G.R. No.

82680 August 15, 1994

NICANOR SOMODIO, petitioner,
vs.
COURT OF APPEALS, EBENECER PURISIMA, and FELOMINO AYCO, respondents.
Jose V. Panes for petitioner.
Vencer, Purisima & Associates for private respondents.

QUIASON, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse
and set aside the Decision dated September 29, 1987 and the Resolution dated February 2,
1988 of the Court of Appeals in CA-G.R. SP No. 11602.
I
On October 21, 1974, Jose Ortigas executed an instrument designated as a Transfer of Rights,
conveying to Wilfredo Mabugat the possession of a residential lot situated at Rajah Muda, Bula,
General Santos City and described in the said instrument as:
Lot No. (Unnumbered), bounded on the North by Temporary Road, on the South
by Customs Zone (Sarangani Bay), on the East by Public Land, and on the West
by Public Land.
Nicanor Somodio, herein petitioner, contributed one-half of the purchase price. On October 22,
1974, Mabugat executed an Affidavit of Trust expressly recognizing the right of petitioner over
one-half undivided portion of the lot. Later, petitioner discovered in the District Land Office that
the lot was numbered "6328-X, Csd 2281-D." Thereafter, petitioner and Mabugat partitioned the
property into two portions, with petitioner taking the western part. Immediately after the partition,
petitioner took possession of his portion and planted thereon ipil-ipil trees, coconut trees and
other fruit-bearing trees.
In 1976, petitioner began construction of a structure with a dimension of 22-by-18 feet on his lot.
His employment, however, took him to Kidapawan, North Cotabato, and he left the unfinished
structure to the case of his uncle. He would visit the property every three months or on
weekened when he had time.
Sometime in October 1977, petitioner allowed respondent Felomino Ayco, to transfer his hut to
petitioner's lot. About six years later, petitioner demanded that Ayco vacate the premises but
such demand proved futile. Hence, on August 23, 1983, petitioner filed an action for unlawful
detainer with damages against respondent Ayco before the Municipal Trial Court, Branch I,
General Santos, docketed as Civil Case No. 2032-II.
Meanwhile, on June 26, 1983, respondent Ebenecer Purisima entered the land and constructed
a house thereon. Four days later, petitioner filed against respondent Purisima a complaint for

forcible entry before the same court docketed as Civil Case No. 2013-I. Said case was later
consolidated with Civil Case No. 2032-II.
In his answer, respondent Purisima averred that the lot was a portion of the land subject of his
application for miscellaneous sales patent with the Bureau of Lands. Purisima described the lot
in question as:
Lot No. 6328-Y, CSD-2281-D, Bula, General Santos, Cotabato. Bounded on the
North by 6328-X; on the South by Sarangani Bay; on the East by a Municipal
Road; and on the West by Lot No. 6328-W, containing an area of 1,095 square
meters and covered by Tax Declaration No. 9647 (Rollo, p. 36; Emphasis
supplied).
Respondent Purisima contended that his father, a geodetic engineer, had surveyed the parcel of
land comprising of Lots Nos. 6427 and 6328 for the Small Farmers Fishpond Association, Inc. in
February 1958, and that his father's survey plan was approved by the Director of Lands in 1960.
Respondent Ayco, on the other hand, did not present any evidence but merely anchored his
right to possess the property on the evidence of Purisima.
On April 30, 1986, the trial court rendered a decision finding that respondent Purisima built his
house "almost on the spot where Somodio's unfinished house" stood "thru stealth and strategy,"
not knowing that the house was built on Lot No. 6328-X and not on Lot No. 6328-Y, the lot said
respondent was claiming (Rollo, p. 43). The court went on to state that:
. . . . He (private respondent Purisima) was a frequent visitor in Rajah Muda and
had sometimes stayed with Mrs. Maturan in Judge Purisima's house on the
adjoining lots, and could not have remained unaware of the possession of
Somodio. He must have depended on the thought that it was his father who
made the subdivision survey and had fenced an area which he had claimed. He
did not exactly verify that the area fenced by his father had an area of only 1,095
square meters, which did not include the are Lot No. 6328-X could eventually be
standing on his property, for Lot No. 6328-X is not claimed by him and has not
been applied for even by his father. His father has been abroad and has not
taken steps to apply for Lot No. 6328-X. This lot is not declared for taxation
purposes in the name of any claimant-applicant. Unless and until there would be
an administrative proceedings and the title ultimately issued in favor of an
applicant, the possession of the actual claimant and occupant has to be
respected and maintained in the interest of public order . . . (Rollo, pp. 43-44).
The Municipal Trial Court further held that petitioner was the actual possessor of Lot No. 6328X. The court did not believe respondent Ayco's claim that the administratrix of the estate of
respondent Purisima's father authorized him to build a hut on Lot No. 6328-X in 1976. At any
rate, the court said that respondent Ayco was willing to vacate the premises provided he be
given financial assistance to do so (Rollo, pp. 43-44).
Nothing that the ocular inspection of the area showed that the houses of respondents Purisima
and Ayco were "inside Lot No. 6328-X" and not on Lot No. 6328-Y, the Municipal Trial Court
held that the case became one which entailed mere removal of the houses from the lot in
question. Accordingly, the court ordered private respondents to remove their respective houses,
to deliver the land to petitioner, and to pay attorney's fees and litigation expenses.

On appeal, the Regional Trial Court, Branch 22, General Santos City, affirmed in toto the
decision of the Municipal Trial Court. Respondent then elevated the cases on a petition for
review to the Court of Appeals, which, in its decision dated September 27, 1987, set aside the
decisions of the two trial courts and ordered the dismissal of the two complaints filed by
petitioner.
The Court of Appeals held that herein petitioner had not "clearly and conclusively established
physical, prior possession over Lot No. 6328-X."
Petitioner's motion for the reconsideration of the decision of the Court of Appeals having been
denied, he filed the instant petition for review on certiorari.
We grant the petition.
II
The procedural issue raised by private respondents should first be resolved. The issue is
whether the instant petition is proper considering that petitioner "merely touch(es) upon
questions of fact which had been carefully considered" by the Court of Appeals (Rollo, p. 92). As
a general rule, the findings of fact of the Court of Appeals are binding on this Court. This rule,
however, is not without exceptions, one of which is when the factual findings of the Court of
Appeals and the trial court are contrary to each other. In such a case, this Court may scrutinize
the evidence on record in order to arrive at the correct findings based on the record (Valenzuela
v. Court of Appeals, 191 SCRA 1 [1990]; Roman Catholic Bishop of Malolos, Inc. v.
Intermediate Appellate Court, 191 SCRA 411 [1990]).
Upon a review of the records, we are convinced that petitioner indeed enjoyed priority of
possession over Lot No. 6328-X, notwithstanding respondent Purisima's claim to the contrary.
In ejectment cases, the only issue for resolution is who is entitled to the physical or material
possession of the property involved, independent of any claim of ownership set forth by any of
the party-litigants. Anyone of them who can prove prior possession de facto may recover such
possession even from the owner himself. This rule holds true regardless of the character of a
party's possession, provided, that he has in his favor priority of time which entitles him to stay on
the property until he is lawfully ejected by a person having a better right by eitheraccion
publiciana or accion reivindicatoria (De Luna v. Court of Appeals, 212 SCRA 276 [1992]).
Petitioner took possession of the property sometime in 1974 when he planted the property to
coconut trees, ipil- ipil trees and fruit trees. In 1976, he started the construction of a building on
the property. It is immaterial that the building was unfinished and that he left for Kidapawan for
employment reasons and visited the property only intermittently. Possession in the eyes of the
law does not mean that a man has to have his feet on every square meter of ground before it
can be said that he is in possession (Ramos v. Director of Lands, 39 Phil. 175 [1918]). It is
sufficient that petitioner was able to subject the property to the action of his will.
Article 531 of the Civil Code of the Philippines provides:
Possession is acquired by the material occupation of a thing or the exercise of a
right, or by the fact that it is subject to the action of our will, or by the proper acts
and legal formalities established for acquiring such right.

Even if the Court of Appeals is correct in its finding that petitioner started introducing
improvements on the land only in 1981, he still enjoyed priority of possession because
respondent Purisima entered the premises only in 1983.
It should be emphasized that the Court of Appeals noted that none of the parties had produced
tax declarations or applications as public land claimants. As such, what should have been
scrutinized is who between the claimants had priority of possession.
Moreover, neither is the fact that respondent Purisima's father surveyed the property of help to
his cause. As the Court of Appeals found, respondent Purisima's father surveyed the land for
the Small Farmers Fishpond Association, Inc., not for himself. Although respondent Purisima
now claims that Lot No. 6328-X was in payment of his fee for the services of his father and that
he caused the construction of a perimeter wall in the area, these facts do not mean that
respondent Purisima himself had prior possession. He did not present any proof that his father
had authorized him to enter the land as his successor-in-interest. Neither did he present proof
that between 1958, when his father allegedly took possession of the land, and 1983, when said
respondent himself entered the land, his father ever exercised whatever right of possession he
should have over the property. Under these circumstances, priority in time should be the pivotal
cog in resolving the issue of possession.
The Court of Appeals opined that petitioner had not properly identified the lot he had occupied.
The matter of identification of the land, however, had been resolved by respondent Purisima's
admission in his pleadings, as well as by two ocular inspections.
In his answer to the complaint, respondent Purisima claimed possession over Lot No. 6328-Y,
while petitioner identified the lot adjacent to it, Lot
NO. 6328-X, as the area where private respondents built their houses. That these two lots are
distinct from one another was resolved by the ocular inspection conducted by a Senior Geodetic
Engineer of the Office of the City Engineer, who found that "south of lot 6328-H across a 10
meter wide road is lot 6328-Y and from thence to the south is lot 6328-X." On June 13, 1985,
the Municipal Trial Court judge himself went to the premises in question and discovered that
aside from the houses of respondents Purisima and Ayco, five other houses had been built on
Lot No. 6328-X.
Petitioner's prior possession over the property, however, is not synonymous with his right of
ownership over the same. As earlier stated, resolution of the issue of possession is far from the
resolution of the issue of ownership. Forcible entry is merely a quieting process and never
determines the actual title to an estate (German Management & Services, Inc. v. Court of
Appeals, 177 SCRA 495 [1989]; Manuel v. Court of Appeals, 199 SCRA 603 [1991].
WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE and that of
the trial courts REINSTATED. Costs against private respondents.
SO ORDERED.
Davide, Jr., Bellosillo and Kapunan, JJ., concur.
Cruz, J., On official leave.

G.R. No. 46623 December 7, 1939

MARCIAL KASILAG, petitioner,
vs.
RAFAELA RODRIGUEZ, URBANO ROQUE, SEVERO MAPILISAN and IGNACIO DEL
ROSARIO, respondents.
Luis M. Kasilag for petitioner.
Fortunato de Leon for respondents.

IMPERIAL, J.:
This is an appeal taken by the defendant-petitioner from the decision of the Court of Appeals
which modified that rendered by the court of First Instance of Bataan in civil case No. 1504 of
said court and held: that the contract Exhibit "1" is entirely null and void and without effect; that
the plaintiffs-respondents, then appellants, are the owners of the disputed land, with its
improvements, in common ownership with their brother Gavino Rodriguez, hence, they are
entitled to the possession thereof; that the defendant-petitioner should yield possession of the
land in their favor, with all the improvements thereon and free from any lien; that the plaintiffsrespondents jointly and severally pay to the defendant-petitioner the sum of P1,000 with interest
at 6 percent per annum from the date of the decision; and absolved the plaintiffs-respondents
from the cross-complaint relative to the value of the improvements claimed by the defendantpetitioner. The appealed decision also ordered the registrar of deeds of Bataan to cancel
certificate of title No. 325, in the name of the deceased Emiliana Ambrosio and to issue in lieu
thereof another certificate of title in favor of the plaintiffs-respondents and their brother Gavino
Rodriguez, as undivided owners in equal parts, free of all liens and incumbrances except those
expressly provided by law, without special pronouncement as to the costs.
The respondents, children and heirs of the deceased Emiliana Ambrosio, commenced the
aforesaid civil case to the end that they recover from the petitioner the possession of the land
and its improvements granted by way of homestead to Emiliana Ambrosio under patent No.
16074 issued on January 11, 1931, with certificate of title No. 325 issued by the registrar of
deeds of Bataan on June 27, 1931 in her favor, under section 122 of Act No. 496, which land
was surveyed and identified in the cadastre of the municipality of Limay, Province of Bataan, as
lot No. 285; that the petitioner pay to them the sum of P650 being the approximate value of the
fruits which he received from the land; that the petitioner sign all the necessary documents to
transfer the land and its possession to the respondents; that he petitioner be restrained, during
the pendency of the case, from conveying or encumbering the land and its improvements; that
the registrar of deeds of Bataan cancel certificate of title No. 325 and issue in lieu thereof
another in favor of the respondents, and that the petitioner pay the costs of suit.
The petitioner denied in his answer all the material allegations of the complaint and by way of
special defense alleged that he was in possession of the land and that he was receiving the
fruits thereof by virtue of a mortgage contract, entered into between him and the deceased
Emiliana Ambrosio on May 16, 1932, which was duly ratified by a notary public; and in
counterclaim asked that the respondents pay him the sum of P1,000 with 12 per cent interest
per annum which the deceased owed him and that, should the respondents be declared to have

a better right to the possession of the land, that they be sentenced to pay him the sum of
P5,000 as value of all the improvements which he introduced upon the land.lawphil.net
On May 16, 1932 Emiliana Ambrosio, in life, and the petitioner executed the following public
deed:
"This agreement, made and entered into this 16th day of May, 1932, by and between Emiliana
Ambrosio, Filipino, of legal age, widow and resident of Limay, Bataan, P.L., hereinafter called
the party of the first part, and Marcial Kasilag, Filipino, of legal age, married to Asuncion Roces,
and resident at 312 Perdigon Street, Manila, P.L., hereinafter called party of the second part.
WITNESSETH: That the parties hereto hereby covenant and agree to and with each
other as follows:
ARTICLE I. That the party of the first part is the absolute registered owner of a parcel of
land in the barrio of Alngan, municipality of Limay, Province of Bataan, her title thereto
being evidenced by homestead certificate of title No. 325 issued by the Bureau of Lands
on June 11, 1931, said land being lot No. 285 of the Limay Cadastre, General Land
Registration Office Cadastral Record No. 1054, bounded and described as follows:
Beginning at point marked 1 on plan E-57394, N. 84 32' W. 614.82 m. from B.B.M. No. 3,
thence N. 66 35' E. 307.15 m. to point "2"; S. 5 07' W. to point "5"; S.6 10' E. 104.26 m. to
point "4"; S. 82 17' W. to point "5"; S. 28 53' W. 72.26 m. to point "6"; N. 71 09' W. to point "7";
N. 1 42' E. 173.72 m. to point 1, point of beginning, "Containing an area of 6.7540 hectares.
"Points 1,2,6 and 7, B.L.; points 3,4 and 5, stakes; points 4, 5 and 6 on bank of Alangan River.
"Bounded on the North, by property claimed by Maria Ambrosio; on the East, by Road; on the
South, by Alangan River and property claimed by Maxima de la Cruz; and on the West, by
property claimed by Jose del Rosario. "Bearing true. Declination 0 51' E. "Surveyed under
authority of sections 12-22, Act No. 2874 and in accordance with existing regulations of the
Bureau of Lands, by Mamerto Jacinto, public land surveyor, on July 8, 1927 and approved on
February 25, 1931.
ARTICLE II. That the improvements on the above described land consist of the
following:
Four (4) mango trees, fruit bearing: one hundred ten (110) hills of bamboo trees; one (1)
tamarind and six (6) boga trees.
ARTICLE III. That the assessed value of the land is P940 and the assessed value of the
improvements is P860, as evidenced by tax declaration No. 3531 of the municipality of
Limay, Bataan.
ARTICLE IV. That for and in consideration of the sum of one thousand pesos (P1,000)
Philippine currency, paid by the party of second part to the party of the first part, receipt
whereof is hereby acknowledged, the party of the first part hereby encumbers and
hypothecates, by way of mortgage, only the improvements described in Articles II and III
hereof, of which improvements the party of the first part is the absolute owner.
ARTICLE V. That the condition of said mortgage is such that if the party of the first part
shall well and truly pay, or cause to paid to the party of the second part, his heirs,

assigns, or executors, on or before the 16th day of November, 1936, or four and one-half
(4) years after date of the execution of this instrument, the aforesaid sum of one
thousand pesos (P1,000) with interest at 12 per cent per annum, then said mortgage
shall be and become null and void; otherwise the same shall be and shall remain in full
force and effect, and subject to foreclosure in the manner and form provided by law for
the amount due thereunder, with costs and also attorney's fees in the event of such
foreclosure.lawphil.net
ARTICLE VI. That the party of the first part shall pay all taxes and assessments which
are or may become due on the above described land and improvements during the term
of this agreement.
ARTICLE VII. That within thirty (30) days after date of execution of this agreement, the
party of the first part shall file a motion before the Court of First Instance at Balanga,
Bataan, P. I., requesting cancellation of Homestead Certificate of Title No. 325 referred
to in Article I hereof and the issuance, in lieu thereof, of a certificate of title under the
provisions of Land Registration Act No. 496, as amended by Act 3901.
ARTICLE III. It if further agreed that if upon the expiration of the period of time (4)
years stipulated in this mortgage, the mortgagor should fail to redeem this mortgage, she
would execute a deed of absolute sale of the property herein described for the same
amount as this mortgage, including all unpaid interests at the rate of 12 per cent per
annum, in favor of the mortgagee.
ARTICLE IX. That in the event the contemplated motion under Article VII hereof is not
approved by the Court, the foregoing contract of sale shall automatically become null
and void, and the mortgage stipulated under Article IV and V shall remain in full force
and effect.
In testimony whereof, the parties hereto have hereunto set their hands the day and year
first herein before written.
(Sgd.) MARCIAL KASILAG
(Sgd.) EMILIANA AMBROSIO
Signed in the presence of:
(Sgd.) ILLEGIBLE
(Sgd.) GAVINO RODRIGUEZ.

PHILIPPINE ISLANDS } ss.

BALANGA, BATAAN } ss.
Before me this day personally appeared Emiliana Ambrosio without cedula by reason of
her sex, to me known and known to me to be the person who signed the foregoing

instrument, and acknowledged to me that she executed the same as her free and
voluntary act and deed.
I hereby certify that this instrument consists of three (3) pages including this page of the
acknowledgment and that each page thereof is signed by the parties to the instrument
and the witnesses in their presence and in the presence of each other, and that the land
treated in this instrument consists of only one parcel.
In witness whereof I have hereunto set my hand and affixed my notarial seal, this 16th
day of May, 1932.
(Sgd.) NICOLAS NAVARRO
Notary Public
My commission expires December 31, 1933.

