The trial court likewise ruled that Salvador failed to prove that the parties had agreed on
the P399,190.46 worth of additional work performed on the Project. There was neither a written
agreement nor notice to respondents that Salvador would undertake such additional work.
The trial court denied Salvadors claim for P39,000 or 20% of the cost of filling materials for
lack of basis. The evidence showed that respondents themselves purchased the filling materials
for P196,000 and had them delivered to the Project site. Salvador merely caused the spreading
of the filling materials. The trial court ruled that no provision in the Contract or subsequent written
agreement justified the 20% charge on materials not procured or delivered by Salvador.
The salient portion of the trial courts decision reads as follows:
The totality of the evidence adduced in this case would show the need for the herein parties to
make a true and honest accounting of all the expenses incurred in the implementation of the

subject construction contract, in the presence of an independent third party. As it now stands,
plaintiffs cause of action herein is insufficiently supported, wanting in fact [and] in credible and
competent basis, as afore-discussed.
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant case
for insufficiency of basis. No pronouncement as to costs.
Defendants counterclaims are likewise dismissed for insufficiency of basis.
SO ORDERED.[15]
Salvador appealed the trial courts decision to the Court of Appeals.
The Ruling of the Court of Appeals
The Court of Appeals upheld the denial of Salvadors claims. However, the appellate court
ruled that the receipts submitted by respondents during the trial adequately established the
damage respondents sustained when Salvador ceased work on the Project. The Court of Appeals
also found Salvador in bad faith for stopping the construction of the Project without valid reasons.
The Court of Appeals granted respondents counterclaims and awarded damages:
WHEREFORE, premises considered, the judgment of the lower court is hereby REVERSED and
SET ASIDE and a new one is entered:
a) Dismissing the Complaint;
b) Ordering plaintiff to reimburse defendant the amount of P1,685,532.48 representing
the amount spent by the defendant in completing the project herself less
the P90,772.91 that defendant admitted to be the balance of her obligation to
plaintiff as of December 28, 1990;
c) Ordering plaintiff to pay defendant P100,000.00 moral damages and P50,000.00
exemplary damages;
d) Ordering plaintiff to pay defendant P20,000.00 as attorneys fees.
Cost against plaintiff-appellant.[16]
Hence, the instant petition.
The Issues
The petition contends that:
1. THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING PETITIONER TO
REIMBURSE THE PRIVATE RESPONDENTS OFP1,685,532.48[17] ALLEGEDLY
SPENT IN COMPLETING THE PROJECT;
2. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CLAIM FOR
ADJUSTMENT OR ESCALATION OF THE CONTRACT PRICE HAD NO
REASONABLE BASIS, IN THE LIGHT OF THE ADMISSION OF THE OBLIGATION
BY PRIVATE RESPONDENTS AND CLEAR EVIDENCE;

3. THE COURT OF APPEALS ERRED IN HOLDING THAT THE ADDITIONAL WORKS


OF PETITIONER WERE NOT AUTHORIZED, IN THE LIGHT OF THE ADMISSION
OF THE OBLIGATION BY PRIVATE RESPONDENTS AND THE CLEAR EVIDENCE.
4. THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACT OF PETITIONER
IN STOPPING WORK IN THE PROJECT WAS DUE TO NON-PAYMENT OF THE
ESCALATED PRICE AND ADDITIONAL WORKS, CONTRARY TO THE CLEAR
EVIDENCE.[18]
The central issues left for the resolution of this Court are: (1) whether Salvadors claims for
additional work, including the 20% charge on filling materials, and escalation of the Contract
Price are valid; and (2) whether respondents are entitled to their counterclaim and damages.
The Ruling of the Court
The petition is partly meritorious.
The Claims for Additional Works Done on the Project
and for Escalation of the Contract Price
It is evident from the issues raised that the petition seeks a review of some of the factual
findings of the Court of Appeals.
Petitions for review on certiorari under Rule 45 are generally limited to questions of law.
Moreover, factual findings of the Court of Appeals, particularly when they affirm those of the trial
court, are binding on this Court.[19]
Upon examining the evidence, the trial and appellate courts found that: (1) respondents did
not authorize additional works on the Project nor agree to a price for such works; and (2)
Salvador did not specify the particular items or materials which had increased in price. The Court
will not disturb these factual findings absent compelling or exceptional reasons. [20]
Given these facts, we rule that the law and the Contract do not allow petitioners claims for
additional works and escalation of the Contract Price.
There are two requisites in order that a contractor may claim additional costs:
Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated
price, in conformity with plans and specifications agreed upon with the landowner, can neither
withdraw from the contract nor demand an increase in the price on account of the higher cost of
labor or materials, save when there has been a change in the plans and specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by
both parties.[21]
Compliance with both of these requirements is a condition precedent to the recovery of
additional costs.[22] Even the absence of one of the elements required by Article 1724 bars
recovery.[23]
In the present case, Salvador failed to present any written authority from respondents for any
change in the plans or specifications agreed upon in the Contract. Salvador also failed to present
any agreement on the price for such additional work. Salvador did not notify respondents in
advance of the additional work he performed on the Project. The Contract did not authorize

Salvador to determine unilaterally the changes to be made in the Project, or what price to charge
for such changes. Not having fulfilled any of the requirements in Article 1724, Salvadors claim
ofP399,190.46 for alleged additional works has no legal basis.
On the other hand, Salvadors demand for an escalation of the Contract Price hinges on
paragraph 18[24] of the Contract.
Construction contracts may provide for the escalation or increase of the price originally
agreed upon by the parties in certain instances. As the Court explained in Baylen Corporation v.
Court of Appeals:[25]
Escalation clauses in construction contracts commonly provide for increases in the contract
price under certain specified circumstances, e.g., as the cost of selected
commodities (cement, fuel, steel bars) or the cost of living in the general community (as
measured by, for instance, the Consumer Price Index officially published regularly by the Central
Bank) move up beyond specified levels. (Emphasis supplied)
The parties may validly agree on an escalation clause. [26] However, the enforceability of an
escalation clause is subject to the conditions stipulated in the contract. [27]
Paragraph 18 of the Contract expressly provides for the escalation or adjustment of the
Contract Price in the event of substantial increase/s of prices of the materials, like cement, G.I.
corrugated sheets.[28] Clearly, paragraph 18 of the Contract authorizes an escalation of the
Contract Price only if there are substantial increases in the prices of materials such as cement
and G.I. corrugated sheets. Absent substantial increases in the prices of materials used in the
Project, paragraph 18 would not apply.
The records show that respondents were amenable to an escalation of the Contract Price,
and that they in fact paid Salvador P250,000 in anticipation of the escalation. Respondents were
merely insisting that Salvador comply with what the Contract required, that is, specify the
increase in the prices of particular materials purchased for the Project. Under paragraph 18,
Salvador had the obligation to show that there were substantial increases in the prices of
particular materials used in the Project. The trial and appellate courts found, and the records
support the finding, that Salvador did not comply with this obligation.
Salvador contends that the computation [29] he submitted dated 25 December 1990 sufficiently
complied with the conditions of paragraph 18. He alleges that the 20% increase in the cost of the
services enumerated in the computation necessarily included the increase in the prices of the
materials used. He had also informed respondents earlier that the prices of construction materials
had increased by as much as 40%. Salvador further argues that the burden of proof had shifted
to respondents to present a counter-computation as to what they considered the correct
escalation of the Contract Price.
We do not agree.
Salvador supplied the materials for the construction of the Project. [30] Salvador would thus be
in the best position to provide the actual increases in the prices of the materials. Salvador also
alleged that the prices of construction materials rose substantially since the Project began in July
1990. The rule is that he who alleges a fact has the burden of proving it. [31] Salvador never
presented receipts, billings from suppliers or similar documents substantiating his claim. Indeed,
Salvadors obdurate refusal to provide the simple details required by the Contract puzzles the
Court.