Doc. No. 178

Page 36 of my register
Book No. IV
One year after the execution of the aforequoted deed, that is, in 1933, it came to pass that
Emiliana Ambrosio was unable to pay the stipulated interests as well as the tax on the land and
its improvements. For this reason, she and the petitioner entered into another verbal contract
whereby she conveyed to the latter the possession of the land on condition that the latter would
not collect the interest on the loan, would attend to the payment of the land tax, would benefit by
the fruits of the land, and would introduce improvements thereon. By virtue of this verbal
contract, the petitioner entered upon the possession of the land, gathered the products thereof,
did not collect the interest on the loan, introduced improvements upon the land valued at
P5,000, according to him and on May 22, 1934 the tax declaration was transferred in his name
and on March 6, 1936 the assessed value of the land was increased from P1,020 to P2,180.
After an analysis of the conditions of Exhibit "1" the Court of Appeals came to the conclusion
and so held that the contract entered into by and between the parties, set out in the said public
deed, was one of absolute purchase and sale of the land and its improvements. And upon this
ruling it held null and void and without legal effect the entire Exhibit 1 as well as the subsequent
verbal contract entered into between the parties, ordering, however, the respondents to pay to
the petitioner, jointly and severally, the loan of P1,000 with legal interest at 6 per cent per
annum from the date of the decision. In this first assignment of error the petitioner contends that
the Court of Appeals violated the law in holding that Exhibit 1 is an absolute deed of sale of the
land and its improvements and that it is void and without any legal effect.
The cardinal rule in the interpretation of contracts is to the effect that the intention of the
contracting parties should always prevail because their will has the force of law between them.
Article 1281 of the Civil Code consecrates this rule and provides, that if the terms of a contract
are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its
stipulations shall be followed; and if the words appear to be contrary to the evident intention of
the contracting parties, the intention shall prevail. The contract set out in Exhibit 1 should be
interpreted in accordance with these rules. As the terms thereof are clear and leave no room for

doubt, it should be interpreted according to the literal meaning of its clauses. The words used by
the contracting parties in Exhibit 1 clearly show that they intended to enter into the principal
contract of loan in the amount of P1,000, with interest at 12 per cent per annum, and into the
accessory contract of mortgage of the improvements on the land acquired as homestead, the
parties having moreover, agreed upon the pacts and conditions stated in the deed. In other
words, the parties entered into a contract of mortgage of the improvements on the land acquired
as homestead, to secure the payment of the indebtedness for P1,000 and the stipulated interest
thereon. In clause V the parties stipulated that Emiliana Ambrosio was to pay, within four and a
half years, or until November 16, 1936, the debt with interest thereon, in which event the
mortgage would not have any effect; in clause VI the parties agreed that the tax on the land and
its improvements, during the existence of the mortgage, should be paid by the owner of the
land; in clause VII it was covenanted that within thirty days from the date of the contract, the
owner of the land would file a motion in the Court of First Instance of Bataan asking that
certificate of title No. 325 be cancelled and that in lieu thereof another be issued under the
provisions of the Land Registration Act No. 496, as amended by Act No. 3901; in clause VIII the
parties agreed that should Emiliana Ambrosio fail to redeem the mortgage within the stipulated
period of four years and a half, she would execute an absolute deed of sale of the land in favor
of the mortgagee, the petitioner, for the same amount of the loan of P1,000 including unpaid
interest; and in clause IX it was stipulated that in case the motion to be presented under clause
VII should be disapproved by the Court of First Instance of Bataan, the contract of sale would
automatically become void and the mortgage would subsist in all its force.
Another fundamental rule in the interpretation of contracts, not less important than those
indicated, is to the effect that the terms, clauses and conditions contrary to law, morals and
public order should be separated from the valid and legal contract and when such separation
can be made because they are independent of the valid contract which expresses the will of the
contracting parties. Manresa, commenting on article 1255 of the Civil Code and stating the rule
of separation just mentioned, gives his views as follows:
On the supposition that the various pacts, clauses or conditions are valid, no difficulty is
presented; but should they be void, the question is as to what extent they may produce
the nullity of the principal obligation. Under the view that such features of the obligation
are added to it and do not go to its essence, a criterion based upon the stability of
juridical relations should tend to consider the nullity as confined to the clause or pact
suffering therefrom, except in case where the latter, by an established connection or by
manifest intention of the parties, is inseparable from the principal obligation, and is a
condition, juridically speaking, of that the nullity of which it would also occasion.
(Manresa, Commentaries on the Civil Code, Volume 8, p. 575.)
The same view prevails in the Anglo-American law, as condensed in the following words:
Where an agreement founded on a legal consideration contains several promises, or a
promise to do several things, and a part only of the things to be done are illegal, the
promises which can be separated, or the promise, so far as it can be separated, from the
illegality, may be valid. The rule is that a lawful promise made for a lawful consideration
is not invalid merely because an unlawful promise was made at the same time and for
the same consideration, and this rule applies, although the invalidity is due to violation of
a statutory provision, unless the statute expressly or by necessary implication declares
the entire contract void. . . . (13 C. J., par. 470, p. 512; New York Cent. etc. R. Co. v.
Gray, 239 U.S., 583; 60 Law ed., 451; U.S. v. Mora, 97 U.S., 413, 24 Law. ed., 1017;

U.S. v. Hodson, 10 Wall, 395; 19 Law ed. 937; Gelpcke v. Dubuque, 1 Wall. 175, 17 Law
ed., 520; U.S. v. Bradly, 10 Pet. 343, 9 Law. ed., 448; Borland v. Prindle, 144 Fed 713;
Western Union Tel. Co. v. Kansas Pac. R. Co., 4 Fed., 284; Northern Pac. R. Co. v.
U.S., 15 Ct. Cl., 428.)
Addressing ourselves now to the contract entered into by the parties, set out in Exhibit 1, we
stated that the principal contract is that of loan and the accessory that of mortgage of the
improvements upon the land acquired as a homestead. There is no question that the first of
these contract is valid as it is not against the law. The second, or the mortgage of the
improvements, is expressly authorized by section 116 of Act No. 2874, as amended by section
23 of Act No. 3517, reading:
SEC. 116. Except in favor of the Government or any of its branches, units or institutions,
or legally constituted banking corporations, lands acquired under the free patent or
homestead provisions shall not be subject to encumbrance or alienation from the date of
the approval of the application and for a term of five years from and after the date of
issuance of the patent or grant, nor shall they become liable to the satisfaction of any
debt contracted prior to the expiration of said period; but the improvements or crops on
the land may be mortgaged or pledged to qualified persons, associations, or
corporations.
It will be recalled that by clause VIII of Exhibit 1 the parties agreed that should Emiliana
Ambrosio fail to redeem the mortgage within the stipulated period of four and a half years, by
paying the loan together with interest, she would execute in favor of the petitioner an absolute
deed of sale of the land for P1,000, including the interest stipulated and owing. The stipulation
was verbally modified by the same parties after the expiration of one year, in the sense that the
petitioner would take possession of the land and would benefit by the fruits thereof on condition
that he would condone the payment of interest upon the loan and he would attend to the
payment of the land tax. These pacts made by the parties independently were calculated to alter
the mortgage a contract clearly entered into, converting the latter into a contract of antichresis.
(Article 1881 of the Civil Code.) The contract of antichresis, being a real encumbrance
burdening the land, is illegal and void because it is legal and valid.
The foregoing considerations bring us to the conclusion that the first assignment of error is wellfounded and that error was committed in holding that the contract entered into between the
parties was one of absolute sale of the land and its improvements and that Exhibit 1 is null and
void. In the second assignment of error the petitioner contends that the Court of Appeals erred
in holding that he is guilty of violating the Public Land Act because he entered into the contract,
Exhibit 1. The assigned error is vague and not specific. If it attempts to show that the said
document is valid in its entirety, it is not well-founded because we have already said that certain
pacts thereof are illegal because they are prohibited by section 116 of Act No. 2874, as
amended.
In the third assignment of error the petitioner insists that his testimony, as to the verbal
agreement entered into between him and Emiliana Ambrosio, should have been accepted by
the Court of Appeals; and in the fourth and last assignment of error the same petitioner
contends that the Court of Appeals erred in holding that he acted in bad faith in taking
possession of the land and in taking advantage of the fruits thereof, resulting in the denial of his
right to be reimbursed for the value of the improvements introduced by him.

We have seen that subsequent to the execution of the contract, Exhibit 1, the parties entered
into another verbal contract whereby the petitioner was authorized to take possession of the
land, to receive the fruits thereof and to introduce improvements thereon, provided that he
would renounce the payment of stipulated interest and he would assume payment of the land
tax. The possession by the petitioner and his receipt of the fruits of the land, considered as
integral elements of the contract of antichresis, are illegal and void agreements because, as
already stated, the contract of antichresis is a lien and such is expressly prohibited by section
116 of Act No. 2874, as amended. The Court of Appeals held that the petitioner acted in bad
faith in taking possession of the land because he knew that the contract he made with Emiliana
Ambrosio was an absolute deed of sale and, further, that the latter could not sell the land
because it is prohibited by section 116. The Civil Code does not expressly define what is meant
by bad faith, but section 433 provides that "Every person who is unaware of any flaw in his title,
or in the manner of its acquisition, by which it is invalidated, shall be deemed a possessor in
good faith"; and provides further, that "Possessors aware of such flaw are deemed possessors
in bad faith". Article 1950 of the same Code, covered by Chapter II relative to prescription of
ownership and other real rights, provides, in turn, that "Good faith on the part of the possessor
consists in his belief that the person from whom he received the thing was the owner of the
same, and could transmit the title thereto." We do not have before us a case of prescription of
ownership, hence, the last article is not squarely in point. In resume, it may be stated that a
person is deemed a possessor in bad faith when he knows that there is a flaw in his title or in
the manner of its acquisition, by which it is invalidated.
Borrowing the language of Article 433, the question to be answered is whether the petitioner
should be deemed a possessor in good faith because he was unaware of any flaw in his title or
in the manner of its acquisition by which it is invalidated. It will be noted that ignorance of the
flaw is the keynote of the rule. From the facts found established by the Court of Appeals we can
neither deduce nor presume that the petitioner was aware of a flaw in his title or in the manner
of its acquisition, aside from the prohibition contained in section 116. This being the case, the
question is whether good faith may be premised upon ignorance of the laws. Manresa,
commenting on article 434 in connection with the preceding article, sustains the affirmative. He
says:
"We do not believe that in real life there are not many cases of good faith founded upon an error
of law. When the acquisition appears in a public document, the capacity of the parties has
already been passed upon by competent authority, and even established by appeals taken from
final judgments and administrative remedies against the qualification of registrars, and the
possibility of error is remote under such circumstances; but, unfortunately, private documents
and even verbal agreements far exceed public documents in number, and while no one should
be ignorant of the law, the truth is that even we who are called upon to know and apply it fall into
error not infrequently. However, a clear, manifest, and truly unexcusable ignorance is one thing,
to which undoubtedly refers article 2, and another and different thing is possible and excusable
error arising from complex legal principles and from the interpretation of conflicting doctrines.
But even ignorance of the law may be based upon an error of fact, or better still,
ignorance of a fact is possible as to the capacity to transmit and as to the intervention of
certain persons, compliance with certain formalities and appreciation of certain acts, and
an error of law is possible in the interpretation of doubtful doctrines. (Manresa,
Commentaries on the Spanish Civil Code. Volume IV, pp. 100, 101 and 102.)

According to this author, gross and inexcusable ignorance of law may not be the basis of good
faith, but possible, excusable ignorance may be such basis. It is a fact that the petitioner is not
conversant with the laws because he is not a lawyer. In accepting the mortgage of the
improvements he proceeded on the well-grounded belief that he was not violating the prohibition
regarding the alienation of the land. In taking possession thereof and in consenting to receive its
fruits, he did not know, as clearly as a jurist does, that the possession and enjoyment of the
fruits are attributes of the contract of antichresis and that the latter, as a lien, was prohibited by
section 116. These considerations again bring us to the conclusion that, as to the petitioner, his
ignorance of the provisions of section 116 is excusable and may, therefore, be the basis of his
good faith. We do not give much importance to the change of the tax declaration, which
consisted in making the petitioner appear as the owner of the land, because such an act may
only be considered as a sequel to the change of possession and enjoyment of the fruits by the
petitioner, to about which we have stated that the petitioner's ignorance of the law is possible
and excusable. We, therefore, hold that the petitioner acted in good faith in taking possession of
the land and enjoying its fruits.
The petitioner being a possessor in good faith within the meaning of article 433 of the Civil Code
and having introduced the improvements upon the land as such, the provisions of article 361 of
the same Code are applicable; wherefore, the respondents are entitled to have the
improvements and plants upon indemnifying the petitioner the value thereof which we fix at
P3,000, as appraised by the trial court; or the respondents may elect to compel the petitioner to
have the land by paying its market value to be fixed by the court of origin.
The respondents also prayed in their complaint that the petitioner be compelled to pay them the
sum of P650, being the approximate value of the fruits obtained by the petitioner from the land.
The Court of Appeals affirmed the judgment of the trial court denying the claim or indemnity for
damages, being of the same opinion as the trial court that the respondents may elect to compel
the petitioner to have the land. The Court of Appeals affirmed the judgment of the trial court that
the respondents have not established such damages. Under the verbal contract between the
petitioner and the deceased Emiliana Ambrosio, during the latter's lifetime, the former would
take possession of the land and would receive the fruits of the mortgaged improvements on
condition that he would no longer collect the stipulated interest and that he would attend to the
payment of the land tax. This agreement, at bottom, is tantamount to the stipulation that the
petitioner should apply the value of the fruits of the land to the payment of stipulated interest on
the loan of P1,000 which is, in turn, another of the elements characterizing the contract of
antichresis under article 1881 of the Civil Code. It was not possible for the parties to stipulate
further that the value of the fruits be also applied to the payment of the capital, because the truth
was that nothing remained after paying the interest at 12% per annum. This interest, at the rate
fixed, amounted to P120 per annum, whereas the market value of the fruits obtainable from the
land hardly reached said amount in view of the fact that the assessed value of said
improvements was, according to the decision, P860. To this should be added the fact that,
under the verbal agreement, from the value of the fruits had to be taken a certain amount to pay
the annual land tax. We mention these data here to show that the petitioner is also not bound to
render an accounting of the value of the fruits of the mortgaged improvements for the reason
stated that said value hardly covers the interest earned by the secured indebtednes.
For all the foregoing considerations, the appealed decision is reversed, and we hereby adjudge:
(1) that the contract of mortgage of the improvements, set out in Exhibit 1, is valid and binding;
(2) that the contract of antichresis agreed upon verbally by the parties is a real incumbrance
which burdens the land and, as such, is a null and without effect; (3) that the petitioner is a

possessor in good faith; (4) that the respondents may elect to have the improvements
introduced by the petitioner by paying the latter the value thereof, P3,000, or to compel the
petitioner to buy and have the land where the improvements or plants are found, by paying them
its market value to be filed by the court of origin, upon hearing the parties; (5) that the
respondents have a right to the possession of the land and to enjoy the mortgaged
improvements; and (6) that the respondents may redeem the mortgage of the improvements by
paying to the petitioner within three months the amount of P1,000, without interest, as that
stipulated is set off by the value of the fruits of the mortgaged improvements which petitioner
received, and in default thereof the petitioner may ask for the public sale of said improvements
for the purpose of applying the proceeds thereof to the payment of his said credit. Without
special pronouncement as to the costs in all instances. So ordered.
Diaz, J., concur.

G.R. Nos. L-20300-01

April 30, 1965

ANTONINO DIZON, ADELAIDA D. REYES, CONSOLACION DEGOLLACION, ET

AL., petitioners,
vs.
HON. JUAN DE G. RODRIGUEZ, as Secretary of Agriculture & Natural Resources,
HERACLITO MONTALBAN, as Acting Director of Fisheries,
MIGUEL TOLENTINO, REPUBLIC OF THE PHILIPPINES, ET AL., respondents.
----------------------------G.R. Nos. L-20355-56

April 30, 1965

REPUBLIC OF THE PHILIPPINES, THE SECRETARY OF AGRICULTURE & NATURAL

RESOURCES, DIRECTOR OF FISHERIES, MIGUEL TOLENTINO, and CLEMENCIA
TOLENTINO, petitioners,
vs.
HON. COURT OF APPEALS, ANTONINO DIZON, ADELAIDA D. REYES, CONSOLACION
DE DEGOLLACION, ARTEMIO DIZON, AMORANDO DIZON, REMEDIOS MANAPAT SYJUCO, and LEONILA SIOCHI GOCO,respondents.
Jalandoni and Jamir for petitioners Antonino Dizon, et al.
Office of the Solicitor General for respondents Republic, et al.
Miguel Tolentino for and in his own behalf.
BARRERA, J.:
These are separate appeals instituted by Antonino Dizon, et al. (G.R. Nos. L-20300-01) and the
Republic of the Philippines, et al. (G.R. Nos. L-20355-56), from a single decision of the Court of
Appeals, as modified by its resolution of August 20, 1962, holding that Lots Nos. 49 and 1 of
subdivision plan Psd.-27941 are parts of the navigable boundary of the Hacienda Calatagan,
covered by Transfer Certificate of Title No. T-722, and declaring the occupants Dizon, et al.
possessors in good faith, entitled to remain therein until reimbursed, by the intervenor Republic
of the Philippines, of the necessary expenses made on the lots in the sum of P40,000.00 and
P25,000.00, respectively.
The facts of these cases, briefly stated, are as follows:
Hacienda Calatagan owned by Alfonso and Jacobo Zobel was originally covered by TCT No. T722. In 1938, the Hacienda constructed a pier, called "Santiago Landing," about 600 meters
long from the shore into the navigable waters of the Pagaspas Bay, to be used by vessels
loading sugar produced by the Hacienda sugar mill. When the sugar mill ceased its operation in
1948, the owners of the Hacienda converted the pier into a fishpond dike and built additional
strong dikes enclosing an area of about 30 hectares (of the Bay) and converted the same into a
fishpond. The Hacienda owners also enclosed a similar area of about 37 hectares of the Bay on
the other side of the pier which was also converted into a fishpond.
In 1949, the Zobels ordered the subdivision of the Hacienda by ordering the preparation of the
subdivision plan Psd-27941 wherein fishpond No. 1 (with 30 hectares) was referred to as Lot
No. 1 and fishpond No. 2 (with 37 hectares) was referred to as Lot No. 49. The plan was

approved by the Director of Lands, and the Register of Deeds issued, from TCT No. T-722, TCT
No. 2739 for lots 49 and 1 in the name of Jacobo Zobel.
In 1950, Jacobo Zobel sold to Antonino Dizon, et al. Lot 49 for which said purchasers obtained
at first TCT No. T-2740 and later T-4718, Lot 1, on the other hand, was purchased by Carlos
Goco, et al., who, in turn, sold one-half thereof to Manuel Sy-Juco, et al. Transfer Certificate of
Title No. 4159 was issued in the names of the Gocos and Sy-Jucos.
On May 24, 1952, Miguel Tolentino filed with the Bureau of Fisheries an application for ordinary
fishpond permit or lease for Lot 49, and an application for a similar permit, for Lot 1, was filed by
his daughter Clemencia Tolentino.
The Dizons, Sy-Jucos, and Gocos filed a protest with the Bureau of Fisheries, claiming the
properties to be private land covered by a certificate of title. This protest was dismissed by the
Director of Fisheries, on the ground that the areas applied for are outside the boundaries of TCT
No. T-722 of Hacienda Calatagan. This ruling was based upon the findings of the committee
created by the Secretary of Agriculture and Natural Resources to look into the matter, that Lots
1 and 49 are not originally included within the boundaries of the hacienda.
On October 1, 1954, the protestants Dizons, Sy-Jucos, and Gocos filed an action in the Court of
First Instance of Manila (Civ. Case No. 24237) to restrain the Director of Fisheries from issuing
the fishpond permits applied for by the Tolentinos. The court dismissed this petition for nonexhaustion of administrative remedy, it appearing that petitioners had not appealed from the
decision of the Director of Fisheries to the Secretary of Agriculture and Natural Resources. On
appeal to this Court, the decision of the lower court was sustained (G.R. No. L-8654,
promulgated April 28, 1956). The protestants then filed an appeal with the Secretary of
Agriculture and Natural Resources. This time, the same was dismissed for being filed out of
time.1wph1.t
On August 16, 1956, the Dizons filed Civil Case 135 and the Sy-Jucos and Gocos, Civil Case
136, in the Court of First Instance of Batangas, to quiet their titles over Lots 49 and 1. Named
defendants were the Secretary of Agriculture and Natural Resources and applicants Tolentinos.
The Republic of the Philippines was allowed to intervene in view of the finding by the
investigating committee created by the respondent Secretary, that the lots were part of the
foreshore area before their conversion into fishponds by the hacienda-owners.
On January 30, 1958, after due hearing, the Court of First Instance of Batangas promulgated a
joint decision making the finding, among others, that the subdivision plan Psd-27941 was
prepared in disregard of the technical description stated in TCT No. T-722, because the
surveyor merely followed the existing shoreline and placed his monuments on the southwest
lateral of Lot 49, which was the pier abutting into the sea; and made the conclusion that Lots 1
and 49 of Psd-27941 were part of the foreshore lands. As the certificate of title obtained by
petitioners covered lands not subject to registration, the same were declared null and void, and
Lots 1 and 49 were declared properties of the public domain. Petitioners appealed to the Court
of Appeals.
In its decision of October 31, 1961, as well as the resolution of August 20, 1962, the appellate
court adopted the findings of the lower court, that the lots in question are part of the foreshore
area and affirmed the ruling cancelling the titles to plaintiffs. Although in the decision of October
31, 1961, the Court of Appeals awarded to applicants Tolentinos damages in the amount of