A contract is the law between the parties and they are bound by its stipulations. [32] If the terms
of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.[33]
Under the terms of paragraph 18 of the Contract, the Contract Price shall be adjusted
accordingly as to the particular item/s o[r] materials involved in the increase/s of prices.
[34]
This stipulation is plainly worded, requiring no interpretation. The Contract Price could be
adjusted only up to the actual increase in the prices of particular item/s or materials used in the
Project.
Paragraph 18 of the Contract did not give Salvador the right to determine arbitrarily the
proportion or amount of the escalation in the Contract Price. The Contract requires that any
escalation in the Contract Price must result from substantial increase/s in the prices
ofparticular item/s or materials used in the Project. This certainly excludes escalation based on
estimates or blanket increases. The computation Salvador provided failed to identify the particular
materials that had increased in price and the amount of such price increases. His general claim
that the prices of construction materials had increased by 40% was not sufficient under the terms
of paragraph 18. There was thus no basis for Salvadors demand of a blanket 20% increase on all
materials.
Assuming arguendo that the Contract authorized Salvador to determine unilaterally the
escalation of the Contract Price, such a provision would be void for violating the principle of
mutuality.[35] In Philippine National Bank v. Court of Appeals, the Court struck down the
increases in interest rates unilaterally imposed by Philippine National Bank pursuant to an
escalation clause, and declared that:
In order that obligations arising from contracts may have the force of law between the parties,
there must be mutuality between the parties based on their essential equality. A contract
containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled
will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence,
even assuming that the P1.8 million loan agreement between the PNB and private respondent
gave the PNB a license (although in fact there was none) to increase the interest rate at will
during the term of the loan, that license would have been null and void for being violative of the
principle of mutuality essential in contracts. It would have invested the loan agreement with the
character of a contract of adhesion, where the parties do not bargain on equal footing, the
weaker partys (the debtor) participation being reduced to the alternative to take it or leave it (Qua
vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the
weaker party whom the courts of justice must protect against abuse and imposition. [36]
Moreover, the computation Salvador submitted plainly shows a 20% increase in the cost
of services. The Contract does not authorize any escalation in the cost of services Salvador
would render to the Project.
We agree with the trial court that Salvador has no basis to charge respondents a fee of 20%
or P39,000 on filling materials that respondents supplied to the Project. Salvador himself testified
that: (1) respondents ordered and purchased the filling materials for P196,000; and (2)
respondents caused the delivery of the materials to the Project site. [37] Neither the Contract nor
any other document presented during trial provided for a 20% charge on materials that
respondents supplied to the Project. On the contrary, under paragraph 20 of the Contract, matters
relating to the Project not stipulated in this contract are deemed not included herein unless the
parties may agree on said matters in writing. Under the Contract, Salvador had the obligation to
supply the materials for the construction of the Project. [38] We cannot penalize respondents and
reward Salvador for respondents act in assuming part of Salvadors obligation under the Contract
when Salvador himself did not object to such act.

Respondents Counterclaim and the Damages


Awarded by the Court of Appeals
The trial court ruled that respondents counterclaim had no basis. On appeal, the Court of
Appeals reversed this ruling and ordered Salvador to reimburse respondents P1,594,759.57,
representing the amount allegedly spent by respondents in completing the Project less
theP90,772.91 balance of the Contract Price. On the ground that Salvador was in bad faith, the
appellate court also awarded respondentsP100,000 in moral damages, P50,000 in exemplary
damages and P20,000 in attorneys fees.
While factual findings of the lower courts are generally conclusive on this Court, the rule is
subject to certain exceptions, as when the findings of fact of the trial court and Court of Appeals
diverge.[39]
The Court of Appeals concluded that Salvador stopped work on the Project due to
respondents failure to accede to his demand for payment of the price escalation. The evidence
on record supports this. Salvador sent respondents several letters threatening to halt construction
of the Project precisely for this reason.
Salvador maintains, however, that he was merely complying with the DPWH Notice when he
stopped all construction activities on 14 January 1991. This argument does not convince us.
Despite Salvadors claim that he received the DPWH Notice on 14 January 1991, the DPWH
Notice itself shows that a certain Dennis Coronado received the notice on 15 January 1991,
[40]
the day after Salvador ceased to work on the Project.
In a contract involving reciprocal obligations, the rules on when a party may be declared in
default are found in Article 1169:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other begins. [41] (Emphasis supplied.)
Although Salvador stopped work on the Project in breach of the Contract and in violation of
the law,[42] respondents were likewise remiss in their obligations under the Contract. Paragraph 7
of the Contract states:
7. The project owner shall be responsible in applying for and obtaining at his/her own expens/es
(sic) whatever permits, licenses and/or documents as may be necessary from the Government or
any of its agencies, or otherwise; xxx
The National Building Code requires a building permit on all construction projects. [43] In the
present case, the parties were able to start and even almost complete the Project without a
building permit. The failure of respondents to secure the required building permit constitutes a
breach of their obligation under the Contract. Even if Salvador did not voluntarily stop working on
the Project, he would not have been able to complete the Project because of the cease-anddesist order from the DPWH.
Thus, we cannot attribute Salvadors failure to complete the Project within the contract period
solely to his voluntary work stoppage. Paragraph 6 of the Contract provides:

6. That should there be any restraining order and/or injunction from the court or any legal
authority which will cause stoppage of the work of the CONTRACTOR relating to the said
project, the same should be considered as [a] fortuitous event and/or force majeure, and the time
of stoppage of work shall be deducted from the agreed time of completion of the project;
[44]
(Emphasis supplied)
The DPWH Notice suspended the running of the period given to Salvador to complete the
Project. Respondents were not able to show that the DPWH lifted the cease-and-desist order, or
that they subsequently secured a building permit. Since respondents failed to prove that they had
fulfilled their obligation under the Contract, Salvadors failure to complete the Project within the
contract period cannot be attributed solely to his voluntary work stoppage. There is, therefore, no
legal basis to grant respondents counterclaim for P1,685,532.48, the amount they allegedly spent
to complete the Project.
Respondents point out that when a new contractor took over to complete the Project, no one
from the DPWH stopped the Project, showing that Salvador could also have completed the
Project even without the required building permit. [45] Respondents betray a disturbingly cavalier
attitude towards the strict requirements of the law, including the Sanitation Code, [46] in
establishing a memorial park or cemetery. The State strictly regulates the establishment of
memorial parks or cemeteries because they affect public health. Memorial parks or cemeteries
must be located and constructed without contaminating rivers, underground water tables and the
surrounding areas.[47]
We also find untenable the award of moral and exemplary damages, as well as attorneys
fees to respondents. A breach of contract may give rise to an award of moral damages if the party
guilty of the breach acted fraudulently or in bad faith. [48] In this case, both parties did not comply
with their obligations under the Contract. Respondents must share part of the blame for the
stoppage of work on the Project, as the stoppage was partly due to respondents failure to obtain
the necessary building permit. Likewise, a breach of contract may give rise to exemplary
damages only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.[49] Neither the records nor the decisions of the trial and appellate courts indicate that
Salvador behaved in such a manner and to such degree as to warrant the grant of exemplary
damages. We also delete the award of attorneys fees since none of the grounds for awarding
attorneys fees under Article 2208 of the Civil Code applies to the present case.
WHEREFORE, the Decision of 30 April 1996 of the Court of Appeals in CA-G.R. CV No.
39661 is REVERSED. The Decision of 18 August 1992 of the Regional Trial Court of San Mateo,
Rizal, Branch 76, in Civil Case No. 754, dismissing petitioner Renato C. Salvadors complaint as
well as respondents Maria Romayne Miranda and Gilbert Mirandas counterclaims, is
REINSTATED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 124899. March 30, 2004]
RENATO C. SALVADOR, petitioner, vs. COURT OF APPEALS, MARIA ROMAYNE MIRANDA
and GILBERT MIRANDA, respondents.
DECISION
CARPIO, J.:
The Case

Before the Court is a petition for review[1] assailing the Decision[2] of 30 April 1996 of the Court
of Appeals in CA-G.R. CV No. 39661. The Court of Appeals set aside the Decision [3] of 18 August
1992 of the Regional Trial Court of San Mateo, Rizal, Branch 76, in Civil Case No. 754. The trial
court dismissed petitioners complaint and respondents counterclaims for insufficiency of basis.
The appellate court found for respondents, and directed petitioner to pay damages.
Antecedent Facts
Maria Romayne Miranda (Romayne) is the owner of a parcel of land (Property) with an area
of 17,748 square meters in Cabcaben, Mariveles, Bataan. The Property is registered with the
Register of Deeds of Bataan under TCT No. T-129442.
Romayne appointed her cousin, Gilbert Miranda (Gilbert), as her attorney-in-fact under a
General Power of Attorney[4] dated 15 April 1990. Romayne authorized Gilbert to execute
contracts on her behalf and to manage her properties, including the Property subject of the
present case, and to perform other acts in her place.
On 9 July 1990, Gilbert, as Romaynes agent, entered into a Development and Construction
Contract[5] (Contract) with Renato C. Salvador (Salvador), a duly licensed contractor and
proprietor of Montariza Construction. The Contract was for the development of the Property into
the Haven of Peace Memorial Park (Project) and the construction of several structures for that
purpose. Salvador agreed to undertake the Project for the consideration of P3,986,643.50
(Contract Price).
Salvador undertook to complete the Project within 180 working days from receipt of the down
payment, with a grace period of 45 working days. The Contract also contained the following
provisions:
17. In case of changes, alterations or deviations in the plans, specifications and bill of materials
hereinabove mentioned as may be necessary in the course of the implementation of the
development and construction, the same shall be mutually agreed upon by the herein parties in
writing;
18. In case of substantial increase/s of prices of the materials, like cement, G.I. corrugated
sheets, the said contract price shall be adjusted accordingly as to the particular item/s of (sic)
material/s involved in the increase/s of prices;
xxx
20. All other matters relating to the project not stipulated in this contract are deemed not included
herein unless the parties may agree on said matters in writing;
xxx.[6]
Work on the Project began sometime in July 1990 upon Gilberts payment of P797,328.70 as
twenty per cent (20%) down payment. Salvador periodically submitted progress billings, which
Gilbert promptly paid. The billings included work on the structures stipulated in the Contract, as
well as additional works and change orders.
In December 1990, however, Salvador demanded that Gilbert pay the following amounts in
addition to the Contract Price: (1) P39,000 or a 20% fee on P196,000 worth of filling materials
respondents themselves supplied for the Project; (2) a 20% escalation or adjustment of the
unpaid balance of the Contract Price in the amount of P637,862.96; and (3) billing for alleged
additional works in the amount of P399,190.46.