P200.00 per hectare from October 1, 1954, when plaintiffs were notified of the denial of their
protest by the Director of Fisheries, such award was eliminated in the resolution of August 20,
1962, for the reason that plaintiffs, who relied on the efficacy of their certificates of title, cannot
be considered possessors in bad faith until after the legality of their said titles has been finally
determined. Appellants were thus declared entitled to retention of the properties until they are
reimbursed by the landowner, the Republic of the Philippines, of the necessary expenses made
on the lands, in the sums of P40,000.00 (for Lot 49) and P25,000.00 (for Lot 1). It is from this
portion of the decision as thus modified that defendants Tolentinos and the intervenor Republic
of the Philippines appealed (in G.R. Nos. L-20355-56), claiming that plaintiffs' possession
became in bad faith when their protest against the application for lease was denied by the
Director of Fisheries. In addition, the intervenor contends that being such possessors in bad
faith, plaintiffs are not entitled to reimbursement of the expenses made on the properties.
In G.R. Nos. L-20300-01, plaintiffs Dizon, et al., claim that the finding that the Lots in question
are part of the seashore or foreshore area was erroneous, because from defendants' own
evidence, the same appear to be marshland before their conversion into fishponds.
It is noteworthy in connection with the appeal of plaintiffs, that they do not contest the existence
of the pier that was used by the hacienda owners in the loading of their manufactured sugar to
vessels. The fact that said pier jutted out 600 meters to the sea indicates that the area over
which such cemented structure spanned was part of the sea or at least foreshore land. And,
plaintiffs were not able to disprove the testimonial evidence that the fishponds in question were
constructed by enclosing the areas with dikes, using the pier as one of the ends of the
fishponds. It is clear that the areas thus enclosed and converted into fishponds were really part
of the foreshore. This, and the fact that the subdivision plan Psd-27941 was found to have been
prepared not in accordance with the technical descriptions in TCT No. T-722 but in disregard of
it, support the conclusion reached by both the lower court and the Court of Appeals that Lots 49
and 1 are actually part of the territorial waters and belong to the State. And, it is an elementary
principle that the incontestable and indefeasible character of a Torrens certificate of title does
not operate when the land thus covered is not capable of registration.
On the matter of possession of plaintiffs-appellants, the ruling of the Court of Appeals must be
upheld. There is no showing that plaintiffs are not purchasers in good faith and for value. As
such title-holders, they have reason to rely on the indefeasible character of their certificates.
On the issue of good faith of the plaintiffs, the Court of Appeals reasoned out:
The concept of possessors in good faith given in Art. 526 of the Civil Code and when
said possession loses this character under Art. 528, needs to be reconciled with the
doctrine of indefeasibility of a Torrens Title. Such reconciliation can only be achieved by
holding that the possessor with a Torrens Title is not aware of any flaw in his Title which
invalidates it until his Torrens Title is declared null and void by final judgment of the
Courts.
Even if the doctrine of indefeasibility of a Torrens Title were not thus reconciled, the
result would be the same, considering the third paragraph of Art. 526 which provides
that:
ART. 526. ...

Mistake upon a doubtful or difficult question of law may be the basis of good faith.
The legal question whether plaintiffs-appellants' possession in good faith, under their
Torrens Titles acquired in good faith, does not lose this character except in the case and
from the moment their Titles are declared null and void by the Courts, a difficult one.
Even the members of this Court were for a long time divided, two to one, on the answer.
It was only after several sessions, where the results of exhaustive researches on both
sides were thoroughly discussed, that an undivided Court finally found the answer given
in the next preceding paragraph. Hence, even if it be assumed for the sake of argument
that the Supreme Court would find that the law is not as we have stated it in the next
preceding paragraph and that the plaintiffs-appellants made a mistake in relying thereon,
such mistake on a difficult question of law may be the basis of good faith. Hence, their
possession in good faith does not lose this character except in the case and from the
moment their Torrens Titles are declared null and void by the Courts.
Under the circumstances of the case, especially where the subdivision plan was originally
approved by the Director of Lands, we are not ready to conclude that the above reasoning of the
Court of Appeals on this point is a reversible error. Needless to state, as such occupants in
good faith, plaintiffs have the right to the retention of the property until they are reimbursed the
necessary expenses made on the lands.
With respect to the contention of the Republic of the Philippines that the order for the
reimbursement by it of such necessary expenses constitutes a judgment against the
government in a suit not consented to by it, suffice it to say that the Republic, on its own
initiative, asked and was permitted to intervene in the case and thereby submitted itself
voluntarily to the jurisdiction of the court.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby
affirmed in all respects, without costs. So ordered.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal
and Bengzon, J.P., JJ., concur.

G.R. No. 111737 October 13, 1999

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS AND SPOUSES TIMOTEO and SELFIDA S.
PIEDA, respondents.
GONZAGA-REYES, J.:
Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals 1 in CAG.R. CV No. 28549 entitled "SPOUSES TIMOTEO PIEDA, ET. AL. vs. DEVELOPMENT
BANK OF THE PHILIPPINES" which affirmed the decision of the Regional Trial Court (RTC),
Branch 16 2, Roxas City in Civil Case No. V-4590, for cancellation of certificate of title and/or
specific performance, accounting and damages with a prayer for the issuance of a writ of
preliminary injunction.1wphi1.nt
The records show that respondent spouses Pieda (PIEDAS) are the registered owners of a
parcel of land (Lot 11-14-1-14) situated at barangay Astorga Dumarao, Capiz containing an
area of 238,406 square meters, more or less, and covered by Homestead Patent No. 0844 and
Original Certificate of Title No. P-1930. On March 7, 1972, the PIEDAS mortgaged the above
described parcel of land to petitioner, Development Bank of the Philippines (DBP) to secure
their agricultural loan in the amount of P20,000.00. The PIEDAS failed to comply with the
terms and conditions of the mortgage compelling DBP to extrajudicially foreclose on February 2,
1977. In the foreclosure sale, DBP was the highest bidder and a Sheriff Certificate of Sale was
executed in its favor. In the corresponding Certificate of Sale, the sheriff indicated that "This
property is sold subject to the redemption within five (5) years from the date of registration of
this instrument and in the manner provided for by law applicable to this case". The certificate of
sale was registered in the Register of Deeds of Capiz on April 25, 1977. On March 10, 1978,
after the expiration of the one-year redemption period provided for under Section 6, ACT 3135,
DBP consolidated its title over the foreclosed property by executing an Affidavit of Consolidation
of Ownership. Subsequently, a Final Deed of Sale was executed in DBP's favor, which was
registered together with the Affidavit of Consolidation of Ownership with the Register of Deeds
of Capiz on May 30, 1978. Consequently, Original Certificate of Title No. P-1930 was cancelled
and TCT No. T-15559 was issued in the name of DBP. Thereafter, DBP took possession of the
foreclosed property and appropriated the produce thereof.
On July 5, 1978, the Ministry of Justice issued Opinion No. 92, Series of 1978 3 which declared
that lands covered by P.D. No. 27 4, like the herein subject property, may not be the object of
foreclosure proceedings after the promulgation of said decree on Oct. 21, 1972.
On August 24, 1981, the PIEDAS offered to redeem the foreclosed property by offering
P10,000.00 as partial redemption payment. This amount was accepted by DBP who issued
O.R. No. 1665719 and through a letter, conditionally approved the offer of redemption
considering the P10,000.00 as down payment. 5 However, on November 11, 1981, DBP sent
the PIEDAS another letter informing them that pursuant to P.D. 27, their offer to redeem
and/or repurchase the subject property could not be favorably considered for the reason that
said property was tenanted. 6 On November 16, 1981, in deference to the above-mentioned
opinion, DBP through Ramon Buenaflor sent a letter to the Acting Register of Deeds of Capiz
requesting the latter to cancel TCT No. T-15559 and to restore Original Certificate of Title No. P1930 in the name of the PIEDAS. The Acting Register of Deeds, in reply to such request,

suggested that DBP file a petition in court pursuant to Section 108 of Presidential Decree
1529 7. In compliance with said suggestion, DBP petitioned for the cancellation of TCT No. T15559 with then Court of First Instance of Capiz, Branch II, docketed as Special Case No. 2653.
The petition was favorably acted upon on February 22, 1982. Thus, the foreclosure proceeding
conducted on February 2, 1977 was declared null and void and the Register of Deeds of Capiz
was ordered to cancel TCT No. 15559; OCT No. 1930 was ordered revived.
Meanwhile, on December 21, 1981, the PIEDAS filed the instant complaint against DBP for
cancellation of certificate of title and/or specific performance, accounting and damages with a
prayer for the issuance of a writ of preliminary injunction averring that DBP, in evident bad faith,
caused the consolidation of its title to the parcel of land in question in spite of the fact that the 5year redemption period expressly stated in the Sheriff's Certificate of Sale had not yet lapsed
and that their offer to redeem the foreclosed property was made well within said period of
redemption. 8
After trial, the RTC ruled in favor of the PIEDAS stating that DBP violated the stipulation in the
Sheriff's Certificate of Sale which provided that the redemption period is five (5) years from the
registration thereof in consonance with Section 119 9 of CA No. 141 10. DBP should therefore
assume liability for the fruits that said property produced from said land considering that it
prematurely took possession thereof. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against the
defendant Development Bank of the Philippines as follows:
1. Condemning the defendant DBP to pay the plaintiffs P201,138.28 less
whatever amount the plaintiffs still have to pay the said defendant DBP as
balance of their loan account reckoned up to the date of this decision;
P20,000.00 as attorney's fees; P5,000.00 as litigation expenses and costs.
SO ORDERED. 11
DBP appealed to the Court of Appeals, which affirmed the decision of the RTC. The Court of
Appeals stated that since DBP was in evident bad faith when it unlawfully took possession of
the property subject of the dispute and defied what was written on the Sheriff's Certificate of
Sale, the PIEDAS were entitled to recover the fruits produced by the property or its equivalent
valued at P72,000.00 per annum or a total of P216,000.00 for the three-year period.
Respondent court stated that said amount was not rebutted by DBP and was fair considering
the size of the land in question. The court added that any discussion with respect to the
redemption period was of little significance since the foreclosure proceeding was declared null
and void in Special Civil Case No. 2653 12 on February 22, 1982. Thus, the right of the
PIEDAS to redeem the property has become moot and academic. Finally, the award of
attorney's fees amounting to P10,000.00 13 was justified considering that the PIEDAS were
compelled to protect their interests. 14
DBP's Motion for Reconsideration 15 was denied; hence this petition where it assigns the
following errors:
Ground No. 1 The Honorable Court Of Appeals Gravely Erred In Affirming The
Court A Quo's Decision Awarding Actual Damages In The Amount Of
P216,000.00 In Favor Of The Private Respondents Notwithstanding The

Absence Of Evidence Substantiating Said Award. Thus, The Honorable Court Of

Appeals Had Decided This Instant Case In A Way Not In Accord With Applicable
Law And Jurisprudence.
2. Ground No. 2 The Honorable Court Of Appeals Gravely Erred In Affirming
The Court A Quo's Finding That DBP Was In Bad Faith When It Took Possession
Of The Property In Question Notwithstanding the Contrary Evidence Adduced By
Petitioner DBP. Thus, The Honorable Court Of Appeals Departed From The
Accepted And Usual Course f Judicial Proceedings.
3. Ground No. 3 The Honorable Court Of Appeals Gravely Erred In Affirming
The Court A Quo's Decision Awarding Attorney's Fees And Litigation Costs In
Favor Of The Private Respondents Notwithstanding Absence Of Evidence
Proving The Same. Clearly, The Lower Court Be Committed Misapprehension Of
Facts That Can Be Considered A Question Of Law. 16
DBP maintains that the valuation of the income derived from the property in dispute allegedly
amounting to P216,000.00 was not proven by the PIEDAS. DBP argues that they granted the
PIEDAS a loan of P20,000.00 in March 7, 1972 and up to the time of the foreclosure of the
property, the PIEDAS have paid only P2,000.00 on their principal. The failure of the PIEDAS
to pay this loan is attributable to the fact that said property did not produce income amounting to
P72,000.00 per annum. According to DBP, in the absence of receipts or other evidence to
support such a claim, the Court of Appeals should not have granted said amount considering
that the PIEDAS had the burden of proving actual damages. Furthermore, Selfida Pieda
herself admitted that the property never produced income amounting to P72,000.00 per annum.
At any rate, the actual amount earned by the property in terms of rentals turned over by the
tenant-farmers or caretakers of the land were duly receipted and were duly accounted for by the
DBP.
DBP also alleges that the mere fact that DBP took possession and administration of the
property does not warrant a finding that DBP was in bad faith. First, records show that the
PIEDAS consented to and approved the takeover of DBP. Second, Sec. 7 17 of Act No.
3135 18 allows the mortgagee-buyer to take possession of the mortgaged property even during
the redemption period. Third, DBP's act of consolidating the title of the property in its name does
not constitute bad faith as there is no law which prohibits the purchaser at public auction from
consolidating title in its name after the expiration of the one (1) year redemption period reckoned
from the time the Certificate of Sale was registered; and neither is there any law or
jurisprudence which prohibits the PIEDAS from exercising their right of redemption over said
property within five (5) years even if title is consolidated in the name of the purchaser. When
DBP consolidated title over the property in its name, the new TCT issued in its favor was subject
to the lien i.e. the right of redemption of the PIEDAS; if there was a failure to register this in the
TCT, DBP should not be faulted. Besides, even if the five (5) year period of redemption was not
indicated therein, Sec. 44 19 and 4620 of Presidential Decree No. 1529 21 attaches such lien by
operation of law even in the absence of an annotation in the title. Moreover, Sec. 119 of CA No.
141 also makes said right of redemption a statutory lien, which subsists and binds the whole
world despite the absence of registration.
DBP also could not have been in bad faith when it denied the PIEDAS' offer to redeem the
property since the denial was premised on Opinion No. 92 of the Minister of Justice series of
1978 which stated that said land was covered under P.D. 27 and could not be the subject of

foreclosure proceedings. For this reason, DBP immediately filed a petition to nullify the
foreclosure proceedings which was favorably acted upon prior to the service of summons and
the complaint in the present case on DBP on June 30, 1982. If DBP was really in bad faith, it
would not have filed said petition for said petition was against its own interests.
Further, DBP asserts that PIEDAS appointed DBP as their attorney-in-fact or agent in case of
foreclosure of the property under Section 4 of the mortgage contract, which provides:
4. . . . In case of foreclosure, the Mortgagor hereby consents to the appointment
of the mortgagee or any of its employees as receiver, without any bond, to take
charge of the mortgage property at once, and to hold possession of the case and
the rents and profits derived from the mortgaged property before the sale. . . . 22
DBP was therefore entitled to take possession of the property pursuant to the mortgage
contract.
Finally, considering that DBP lawfully had material possession of the property after it
consolidated its title, DBP was entitled to the fruits and income thereof pursuant to Section 34,
Rule 39 of the Rules of Court:
Sec. 34. Rents and Profits Pending Redemption. Statement thereof and credit
therefor on redemption. The purchaser, from the time of the sale until a
redemption, and a redemptioner, from the time of his redemption until another
redemption, is entitled to receive the rents of the property sold or the value of the
use or occupation thereof when such property is in the possession of a tenant. . .
.
Taking all this into consideration, DBP cannot be faulted for taking over possession of the
property in question.
The core issue in this case is whether DBP was in bad faith when it took possession of the
disputed lot.
We rule in the negative and find DBP's contentions meritorious.
A possessor in good faith is one who is not aware that there exists in his title or mode of
acquisition any flaw, which invalidates it. 23 Good faith is always presumed, and upon him who
alleges bad faith on the part of a possessor rests the burden of proof. 24 It was therefore
incumbent on the PIEDAS to prove that DBP was aware of the flaw in its title i.e. the nullity of
the foreclosure. This, they failed to do.
Respondent PIEDAS argue that DBP's bad faith stems from the fact that DBP consolidated
title over the disputed property despite the statement in the Sheriff's Certificate of Sale to the
effect that said land was subject to a five year redemption period. The period of redemption of
extrajudicially foreclosed land is provided under Section 6 of ACT No. 3135 to wit:
Sec. 6. In all cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, the debtor, his successors in interest or any
judicial creditor or judgment creditor of said debtor, or any person having a lien
on the property subsequent to the mortgage or deed of trust under which the

property is sold, may redeem the same at any time within the term of one year
from and after the date of sale; and such redemption shall be governed by the
provisions of section four hundred and sixty-four to four hundred and sixty-six,
inclusive, of the Code of Civil Procedure, 25 in so far as these are not inconsistent
with the provisions of this Act.
If no redemption is made within one year, the purchaser is entitled as a matter of right to
consolidate 26 and to possess 27 the property. 28 Accordingly, DBP's act of consolidating its title
and taking possession of the subject property after the expiration of the period of redemption
was in accordance with law. Moreover, it was in consonance with Section 4 of the mortgage
contract between DBP and the PIEDAS where they agreed to the appointment of DBP as
receiver to take charge and to hold possession of the mortgage property in case of foreclosure.
DBP's acts cannot therefore be tainted with bad faith.
The right of DBP to consolidate its title and take possession of the subject property is not
affected by the PIEDAS' right to repurchase said property within five years from the date of
conveyance granted by Section 119 of CA No. 141. In fact, without the act of DBP consolidating
title in its name, the PIEDAS would not be able to assert their right to repurchase granted
under the aforementioned section. Respondent PIEDAS are of the erroneous belief that said
section prohibits a purchaser of homestead land in a foreclosure sale from consolidating his title
over said property after the one-year period to redeem said property has expired. Section 119
does not contain any prohibition to convey homestead land but grants the homesteader, his
widow or legal heirs a right to repurchase said land within a period of five years in the event that
he conveys said land. This is in consonance with the policy of homestead laws to distribute
disposable agricultural lands of the State to land-destitute citizens for their home and
cultivation. 29 The right to repurchase under Section 119 aims to preserve and keep in the family
of the homesteader that portion of public land which the State had gratuitously given
him. 30 Such right is based on the assumption that the person under obligation to reconvey the
property has the full title to the property because it was voluntarily conveyed to him or that he
consolidated his title thereto by reason of a redemptioner's failure to exercise his right of
redemption. 31 It is also settled that "the five-year period of redemption fixed in Section 119 of
the Public Land Law of homestead sold at extrajudicial foreclosure begins to run from the day
after the expiration of the one-year period of repurchase allowed in an extrajudicial
foreclosure". 32 Thus DBP's consolidation of title did not derogate from or impair the right of the
PIEDAS to redeem the same under C.A. No. 141.
It may be argued that P.D. 27 was already in effect when DBP foreclosed the property.
However, the legal propriety of the foreclosure of the land was put into question only after
Opinion No. 92 series of 1978 of the Ministry of Justice declared that said land was covered by
P.D. 27 and could not be subject to foreclosure proceedings. The Opinion of the Ministry of
Justice was issued on July 5, 1978 or almost two months after DBP consolidated its title to the
property on March 10, 1978. By law and jurisprudence, a mistake upon a doubtful or difficult
question of law may properly be the basis of good faith. 33
In the case of Maneclang vs. Baun, 34 we held that when a contract of sale is void, the
possessor is entitled to keep the fruits during the period for which it held the property in good
faith. Good faith of the possessor ceases when an action to recover possession of the property
is filed against him and he is served summons therefore. 35In the present case, DBP was served
summons on June 30, 1982. 36 By that time, it was no longer in possession of the disputed land
as possession thereof was given back to the PIEDAS after the foreclosure of DBP was

declared null and void on February 22, 1982. Therefore, any income collected by DBP after it
consolidated its title and took possession of the property on May 30, 1978 up to February 22,
1982 belongs to DBP as a possessor in good faith since its possession was never legally
interrupted.
Finally, we delete the award for attorney's fees. Although attorney's fees may be awarded if the
claimant is compelled to litigate with third persons or to incur expenses to protect his interest by
reason of an unjustified act or omission of the party from whom it is sought 37, we hold that
DBP's acts were clearly not unjustified.
WHEREFORE, the instant petition is hereby GRANTED, and the appealed decision of the Court
of Appeals is REVERSED. The Development Bank of the Philippines is absolved from any
liability to Timoteo and Selfida Pieda in so far as it orders the DBP to pay the PIEDAS
P216,000.00 as annual produce value of the land; P20,000.00 in attorney's fees, P5,000.00 in
litigation expenses and the costs of the suit. This decision is without prejudice to whatever
liability the PIEDAS may still have to the DBP with respect to their loan.
SO ORDERED.
Melo, Vitug, Panganiban and Purisima, JJ., concur.

G.R. No. L-50264 October 21, 1991

IGNACIO WONG, petitioner,
vs.
HON. LUCAS D. CARPIO, as Presiding Judge, Court of First Instance of Davao del Sur,
Branch V and MANUEL MERCADO, respondents.
Rodolfo B. Quiachon for petitioner.
Jose M. Ilagan for private respondent.

BIDIN, J.:p
This is a petition for review on certiorari, certified to this Court by the Court of Appeals as it
involves purely question of law, seeking the annulment of the September 29, 1978 decision of
the then Court of First Instance ** of Davao del Sur, Branch V, in Civil Case No. 1258 which
reversed the February 20, 1978 decision of the Municipal Court of Sta. Maria, *** Davao del Sur
in an action for Forcible Entry (Civil Case No. 13) ordering the dismissal of the complaint as well
as the counterclaim.
The undisputed facts of this case, as found by both the trial court and the then Court of First
Instance of Davao del Sur, are as follows:
On the basis of the admission of parties in their respective pleadings, the oral
testimonies of all witnesses for both plaintiff and defendants and the
documentary evidence offered and admitted this Court finds that plaintiff Manuel
Mercado acquired his rights to possess the land in litigation, particularly lot 3
(LRC) Pcs-295, (situated at Colonga, Sta. Maria, Davao del Sur) and which is
particularly described and embraced in Transfer Certificate of title No. (T-4244)
T-972 from William Giger by virtue of a deed of sale with right to repurchase
which was executed in 1972 for a consideration of P3,500.00 (testimony of
plaintiff, T.S.N., p. 3, hearing of January 7, 1977). Then, in 1973, William Giger
again asked an additional amount of P2,500.00 from plaintiff and so he required
William Giger to sign a new deed of Pacto de Retro Sale (Exhibit "A") on
November 5,1973 at Davao City before Notary Public Gregorio C. Batiller
(T.S.N., p. 5, hearing of January 7, 1977). In 1972, plaintiff began harvesting only
the coconut fruits and he paid the taxes on the land (Exhibits B to E) for Mr.
Giger. He went periodically to the land to make copra but he never placed any
person on the land in litigation to watch it. Neither did he reside on the land as he
is a businessman and storekeeper by occupation and resides at Lower Sta.
Maria, Davao del Sur while the land in litigation is at Colongan, Sta. Maria.
Neither did he put any sign or hut to show that he is in actual possession (p. 8,
T.S.N., p. 7, hearing of January 14, 1978). He knew defendants' laborers were in
the land in suit as early as August, 1976 and that they have a hut there but he did
not do anything to stop them. Instead plaintiff was happy that there were people
and a hut on the land in suit (p. 14, T.S.N., hearing of January 14, 1978).

Before July, 1976, defendant Ignacio Wong went to the land in litigation to find
out if there were other people residing there or claiming it besides the owner and
he found none. So, in July, 1976, defendant Ignacio Wong bought the parcel of
land in litigation from William Giger and his wife Cecilia Valenzuela (Exhibit 5).
After the execution of Exhibit 5, defendant Ignacio Wong asked for the delivery of
the title to him and so he has in his possession TCT No. (T-4244) T-974 (Exhibit
6) in the name of William Giger. Mr. Wong declared the land in suit for taxation
purposes in his name (Exhibit 7). He tried to register the pacto de retro sale with
the Register of Deeds by paying the registration fee (Exhibit 8) but due to some
technicalities, the pacto de retro sale could not be registered. The defendant
Wong placed laborers on the land in suit, built a small farm house after making
some clearings and fenced the boundaries. He also placed signboards (T.S.N.,
pp. 14-15, hearing of September 15, 1977). On September 27, 1976, plaintiff
Manuel Mercado again went to the land in suit to make copras. That was the time
the matter was brought to the attention of the police of Sta. Maria, Davao del Sur
and the incident entered in the police blotter (Exhibit 11). Then on November 18,
1976, defendant Wong ordered the hooking of the coconuts from the land in
litigation and nobody disturbed him. But on November 29, 1976, defendant
received a copy of plaintiff's complaint for forcible entry with summons to answer
which is the case now before the Court. During the pendency of this instant
complaint for forcible entry, spouses William Giger and Cecilia Valenzuela filed a
case for reformation of instrument with the Court of First Instance of Digos,
Davao del Sur against plaintiff Mercado (Exhibit 4). The case pertains to Exhibit
"A" of plaintiff. (pp. 1-3, CA Decision, pp. 82-84, Rollo).
On the basis of the aforestated undisputed facts, the Municipal Court of Sta. Maria, Davao del
Sur in its February 20, 1978 Decision found that herein petitioner (defendant Ignacio Wong) had
prior, actual and continuous physical possession of the disputed property and dismissed both
the complaint and the counter-claim.
On appeal, the then Court of First Instance of Davao del Sur, in its September 29, 1978
Decision drew a completely different conclusion from the same set of facts and ruled in favor of
herein private respondent (plaintiff Manuel Mercado). The decretal portion of the said decision,
reads:
WHEREFORE, the Court finds the plaintiff to have taken possession of the
property earlier in point of time and defendant is an intruder and must, as he is
hereby ordered to return, the possession of the land in question for the plaintiff,
paying a monthly rental of P400.00 from August, 1976, till the property is
returned with costs against the defendant. Judgment is reversed.
Petitioner filed the instant petition with the Court of Appeals. But the Court of Appeals, in its
March 1, 1979 Resolution **** found that the only issue is a pure question of law the
correctness of the conclusion drawn from the undisputed facts and certified the case to this
Court.
In its April 4, 1979 Resolution, the Second Division of this Court docketed the case in this Court
and considered it submitted for decision.
Petitioner alleged two (2) errors committed by respondent judge, to wit:

A) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER IS AN

INTRUDER IS WITHOUT FACTUAL AND LEGAL BASIS FOR PURPOSES OF A FORCIBLE
ENTRY.
B) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER MUST PAY A
MONTHLY RENTAL OF P400.00 FROM AUGUST, 1976 TILL THE PROPERTY IS
RETURNED HAS NO LEGAL AND FACTUAL BASIS.
The petition is without merit.
Petitioner, in claiming that the private respondent has not established prior possession, argues
that private respondent's periodic visit to the lot to gather coconuts may have been consented to
and allowed or tolerated by the owner thereof for the purposes of paying an obligation that may
be due to the person gathering said nuts and that a person who enters a property to gather
coconut fruits and convert the same to copras may only be a hired laborer who enters the
premises every harvest season to comply with the contract of labor with the true owner of the
property.
The argument is untenable.
It should be stressed that "possession is acquired by the material occupation of a thing or the
exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts
and legal formalities for acquiring such right." (Art. 531, Civil Code; Rizal Cement Co., Inc. vs.
Villareal, 135 SCRA 15 [1985]); and that the execution of a sale thru a public instrument shall be
equivalent to the delivery of the thing, unless there is stipulation to the contrary . . . . If, however,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it herself, because such tenancy and enjoyment
are opposed by another, then delivery has not been effected. (Paras, Civil Code of the
Philippines, Vol. II, 1989 Ed., p. 400).
Applying the above pronouncements on the instant case, it is clear that possession passed from
vendor William Giger to private respondent Manuel Mercado by virtue of the first sale a retro
(Exhibit A), and accordingly, the later sale a retro (Exhibit 5) in favor of petitioner failed to pass
the possession of the property because there is an impediment the possession exercised by
private respondent. Possession as a fact cannot be recognized at the same time in two different
personalities except in the cases of co-possession. Should a question arise regarding the fact of
possession, the present possessor shall be preferred; if there are two possessions, the one
longer in possession, if the dates of possession are the same, the one who presents a title; and
if these conditions are equal, the thing shall be placed in judicial deposit pending determination
of its possession or ownership through proper proceedings (Art. 538, Civil Code).
As to petitioner's query that "Is the entry of petitioner to the property characterized by force,
intimidation, threat, strategy, or stealth in order to show that private respondent has had
possession so that the case is within the jurisdiction of the inferior court?" (p. 15, Petition; p.
16, Rollo). The same is answered in the affirmative.
The act of entering the property and excluding the lawful possessor therefrom necessarily
implies the exertion of force over the property, and this is all that is necessary. Under the rule,
entering upon the premises by strategy or stealth is equally as obnoxious as entering by force.
The foundation of the action is really the forcible exclusion of the original possessor by a person

who has entered without right. The words "by force, intimidation, threat, strategy, or stealth"
include every situation or condition under which one person can wrongfully enter upon real
property and exclude another who has had prior possession therefrom. If a trespasser enters
upon land in open daylight, under the very eyes of person already clothed with lawful
possession, but without the consent of the latter, and there plants himself and excludes such
prior possessor from the property, the action of forcible entry and detainer can unquestionably
be maintained, even though no force is used by the trespasser other than such as is necessarily
implied from the mere acts of planting himself on the ground and excluding the other party.
(Tolentino, Civil Code of the Philippines, Vol. II, 1983 Ed., pp. 243-244; Drilon vs. Gaurana, 149
SCRA 342 [1987]).
Anent the award of rentals in favor of private respondent, the same is in order. Petitioner's
argument that there is no legal or factual basis for the payment of monthly rentals because bad
faith on the part of petitioner was never proved deserves no merit.
It should be noted that possession acquired in good faith does not lose this character except in
the case and from the moment facts exist which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully. (Art. 528, Civil Code).
Possession in good faith ceases from the moment defects in the title are made known to the
possessors, by extraneous evidence or by suit for recovery of the property by the true owner.
Whatever may be the cause or the fact from which it can be deduced that the possessor has
knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to
show bad faith. (Tolentino, Civil Code of the Philippines, Vol. II, p. 226). Such interruption takes
place upon service of summons (Manotok Realty vs. Judge Tecson, 164 SCRA 587 [1988]
citing Mindanao Academy, Inc. v. Yap (13 SCRA 190 [1965]). In the latter case, this Court held:
. . . Although the bad faith of one party neutralizes that of the other and hence as
between themselves their rights would be as if both of them had acted in good
faith at the time of the transaction, this legal fiction of Yap's good faith ceased
when the complaint against him was filed, and consequently the court's
declaration of liability for the rents thereafter is correct and proper. A possessor
in good faith is entitled to the fruits only so long as his possession is not legally
interrupted, and such interruption takes place upon service of judicial summons
(Arts. 544 and 1123, Civil Code).
A perusal of the records of the case shows that petitioner received private respondent's
complaint for forcible entry with summons on November 29, 1976 (Rollo, p. 46). His good faith
therefore ceased on November 29,1976. Accordingly, the computation of the payment of
monthly rental should start from December, 1976, instead of August, 1976.
WHEREFORE, with the modification that the computation of the monthly rental should start from
December, 1976 instead of August, 1976, the September 29, 1978 decision of respondent judge
is Affirmed in all other respects, with costs against petitioner.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Davide, Jr., JJ., concur.

G.R. No. L-30351 September 11, 1974

AUREA BAEZ and RAMON BAEZ Substituted by their legal heir, OSCAR VIRATA
BAEZ, petitioners,
vs.
COURT OF APPEALS and PIO ARCILLA, respondents.
Domingo A. Songalia for petitioners.
Arsenio R. Reyes for respondent.

ZALDIVAR, J.:p
A petition for review of the decision of the Court of Appeals in C.A. G.R. No. 36227-R (Pio
Arcilla, plaintiff-appellant, versus Aurea Baez, Ramon Baez and People's Homesite and
Housing Corporation, defendants-appellees).
The pertinent facts or the case are as follows: In 1956 respondent Pio Arcilla occupied a parcel
of land, later known as Lot 5, Block E-130 East Avenue Subdivision, Diliman, Quezon City,
owned by the People's Homesite and Housing Corporation (hereinafter referred to as PHHC).
He fenced the lot with wire, and erected a house and made some plantings thereon. His moves
to apply for the acquisition of the lot from the PHHC when the same became available for
disposition came to naught because the employees of the PHHC whose help he sought merely
regaled him with promises that the matter would be attended to. Nevertheless, his occupancy
was made a matter of record with the PHHC in connection with a census of occupants and
squatters taken some time later.
Notwithstanding respondent Arcilla's occupancy, the lot was awarded, on May 20, 1960, to
Cristeta L. Laquihon pursuant to a conditional contract to sell executed by the PHHC, subject to
the standard resolutory conditions imposed upon grants of similar nature, including the
grantee's undertaking to eject trespassers, intruders or squatters on the land, and to construct a
residential house on the lot within a period of one year from the signing of the contract, noncompliance with, which conditions would result in the contract being "deemed annulled and
cancelled". Respondent Arcilia had no notice of this award, and neither did the grantee nor the
PHHC take any step to oust him from the premises occupied by him. It was only on April 29,
1963 that he was first required to leave the area aforesaid.
Meanwhile, on May 9, 1962, grantee Cristeta L. Laquihon died, survived by her father, Basilio
Laquihon, who, on July 27, 1962, executed a deed of adjudication in his favor of the rights and
interests thus far acquired by his deceased daughter over the lot in question. In said deed
Basilio Laquihon also acknowledged an indebtedness of the deceased to herein petitioner
Aurea V. Baez in the sum of P3,000.00 and agreed to assign the rights thus adjudicated by
way of payment of the debt. The corresponding request for the transfer of the rights from
Cristeta to Basilio L. Laquihon was made by the latter to the PHHC on August 9, 1962, while an
undated request for the approval of the assignment of said land to Aurea V. Baez as above
stated was similarly filed with the PHHC.

The PHHC referred the requests for transfer and for assignment to its Head Executive
Assistant, Olimpio N. Epis, for study. Mr. Epis. in his memorandum, opined that, because the
grantee failed, among others, to construct a residential house on the land within the period
provided in the conditional contract, the grantee's rights under the contract were forfeited and,
accordingly, she did not acquire any right which could be transmitted upon her death to her
alleged successor, Basilio Laquihon. Hence, he recommended the disapproval of the petition for
transfer. It appears, however, that the unfavorable recommendation of Mr. Epis was not acted
upon by the Board of the PHHC but, instead, was returned by the General Manager to Mr. Epis
with verbal instructions to restudy the matter. After a restudy, Mr. Epis changed his opinion, and
considered the transfers from Cristeta L. Laquihon to Basilio Laquihon, and from the latter to
Aurea V. Baez, to be proper and meritorious, and recommended the approval of the same.
This was in conformity with a previous recommendation made by PHHC's Homesite Sales
Supervisor, Roman Carreaga, to the PHHC's General Manager. On November 15, 1962,
PHHC's Board of Directors adopted Resolution No. 200 approving the transfer of rights from
Basilio Laquihon to Aurea V. Baez as a meritorious case. The transfer thus approved,
petitioner Aurea V. Baez continued paying the installments on the purchase price of the land.
Respondent Pio Arcilia did not know of the foregoing developments until sometime in 1963
when he was given notice to vacate the lot occupied by him. He then interposed a protest
against the award and transfer to petitioner Aurea V. Baez, claiming that the original awardee
acquired no rights to the aforesaid lot and that the transferee was disqualified from acquiring
lots of the PHHC. Since the PHHC's Board of Directors had theretofore approved the transfer
objected to, the Administrative Investigating Committee, to whom the protest was referred for
resolution, considered itself without any further power to review the action of the Board, and
accordingly dismissed the protest. In the meantime, petitioner Aurea V. Baez completed the
installment payments on the land, and on October 29, 1964, the PHHC executed the
corresponding deed of sale over the lot in her favor.
Thus left without recourse before the PHHC, respondent Arcilla went to court with his complaint
to nullify the award of the lot in question in favor of petitioner Aurea V. Baez and to compel the
PHHC to award the same to him, with prayer for attorney's fees and costs. After trial on the
merits, the court a quo found for petitioners and accordingly decreed the dismissal of
respondent's complaint, without costs.
Respondent Arcilla appealed to the Court of Appeals, which rendered the decision sought to be
reviewed, the dispositive portion of which decision reads thus:
WHEREFORE, the judgment appealed from is hereby reversed and, in lieu
thereof, another is hereby rendered declaring null and void the transfer of rights
over and award of lot 5, Block B-130, East Avenue Subdivision of appellee
PHHC, in favor of appellee Aurea Baez and ordering appellee People's
Homesite and Housing Corporation to afford appellant Pio Arcilla the opportunity,
within thirty (30) days from the finality of this decision, to perfect his preferential
right to purchase said lot and thereafter to execute and deliver such deed and
documents necessary to consummate the sale to said appellant.
Seeking a review of the decision, petitioners filed the instant petition. During its pendency,
petitioner Ramon Baez died on March 30, 1972, and petitioner Aurea Baez also died on
August 11, 1972, and the motion to have their heir, Oscar Virata Baez, substituted for them,
was granted by this Court on October 9, 1972.