Salvador was particularly insistent on the escalation of the Contract Price. In his first letter
dated 18 December 1990, Salvador informed Gilbert that the prices of construction materials had
increased by about forty (40%) percent. [7] Two days later, Salvador wrote again to advise Gilbert
that although the Project was almost 90% completed, the latters failure to grant the escalation
would leave Salvador with no choice but to stop operation and wait for you (Gilbert) to initiate a
renegotiation.[8]
Gilbert responded by requesting for a detailed computation of the proposed escalation. On 25
December 1990, Salvador submitted a breakdown of the services and construction work done on
the Project. The breakdown included the total cost of each service and the portion of the Contract
Price still due for each service. To arrive at the proposed escalation of P637,862.96, the
computation merely imposed a uniform increase of 20% on the outstanding balance still payable
on each service.[9]
Dissatisfied with the computation, Gilbert required Salvador to submit receipts showing the
purchase of construction materials used in the Project, the dates of purchase of these materials,
and the increase in their prices. Gilbert pointed out that he had already paid a total
ofP3,775,804.80 for work on the Project and that the remaining balance due under the Contract
was P210,838.71. Salvador agreed to submit the required documents while Gilbert agreed to
release an additional P120,065.80. Thus, only P90,772.91 of the Contract Price remained
unpaid.
Gilbert also paid Salvador an additional P100,000[10] and P150,000[11] as advances on the
escalation of the Contract Price. However, citing paragraph 17 of the Contract, Gilbert contended
that further demands for additional costs and escalation were baseless and unreasonable.
On 11 January 1991, Salvador reiterated his last and final demand that Gilbert pay within 5
days a total of P1,076,253.32 representing the 20% charge on filling materials, the 20%
escalation of the Contract Price and the latest billing for additional works. Otherwise, Salvador
would stop work on the Project because he had no more funds and resources to continue the
operation.[12] Salvador ceased construction work on the Project on 14 January 1991.
In a letter dated 16 January 1991, Salvador informed Gilbert that his office had received a
notice of illegal construction (DPWH Notice) from the Balanga, Bataan district office of the
Department of Public Works and Highways. The DPWH Notice, [13] copy of which Salvador
attached to his letter, was dated 8 January 1991 and received by one of Salvadors engineers on
15 January 1991.[14] The DPWH Notice stated that the Project had no building permit and ordered
Salvador to stop immediately all building activities and to contact the district office within 3 days.
Salvador reminded Gilbert that it was the latters responsibility under the Contract to secure the
necessary permits and licenses for the Project.
A few days later, Gilbert received a demand letter from Salvadors counsel requiring the
payment of P1,076,253.32 and 10% attorneys fees within 3 days. On 31 January 1991, Salvador
filed before the trial court a complaint for collection of sum of money and damages or for
declaration of claim as lien against Romayne and Gilbert (respondents).
In March 1991, Gilbert replaced Salvador with a new contractor and ejected Salvadors crew
from the Project site.
The Ruling of the Trial Court
After trial on the merits, the trial court dismissed Salvadors complaint and respondents
counterclaims for insufficiency of basis.

The trial court observed that the escalation clause in the Contract required Salvador to
specify the materials the prices of which had increased. Since the documents submitted by
Salvador did not specify these materials, the trial court held that there was no basis for an
adjustment or escalation of the Contract Price.
The trial court likewise ruled that Salvador failed to prove that the parties had agreed on
the P399,190.46 worth of additional work performed on the Project. There was neither a written
agreement nor notice to respondents that Salvador would undertake such additional work.
The trial court denied Salvadors claim for P39,000 or 20% of the cost of filling materials for
lack of basis. The evidence showed that respondents themselves purchased the filling materials
for P196,000 and had them delivered to the Project site. Salvador merely caused the spreading
of the filling materials. The trial court ruled that no provision in the Contract or subsequent written
agreement justified the 20% charge on materials not procured or delivered by Salvador.
The salient portion of the trial courts decision reads as follows:
The totality of the evidence adduced in this case would show the need for the herein parties to
make a true and honest accounting of all the expenses incurred in the implementation of the
subject construction contract, in the presence of an independent third party. As it now stands,
plaintiffs cause of action herein is insufficiently supported, wanting in fact [and] in credible and
competent basis, as afore-discussed.
WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant case
for insufficiency of basis. No pronouncement as to costs.
Defendants counterclaims are likewise dismissed for insufficiency of basis.
SO ORDERED.[15]
Salvador appealed the trial courts decision to the Court of Appeals.
The Ruling of the Court of Appeals
The Court of Appeals upheld the denial of Salvadors claims. However, the appellate court
ruled that the receipts submitted by respondents during the trial adequately established the
damage respondents sustained when Salvador ceased work on the Project. The Court of Appeals
also found Salvador in bad faith for stopping the construction of the Project without valid reasons.
The Court of Appeals granted respondents counterclaims and awarded damages:
WHEREFORE, premises considered, the judgment of the lower court is hereby REVERSED and
SET ASIDE and a new one is entered:
a) Dismissing the Complaint;
b) Ordering plaintiff to reimburse defendant the amount of P1,685,532.48 representing
the amount spent by the defendant in completing the project herself less
the P90,772.91 that defendant admitted to be the balance of her obligation to
plaintiff as of December 28, 1990;
c) Ordering plaintiff to pay defendant P100,000.00 moral damages and P50,000.00
exemplary damages;
d) Ordering plaintiff to pay defendant P20,000.00 as attorneys fees.

Cost against plaintiff-appellant.[16]


Hence, the instant petition.
The Issues
The petition contends that:
1. THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING PETITIONER TO
REIMBURSE THE PRIVATE RESPONDENTS OFP1,685,532.48[17] ALLEGEDLY
SPENT IN COMPLETING THE PROJECT;
2. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CLAIM FOR
ADJUSTMENT OR ESCALATION OF THE CONTRACT PRICE HAD NO
REASONABLE BASIS, IN THE LIGHT OF THE ADMISSION OF THE OBLIGATION
BY PRIVATE RESPONDENTS AND CLEAR EVIDENCE;
3. THE COURT OF APPEALS ERRED IN HOLDING THAT THE ADDITIONAL WORKS
OF PETITIONER WERE NOT AUTHORIZED, IN THE LIGHT OF THE ADMISSION
OF THE OBLIGATION BY PRIVATE RESPONDENTS AND THE CLEAR EVIDENCE.
4. THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACT OF PETITIONER
IN STOPPING WORK IN THE PROJECT WAS DUE TO NON-PAYMENT OF THE
ESCALATED PRICE AND ADDITIONAL WORKS, CONTRARY TO THE CLEAR
EVIDENCE.[18]
The central issues left for the resolution of this Court are: (1) whether Salvadors claims for
additional work, including the 20% charge on filling materials, and escalation of the Contract
Price are valid; and (2) whether respondents are entitled to their counterclaim and damages.
The Ruling of the Court
The petition is partly meritorious.
The Claims for Additional Works Done on the Project
and for Escalation of the Contract Price
It is evident from the issues raised that the petition seeks a review of some of the factual
findings of the Court of Appeals.
Petitions for review on certiorari under Rule 45 are generally limited to questions of law.
Moreover, factual findings of the Court of Appeals, particularly when they affirm those of the trial
court, are binding on this Court.[19]
Upon examining the evidence, the trial and appellate courts found that: (1) respondents did
not authorize additional works on the Project nor agree to a price for such works; and (2)
Salvador did not specify the particular items or materials which had increased in price. The Court
will not disturb these factual findings absent compelling or exceptional reasons. [20]
Given these facts, we rule that the law and the Contract do not allow petitioners claims for
additional works and escalation of the Contract Price.
There are two requisites in order that a contractor may claim additional costs:

Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated
price, in conformity with plans and specifications agreed upon with the landowner, can neither
withdraw from the contract nor demand an increase in the price on account of the higher cost of
labor or materials, save when there has been a change in the plans and specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by
both parties.[21]
Compliance with both of these requirements is a condition precedent to the recovery of
additional costs.[22] Even the absence of one of the elements required by Article 1724 bars
recovery.[23]
In the present case, Salvador failed to present any written authority from respondents for any
change in the plans or specifications agreed upon in the Contract. Salvador also failed to present
any agreement on the price for such additional work. Salvador did not notify respondents in
advance of the additional work he performed on the Project. The Contract did not authorize
Salvador to determine unilaterally the changes to be made in the Project, or what price to charge
for such changes. Not having fulfilled any of the requirements in Article 1724, Salvadors claim
ofP399,190.46 for alleged additional works has no legal basis.
On the other hand, Salvadors demand for an escalation of the Contract Price hinges on
paragraph 18[24] of the Contract.
Construction contracts may provide for the escalation or increase of the price originally
agreed upon by the parties in certain instances. As the Court explained in Baylen Corporation v.
Court of Appeals:[25]
Escalation clauses in construction contracts commonly provide for increases in the contract
price under certain specified circumstances, e.g., as the cost of selected
commodities (cement, fuel, steel bars) or the cost of living in the general community (as
measured by, for instance, the Consumer Price Index officially published regularly by the Central
Bank) move up beyond specified levels. (Emphasis supplied)
The parties may validly agree on an escalation clause. [26] However, the enforceability of an
escalation clause is subject to the conditions stipulated in the contract. [27]
Paragraph 18 of the Contract expressly provides for the escalation or adjustment of the
Contract Price in the event of substantial increase/s of prices of the materials, like cement, G.I.
corrugated sheets.[28] Clearly, paragraph 18 of the Contract authorizes an escalation of the
Contract Price only if there are substantial increases in the prices of materials such as cement
and G.I. corrugated sheets. Absent substantial increases in the prices of materials used in the
Project, paragraph 18 would not apply.
The records show that respondents were amenable to an escalation of the Contract Price,
and that they in fact paid Salvador P250,000 in anticipation of the escalation. Respondents were
merely insisting that Salvador comply with what the Contract required, that is, specify the
increase in the prices of particular materials purchased for the Project. Under paragraph 18,
Salvador had the obligation to show that there were substantial increases in the prices of
particular materials used in the Project. The trial and appellate courts found, and the records
support the finding, that Salvador did not comply with this obligation.
Salvador contends that the computation [29] he submitted dated 25 December 1990 sufficiently
complied with the conditions of paragraph 18. He alleges that the 20% increase in the cost of the

services enumerated in the computation necessarily included the increase in the prices of the
materials used. He had also informed respondents earlier that the prices of construction materials
had increased by as much as 40%. Salvador further argues that the burden of proof had shifted
to respondents to present a counter-computation as to what they considered the correct
escalation of the Contract Price.
We do not agree.
Salvador supplied the materials for the construction of the Project. [30] Salvador would thus be
in the best position to provide the actual increases in the prices of the materials. Salvador also
alleged that the prices of construction materials rose substantially since the Project began in July
1990. The rule is that he who alleges a fact has the burden of proving it. [31] Salvador never
presented receipts, billings from suppliers or similar documents substantiating his claim. Indeed,
Salvadors obdurate refusal to provide the simple details required by the Contract puzzles the
Court.
A contract is the law between the parties and they are bound by its stipulations. [32] If the terms
of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.[33]
Under the terms of paragraph 18 of the Contract, the Contract Price shall be adjusted
accordingly as to the particular item/s o[r] materials involved in the increase/s of prices.
[34]
This stipulation is plainly worded, requiring no interpretation. The Contract Price could be
adjusted only up to the actual increase in the prices of particular item/s or materials used in the
Project.
Paragraph 18 of the Contract did not give Salvador the right to determine arbitrarily the
proportion or amount of the escalation in the Contract Price. The Contract requires that any
escalation in the Contract Price must result from substantial increase/s in the prices
ofparticular item/s or materials used in the Project. This certainly excludes escalation based on
estimates or blanket increases. The computation Salvador provided failed to identify the particular
materials that had increased in price and the amount of such price increases. His general claim
that the prices of construction materials had increased by 40% was not sufficient under the terms
of paragraph 18. There was thus no basis for Salvadors demand of a blanket 20% increase on all
materials.
Assuming arguendo that the Contract authorized Salvador to determine unilaterally the
escalation of the Contract Price, such a provision would be void for violating the principle of
mutuality.[35] In Philippine National Bank v. Court of Appeals, the Court struck down the
increases in interest rates unilaterally imposed by Philippine National Bank pursuant to an
escalation clause, and declared that:
In order that obligations arising from contracts may have the force of law between the parties,
there must be mutuality between the parties based on their essential equality. A contract
containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled
will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence,
even assuming that the P1.8 million loan agreement between the PNB and private respondent
gave the PNB a license (although in fact there was none) to increase the interest rate at will
during the term of the loan, that license would have been null and void for being violative of the
principle of mutuality essential in contracts. It would have invested the loan agreement with the
character of a contract of adhesion, where the parties do not bargain on equal footing, the
weaker partys (the debtor) participation being reduced to the alternative to take it or leave it (Qua
vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the
weaker party whom the courts of justice must protect against abuse and imposition. [36]

Moreover, the computation Salvador submitted plainly shows a 20% increase in the cost
of services. The Contract does not authorize any escalation in the cost of services Salvador
would render to the Project.
We agree with the trial court that Salvador has no basis to charge respondents a fee of 20%
or P39,000 on filling materials that respondents supplied to the Project. Salvador himself testified
that: (1) respondents ordered and purchased the filling materials for P196,000; and (2)
respondents caused the delivery of the materials to the Project site. [37] Neither the Contract nor
any other document presented during trial provided for a 20% charge on materials that
respondents supplied to the Project. On the contrary, under paragraph 20 of the Contract, matters
relating to the Project not stipulated in this contract are deemed not included herein unless the
parties may agree on said matters in writing. Under the Contract, Salvador had the obligation to
supply the materials for the construction of the Project. [38] We cannot penalize respondents and
reward Salvador for respondents act in assuming part of Salvadors obligation under the Contract
when Salvador himself did not object to such act.
Respondents Counterclaim and the Damages
Awarded by the Court of Appeals
The trial court ruled that respondents counterclaim had no basis. On appeal, the Court of
Appeals reversed this ruling and ordered Salvador to reimburse respondents P1,594,759.57,
representing the amount allegedly spent by respondents in completing the Project less
theP90,772.91 balance of the Contract Price. On the ground that Salvador was in bad faith, the
appellate court also awarded respondentsP100,000 in moral damages, P50,000 in exemplary
damages and P20,000 in attorneys fees.
While factual findings of the lower courts are generally conclusive on this Court, the rule is
subject to certain exceptions, as when the findings of fact of the trial court and Court of Appeals
diverge.[39]
The Court of Appeals concluded that Salvador stopped work on the Project due to
respondents failure to accede to his demand for payment of the price escalation. The evidence
on record supports this. Salvador sent respondents several letters threatening to halt construction
of the Project precisely for this reason.
Salvador maintains, however, that he was merely complying with the DPWH Notice when he
stopped all construction activities on 14 January 1991. This argument does not convince us.
Despite Salvadors claim that he received the DPWH Notice on 14 January 1991, the DPWH
Notice itself shows that a certain Dennis Coronado received the notice on 15 January 1991,
[40]
the day after Salvador ceased to work on the Project.
In a contract involving reciprocal obligations, the rules on when a party may be declared in
default are found in Article 1169:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him. From the moment
one of the parties fulfills his obligation, delay by the other begins. [41] (Emphasis supplied.)