Petitioners in their Brief made assignments of error, as follows:

1. That the Court of Appeals erred in holding that the respondent Pio Arcilla has
the personality to seek the annulment of the award and sale, of Lot 5, Block E130, East Avenue Subdivision, Diliman, Quezon City, belonging to the PHHC, to
the applicant Cristela L. Laquihon on May 20, 1960, by PHHC, and the transfer of
her rights over the lot by her father Basilio Laquihon to the petitioner Aurea
Baez in payment of the indebtedness of Cristeta L. Laquihon to the petitioner
Aurea Baez in the amount of P3,000.00;
2. The Court of Appeals erred in holding that the respondent Pio Arcilla has a
preferential right to purchase the lot in question, lot 5, block E-130, East Avenue
Subdivision, Quezon City, of the People's Homesite and Housing Corporation;
3. That the Court of Appeals erred in holding that the award of the lot in question
to Cristeta L. Laquihon, made on May 20, 1960 was null and void, because said
awardee failed to construct a house in the lot within a period of one (1) year from
the signing of the contract to sell and, therefore, upon the death of Cristeta L.
Laquihon on May 9, 1962, she transferred no rights to her father Basilio Laquihon
and said Basilio Laquihon could not validly sell his rights of the lot in question to
the petitioners;
4. That the Court of Appeals erred in holding that the approval of the transfer of
rights of the late Cristeta L. Laquihon by her father Basilio Laquihon to the
petitioner Aurea Baez was due to the intercession of the then Senator
Estanislao Fernandez; and
5. That the Court of Appeals erred in holding that the petitioners are not qualified
to acquire the lot in question for having allegedly a lot in San Juan, Rizal.
1. Article 1397 of the Civil Code provides that the action for annulment of contracts may be
instituted by all who are thereby obliged principally or subsidiarily. Hence strangers to the
contract who are not bound thereby have neither the right nor the personality to bring an action
to annul such contract. It cannot be gainsaid that respondent Pio Arcilla was a stranger to, and
not bound principally or subsidiarily by, the conditional contract to sell executed on May 20,
1960 by the PHHC in favor of Cristeta L. Laquihon, and the transfer of rights over the same lot
from Basilio Laquihon to Aurea V. Baez. Hence respondent Pio Arcilla could not bring an
action to annul the same.
There is, however, an exception to the rule laid down in Article 1397. This Court, in Teves vs.
People's Homesite and Housing Corporation, L-21498, June 27, 1968 1 citing Ibaez vs.
Hongkong and Shanghai Bank 2 , held that "a person who is not a partly obliged principally or
subsidiarily in a contract may exercise an action for nullity of the contract if he is prejudiced in
his rights with respect to one of the contracting parties, and can show the detriment which would
positively result to him from the contract in which he had no intervention." Pursuant to said
doctrine, in order that respondent Pio Arcilla might bring an action for the nullity of the contracts
aforesaid, he should have been not only prejudiced in his rights with respect to one of the
contracting parties, but must have also shown the detriment which he would positively suffer
from the contracts. It becomes, therefore, necessary to inquire, whether respondent Pio Arcilla's

rights were prejudiced by the aforesaid contracts, and as to what detriment, if any, he suffered
because of those contracts.
What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found that Pio
Arcilla "makes no pretense that he entered into and built his land upon appellee PHHC's land
with the consent of the latter." Pio Arcilia was, therefore, a trespasser, or a squatter, he being a
person who settled or located on land, in closed or uninclosed with "no bona fide claim or color
of title and without consent of the owner." 3 He began his material possession of the lot in bad
faith, knowing that he did not have a right thereto, and it is presumed that his possession
continued to be enjoyed in the same character in which it was acquired, i.e. in bad faith until the
contrary is proved. 4 And what right can a squatter have to the land into which he has intruded
against the owner of the land? The answer is not hard to find, A squatter can have no
possessory rights whatsoever, and his occupancy of the land is only at the owner's sufferance,
his acts are merely tolerated and cannot affect the owner's possession. 5 The squatter is
necessarily bound to an implied promise, that he will vacate upon demand.
This Court, in Bernardo et al. vs. Bernardo and Court of Appeals 6 , laid down the doctrine that:
In carrying out its social re-adjustment policies, the government could not simply
lay aside moral standards, and aim to favor usurpers, squatters, and intruders,
unmindful of the lawful or unlawful origin and character of their occupancy. Such
a policy would perpetuate conflicts instead of attaining their just solution.
Respondent Pio Arcilla, having no possessory rights whatsoever, what detriment could be have
suffered from the aforesaid contracts?
The Court of Appeals, however, held that respondent Pio Arcilia had a right to purchase the lot
occupied by him. The discussion of this alleged right brings us to the second assignment of
error.
2. We find merit in petitioners' second assignment of error. Relying on the decision of the Court
of Appeals, respondent Arcilia anchored his alleged preferential right to purchase Lot 5, Block
E-130 on Resolution No. 562 of PHHC's Board of Directors, dated June 27, 1963, which reads
as follows:
(1) No preference, advantage or benefit shall be given to squatters in the
allocation of PHHC residential lots by reason alone of their prior occupancy
thereof, but they shall be treated on the same footing as other qualified
applicants. Squatters who are found qualified and deserving shall be given
preferential awards only in PHHC resettlement projects, if they voluntarily comply
with PHHC rules and policies without waiting to be evicted thru court
proceedings.
and on Resolution No. 558, dated April 16, 1962, which approved the recommendations of its
Acting Legal Officer. The recommendations included the proposed "Application Forms No. 6-D
and No. 6-F" for non-occupants and occupants or squatters, respectively, and provided, among
others, that:
(6) The Sales and Management Department should have a ready and up-to- date
census of all lots occupied by squatters within PHHC subdivisions open for sale

or award, in order that lots occupied by squatters who are not qualified to buy the
same, or who do not merit an award shall not be awarded to anybody until the
PHHC has obtained a final court decision for the eviction of such squatter.
(Exhibit 1-B).
It should not be lost sight of, however, that according to the decision of the Court of Appeals,
"Time there may have been, perhaps, when occupancy of a lot without the consent of said
appellee was not recognized at all as basis for a claim to a right to purchase said lot;" and that
"on the face of the evidence presented before us in this case, we note a clear shift in policy in
the disposition of lots of appellee PHHC," and the shift in policy was evidenced by the aforequoted resolutions.
If the afore-quoted resolutions relied upon by respondent Arcilla were evidence of the shift of
policy, then, it stands to reason that before the adoption of said resolutions, the policy of the
PHHC was different; otherwise, there would have been no reason for a change of policy.
Resolution No. 562 was dated June 27, 1963. Hence the policy before June 27, 1963 was
different. In fact even the Court of Appeals noted that before said date, "occupancy of a lot" was
perhaps "not recognized at all as a basis for a claim of a right to purchase said lot." Hence at
the time Lot No. 5 was awarded to Cristeta L. Laquihon on May 20, 1960, and at the time the
PHHC approved the transfer of original awardee's rights to herein petitioners on Nov. 15, 1962,
it was not yet the policy of the PHHC to recognize mere occupancy of a lot as giving a right to
purchase the same, for said Policy was adopted only later, i.e. on June 27, 1963.
Moreover, it is not stated expressly in the above-quoted resolutions, and neither can it be
necessarily implied therefrom, that the occupant was given a preferential right to purchase the
lot he occupied. In fact Resolution No. 562 explicitly states that although a squatter shall be
treated on the same footing as other qualified applicants, said occupant has no preference at all
by reason of said occupancy. In the instant case, it is not even shown, although it was taken for
granted, that respondent Pio Arcilia was a qualified applicant who should be treated on the
Same footing as others. The fact is that said respondent never filed an application for the lot, so
he cannot be a qualified applicant. A squatter found to be qualified and deserving was to be
given preferential award, not necessarily to the same lot he occupies but only in PHHC
resettlement projects; and it does not appear that Lot 5, Block E-130, in question, is in a
resettlement project.
Furthermore, said preferential award in resettlement projects is granted only in case the
squatter is not evicted through court proceedings. In the instant case, respondent Arcilla had
been ejected from the lot through court proceedings in Civil Case No. IV-11691 of the City Court
of Quezon City. If a squatter was given a Preferential right to the lot he occupies, how come that
the same resolution No. 562 also provided that "No administrative case shall be entertained on
the basis alone of a squatter's claim of prior or actual occupancy of PHHC lot?"
We hold that the claim, of respondent Pio Arcilla to the alleged preferential right to purchase Lot
5, Block E-130, had not been substantiated.
3. Respondent Arcilla argues that the awardee of the lot, Cristeta L. Laquihon, did not comply
with the resolutory condition of building a house; so, she acquired no rights that could be
transmitted to her father.
This Court cannot sustain respondent's stand.

This Court of Appeals stated in its decision that the contract to sell, dated May 20, 1960,
executed by the PHHC in favor of Cristeta L. Laquihon was.
Subject to the standard resolutory conditions imposed upon grants of similar
nature, including the grantee's undertaking to eject trespassers, intruders or
squatters on the land and to 'construct a residential house on the lot and shall
complete the same within a period of (1) year from the signing of this contract
with no extension,' the non-compliance with which results in the contract being
'deemed annulled and cancelled (Exhibit 7).
Because no residential house, continued the Court of Appeals, was ever erected by the
awardee on the premises not even until she died on May 9, 1962, "she failed to comply with
a condition of the award, the non-compliance with which has a resolutory effect upon the
award," such that when Cristeta L. Laquihon died, she acquired no vested right in the land, and
she transmitted nothing to her father, Basilio Laquihon, who, on his part, could not have
transferred any right to petitioners Baez.
It is granted that by virtue of the resolutory condition, the resolution of the contract took place by
force of law and that there was no need of judicial declaration to resolve the contract. Civilists,
however, are not agreed on whether the injured party retains the option of demanding fulfillment
or rescission of the obligation as provided in Article 1191 or not. Thus Collin y Capitant, Curson
Elemental de Derecho Civil, Vol. III, p. 750 says:
En la hipotesis de una clausula del contrato que pronuncie una resolucion
eventual, hay que proclamar la validez de tal clausula en el Derecho espanol
siempre que no aparezca por sus circumstancias como contraria a la ley o a las
buenas costumbres.
El efecto de tal clausula sera que la resolucion se produzca de pleno derecho,
sin intervencion judicial; pero entendemos que, a pesar de ella el acreedor
conservara el derecho de opcion que le concede el art. 1124 [Art. 1191 of the
Civil Code of the Philippines] a no ser que la clausula misma resulte otra cosa.
Manresa, in Commentaries al Codigo Civil Espanol, 1967, Vol. VIII, p. 416, however, says that
the stipulated resolution of the contract in case one of the parties does not comply with his
undertaking is produced by force of law, but the option of the injured party disappears.
If the creditor could still demand, in spite of the resolution ipso jure of the contract, then the
resolution would not be mandatory on the creditor and the resolution would produce its effect
when the creditor notified the debtor of his decision. (Tolentino, Civil Code of the Philippines,
Vol. IV, p. 175.)
It is certain, therefore, that the said contract to sell in the instant case was by virtue of the
stipulated resolutory conditions resolved by operation of law. But the Court of Appeals
overlooked in the instant case the express provision of the contract to sell that said resolution
becomes effective only from the date written notice thereof is sent by the PHHC to the
applicant. Thus paragraph 12 of the contract to sell (Exhibit 7) provides:
12. Should the APPLICANT violate, refuse or fail to comply with any of the terms
and conditions stipulated herein or default in the payment of three monthly

installments as provided for in paragraph 1 hereof, this contract shall be deemed

annulled and cancelled and the CORPORATION shall be at liberty to dispose of
said property to any other person in the same manner as if the contract had
never been made ... The annulment and cancellation and the right of the
CORPORATION to repossess the property shall become effective from the date
written notice thereof is sent by the CORPORATION to the APPLICANT at his
last known post-office address ...
The record does not show, and the decision of the Court of Appeals does not state, that the
PHHC ever notified in writing the awardee of the cancellation of the contract to sell. Hence, the
resolution of the contract never became effective. Consequently, whatever rights the original
awardee Cristeta Laquihon had over the disputed lot were transmitted upon her death to her
only legal and compulsory heir, her father Basilio (Art. 777, Civil Code) which rights the latter
could also convey to herein petitioners.
But even if it be assumed gratia argumenti, that the original awardee Cristeta Laquihon acquired
no vested right to the lot upon her death because of her failure to comply with the resolutory
condition of constructing a house on the lot, and the lot had to revert to the PHHC, still it cannot
be denied that the PHHC waived the effects of said resolutory condition when its Board of
Directors approved, on November 15, 1962, the transfer to Aurea Baez. In consenting to the
transfer, the PHHC necessarily waived any right that might have accrued to it by virtue of the
resolution of the contract before the transfer.
Regarding the other resolutory condition mentioned by the decision sought to be reviewed, and
emphasized by private respondent, that the original awardee did not file an action for ejectment,
it is to be noted that the awardee was not obliged to file said ejectment suit against respondent,
the latter having squatted on the land since 1956 and the award to Cristeta Laquihon having
been made only on May 20, 1960. On this matter, the Constitutional Contract to Sell (Exhibit 7)
explicitly provides that:
3. ... The applicant shall undertake the ejectment of any trespasser, intruder or
squatter who shall build on the lot or who shall deprive him of the right to possess
the same from the date of this contract.
The awardee was obliged to eject squatters 44 who shall build on the lot ... from the date of this
contract." Hence, respondent Arcilla having built his house or squatted on the land very much
before, i.e. 4 years before the land was awarded to awardee, the latter was not under
contractual obligation to eject him.
Resolution No. 558 does not require, furthermore, that the applicant for, or transferee of, a
PHHC lot should reside in Quezon City. What the Resolution requires is that he should have his
"permanent residence or principal place of work or business in Quezon City, Manila or suburbs
..." San Juan, the address of petitioners herein, is certainly included in the term "suburbs."
4. In support of their fourth assignment of error, that the Court of Appeals erred in
holding that the approval of the transfer of the rights to the lot to petitioners was
due to the intercession of the then Senator Estanislao Fernandez, petitioners
argued that the issue of whether the letter of Senator Fernandez influenced the
approval of the transfer was not assigned as error in respondent Arcilla's brief in
the Court of Appeals, and neither was such influence alleged in the complaint,

hence the Court of Appeals could not decide said issue; and that the Board of
Directors, uninfluenced by politicians, used its discretion in approving the
transfer.
Section 7 of Rule 51 of the Rules of Court provides that in order that a question may be
considered by the Court of Appeals, said question must be stated in the assignment of errors
and it must be properly argued in the brief. (Traders Insurance and Surety Co. vs. Golangco, et
al., 95 Phil. 824, 830; Tan Si Kick v. Tiacho, 79 Phil. 696, 698.) We note that there were only
two errors assigned in appellant's brief in the Court of Appeals, namely: that the trial court erred
in holding that (1) the claim of plaintiff that defendant was disqualified to acquire lot 5 for she
already owned lot in San Juan was not substantiated, and (2) there was a valid perfected
contract of sale between the PHHC and the late Cristeta Laquihon, and between the PHHC and
Aurea Baez and Ramon Baez, and that they are bound by the terms and conditions thereof.
Hence the alleged intercession of the then Senator Estanislao Fernandez in the transfer of right
by Basilio Laquihon to petitioners, which was not stated in the assignment of errors and not
argued in the brief, should have not been considered by the Court of Appeals.
Moreover, the evidence on which the finding of the Court of Appeals that the PHHC
accommodated petitioners because of the intercession of whoever wrote "Exhibit C, has no
evidentiary basis, for Exhibit C was rejected by the trial court "for being immaterial, irrelevant,
impertinent and not properly identified (TSN, Nov. 4, 1964, p. 90)." The party introducing it did
not even ask permission from the Court that the same be attached to the record so that the
appellate court may review the ruling of the trial court (U.S. vs. Cabaraban, 36 Phil. 251, 253254; Velez vs. Chaves, 50 Phil. 676, 678-679). Evidence ruled out at the trial of the case cannot
be taken into consideration in the decision, for that would infringe the constitutional right of the
adverse party to due process of law (Tinsay vs. Yusay and Yusay, 47 Phil. 639, 643).
Documents forming no part of the proofs before the appellate court will not be considered in
disposing of the issues of an action (De Castro v. Court of Appeals, 75 Phil., 824, 835, citing
Dayrit v. Gonzalez, 7 Phil. 182; 5 Encyc. of Evidence, 469). Although said letter was written on
stationery bearing the letterhead of the then Senator Fernandez, it does not conclusively follow
that it was Senator Fernandez himself who wrote the letter. Even the signature of the letter was
"illegible".
But assuming that the letter was written by Senator Fernandez, it cannot be implied from the
facts of the case that the transfer of rights from Basilio Laquihon to petitioners herein was
approved solely on the strength of such letter, for the approval of the transfer was
recommended as "extremely meritorious" by the Head Executive Assistant (Exh. "2"), and by
the Homesite Sales Supervisor (Exh. F). Neither can it be said that the approval of the transfer
by the Board of Directors was vitiated by undue influence or that it was illegal. That letter, even
if it was written really by Senator Fernandez, could not destroy the free agency of the PHHC
Board of Directors, and it could not have interfered with the exercise of Board's independent
discretion. This Court has already said that solicitation, importunity, argument and persuasion
are not undue influence, and a contract is not to be set aside merely because one party used
these means to obtain the consent of the others. Influence obtained by persuasion or argument
or by appeals to the affections is not prohibited either in law or morals, and i s not obnoxious
even in courts of equity. Such may be termed "due influence." (Martinez vs. Hongkong and
Shanghai Bank, 15 Phil. 252, 270.)
5. In support of their fifth assignment of error, petitioners argued that the Court of Appeals erred
in relying merely on the certification of the Municipal Treasurer of San Juan to the effect that his