Although Salvador stopped work on the Project in breach of the Contract and in violation of
the law,[42] respondents were likewise remiss in their obligations under the Contract. Paragraph 7
of the Contract states:
7. The project owner shall be responsible in applying for and obtaining at his/her own expens/es
(sic) whatever permits, licenses and/or documents as may be necessary from the Government or
any of its agencies, or otherwise; xxx
The National Building Code requires a building permit on all construction projects. [43] In the
present case, the parties were able to start and even almost complete the Project without a
building permit. The failure of respondents to secure the required building permit constitutes a
breach of their obligation under the Contract. Even if Salvador did not voluntarily stop working on
the Project, he would not have been able to complete the Project because of the cease-anddesist order from the DPWH.
Thus, we cannot attribute Salvadors failure to complete the Project within the contract period
solely to his voluntary work stoppage. Paragraph 6 of the Contract provides:
6. That should there be any restraining order and/or injunction from the court or any legal
authority which will cause stoppage of the work of the CONTRACTOR relating to the said
project, the same should be considered as [a] fortuitous event and/or force majeure, and the time
of stoppage of work shall be deducted from the agreed time of completion of the project;
[44]
(Emphasis supplied)
The DPWH Notice suspended the running of the period given to Salvador to complete the
Project. Respondents were not able to show that the DPWH lifted the cease-and-desist order, or
that they subsequently secured a building permit. Since respondents failed to prove that they had
fulfilled their obligation under the Contract, Salvadors failure to complete the Project within the
contract period cannot be attributed solely to his voluntary work stoppage. There is, therefore, no
legal basis to grant respondents counterclaim for P1,685,532.48, the amount they allegedly spent
to complete the Project.
Respondents point out that when a new contractor took over to complete the Project, no one
from the DPWH stopped the Project, showing that Salvador could also have completed the
Project even without the required building permit. [45] Respondents betray a disturbingly cavalier
attitude towards the strict requirements of the law, including the Sanitation Code, [46] in
establishing a memorial park or cemetery. The State strictly regulates the establishment of
memorial parks or cemeteries because they affect public health. Memorial parks or cemeteries
must be located and constructed without contaminating rivers, underground water tables and the
surrounding areas.[47]
We also find untenable the award of moral and exemplary damages, as well as attorneys
fees to respondents. A breach of contract may give rise to an award of moral damages if the party
guilty of the breach acted fraudulently or in bad faith. [48] In this case, both parties did not comply
with their obligations under the Contract. Respondents must share part of the blame for the
stoppage of work on the Project, as the stoppage was partly due to respondents failure to obtain
the necessary building permit. Likewise, a breach of contract may give rise to exemplary
damages only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.[49] Neither the records nor the decisions of the trial and appellate courts indicate that
Salvador behaved in such a manner and to such degree as to warrant the grant of exemplary
damages. We also delete the award of attorneys fees since none of the grounds for awarding
attorneys fees under Article 2208 of the Civil Code applies to the present case.
WHEREFORE, the Decision of 30 April 1996 of the Court of Appeals in CA-G.R. CV No.
39661 is REVERSED. The Decision of 18 August 1992 of the Regional Trial Court of San Mateo,

Rizal, Branch 76, in Civil Case No. 754, dismissing petitioner Renato C. Salvadors complaint as
well as respondents Maria Romayne Miranda and Gilbert Mirandas counterclaims, is
REINSTATED. No pronouncement as to costs.
SO ORDERED.

EPITACIO DELIMA, PACIANO DELIMA, FIDEL DELIMA, ET AL. VS. COURT OF APPEALS
G.R. NO. L-46296 201 SCRA 641

SEPTEMBER 24, 1991

PONENTE: MEDIALDEA, J.
Doctrine: No prescription shall run in favor of a co-owner against his co-owners or co-heirs as
long as he expressly or impliedly recognizes the co-ownership. The exception however is that the
from the moment one of the co-owners claims that he is the absolute and exclusive owner of the
properties and denies the others any share therein, the question is no longer one of partition but
of ownership.
Facts: Lino Delima acquired Lot. No. 7758 of the Talisay-Minglanilla Friar Lands Estate in Cebu
by sale on installments from the government. After his demise in 1921 he had his three brothers
and a sister listed as his heirs. The heirs were Eulalio Delima, Juanita Delima, Galileo Delima,
and Vicente Delima. A new Transfer Certificate of Title was issued in the name of the Legal Heirs
of Lino Delima represented by Galileo Delima. On September 22, 1953, Galileo executed an
affidavit of Extra-judicial Declaration of Heirs adjudicating to himself the subject property
excluding the other heirs. He declared the lot to be of his own and paid for its taxes. On February
29, 1968, the surviving heirs of Eulalio and Juanita Delima, filed with the Court of First Instance of
Cebu an action for reconveyance and partition of property and for the annulment of the certificate
of title issued plus damages against their Uncle Galileo. Vicente Delima was also later included
as party defendant for his refusal to help in the action.
The trial court decided in favor of the petitioners rendering the TCT No. 3009 null and void
and declaring Vicente, the Heirs of Juanita, the Heirs of Eulalio and the Heirs of Galileo to be
owners of the property, each sharing a pro-indiviso share of one-fourth of the whole. The
respondents, Heirs of Galileo Delima, appealed to the Court of Appeals which reversed the
decision in their favor. It upheld the claim of Galileo that the other brothers and sisters have
already waived their rights to the property being that it was Galileo alone that paid for the balance
of the purchase price and the realty taxes for the property.
Issue: Whether or not petitioners action for partition is already barred by the statutory period
provided by law which shall enable Galileo Delima to perfect his claim of ownership by acquisitive
prescription to the exclusion of petitioners from their shared in the disputed property?

Held: Yes, Article 494 (5) of the Civil Code provides that: No prescription shall run in favor of a
co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly
recognized the co-ownership. By this it is therefore understood that possession by a co-owner
will not be presumed to be adverse to the others, but will be held to benefit all. Being that Galileo
was holding the property in representation of the co-owners; he was therefore acting as an
administrator who took care of the property yet still having the ultimate obligation to deliver the
property to his co-owners.
However this rule shall no longer apply when one of the co-owners begin to claim the
absolute and exclusive ownership and denies the others any share therein. The imprescriptability
of the action for partition shall no longer apply since Galileo is adversely claiming lone ownership
over the property. In order that a possession be considered adverse amounting to a repudiation
of the co-ownership, the following elements must concur: (1) that the trustee has performed the
unequivocal acts amounting to an ouster of the cestui que trust; (2) that such positive acts of
repudiation had been made known to the cestui que trust; and (3) that the evidence thereon
should be clear and conclusive.
Since Galileo, having executed a deed of partition and obtained subsequent to that the
cancellation of the old title and the creation of a new one wherein he appears as the new owner
of the property, he thereby in effect denied and repudiated the ownership of the other co-owners
over their shares. From this act, the statute of limitations started to run. Since an action for
reconveyance
FIRST
[G.R.

DIVISION
No.

46296.

September

24,

1991.]

EPITACIO DELIMA, PACIANO DELIMA, FIDEL DELIMA, VIRGILIO DELIMA, GALILEO


DELIMA, JR., BIBIANO BACUS, OLIMPIO BACUS and PURIFICACION BACUS, Petitioners,
v. HON. COURT OF APPEALS, GELILEO DELIMA (deceased), substituted by his legal
heirs, namely; FLAVIANA VDA. DE DELIMA, LILY D. ARIAS, HELEN NIADAS, ANTONIO
DELIMA, DIONISIO DELIMA, IRENEA DELIMA, ESTER DELIMA AND FELY
DELIMA, Respondents.
Gabriel

J.

Canete,

for Petitioners.

Emilio Lumontad, Jr. for Private Respondents.


DECISION
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals reversing the trial
courts judgment which declared as null and void the certificate of title in the name of
respondents predecessor and which ordered the partition of the disputed lot among the parties
as
co-owners.
The antecedent facts of the case as found both by the respondent appellate court and by the trial
court
are
as
follows:chanrob1es
virtual
1aw
library

During his lifetime, Lino Delima acquired Lot No. 7758 of the Talisay-Minglanilla Friar Lands
Estate in Cebu by sale on installments from the government. Lino Delima later died in 1921
leaving as his only heirs three brothers and a sister namely: Eulalio Delima, Juanita Delima,
Galileo Delima and Vicente Delima. After his death, TCT No. 2744 of the property in question was
issued on August 3, 1953 in the name of "The Legal Heirs of Lino Delima, deceased, represented
by
Galileo
Delima."cralaw
virtua1aw
library
On September 22, 1953, Galileo Delima, now substituted by respondents, executed an affidavit
of "Extra-judicial Declaration of Heirs." Based on this affidavit, TCT No. 2744 was cancelled and
TCT No. 3009 was issued on February 4, 1954 in the name of Galileo Delima alone to the
exclusion
of
the
other
heirs.
Galileo Delima declared the lot in his name for taxation purposes and paid the taxes thereon from
1954
to
1965.
On February 29, 1968, Petitioners, who are the surviving heirs of Eulalio and Juanita Delima,
filed With the Court of First Instance of Cebu (now Regional Trial Court) an action for
reconveyance and/or partition of property and for the annulment of TCT No. 3009 with damages
against their uncles Galileo Delima and Vicente Delima,. Vicente Delima was joined as party
defendant by the petitioners for his refusal to join the latter in their action.
On January 16, 1970, the trial court rendered a decision in favor of petitioners, the dispositive
portion
of
which
states:chanrobles
virtual
lawlibrary
"IN VIEW OF THE FOREGOING CONSIDERATIONS, the following are the declared owners of
Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate presently covered by Transfer
Certificate of Title No. 3009, each sharing a pro-indiviso share of one-fourth;
1)