office "has a record of real property holding of Ramon and Aurea Baez" consisting of a lot
located at M. J. Paterno Street and assessed at P31,190.00 under Tax Declaration No. 23804
of the land records of said municipality, for a tax declaration is not evidence of title of property,
and respondent Arcilla did not present any other evidence to prove that petitioners are really
owners of a lot in San Juan, Rizal; that even granting that they are owners of a lot, still as
maintained by the PHHC, they are not disqualified to acquire the lot in question as they merely
stepped into the shoes of the original purchaser Cristeta Laquihon; that R. A. No. 498, relied
upon by respondent in his complaint in asserting that the award of the lot to petitioner Aurea
Baez was null and void, is not applicable to the case and could not therefore have been
violated.
In the decision under review, the Court of Appeals said that to be an awardee of PHHC's lots,
one must not "already own or hold under a contract to buy residential lot or lots in any
subdivision situated in ... San Juan ... (Exhibits D-2 and Z)."
Paragraph 9 of the Conditional Contract to Sell (Exhibit 7) also provides that "any transfer that
may be authorized or permitted by the CORPORATION shall be under the condition that the
transferee is qualified to acquire a lot under the rules and regulations of the CORPORATION ..."
The sole evidence submitted by respondent Arcilla to prove that petitioners herein were
disqualified to be transferees of the lot in question was the certification of the Treasurer of San
Juan (Exhibit I) that there is a tax declaration No. 23804 of the land records of said municipality
in the name of Ramon and Aurea Baez. Said Tax declaration is insufficient to prove ownership.
It has been held anent this matter that
Assessment alone is of little value as proof of title. Mere tax declaration does not
vest ownership of the property in the declarant" (Province of Camarines Sur vs.
Director of Lands, 64 Phil. 600, 613 citing Evangelista vs. Tabayuyong, 7 Phil.,
607; Casimiro vs. Fernandez, 9 Phil., 562; Elumbaring vs. Elumbaring, 12 Phil.
384).
It is well-settled that neither tax receipts nor declaration of ownership for taxation purposes are
evidence of ownership or of the right to possess realty when not supported by other effective
proofs. (Elumbaring vs. Elumbaring, 12 Phil. 384, 388389).
It has not been proven, therefore, that petitioners herein are owners of a lot in San Juan, and
consequently disqualified to be transferees of the questioned lot.
R.A. No. 498, relied upon by herein respondent in his complaint, in asserting that the award to
petitioners was null and void, is not applicable to the instant case. Said Act authorizes cities,
municipalities and provinces to purchase and/or expropriate home sites and landed estates and
subdivide them for resale at cost, and provides in Section 3 that 14 no such lot shall be sold to
any person, who already owns a residential lot, and any sale made to such person shall be
void." The PHHC not being a city, municipality, or province, it is apparent that Act is not
applicable to the instant case.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals, dated January 9, 1969, in
CA-G. R. No. 36227-R, is set aside, and the decision of the Court of First Instance of Quezon
City in Civil Case No. Q-7679, is affirmed. Costs against respondent Pio Arcilla.

IT IS SO ORDERED.
Fernando, Barredo, Antonio and Aquino, JJ., concur.
Fernandez, J., took no part.

HEIRS OF ANACLETO B. NIETO, namely,

SIXTA P. NIETO, EULALIO P. NIETO,
GAUDENCIO P. NIETO, and CORAZON P.
NIETO-IGNACIO, represented by EULALIO P.
NIETO,
Petitioners,

- versus -

MUNICIPALITY OF MEYCAUAYAN,
BULACAN, represented by MAYOR EDUARDO
ALARILLA,
Respondent.

G.R. No. 150654

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:
December 13, 2007

x-----------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the Decision[1] of the Court of Appeals, dated October
30, 2001, which dismissed the petition for review of the Decision of the Regional Trial Court (RTC) of
Malolos, Bulacan. The latter dismissed a complaint to recover possession of a registered land on the
ground of prescription and laches.
The antecedents are as follows:
Anacleto Nieto was the registered owner of a parcel of land, consisting of 3,882 square meters,
situated at Poblacion, Meycauayan, Bulacan and covered by TCT No. T-24.055 (M). The property is
being used by respondent, Municipality of Meycauayan, Bulacan, which constructed an extension of the
public market therein.
Upon Anacletos death on July 26, 1993, his wife, Sixta P. Nieto, and their three children,
namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-Ignacio, herein petitioners, collated all the
documents pertaining to his estate. When petitioners failed to locate the owners duplicate copy of TCT
No. T-24.055 (M), they filed a petition for the issuance of a second owners copy with the RTC, Malolos,

Bulacan. In that case, petitioners discovered that the missing copy of the title was in the possession of the
respondent. Consequently, petitioners withdrew the petition and demanded from respondent the return of
property and the certificate of title.
On February 23, 1994, petitioners formally demanded from respondent the return of the possession
and full control of the property, and payment of a monthly rent with interest from January
1964. Respondent did not comply with petitioners demand.[2]
On December 28, 1994, petitioners filed a complaint[3] for recovery of possession and damages
against respondent alleging that the latter was in possession of the owners copy of TCT No. T-24.055
(M). They averred that, in 1966, respondent occupied the subject property by making it appear that it
would expropriate the same. Respondent then used the land as a public market site and leased the stalls
therein to several persons without paying Anacleto Nieto the value of the land or rent therefor. Petitioners
prayed that respondent be ordered to surrender to them the owners copy of TCT No. T-24.055 (M),
vacate the property, and pay them the rents thereon from 1966 until the date of the filing of the complaint
for the total of P1,716,000.00, and P10,000.00 a month thereafter, as well as P300,000.00 as moral
damages, and P100,000.00 as attorneys fees.
In its Answer,[4] respondent alleged that the property was donated to it and that the action was
already time-barred because 32 years had elapsed since it possessed the property.
Respondent and counsel failed to appear during the scheduled pre-trial conference.[5] Upon
petitioners motion, respondent was declared as in default and petitioners were allowed to present
evidence ex parte. Respondent filed a motion for reconsideration which the RTC granted. Respondent
was then allowed to cross-examine petitioners lone witness and present its own evidence. However,
despite notice, respondent failed again to appear during the scheduled hearing. Hence, the RTC
considered respondent to have waived its right to cross-examine petitioners witness and present its own
evidence. The case was then submitted for decision.
On August 1, 1995, the RTC rendered a Decision dismissing the complaint as well as respondents
counterclaims for damages. For lack of proof, the RTC disregarded respondents claim that Anacleto
Nieto donated the property to it in light of the fact that the title remained in the name of Anacleto.
Nonetheless, the RTC did not rule in favor of petitioners because of its finding that the case was already
barred by prescription. It held that the imprescriptibility of actions to recover land covered by the Torrens
System could only be invoked by the registered owner, Anacleto Nieto, and that the action was also
barred by laches.

Petitioners appealed the case to the Court of Appeals (CA). On October 30, 2001, the CA
rendered a Decision dismissing the case for lack of jurisdiction. According to the CA, the petition
involved a pure question of law; hence, petitioners should have filed a petition directly with this Court.[6]
Accordingly, petitioners elevated the case to this Court through a petition for review
on certiorari, raising the following issues:
A. Are lands covered by the Torrens System subject to prescription?
B. May the defense of [l]aches be invoked in this specific case?
C. May the defense of imprescriptibility only be invoked by the registered owner to the
exclusion of his legitimate heirs?[7]

The petition is meritorious.

Respondent argues that the action of petitioner to recover possession of the property is already
barred by prescription.

We do not agree.

An action to recover possession of a registered land never prescribes in view of the provision of
Section 44 of Act No. 496 to the effect that no title to registered land in derogation of that of a registered
owner shall be acquired by prescription or adverse possession.[8] It follows that an action by the
registered owner to recover a real property registered under the Torrens System does not prescribe.

Despite knowledge of this avowed doctrine, the trial court ruled that petitioners cause of action
had already prescribed on the ground that the imprescriptibility to recover lands registered under the
Torrens System can only be invoked by the person under whose name the land is registered.

Again, we do not agree. It is well settled that the rule on imprescriptibility of registered lands not
only applies to the registered owner but extends to the heirs of the registered owner as well. [9] Recently

in Mateo v. Diaz,[10] the Court held that prescription is unavailing not only against the registered owner,
but also against his hereditary successors because the latter step into the shoes of the decedent by
operation of law and are the continuation of the personality of their predecessor-in-interest.
Hence, petitioners, as heirs of Anacleto Nieto, the registered owner, cannot be barred by prescription
from claiming the property.
Aside from finding that petitioners cause of action was barred by prescription, the trial court
reinforced its dismissal of the case by holding that the action was likewise barred by laches.

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of
time, to do that which, by exercising due diligence could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting the presumption that the
party entitled to assert his right has either abandoned or declined to assert it.[11]
In a number of cases, the Court has held that an action to recover registered land covered by the
Torrens System may not be barred by laches.[12] Laches cannot be set up to resist the enforcement of an
imprescriptible legal right.[13] Laches, which is a principle based on equity, may not prevail against a
specific provision of law, because equity, which has been defined as justice outside legality, is applied
in the absence of and not against statutory law or rules of procedure.[14]
In recent cases, [15] however, the Court held that while it is true that a Torrens title is indefeasible
and imprescriptible, the registered landowner may lose his right to recover possession of his registered
property by reason of laches.
Yet, even if we apply the doctrine of laches to registered lands, it would still not bar petitioners
claim. It should be stressed that laches is not concerned only with the mere lapse of time.[16] The
following elements must be present in order to constitute laches:
(1) conduct on the part of the defendant, or of one under whom he claims, giving rise to
the situation of which complaint is made for which the complaint seeks a remedy;
(2) delay in asserting the complainants rights, the complainant having had knowledge
or notice, of the defendants conduct and having been afforded an opportunity to
institute a suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would
assert the right on which he bases his suit; and
(4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held to be barred.[17]

We note that the certificate of title in the name of Anacleto Nieto was found in respondents
possession but there was no evidence that ownership of the property was transferred to the municipality
either through a donation or by expropriation, or that any compensation was paid by respondent for the
use of the property. Anacleto allegedly surrendered the certificate of title to respondent upon the belief
that the property would be expropriated. Absent any showing that this certificate of title was fraudulently
obtained by respondent, it can be presumed that Anacleto voluntarily delivered the same to
respondent. Anacletos delivery of the certificate of title to respondent could, therefore, be taken to mean
acquiescence to respondents plan to expropriate the property, or a tacit consent to the use of the property
pending its expropriation.
This Court has consistently held that those who occupy the land of another at the latters tolerance
or permission, without any contract between them, are necessarily bound by an implied promise that the
occupants will vacate the property upon demand.[18] The status of the possessor is analogous to that of a
lessee or tenant whose term of lease has expired but whose occupancy continues by tolerance of the
owner. In such case, the unlawful deprivation or withholding of possession is to be counted from the date
of the demand to vacate.[19] Upon the refusal to vacate the property, the owners cause of action accrues.
In this case, the first element of laches occurred the moment respondent refused to vacate the
property, upon petitioners demand, on February 23, 1994. The filing of the complaint on December 28,
1994, after the lapse of a period of only ten months, cannot be considered as unreasonable delay
amounting to laches.
Moreover, case law teaches that if the claimants possession of the land is merely tolerated by its
lawful owner, the latters right to recover possession is never barred by laches. Even if it be supposed that
petitioners were aware of respondents occupation of the property, and regardless of the length of that
possession, the lawful owners have a right to demand the return of their property at any time as long as
the possession was unauthorized or merely tolerated, if at all.[20]
Furthermore, the doctrine of laches cannot be invoked to defeat justice or to perpetrate fraud and
injustice. It is the better rule that courts, under the principle of equity, will not be guided or bound strictly
by the statute of limitations or the doctrine of laches when by doing so, manifest wrong or injustice would
result.[21]
Finally, we find that the rentals being prayed for by petitioners are reasonable considering the size
and location of the subject property. Accordingly, the award of rentals is warranted.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional
Trial Court of Malolos, Bulacan, dated August 1, 1995, is REVERSEDand SET ASIDE. Respondent
is ORDERED (a) to vacate and surrender peaceful possession of the property to petitioners, or pay the
reasonable value of the property; (b) to pay P1,716,000.00 as reasonable compensation for the use of the
property from 1966 until the filing of the complaint and P10,000.00 monthly rental thereafter until it
vacates the property, with 12% interest from the filing of the complaint until fully paid; and (c) to return
to petitioners the duplicate copy of TCT No. T-24.055 (M).
SO ORDERED.

G.R. No. L-54526 August 25, 1986

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner,
vs.
THE COURT OF APPEALS and THE CITY OF DAGUPAN, respondents.
Miguel T. Caguioa, Ireneo B. Orlino and Manuel D. Victorio for respondent City of Dagupan.

FERIA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed
the decision of the then Court of First Instance of Pangasinan. The lower court had declared
respondent City of Dagupan the lawful owner of the Dagupan Waterworks System and held that
the National Waterworks and Sewerage Authority, now petitioner Metropolitan Waterworks and
Sewerage System, was a possessor in bad faith and hence not entitled to indemnity for the
useful improvements it had introduced.
Before proceeding further, it may be necessary to invite attention to the common error of joining
the court (be it a Regional Trial Court, the Intermediate Appellate Court, or the Sandiganbayan)
as a party respondent in an appeal by certiorari to this Court under Rule 45 of the Rules of
Court. The only parties in an appeal by certiorari are the appellant as petitioner and the appellee
as respondent. (Cf. Elks Club vs. Rovira, 80 Phil. 272) The court which rendered the judgment
appealed from is not a party in said appeal. It is in the special civil action of certiorari under
Section 5 of Rule 65 of the Rules of Court where the court or judge is required to be joined as
party defendant or respondent. The joinder of the Intermediate Appellate Court or the
Sandiganbayan as party respondent in an appeal by certiorari is necessary in cases where the
petitioner-appellant claims that said court acted without or in excess of its jurisdiction or with
grave abuse of discretion. An example of this is a case where the petitioner-appellant claims
that the Intermediate Appellate Court or the Sandiganbayan acted with grave abuse of
discretion in making its findings of fact, thus justifying the review by this court of said findings of
fact. (See the exceptions to the rule of conclusiveness of the findings of fact of the Intermediate
Appellate Court or the Sandiganbayan in the case of Sacay vs. Sandiganbayan, G.R. Nos.
66497-98, July 10, 1986.) In such a case, the petition for review on certiorari under Rule 45 of
the Rules of Court is at the same time a petition for certiorari under Rule 65, and the joinder of
the Intermediate Appellate Court or the Sandiganbayan becomes necessary. (Cf. Lianga
Lumber Company vs. Lianga Timber Co., Inc., March 31, 1977, 76 SCRA 197).
The City of Dagupan (hereinafter referred to as the CITY) filed a complaint against the former
National Waterworks and Sewerage Authority (hereinafter referred to as the NAWASA), now the
Metropolitan Waterworks and Sewerage System (hereinafter referred to as MWSS), for
recovery of the ownership and possession of the Dagupan Waterworks System. NAWASA
interposed as one of its special defenses R.A. 1383 which vested upon it the ownership,
possession and control of all waterworks systems throughout the Philippines and as one of its
counterclaims the reimbursement of the expenses it had incurred for necessary and useful
improvements amounting to P255,000.00. Judgment was rendered by the trial court in favor of
the CITY on the basis of a stipulation of facts. The trial court found NAWASA to be a possessor
in bad faith and hence not entitled to the reimbursement claimed by it. NAWASA appealed to
the then Court of Appeals and argued in its lone assignment of error that the CITY should have

been held liable for the amortization of the balance of the loan secured by NAWASA for the
improvement of the Dagupan Waterworks System. The appellate court affirmed the judgment of
the trial court and ruled as follows:
However, as already found above, these useful expenses were made in utter bad
faith for they were instituted after the complaint was filed and after numerous
Supreme Court decisions were promulgated declaring unconstitutional the taking
by NAWASA of the patrimonial waterworks systems of cities, municipalities and
provinces without just compensation.
Under Article 546 of the New Civil Code cited by the appellant, it is clear that a
builder or a possessor in bad faith is not entitled to indemnity for any useful
improvement on the premises. (Santos vs. Mojica, L-25450, Jan. 31, 1969). In
fact, he is not entitled to any right regarding the useful expenses (II Paras (1971)
387). He shall not have any right whatsoever. Consequently, the owner shall be
entitled to all of the useful improvements without any obligation on his part
(Jurado, Civil Law Reviewer (1974) 223).
Petitioner-Appellant MWSS, successor-in-interest of the NAWASA, appealed to this Court
raising the sole issue of whether or not it has the right to remove all the useful improvements
introduced by NAWASA to the Dagupan Waterworks System, notwithstanding the fact that
NAWASA was found to be a possessor in bad faith. In support of its claim for removal of said
useful improvements, MWSS argues that the pertinent laws on the subject, particularly Articles
546, 547 and 549 of the Civil Code of the Philippines, do not definitely settle the question of
whether a possessor in bad faith has the right to remove useful improvements. To bolster its
claim MWSS further cites the decisions in the cases of Mindanao Academy, Inc. vs. Yap (13
SCRA 190) and Carbonell vs. Court of Appeals (69 SCRA 99).
The CITY in its brief questions the raising of the issue of the removal of useful improvements for
the first time in this Court, inasmuch as it was not raised in the trial court, much less assigned as
an error before the then Court of Appeals. The CITY further argues that petitioner, as a
possessor in bad faith, has absolutely no right to the useful improvements; that the rulings in the
cases cited by petitioner are not applicable to the case at bar; that even assuming that petitioner
has the right to remove the useful improvements, such improvements were not actually
identified, and hence a rehearing would be required which is improper at this stage of the
proceedings; and finally, that such improvements, even if they could be identified, could not be
separated without causing substantial injury or damage to the Dagupan Waterworks System.
The procedural objection of the CITY is technically correct. NAWASA should have alleged its
additional counterclaim in the alternative-for the reimbursement of the expenses it had incurred
for necessary and useful improvements or for the removal of all the useful improvements it had
introduced.
Petitioner, however, argues that although such issue of removal was never pleaded as a
counterclaim nevertheless it was joined with the implied consent of the CITY, because the latter
never filed a counter-manifestation or objection to petitioner's manifestation wherein it stated
that the improvements were separable from the system, and quotes the first part of Sec. 5 of
Rule 10 of the Rules of Court to support its contention. Said provision reads as follows:

SEC. 5. Amendment to conform to or authorize presentation of evidence.-When

issues not raised by the pleadings are tried by express or implied consent of the
parties, they shall be treated in all respects, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause
them to conform to the evidence and to raise these issues may be made upon
motion of any party at any time, even after judgment; but failure so to amend
does not affect the result of the trial of these issues. ...
This argument is untenable because the above-quoted provision is premised on the fact that
evidence had been introduced on an issue not raised by the pleadings without any objection
thereto being raised by the adverse party. In the case at bar, no evidence whatsoever had been
introduced by petitioner on the issue of removability of the improvements and the case was
decided on a stipulation of facts. Consequently, the pleadings could not be deemed amended to
conform to the evidence.
However, We shall overlook this procedural defect and rule on the main issue raised in this
appeal, to wit: Does a possessor in bad faith have the right to remove useful improvements?
The answer is clearly in the negative. Recognized authorities on the subject are agreed on this
point. *
Article 449 of the Civil Code of the Philippines provides that "he who builds, plants or sows in
bad faith on the land of another, loses what is built, planted or sown without right to indemnity."
As a builder in bad faith, NAWASA lost whatever useful improvements it had made without right
to indemnity (Santos vs. Mojica, Jan. 31, 1969, 26 SCRA 703).
Moreover, under Article 546 of said code, only a possessor in good faith shall be refunded for
useful expenses with the right of retention until reimbursed; and under Article 547 thereof, only a
possessor in good faith may remove useful improvements if this can be done without damage to
the principal thing and if the person who recovers the possession does not exercise the option
of reimbursing the useful expenses. The right given a possessor in bad faith is to remove
improvements applies only to improvements for pure luxury or mere pleasure, provided the thing
suffers no injury thereby and the lawful possessor does not prefer to retain them by paying the
value they have at the time he enters into possession (Article 549, Id.).
The decision in the case of Mindanao Academy, Inc. vs. Yap (13 SCRA 190) cited by petitioner
does not support its stand. On the contrary, this Court ruled in said case that "if the defendant
constructed a new building, as he alleges, he cannot recover its value because the construction
was done after the filing of the action for annulment, thus rendering him a builder in bad faith
who is denied by law any right of reimbursement." What this Court allowed appellant Yap to
remove were the equipment, books, furniture and fixtures brought in by him, because they were
outside of the scope of the judgment and may be retained by him.
Neither may the decision in the case of Carbonell vs. Court of Appeals (69 SCRA 99), also cited
by petitioner, be invoked to modify the clear provisions of the Civil Code of the Philippines that a
possessor in bad faith is not entitled to reimbursement of useful expenses or to removal of
useful improvements.
In said case, both the trial court and the Court of Appeals found that respondents Infantes were
possessors in good faith. On appeal, the First Division of this Court reversed the decision of the
Court of Appeals and declared petitioner Carbonell to have the superior right to the land in

question. On the question of whether or not respondents Infantes were possessors in good faith
four Members ruled that they were not, but as a matter of equity allowed them to remove the
useful improvements they had introduced on the land. Justice Teehankee (now Chief Justice)
concurred on the same premise as the dissenting opinion of Justice Munoz Palma that both the
conflicting buyers of the real property in question, namely petitioner Carbonell as the first buyer
and respondents Infantes as the second buyer, may be deemed purchasers in good faith at the
respective dates of their purchase. Justice Munoz Palma dissented on the ground that since
both purchasers were undoubtedly in good faith, respondents Infantes' prior registration of the
sale in good faith entitled them to the ownership of the land. Inasmuch as only four Members
concurred in ruling that respondents Infantes were possessors in bad faith and two Members
ruled that they were possessors in good faith said decision does not establish a precedent.
Moreover, the equitable consideration present in said case are not present in the case at bar.
WHEREFORE, the decision of the appellate court is affirmed with costs against petitioner.
SO ORDERED.
Fernan, Gutierrez, Jr., Paras and Cruz, JJ., concur.
Alampay, ** J., took no part.

G.R. No. 77266 July 19, 1989

ARTHUR PAJUNAR and INVENCIA PAJUNAR, petitioners,
vs.
HON. COURT OF APPEALS, MAURO ELUNA and TEOFILA ELUNA, respondents.

PARAS, J.:
This is a petition for review on certiorari seeking to set aside the decision of the Second Division
of the Court of Appeals ** in C.A. G.R. No. SP. 02247 (UDK 7544), entitled "Arthur & Invencia
Pajunar v. Hon. Pedro Gabaton, Judge, RTC, Branch XLI, Negros Oriental, Mauro Eluna and
Teofila Eluna" for Recovery of Personal Property with Writ of Replevin which affirmed the Order
of the aforenamed Regional Trial Court of Negros Oriental *** which reads:
This is a case of Recovery of Personal Property with a Writ of Replevin filed by
one Arthur and Invencia Pajunar as plaintiffs, against one Mauro and Teofila
Eluna as defendants, tried and decided by the Municipal Court of Siaton.
The decision is in favor of the defendants and against the plaintiffs apparently
based primarily on the preponderance of evidence and prescription.
Upon close reading of the exhaustive memorandum submitted by each of the
parties in this case and a close perusal of all the evidences on record and
checking them against the decision itself appealed, this court is of the opinion
and so holds that the grounds upon which this decision is based are well taken,
so that there is nothing that this court can add neither can deduct for the same
conforms to the thinking of this court.
WHEREFORE, premises considered, the appealed decision of the above-entitled
case rendered by the Municipal Court of Siaton is hereby affirmed. (Rollo, p. 9)
The facts of the case as found by public respondent Court of Appeals are as follows:
Sometime in 1969, respondent Mauro Eluna bartered his three-year old male cow for one year
old female carabao then in the possession of Aurelio Enopia. The female carabao, which is the
one in question, bore the brand "ART" in her front and hind legs at the time she was acquired by
Mauro. Although the animal was branded, said respondent did not or could not register the
transfer to him.
In March, 1980, petitioner Arthur Pajunar learned that the disputed carabao was in the
possession of respondent Eluna. Claiming that he was the original owner of the carabao which
got lost in 1974, petitioner demanded her return. He demanded also the delivery to him of the
two offsprings of the carabao which were five years and eight months old at the time they were
registered in 1980. When Eluna refused to do so despite repeated demands, petitioner went to
court to recover possession (Rollo, pp. 10-11).

From the adverse order of the Regional Trial Court, plaintiff appealed to public respondent Court
of Appeals.
In its decision dated October 30, 1986, the Court of Appeals affirmed the decision of the lower
court, with appellate tribunal declaring:
Consequently, since respondent Eluna had possessed the carabao since 1969,
that is, for more than ten (10) years, he acquired ownership by prescription under
Article 1132 of the Civil Code.
ART. 1132. The ownership of movables prescribes through uninterrupted
possession for four years in good faith.
The ownership of personal property also prescribes through uninterrupted
possession for eight years, without need of any other condition.
With regard to the right of the owner to recover personal property lost or of which
he has been illegally deprived, as well as with respect to movables acquired in a
public sale, fair or market, or from a merchant's store, the provisions of articles
559 and 1505 of this Code shall be observed. (1955a).
On March 23, 1987, the Court resolved, after considering the pleadings filed by both respondent
and petitioner, to give due course to the petition.
The three assignments of error raised by the petitioner (Rollo, p. 4) in this case, may be reduced
to one main issue:
Whether or not the findings of the lower court which were affirmed by the Court of
Appeals are supported by substantial evidence.
Petitioner contends that private respondent Eluna has failed to establish his ownership of the
mestisa carabao found in his possession. Since the female carabao bears the brand "ART" on
the fore and hind legs of the animal as branded by petitioners before it got lost (Rollo, p. 4),
failure of defendant Mauro Eluna to register in his name the said carabao, constitutes a flaw in
his ownership as required by law (Rollo, pp. 10-11).
Private respondents claim that the female carabao has been in their possession for more than
ten (10) years as the subject carabao was acquired by the defendants now respondents through
barter from one Aurelio Enopia in 1969. The incident was discovered by the plaintiffs only in
March, 1980. Hence respondents acquired ownership of said carabao by prescription under
Article 1132 of the Civil Code (Rollo, p. 12) as found by public respondent Court of Appeals.
The trial court's findings of facts carry great weight for having the advantage of having examined
the deportment and demeanor of the witnesses. The only exception to the rule is when the trial
court plainly overlooked certain facts and circumstances of weight and influence which, if
considered, will materially alter the result of the case (People v. Ramos, 153 SCRA 276 [1987];
People v. Camay, 152 SCRA 401 [1987]).

A careful examination of the records shows that there are circumstances of substance and
value which were overlooked and which affect the result of the case.
This can be gleaned from the decision of the Court of Appeals, when it stated:
In issuing the foregoing order, the respondent Judge apparently relied on the
findings of fact and conclusions of law made by the Municipal Court of Siaton,
Negros Oriental. Unfortunately, the decision of the Municipal Court was wanting
in many respects particularly in its findings. It failed, for instance, to make a
determination of certain factual matters which could have helped in the faster
disposition of the case. Instead of general statements explaining why he was
adopting the decision of the Municipal Court, it would have been better if the
respondent Judge had made his own finding and analysis of the evidence on
record. This was called for because the respondent Judge was acting in the
exercise of the appellate jurisdiction of his court. (Emphasis supplied) (Rollo, p.
10)
Well-settled is the rule that findings of facts of the Appellate Court are generally binding on this
Court (People v. Atanacio, 128 SCRA 22 [1984] Aguirre v. People, 155 SCRA 337 [1987]; Cue
Bie v. Intermediate Appellate Court, 154 SCRA 599 [1987]). However, there are exceptions to
the general rule that findings of facts of the Court of Appeals are binding upon the Supreme
Court as when the Court of Appeals clearly misconstrued and misapplied the law, drawn from
incorrect conclusions of fact established by evidence and otherwise at certain conclusions which
are based on misapprehension of facts and pure conjectures, and made inferences which are
manifestly mistaken and absurd (Chase v. Buencamino, Jr., 136 SCRA 365 [1985]; Baliwag
Transit, Inc. v. CA, 147 SCRA 82 [1987]; International Harvester, Inc. v. Joson & CA, 149 SCRA
641 [1987]; Maclan v. Santos, 156 SCRA 542 [1987]; Mendoza v. CA, 156 SCRA 597 [1987]).
From the records it is clear that although the animal was branded "ART" in her front and hind
legs at the time she was acquired by respondent Mauro, said respondent did not or could not
register the transfer to him in accordance with Section 529 of the Revised Administrative Code
(Rollo, p. 11).
Section 529 of the Revised Administrative Code provides:
Registration necessary to validity of transfer. No transfer shall be valid unless the
same is registered and a certificate of transfer obtained as herein provided, but
the large cattle under two years of age may be registered and branded gratis for
the purpose of effecting a valid transfer, if the registration and transfer are made
at the same time.
The records show that respondents did not comply with this requirement (Petition, p. 2; Rollo, p.
3). Respondents are not possessors in good faith, as a possessor in good faith is one not aware
that there exists in his title or mode of acquisition any flaw which invalidates it. Furthermore,
failure of a party to exercise precaution to acquaint himself with the defects in the title of his
vendor precludes him claiming possession in good faith (Caram v. Laureta, 103 SCRA [1981]
cited in Manotok Realty, Inc. v. Court of Appeals, 134 SCRA 325 [1985]).

This duty to make a closer inquiry into the certificate of registration of the female carabao which
was the subject of the barter, defendant Mauro Eluna should have performed but did not. Thus,
his being in bad faith, in acquiring the carabao from his vendor, Aurelio Enopia.
Thus, as has been stressed by this Court:
A purchaser cannot close his eyes to facts which should put a reasonable man
upon his guard, and then claim that he acted in good faith under the belief that
there was no defect in the title of the vendor. His mere refusal to believe that
such defect exists, or his willful closing of the eyes to the possibility of the
existence of a defect in his vendor's title will not make him an innocent purchaser
for value, if it afterwards develops that the title was in fact defective and it
appears that he had such notice of the defect would have led to its discovery had
he acted with the measure of precaution which may reasonably be required of a
prudent man in a like situation. (Leung Lee v. Strong, 37 Phil. 644, see also
Emos v. Zusuarregui, 53 Phil. 197, cited in Francisco v. Court of Appeals, 153
SCRA 330).
It is clear from the foregoing that possession in good faith for four (4) years is not applicable,
neither can possession in bad faith of eight (8) years benefit respondents, for when the owner of
a movable has lost or has been illegally deprived of his property he can recover the same
without need to reimburse the possessor, as provided in Art. 559 of the Civil Code which states:
Art. 559. The possession of movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully
deprived, has acquired it in good faith at a public sale, the owner cannot obtain
its return without reimbursing the price paid therefor. (464a)
Neither can Art. 716 of the Civil Code apply, for this article evidently refers to a possessor in
good faith. Art. 716 say:
The owner of a swarm of bees shall have a right to pursue them to another's
land, indemnifying the possessor of the latter for the damage. If the owner has
not pursued the swarm, or ceases to do so within two consecutive days, the
possessor of the land may occupy or retain the same. The owner of
domesticated animals may also claim them within twenty days to be counted
from their occupation by another person. This period having expired, they shall
pertain to him who has caught and kept them. (612a)
PREMISES CONSIDERED, the decision of the Court of Appeals in CA-G.R. SP No. 02247 is
REVERSED and SET ASIDE and petitioners Arthur Pajunar and Invencia Pajunar are declared
the owners of the carabaos in question.
SO ORDERED.
Melencio-Herrera, (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

G.R. No. 80298 April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,
vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and
style of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents.
Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.
Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.:
The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
particular question of when a person may be deemed to have been "unlawfully deprived" of
movable property in the hands of another. The article runs in full as follows:
Art. 559. The possession of movable property acquired in good faith is equivalent
to a title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully
deprived has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor.
The movable property in this case consists of books, which were bought from the petitioner by
an impostor who sold it to the private respondents. Ownership of the books was recognized in
the private respondents by the Municipal Trial Court, 1 which was sustained by the Regional
Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to
declare that all these courts have erred and should be reversed.
This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz
placed an order by telephone with the petitioner company for 406 books, payable on
delivery. 4 EDCA prepared the corresponding invoice and delivered the books as ordered, for
which Cruz issued a personal check covering the purchase price of P8,995.65. 5 On October 7,
1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the
seller's ownership from the invoice he showed her, paid him P1,700.00. 6
Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had claimed to
be a dean and was informed that there was no such person in its employ. Further verification
revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against
which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and
arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Pea
and his sale of 120 of the books he had ordered from EDCA to the private
respondents. 8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN
Avenue, which forced their way into the store of the private respondents and threatened Leonor
Santos with prosecution for buying stolen property. They seized the 120 books without warrant,
loading them in a van belonging to EDCA, and thereafter turned them over to the petitioner. 9
Protesting this high-handed action, the private respondents sued for recovery of the books after
demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and
the petitioner, after initial refusal, finally surrendered the books to the private respondents. 10 As
previously stated, the petitioner was successively rebuffed in the three courts below and now
hopes to secure relief from us.
To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in
taking the law into its own hands and forcibly recovering the disputed books from the private
respondents. The circumstance that it did so with the assistance of the police, which should
have been the first to uphold legal and peaceful processes, has compounded the wrong even
more deplorably. Questions like the one at bar are decided not by policemen but by judges and
with the use not of brute force but of lawful writs.
Now to the merits
It is the contention of the petitioner that the private respondents have not established their
ownership of the disputed books because they have not even produced a receipt to prove they
had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559 provides
that "the possession of movable property acquired in good faith is equivalent to a title," thus
dispensing with further proof.
The argument that the private respondents did not acquire the books in good faith has been
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of
the books from the EDCA invoice showing that they had been sold to Cruz, who said he was
selling them for a discount because he was in financial need. Private respondents are in the
business of buying and selling books and often deal with hard-up sellers who urgently have to
part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the
many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in the
business of buying and selling books to buy them at a discount and resell them for a profit.
But the real issue here is whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.
In its extended memorandum, EDCA cites numerous cases holding that the owner who has
been unlawfully deprived of personal property is entitled to its recovery except only where the
property was purchased at a public sale, in which event its return is subject to reimbursement of
the purchase price. The petitioner is begging the question. It is putting the cart before the horse.
Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been
unlawfully deprived of the books.
The petitioner argues that it was, because the impostor acquired no title to the books that he
could have validly transferred to the private respondents. Its reason is that as the payment
check bounced for lack of funds, there was a failure of consideration that nullified the contract of
sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the
parties on the subject matter and the consideration. According to the Civil Code:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to
the provisions of the law governing the form of contracts.
xxx xxx xxx
Art. 1477. The ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof.
Art. 1478. The parties may stipulate that ownership in the thing shall not pass to
the purchaser until he has fully paid the price.
It is clear from the above provisions, particularly the last one quoted, that ownership in the thing
sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to
that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee
upon the actual or constructive delivery of the thing sold even if the purchase price has not yet
been paid.
Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of
the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to
another.
In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics to Francisco Ang,
who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the
recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying for
the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive Asiatic
the Court of Appeals declared:
Yet the defendant invoked Article 464 12 of the Civil Code providing, among other
things that "one who has been unlawfully deprived of personal property may
recover it from any person possessing it." We do not believe that the plaintiff has
been unlawfully deprived of the cartons of Gloco Tonic within the scope of this
legal provision. It has voluntarily parted with them pursuant to a contract of
purchase and sale. The circumstance that the price was not subsequently paid
did not render illegal a transaction which was valid and legal at the beginning.
In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to
Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff
sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived
of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held:
The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been
unlawfully deprived of her car. At first blush, it would seem that she was
unlawfully deprived thereof, considering that she was induced to part with it by

reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling,

like robbery, is an illegal method of deprivation of property. In a manner of
speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by
which Warner L. Feist induced her to part with it is illegal and is punished by law.
But does this "unlawful deprivation" come within the scope of Article 559 of the
New Civil Code?
xxx xxx xxx
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a
voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is
susceptible of either ratification or annulment. If the contract is ratified, the action
to annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed
from all its defects (Article 1396, N.C.C.); if the contract is annulled, the
contracting parties are restored to their respective situations before the contract
and mutual restitution follows as a consequence (Article 1398, N.C.C.).
However, as long as no action is taken by the party entitled, either that of
annulment or of ratification, the contract of sale remains valid and binding. When
plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said
voidable contract of sale, the title to the car passed to Feist. Of course, the title
that Feist acquired was defective and voidable. Nevertheless, at the time he sold
the car to Felix Sanchez, his title thereto had not been avoided and he therefore
conferred a good title on the latter, provided he bought the car in good faith, for
value and without notice of the defect in Feist's title (Article 1506, N.C.C.). There
being no proof on record that Felix Sanchez acted in bad faith, it is safe to
assume that he acted in good faith.
The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied
to the case before us.
Actual delivery of the books having been made, Cruz acquired ownership over the books which
he could then validly transfer to the private respondents. The fact that he had not yet paid for
them to EDCA was a matter between him and EDCA and did not impair the title acquired by the
private respondents to the books.
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be
interpreted in the manner suggested by the petitioner. A person relying on the seller's title who
buys a movable property from him would have to surrender it to another person claiming to be
the original owner who had not yet been paid the purchase price therefor. The buyer in the
second sale would be left holding the bag, so to speak, and would be compelled to return the
thing bought by him in good faith without even the right to reimbursement of the amount he had
paid for it.
It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the
books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed
her assured her that the books had been paid for on delivery. By contrast, EDCA was less than
cautious in fact, too trusting in dealing with the impostor. Although it had never transacted
with him before, it readily delivered the books he had ordered (by telephone) and as readily
accepted his personal check in payment. It did not verify his identity although it was easy

enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated
in the sales invoice issued to him, by the printed terms thereon, that the books had been paid
for on delivery, thereby vesting ownership in the buyer.
Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the
books being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz was
presumed under Article 559 by his mere possession of the books, these being movable
property, Leonor Santos nevertheless demanded more proof before deciding to buy them.
It would certainly be unfair now to make the private respondents bear the prejudice sustained by
EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss
to the Santoses who had acted in good faith, and with proper care, when they bought the books
from Cruz.
While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the
private respondents but against Tomas de la Pea, who has apparently caused all this trouble.
The private respondents have themselves been unduly inconvenienced, and for merely
transacting a customary deal not really unusual in their kind of business. It is they and not
EDCA who have a right to complain.
WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs
against the petitioner.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. L-20264 January 30, 1971

CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners,
vs.
HON. COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B.
GUEVARA, respondents.
Deogracias T. Reyes and Jose M. Luison for petitioners.
Tolentino and Garcia and D.R. Cruz for private respondents.