Vicente

Delima

(one-fourth)

2) Heirs of Juanita Delima, namely: Bibiano Bacus, Olimpio Bacus and Purificacion Bacus (onefourth),
3) Heirs of Eulalio Delima, namely Epitacio, Paciano, Fidel, Virgilio and Galileo Jr., all surnamed
Delima
(one-fourth);
and
4) The Heirs of Galileo Delima, namely Flaviana Vda. de Delima, Lily D. Arias, Helen Niadas, and
Dionisio, Antonio, Eotu, Irenea, and Fely, all surnamed Delima (one-fourth).
"Transfer Certificate of Title No. 3009 is declared null and void and the Register of Deeds of Cebu
is ordered to cancel the same and issue in lieu thereof another title with the above heirs as proindiviso
owners.
"After the payment of taxes paid by Galileo Delima since 1958, the heirs of Galileo Delima are
ordered to turn over to the other heirs their respective shares of the fruits of the lot in question
computed at P170.00 per year up to the present time with legal (interest).
"Within sixty (60) days from receipt of this decision the parties are ordered to petition the lot in
question and the defendants are directed to immediately turn over possession of the shares here
awarded
to
the
respective
heirs.
"Defendants
"The
"SO

are

condemned

to

pay

counterclaim
ORDERED."

the

costs
is

(pp.

of

the

suit.

dismissed.
54-55,

Rollo).

Not satisfied with the decision, respondents appealed to the Court of Appeals. On May 19, 1977,
respondent appellate court reversed the trial courts decision and upheld the claim of Galileo
Delima that all the other brothers and sister of Lino Delima, namely Eulalio, Juanita and Vicente,
had already relinquished and waived their rights to the property in his favor, considering that he

(Galileo Delima) alone paid the remaining balance of the purchase price of the lot and the realty
taxes
thereon
(p.
26,
Rollo).
Hence, this petition was filed with the petitioners alleging that the Court of Appeals
erred:jgc:chanrobles.com.ph
"1) In not holding that the right of a co-heir to demand partition of inheritance is imprescriptible. If
it does, the defenses of prescription and laches have already been waived.
"2)

In

disregarding

the

evidence

of

the

petitioners."

(p.

13,

Rollo).

The issue to be resolved in the instant case is whether or not petitioners action for partition is
already barred by the statutory period provided by law which shall enable Galileo Delima to
perfect his claim of ownership by acquisitive prescription to the exclusion of petitioners from their
shares
in
the
disputed
property.chanrobles
law
library
:
red
Article

494

of

the

Civil

Code

expressly

provides:jgc:chanrobles.com.ph

"Art. 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may
demand at any time the partition of the thing owned in common, insofar as his share is
concerned.
"Nevertheless, an agreement to keep the thing undivided for a certain period of time, not
exceeding ten years, shall be valid. This term may be extended by a new agreement.
"A donor or testator may prohibit partition for a period which shall not exceed twenty years.
"Neither

shall

there

be

any

partition

when

it

is

prohibited

by

law.

"No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so
long as he expressly or impliedly recognizes the co-ownership."cralaw virtua1aw library
As a rule, possession by a co-owner will not be presumed to be adverse to the others, but will be
held to benefit all. It is understood that the co-owner or co-heir who is in possession of an
inheritance pro-indiviso for himself and in representation of his co-owners or co-heirs, if, as such
owner, he administers or takes care of the rest thereof with the obligation of delivering it to his coowners or co-heirs, is under the same situation as a depository, a lessee or a trustee (Bargayo v.
Camumot, 40 Phil. 857; Segura v. Segura, No. L-29320, September 19, 1988, 165 SCRA 368).
Thus, an action to compel partition may be filed at any time by any of the co-owners against the
actual possessor. In other words, no prescription shall run in favor of a co-owner against his coowners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Del Blanco
v. Intermediate Appellate Court, No. 72694, December 1 , 1987, 156 SCRA 55).
However, from the moment one of the co-owners claims that he is the absolute and exclusive
owner of the properties and denies the others any share therein, the question involved is no
longer one of partition but of ownership (De Castro v. Echarri, 20 Phil. 23; Bargayo v. Camumot,
supra; De los Santos v. Santa Teresa, 44 Phil. 811). In such case, the imprescriptibility of the
action for partition can no longer be invoked or applied when one of the co-owners has adversely
possessed the property as exclusive owner for a period sufficient to vest ownership by
prescription.
It is settled that possession by a co-owner or co-heir is that of a trustee. In order that such
possession is considered adverse to the cestui que trust amounting to a repudiation of the coownership, the following elements must concur: 1) that the trustee has performed unequivocal
acts amounting to an ouster of the cestui que trust; 2) that such positive acts of repudiation had
been made known to the cestui que trust; and 3) that the evidence thereon should be clear and
conclusive (Valdez v. Olorga, No. L-22571, May 25, 1973, 51 SCRA 71; Pangan v. Court of
Appeals,
No.
L-39299,
October
18,
1988,
166
SCRA
375).
We have held that when a co-owner of the property in question executed a deed of partition and
on the strength thereof obtained the cancellation of the title in the name of their predecessor and
the issuance of a new one wherein he appears as the new owner of the property, thereby in effect

denying or repudiating the ownership of the other co-owners over their shares, the statute of
limitations started to run for the purposes of the action instituted by the latter seeking a
declaration of the existence of the co-ownership and of their rights thereunder (Castillo v. Court of
Appeals, No. L-18046, March 31, 1964, 10 SCRA 549). Since an action for reconveyance of land
based on implied or constructive trust prescribes after ten (10) years, it is from the date of the
issuance of such title that the effective assertion of adverse title for purposes of the statute of
limitations is counted (Jaramil v. Court of Appeals, No. L-31858, August 31, 1977, 78 SCRA
420).chanrobles
law
library
Evidence shows that TCT No. 2744 in the name of the legal heirs of Lino Delima, represented by
Galileo Delima, was cancelled by virtue of an affidavit executed by Galileo Delima and that on
February 4, 1954, Galileo Delima obtained the issuance of a new title in his name numbered TCT
No. 3009 to the exclusion of his co-heirs. The issuance of this new title constituted an open and
clear repudiation of the trust or co-ownership, and the lapse of ten (10) years of adverse
possession by Galileo Delima from February 4, 1954 was sufficient to vest title in him by
prescription. As the certificate of title was notice to the whole world of his exclusive title to the
land, such rejection was binding on the other heirs and started as against them the period of
prescription. Hence, when petitioners filed their action for reconveyance and/or to compel
partition on February 29, 1963, such action was already barred by prescription. Whatever claims
the other co-heirs could have validly asserted before can no longer be invoked by them at this
time.
ACCORDINGLY, the petition is hereby DENIED and the assailed decision of the Court of Appeals
dated May 19, 1977 is AFFIRMED.
__________________________________________________________________
Mariategui v. CA, 205 SCRA 337
FACTS: Lupo Mariategui contracted three marriages during his lifetime. He had 4 children with
his first wife, Eusebia Montellano. He had 1 child with his second wife, Flaviana Montellano. And
he had 3 children with his third wife, Felipa Velasco. Lupo died instestate. Upon his death,
descendants from his first and second marriages executed a deed of extrajudicial partition on Lot
No. 163. However, the children on Lupos third marriage filed with the lower court an amended
complaint claiming that they were deprive on the partition of Lot No. 163 which were owned by
their common father. The petitioners, children on first and second marriage, filed a counterclaim
to dismiss the said complaint. Trial court denied the motion to dismiss and also the complaint by
the respondents, children on third marriage. Respondents elevated the case on CA on the ground
that the trial court committed an error for not finding the third marriage to be lawfully married and
also in holding respondents are not legitimate children of their said parents. CA rendered a
decision declaring all the children and descendants of Lupo, including the respondents, are
entitled to equal shares of estate of their father. However, petitioners filed a motion for
reconsideration of said decision.
ISSUE: Whether or not respondents were able to prove their succession rights over the said
estate.
HELD: With respect to the legal basis of private respondents' demand for partition of the estate of
Lupo Mariategui, the Court of Appeals aptly held that the private respondents are legitimate
children of the deceased. Lupo Mariategui and Felipa Velasco were alleged to have been lawfully
married in or about 1930. This fact is based on the declaration communicated by Lupo Mariategui
to Jacinto who testified that "when his father was still living, he was able to mention to him that he
and his mother were able to get married before a Justice of the Peace of Taguig, Rizal." The
spouses deported themselves as husband and wife, and were known in the community to be
such. Although no marriage certificate was introduced to this effect, no evidence was likewise
offered to controvert these facts. Moreover, the mere fact that no record of the marriage exists
does not invalidate the marriage, provided all requisites for its validity are present. Under these
circumstances, a marriage may be presumed to have taken place between Lupo and Felipa.
G.R. No. L-57062 January 24, 1992
MARIA
vs.

DEL

ROSARIO

MARIATEGUI,

ET

AL., petitioners,

HON. COURT OF APPEALS, JACINTO MARIATEGUI, JULIAN MARIATEGUI and PAULINA


MARIATEGUI,respondents.
Montesa, Albon & Associates for petitioners.
Parmenio B. Patacsil, Patacsil Twins Law Office for the heirs of the late Maria del Rosario
Mariategui.
Tinga, Fuentes & Tagle Firm for private respondents.

BIDIN, J.:
This is a petition for review on certiorari of the decision * of the Court of Appeals dated December
24, 1980 in CA-G.R. No. 61841, entitled "Jacinto Mariategui, et al. v. Maria del Rosario
Mariategui, et al.," reversing the judgment of the then Court of First Instance of Rizal, Branch
VIII ** at Pasig, Metro Manila.
The undisputed facts are as follows:
Lupo Mariategui died without a will on June 26, 1953 (Brief for respondents, Rollo, pp. 116; 8).
During his lifetime, Lupo Mariategui contracted three (3) marriages. With his first wife, Eusebia
Montellano, who died on November 8, 1904, he begot four (4) children, namely: Baldomera,
Maria del Rosario, Urbana and Ireneo. Baldomera died and was survived by her children named
Antero, Rufina, Catalino, Maria, Gerardo, Virginia and Federico, all surnamed Espina. Ireneo also
died and left a son named Ruperto. With his second wife, Flaviana Montellano, he begot a
daughter named Cresenciana who was born on May 8, 1910 (Rollo, Annex "A", p. 36).
Lupo Mariategui and Felipa Velasco (Lupo's third wife) got married sometime in 1930. They had
three children, namely: Jacinto, born on July 3, 1929, Julian, born on February 16, 1931 and
Paulina, born on April 19, 1938. Felipa Velasco Mariategui died in 1941 (Rollo, Ibid).
At the time of his death, Lupo Mariategui left certain properties which he acquired when he was
still unmarried (Brief for respondents, Rollo, pp. 116; 4). These properties are described in the
complaint as Lots Nos. 163, 66, 1346 and 156 of the Muntinglupa Estate (Rollo, Annex "A", p.
39).
On December 2, 1967, Lupo's descendants by his first and second marriages, namely, Maria del
Rosario, Urbana, Ruperto, Cresencia, all surnamed Mariategui and Antero, Rufina, Catalino,
Maria, Gerardo, Virginia and Federico, all surnamed Espina, executed a deed of extrajudicial
partition whereby they adjudicated unto themselves Lot No. 163 of the Muntinglupa Estate.
Thereafter, Lot No. 163 was the subject of a voluntary registration proceedings filed by the
adjudicatees under Act No. 496, and the land registration court issued a decree ordering the
registration of the lot. Thus, on April 1, 1971, OCT No. 8828 was issued in the name of the
above-mentioned heirs. Subsequently, the registered owners caused the subdivision of the said
lot into Lots Nos. 163-A to 163-H, for which separate transfer certificates of title were issued to
the respective parties (Rollo, ibid).
On April 23, 1973, Lupo's children by his third marriage with Felipa Velasco (Jacinto, Julian and
Paulina) filed with the lower court an amended complaint claiming that Lot No. 163 together with
Lots Nos. 669, 1346 and 154 were owned by their common father, Lupo Mariategui, and that,
with the adjudication of Lot No. 163 to their co-heirs, they (children of the third marriage) were
deprived of their respective shares in the lots. Plaintiffs pray for partition of the estate of their
deceased father and annulment of the deed of extrajudicial partition dated December 2, 1967
(Petition, Rollo, p. 10). Cresencia Mariategui Abas, Flaviana Mariategui Cabrera and Isabel

Santos were impleaded in the complaint as unwilling defendants as they would not like to join the
suit as plaintiffs although they acknowledged the status and rights of the plaintiffs and agreed to
the partition of the parcels of land as well as the accounting of their fruits (Ibid., Rollo, p. 8;
Record on Appeal, p. 4).
The defendants (now petitioners) filed an answer with counterclaim (Amended Record on Appeal,
p. 13). Thereafter, they filed a motion to dismiss on the grounds of lack of cause of action and
prescription. They specifically contended that the complaint was one for recognition of natural
children. On August 14, 1974, the motion to dismiss was denied by the trial court, in an order the
dispositive portion of which reads:
It is therefore the opinion of the Court that Articles 278 and 285 of the Civil Code
cited by counsel for the defendants are of erroneous application to this case. The
motion to dismiss is therefore denied for lack of merit.
SO ORDERED. (Ibid, p. 37).
However, on February 16, 1977, the complaint as well as petitioners' counterclaim were
dismissed by the trial court, in its decision stating thus:
The plaintiffs' right to inherit depends upon the acknowledgment or recognition of
their continuous enjoyment and possession of status of children of their supposed
father. The evidence fails to sustain either premise, and it is clear that this action
cannot be sustained. (Ibid, Rollo, pp. 67-68)
The plaintiffs elevated the case to the Court of Appeals on the ground that the trial court
committed an error ". . . in not finding that the parents of the appellants, Lupo Mariategui and
Felipa Velasco (were) lawfully married, and in holding (that) they (appellants) are not legitimate
children of their said parents, thereby divesting them of their inheritance . . . " (Rollo, pp. 14-15).
On December 24, 1980, the Court of Appeals rendered a decision declaring all the children and
descendants of Lupo Mariategui, including appellants Jacinto, Julian and Paulina (children of the
third marriage) as entitled to equal shares in the estate of Lupo Mariategui; directing the
adjudicatees in the extrajudicial partition of real properties who eventually acquired transfer
certificates of title thereto, to execute deeds of reconveyance in favor, and for the shares, of
Jacinto, Julian and Paulina provided rights of innocent third persons are not prejudiced otherwise
the said adjudicatees shall reimburse the said heirs the fair market value of their shares; and
directing all the parties to submit to the lower court a project of partition in the net estate of Lupo
Mariategui after payment of taxes, other government charges and outstanding legal obligations.
The defendants-appellees filed a motion for reconsideration of said decision but it was denied for
lack of merit. Hence, this petition which was given due course by the court on December 7, 1981.
The petitioners submit to the Court the following issues: (a) whether or not prescription barred
private respondents' right to demand the partition of the estate of Lupo Mariategui, and (b)
whether or not the private respondents, who belatedly filed the action for recognition, were able
to prove their successional rights over said estate. The resolution of these issues hinges,
however, on the resolution of the preliminary matter, i.e., the nature of the complaint filed by the
private respondents.
The complaint alleged, among other things, that "plaintiffs are the children of the deceased
spouses Lupo Mariategui . . . and Felipa Velasco"; that "during his lifetime, Lupo Mariategui had
repeatedly acknowledged and confirmed plaintiffs as his children and the latter, in turn, have
continuously enjoyed such status since their birth"; and "on the basis of their relationship to the
deceased Lupo Mariategui and in accordance with the law on intestate succession, plaintiffs are

entitled to inherit shares in the foregoing estate (Record on Appeal, pp. 5 & 6). It prayed, among
others, that plaintiffs be declared as children and heirs of Lupo Mariategui and adjudication in
favor of plaintiffs their lawful shares in the estate of the decedent (Ibid, p. 10).
A perusal of the entire allegations of the complaint, however, shows that the action is principally
one of partition. The allegation with respect to the status of the private respondents was raised
only collaterally to assert their rights in the estate of the deceased. Hence, the Court of Appeals
correctly adopted the settled rule that the nature of an action filed in court is determined by the
facts alleged in the complaint constituting the cause of action (Republic vs. Estenzo, 158 SCRA
282 [1988]).
It has been held that, if the relief demanded is not the proper one which may be granted under
the law, it does not characterize or determine the nature of plaintiffs' action, and the relief to
which plaintiff is entitled based on the facts alleged by him in his complaint, although it is not the
relief demanded, is what determines the nature of the action (1 Moran, p. 127, 1979 ed., citing
Baguioro vs. Barrios, et al., 77 Phil. 120).
With respect to the legal basis of private respondents' demand for partition of the estate of Lupo
Mariategui, the Court of Appeals aptly held that the private respondents are legitimate children of
the deceased.
Lupo Mariategui and Felipa Velasco were alleged to have been lawfully married in or about 1930.
This fact is based on the declaration communicated by Lupo Mariategui to Jacinto who testified
that "when (his) father was still living, he was able to mention to (him) that he and (his) mother
were able to get married before a Justice of the Peace of Taguig, Rizal." The spouses deported
themselves as husband and wife, and were known in the community to be such. Although no
marriage certificate was introduced to this effect, no evidence was likewise offered to controvert
these facts. Moreover, the mere fact that no record of the marriage exists does not invalidate the
marriage, provided all requisites for its validity are present (People vs. Borromeo, 133 SCRA 106
[1984]).
Under these circumstances, a marriage may be presumed to have taken place between Lupo
and Felipa. The laws presume that a man and a woman, deporting themselves as husband and
wife, have entered into a lawful contract of marriage; that a child born in lawful wedlock, there
being no divorce, absolute or from bed and board is legitimate; and that things have happened
according to the ordinary course of nature and the ordinary habits of life (Section 5 (z), (bb), (cc),
Rule 131, Rules of Court; Corpus v. Corpus, 85 SCRA 567 [1978]; Saurnaba v. Workmen's
Compensation, 85 SCRA 502 [1978]; Alavado v. City Gov't. of Tacloban, 139 SCRA 230 [1985];
Reyes v. Court of Appeals, 135 SCRA 439 [1985]).
Courts look upon the presumption of marriage with great favor as it is founded on the following
rationale:
The basis of human society throughout the civilized world is that of marriage.
Marriage in this jurisdiction is not only a civil contract, but it is a new relation, an
institution in the maintenance of which the public is deeply interested.
Consequently, every intendment of the law leans toward legalizing matrimony.
Persons dwelling together in apparent matrimony are presumed, in the absence of
any counterpresumption or evidence special to that case, to be in fact married. The
reason is that such is the common order of society and if the parties were not what
they thus hold themselves out as being, they would be living in the constant
violation
of
decency
and
of
law . . . (Adong vs. Cheong Seng Gee, 43 Phil. 43, 56 [1922] quoted in Alavado vs.
City Government of Tacloban, 139 SCRA 230 [1985]).

So much so that once a man and a woman have lived as husband and wife and such relationship
is not denied nor contradicted, the presumption of their being married must be admitted as a fact
(Alavado v. City Gov't. of Tacloban, supra).
The Civil Code provides for the manner under which legitimate filiation may be proven. However,
considering the effectivity of the Family Code of the Philippines, the case at bar must be decided
under a new if not entirely dissimilar set of rules because the parties have been overtaken by
events, to use the popular phrase (Uyguangco vs. Court of Appeals, G.R. No. 76873, October 26,
1989). Thus, under Title VI of the Family Code, there are only two classes of children
legitimate and illegitimate. The fine distinctions among various types of illegitimate children have
been eliminated (Castro vs. Court of Appeals, 173 SCRA 656 [1989]).
Article 172 of the said Code provides that the filiation of legitimate children may be established by
the record of birth appearing in the civil register or a final judgment or by the open and continuous
possession of the status of a legitimate child.
Evidence on record proves the legitimate filiation of the private respondents. Jacinto's birth
certificate is a record of birth referred to in the said article. Again, no evidence which tends to
disprove facts contained therein was adduced before the lower court. In the case of the two other
private respondents, Julian and Paulina, they may not have presented in evidence any of the
documents required by Article 172 but they continuously enjoyed the status of children of Lupo
Mariategui in the same manner as their brother Jacinto.
While the trial court found Jacinto's testimonies to be inconsequential and lacking in substance as
to certain dates and names of relatives with whom their family resided, these are but minor
details. The nagging fact is that for a considerable length of time and despite the death of Felipa
in 1941, the private respondents and Lupo lived together until Lupo's death in 1953. It should be
noted that even the trial court mentioned in its decision the admission made in the affidavit of
Cresenciana Mariategui Abas, one of the petitioners herein, that " . . . Jacinto, Julian and Paulina
Mariategui
ay
pawang
mga
kapatid
ko
sa
ama . . ." (Exh. M, Record on Appeal, pp. 65-66).
In view of the foregoing, there can be no other conclusion than that private respondents are
legitimate children and heirs of Lupo Mariategui and therefore, the time limitation prescribed in
Article 285 for filing an action for recognition is inapplicable to this case. Corollarily, prescription
does not run against private respondents with respect to the filing of the action for partition so
long as the heirs for whose benefit prescription is invoked, have not expressly or impliedly
repudiated the co-ownership. In other words, prescription of an action for partition does not lie
except when the co-ownership is properly repudiated by the co-owner (Del Banco vs.
Intermediate Appellate Court, 156 SCRA 55 [1987] citing Jardin vs. Hollasco, 117 SCRA 532
[1982]).
Otherwise stated, a co-owner cannot acquire by prescription the share of the other co-owners
absent a clear repudiation of co-ownership duly communicated to the other co-owners (Mariano
vs. De Vega, 148 SCRA 342 [1987]). Furthermore, an action to demand partition is
imprescriptible and cannot be barred by laches (Del Banco vs. IAC, 156 SCRA 55 [1987]). On the
other hand, an action for partition may be seen to be at once an action for declaration of coownership and for segregation and conveyance of a determinate portion of the property involved
(Roque vs. IAC, 165 SCRA 118 [1988]).
Petitioners contend that they have repudiated the co-ownership when they executed the
extrajudicial partition excluding the private respondents and registered the properties in their own
names (Petition, p. 16; Rollo, p. 20). However, no valid repudiation was made by petitioners to
the prejudice of private respondents. Assuming petitioners' registration of the subject lot in 1971

was an act of repudiation of the co-ownership, prescription had not yet set in when private
respondents filed in 1973 the present action for partition (Ceniza vs. C.A., 181 SCRA 552 [1990]).
In their complaint, private respondents averred that in spite of their demands, petitioners, except
the unwilling defendants in the lower court, failed and refused to acknowledge and convey their
lawful shares in the estate of their father (Record on Appeal, p. 6). This allegation, though denied
by the petitioners in their answer (Ibid, p. 14), was never successfully refuted by them. Put
differently, in spite of petitioners' undisputed knowledge of their relationship to private
respondents who are therefore their co-heirs, petitioners fraudulently withheld private
respondent's share in the estate of Lupo Mariategui. According to respondent Jacinto, since
1962, he had been inquiring from petitioner Maria del Rosario about their (respondents) share in
the property left by their deceased father and had been assured by the latter (Maria del Rosario)
not to worry because they will get some shares. As a matter of fact, sometime in 1969, Jacinto
constructed a house where he now resides on Lot No. 163 without any complaint from
petitioners.
Petitioners' registration of the properties in their names in 1971 did not operate as a valid
repudiation of the co-ownership. In Adille vs. Court of Appeals (157 SCRA 455, 461-462 [1988]),
the Court held:
Prescription, as a mode of terminating a relation of co-ownership, must have been
preceded by repudiation (of the co-ownership). The act of repudiation, in turn, is
subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such
an act of repudiation is clearly made known to the other co-owners; (3) the
evidence thereon is clear and conclusive; and (4) he has been in possession
through open, continuous, exclusive, and notorious possession of the property for
the period required by law.
xxx xxx xxx
It is true that registration under the Torrens system is constructive notice of title, but
it has likewise been our holding that the Torrens title does not furnish shield for
fraud. It is therefore no argument to say that the act of registration is equivalent to
notice of repudiation, assuming there was one, notwithstanding the long-standing
rule that registration operates as a universal notice of title.
Inasmuch as petitioners registered the properties in their names in fraud of their co-heirs
prescription can only be deemed to have commenced from the time private respondents
discovered the petitioners' act of defraudation (Adille vs. Court of Appeals, supra). Hence,
prescription definitely may not be invoked by petitioners because private respondents
commenced the instant action barely two months after learning that petitioners had registered in
their names the lots involved.
WHEREFORE, the petition is DENIED and the assailed decision of the Court of Appeals dated
December 24, 1980 is Affirmed.
SO ORDERED.
Gutierrez, Jr., Feliciano, Davide, Jr. and Romero, JJ., concur.

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