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

owner the big diamond on Exhibit 1 was before the trial never dismantled. When dismantled,
defendant's diamond was found to weigh 2.57 cts."3
Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with the
judgment of the lower court being reversed. It is this decision now under review.
These are the facts as found by respondent Court of Appeals: "That the ring brought by the
parties for examination by Rafael Rebullida on December 14, 1953 was the same ring
purchased by plaintiff from R. Rebullida, Inc. on October 27, 1947 and stolen in February, 1952
has been abundantly established by plaintiff's evidence. Before plaintiff lost the ring, she had
been wearing it for six years and became familiar with it. Thus, when she saw the missing ring
in the finger of defendant, she readily and definitely identified it. Her identification was confirmed
by Mr. Rafael Rebullida, whose candid testimony is entitled to great weight, with his 30 years
experience behind him in the jewelry business and being a disinterested witness since both
parties are his customers. Indeed, defendant made no comment when in her presence
Rebullida after examining the ring and stock card told plaintiff that that was her ring, nor did she
answer plaintiff's letter of demand, ... asserting ownership. Further confirmation may be found in
the extra-judicial admissions, contained in defendant's original and first amended answers ..."4
These further facts likewise appeal therein: "The foregoing proof is not counter-balanced by the
denial on the part of defendant or the presentation of the ring, Exhibit I, which has a diamondsolitaire 2.57 cts., or much heavier than the lost diamond weighing 2.05 cts. only. It is
noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from whom
the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss Hinahon
did not even know her true and full name, nor her forwarding address. She appeared from
nowhere, boarded three months in the house of Miss Hinahon long enough to sell her diamond
ring, disappearing from the scene a week thereafter. Indeed, the case was terminated without
any hearing on the third-party and fourth-party complaints, which would have shown up the
falsity of defendant's theory. Moreover, Mrs. Baldomera Miranda, third-party defendant, who
tried to corroborate defendant on the latter's alleged attempt to exchange the ring defendant
bought through her, is [belied] by her judicial admission in her Answer that appellee `suggested
that she would make alterations to the mounting and structural design of the ring to hide the true
identity and appearance of the original one' (Cunanan vs. Amparo, 45 O.G. 3796). Finally,
defendant is refuted by her own extra-judicial admissions ... although made by defendant's
counsel. For an attorney who acts as counsel of record and is permitted to act such, has the
authority to manage the cause, and this includes the authority to make admission for the
purpose of the litigation... Her proffered explanation that her counsel misunderstood her is
puerile because the liability to error as to the identity of the vendor and the exchange of the ring
with another ring of the same value, was rather remote."5
It is in the light of the above facts as well as the finding that the discrepancy as to the weight
between the diamond-solitaire in Exhibit I and the lost diamond was due to defendant having
"substituted a diamond-solitaire of plaintiff with a heavier stone" that the decision was rendered,
respondent Court reversing the lower court and ordering defendant, now petitioner Consuelo S.
de Garcia, to return plaintiff's ring or fact value of P1,000.00 and costs, as well as to pay plaintiff
P1,000.00 as attorney's fee and P1,000.00 as exemplary damages. Hence this appeal.
To repeat, there is no occasion to reverse respondent Court. It correctly applied the law to the
facts as found.

1. The controlling provision is Article 559 of the Civil Code. It reads thus: "The possession of
movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost
any movable or has been unlawfully deprived thereof may recover it from the person in
possession of the same. If the possessor of a movable lost of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor." Respondent Angelina D. Guevara, having
been unlawfully deprived of the diamond ring in question, was entitled to recover it from
petitioner Consuelo S. de Garcia who was found in possession of the same. The only exception
the law allows is when there is acquisition in good faith of the possessor at a public sale, in
which case the owner cannot obtain its return without reimbursing the price. As authoritative
interpreted in Cruz v. Pahati, 6 the right of the owner cannot be defeated even by proof that
there was good faith by the acquisition by the possessor. There is a reiteration of this principle
in Aznar v. Yapdiangco.7 Thus: "Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another, is based on his being dispossessed
without his consent. The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by the another, the law imposes the loss upon the party who, by
his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case
which is covered by an express provision of the new Civil Code, specifically Article 559.
Between a common law principle and statutory provision, the latter must prevail in this
jurisdiction."8
2. It is thus immediately apparent that there is no merit to the contention raised in the first
assigned error that her possession in good faith, equivalent to title, sufficed to defeat
respondent Guevara's claim. As the above cases demonstrate, even on that assumption the
owner can recover the same once she can show illegal deprivation. Respondent Court of
Appeals was so convinced from the evidence submitted that the owner of the ring in litigation is
such respondent. That is a factual determination to which we must pay heed. Instead of proving
any alleged departure from legal norms by respondent Court, petitioner would stress Article 541
of the Civil Code, which provides: 'A possessor in the concept of owner has in his favor the legal
presumption that he possesses with a just title and he cannot be obliged to show or prove it."
She would accord to it a greater legal significance than that to which under the controlling
doctrines it is entitled.lwph1.t The brief for respondents did clearly point out why petitioner's
assertion is lacking in support not only from the cases but even from commentators. Thus:
"Actually, even under the first clause, possession in good faith does not really amount to title, for
the reason that Art. 1132 of the Code provides for a period of acquisitive prescription for
movables through `uninterrupted possession for four years in good faith' (Art. 1955 of the old
Spanish Code, which provided a period of three years), so that many Spanish writers, including
Manresa, Sanchez Roman, Scaevola, De Buen, and Ramos, assert that under Art. 464 of the
Spanish Code (Art. 559 of the New Civil Code), the title of the possessor is not that of
ownership, but is merely a presumptive title sufficient to serve as a basis of acquisitive
prescription (II Tolentino, Civil Code of the Phil. p. 258: IV Manresa, Derecho Civil Espaol, 6th
Ed., p. 380). And it is for the very reason that the title established by the first clause of Art. 559
is only a presumptive title sufficient to serve as a basis for acquisitive prescription, that the
clause immediately following provides that `one who has lost any movable or has been
unlawfully deprived thereof, may recover it from the person in possession of the same.' As
stated by the Honorable Justice Jose B. L. Reyes of this Court in Sotto vs. Enage (C.A.), 43 Off.
Gaz. 5075, Dec. 1947: `Article 559 in fact assumes that possessor is as yet not the owner; for it
is obvious that where the possessor has come to acquire indefeasible title by, let us say,
adverse possession for the necessary period, no proof of loss or illegal deprivation could avail
the former owner of the chattel. He would no longer be entitled to recover it under any
condition.' "9

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

litigants from resorting to fraudulent devices to frustrate the ends of justice, as defendant herein
tried to substitute the ring, Exhibit 1, for plaintiff's ring." 10 Considering the circumstances, the
cursory discussion of the sixth assigned error on the matter by petitioner fails to demonstrate
that respondent Court's actuation is blemished by legal defects.
WHEREFORE, the decision of respondent Court of Appeals of August 6, 1962 is hereby
affirmed. With costs.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor and
Makasiar JJ., concur.
Reyes, J.B.L., J., concurs in the result, Art. 85 of the Code of Commerce not being applicable.

G.R. No. L-30817 September 29, 1972

DOMINADOR DIZON, doing business under the firm name "Pawnshop of Dominador
Dizon", petitioner,
vs.
LOURDES G. SUNTAY, respondent.
Andres T. Velarde for petitioner.
Rafael G. Suntay for respondent.

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

ring, the latter finally delivered to the former the pawnshop ticket ... which is the receipt of the
pledge with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out that
Clarita R. Sison pledged, she took steps to file a case of estafa against the latter with the fiscal's
office. Subsequently thereafter, the plaintiff, through her lawyer, wrote a letter ... dated
September 22, 1962, to the defendant asking for the delivery to the plaintiff of her ring pledged
with defendant's pawnshop under pawnshop receipt serial-B No. 65606, dated June 15, 1962 ...
. Since the defendant refused to return the ring, the plaintiff filed the present action with the
Court of First Instance of Manila for the recovery of said ring, with P500.00 as attorney's fees
and costs. The plaintiff asked for the provisional remedy of replevin by the delivery of the ring to
her, upon her filing the requisite bond, pending the final determination of the action. The lower
court issued the writ of replevin prayed for by plaintiff and the latter was able to take possession
of the ring during the pendency of the action upon her filing the requisite bond." 3 It was then
noted that the lower court rendered judgment declaring that plaintiff, now respondent Suntay,
had the right to the possession of the ring in question. Petitioner Dizon, as defendant, sought to
have the judgment reversed by the Court of Appeals. It did him no good. The decision of May
19, 1969, now on review, affirmed the decision of the lower court.
In the light of the facts as thus found by the Court of Appeals, well-nigh conclusive on use, with
the applicable law being what it is, this petition for review cannot prosper. To repeat, the
decision of the Court of Appeals stands.
1. There is a fairly recent restatement of the force and effect of the governing codal norm in De
Gracia v. Court of Appeals. 4 Thus: "The controlling provision is Article 559 of the Civil Code. It
reads thus: 'The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may
recover it from the person in possession of the same. If the possessor of a movable lost of
which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the
owner cannot obtain its return without reimbursing the price paid therefor.' Respondent Angelina
D. Guevara, having been unlawfully deprived of the diamond ring in question, was entitled to
recover it from petitioner Consuelo S. de Garcia who was found in possession of the same. The
only exception the law allows is when there is acquisition in good faith of the possessor at a
public sale, in which case the owner cannot obtain its return without reimbursing the price. As
authoritatively interpreted in Cruz v. Pahati, the right of the owner cannot be defeated even by
proof that there was good faith in the acquisition by the possessor. There is a reiteration of this
principle in Aznar v. Yapdiangco. Thus: 'Suffice it to say in this regard that the right of the owner
to recover personal property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that were one of two innocent
persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party
who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in
a case which is covered by an express provision of the new Civil Code, specifically Article 559.
Between a common law principle and a statutory provision, the latter must prevail in this
jurisdiction." " 5
2. It must have been a recognition of the compulsion exerted by the above authoritative
precedents that must have caused petitioner to invoke the principle of estoppel. There is clearly
a misapprehension. Such a contention is devoid of any persuasive force.
Estoppel as known to the Rules of Court 6 and prior to that to the Court of Civil Procedure, 7 has
its roots in equity. Good faith is its basis. 8 It is a response to the demands of moral right and
natural justice. 9 For estoppel to exist though, it is indispensable that there be a declaration, act

or omission by the party who is sought to be bound. Nor is this all. It is equally a requisite that
he, who would claim the benefits of such a principle, must have altered his position, having
been so intentionally and deliberately led to comport himself thus, by what was declared or what
was done or failed to be done. If thereafter a litigation arises, the former would not be allowed to
disown such act, declaration or omission. The principle comes into full play. It may successfully
be relied upon. A court is to see to it then that there is no turning back on one's word or a
repudiation of one's act. So it has been from our earliest decisions. As Justice Mapa pointed out
in the first case, a 1905 decision, Rodriguez v. Martinez, 10 a party should not be permitted "to
go against his own acts to the prejudice of [another]. Such a holding would be contrary to the
most rudimentary principles of justice and law." 11 He is not, in the language of Justice Torres,
in Irlanda v. Pitargue, 12 promulgated in 1912, "allowed to gainsay [his] own acts or deny rights
which [he had] previously recognized." 13 Some of the later cases are to the effect that an
unqualified and unconditional acceptance of an agreement forecloses a claim for interest not
therein provided. 14 Equally so the circumstance that about a month after the date of the
conveyance, one of the parties informed the other of his being a minor, according to Chief
Justice Paras, "is of no moment, because [the former's] previous misrepresentation had already
estopped him from disavowing the contract. 15 It is easily understandable why, under the
circumstances disclosed, estoppel is a frail reed to hang on to. There was clearly the absence of
an act or omission, as a result of which a position had been assumed by petitioner, who if such
elements were not lacking, could not thereafter in law be prejudiced by his belief in what had
been misrepresented to him. 16 As was put by Justice Labrador, "a person claimed to be
estopped must have knowledge of the fact that his voluntary acts would deprive him of some
rights because said voluntary acts are inconsistent with said rights." 17 To recapitulate, there is
this pronouncement not so long ago, from the pen of Justice Makalintal, who reaffirmed that
estoppel "has its origin in equity and, being based on moral right and natural justice, finds
applicability wherever and whenever the special circumstances of a case so demand." 18
How then can petitioner in all seriousness assert that his appeal finds support in the doctrine of
estoppel? Neither the promptings of equity nor the mandates of moral right and natural justice
come to his rescue. He is engaged in a business where presumably ordinary prudence would
manifest itself to ascertain whether or not an individual who is offering a jewelry by way of a
pledge is entitled to do so. If no such care be taken, perhaps because of the difficulty of
resisting opportunity for profit, he should be the last to complain if thereafter the right of the true
owner of such jewelry should be recognized. The law for this sound reason accords the latter
protection. So it has always been since Varela v.
Finnick, 19 a 1907 decision. According to Justice Torres: "In the present case not only has the
ownership and the origin of the jewels misappropriated been unquestionably proven but also
that the accused, acting fraudulently and in bad faith, disposed of them and pledged them
contrary to agreement, with no right of ownership, and to the prejudice of the injured party, who
was thereby illegally deprived of said jewels; therefore, in accordance with the provisions of
article 464, the owner has an absolute right to recover the jewels from the possession of
whosoever holds them, ... ." 20 There have been many other decisions to the same effect since
then. At least nine may be cited. 21 Nor could any other outcome be expected, considering the
civil code provisions both in the former Spanish legislation 22 and in the present
Code. 23 Petitioner ought to have been on his guard before accepting the pledge in question.
Evidently there was no such precaution availed of. He therefore, has only himself to blame for
the fix he is now in. It would be to stretch the concept of estoppel to the breaking point if his
contention were to prevail. Moreover, there should have been a realization on his part that
courts are not likely to be impressed with a cry of distress emanating from one who is in a
business authorized to impose a higher rate of interest precisely due to the greater risk
assumed by him. A predicament of this nature then does not suffice to call for less than

undeviating adherence to the literal terms of a codal provision. Moreover, while the activity he is
engaged in is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of the
necessities precisely of that element of our population whose lives are blighted by extreme
poverty. From whatever angle the question is viewed then, estoppel certainly cannot be justly
invoked.
WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is affirmed, with costs
against petitioner.
Concepcion, C.J., Zaldivar, Makasiar, Antonio and Esguerra, JJ., concur.
Makalintal and Barredo, JJ., took no part.
Castro, J., reserves his vote.

G.R. No. L-18536

March 31, 1965

JOSE B. AZNAR, plaintiff-appellant,

vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.
REGALA, J.:
This is an appeal, on purely legal questions, from a decision of the Court of First Instance of
Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the
possession of the car in dispute.
The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised
in two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28,
1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos
residence to answer the ad. However, Teodoro Santos was out during this call and only the
latter's son, Irineo Santos, received and talked with De Dios. The latter told the young Santos
that he had come in behalf of his uncle, Vicente Marella, who was interested to buy the
advertised car.
On being informed of the above, Teodoro Santos instructed his son to see the said Vicente
Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting,
Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid
only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a
certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's
favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon
City where the registration of the car in Marella's name was effected. Up to this stage of the
transaction, the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration
papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them
until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then
proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former demanded the
payment from Vicente Marella. Marella said that the amount he had on hand then was short by
some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly
living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go
to the said sister and suggested that Irineo Santos go with him. At the same time, he requested
the registration papers and the deed of sale from Irineo Santos on the pretext that he would like
to show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to
the latter and thereupon, in the company of L. De Dios and another unidentified person,
proceeded to the alleged house of Marella's sister.

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

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

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

G.R. No. L-42856 January 27, 1981

REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, RICARDO RAMOS, PHILIPPINE NATIONAL
BANK and THE REGISTER OF DEEDS OF ISABELA, respondents.

CONCEPCION JR., J.:

Petition for certiorari. to review the decision of the Court of Appeals in CA-G.R. No. 40806-R,
entitled: "Republic of the Philippines, plaintiff-appellee, versus Ricardo Ramos, et al.,
defendants-appellants," dismissing the complaint which prays for the annulment of Homestead
Patent No. V-62617. the cancellation of Original Certificate of Title No. P-5619, issued in the
name of Ricardo Ramos by the Register of Deeds of Isabela, and the reversion to the State of
the homestead, together with the improvements made thereon.
The facts of the case, as found by the Court of Appeals, are as follows:
Sometime in 1928 or 1929, appellant 1 Ricardo Ramos filed Homestead
Application No. 229645 for a 3-hectare land, covering a portion of Cadastral Lot
No. 2222 within the Municipality of Rizal, Nueva Ecija (Exh. G, p. 10, Folder).
The application was approved and Homestead Entry No. 137238 was recorded
in his name only on June 22, 1940 (Exh. H, p. 11, folder).
Upon receipt of the approval of his application, appellant immediately filed his
final proof papers in 1941. However, due to the chaotic conditions during the last
global war, an the papers relative to his application were lost and/or destroyed,
necessitating their reconstitution. As a result, the defendant had to file anew his
final proof papers.
Pending approval of his homestead application in Rizal, Nueva Ecija, appellant
Ramos migrated to Isabela for additional lands to acquire and till. Fortunately for
him, he found a 14-hectare land covered by a subsisting Homestead Application
of one Simeon Lopez, which, however, was clearly abandoned by the said
applicant. With the assistance of the then District Land Officer, Atty. Agustin
Navarro, the appellant Ramos initiated a protest against Simeon Lopez in
accordance with the Public Land Law, simultaneously filing his own homestead
application therefor on September 20, 1947 (Exh. A). After due investigation, his
protest was given due course, and his homestead application (Homestead
Application No. 4-617), accepted and approved by the District Land Officer on
November 22, 1947 (Exh. 7).
Meanwhile, in the same year (December 27, 1947), the Bureau of Lands
approved the final proof and ordered the issuance of appellant's homestead
patent in Rizal, Nueva Ecija. On January 26, 1949, the corresponding
Homestead Patent No. V-1833 was finally issued (Exh. L, p. 15, Folder of Exh.)
and became the basis of Original Certificate of Title No. P-3619 that was later
registered in Ramos' name. Having thus obtained an indefeasible title over his 3-

hectare land in Rizal, Nueva Ecija, appellant now wanted to do likewise with his
second homestead application in San Mateo, Isabela. Hence, after the approval
of his second homestead application on November 22, 1947, he took possession
of the 14-hectare land in lsabela and by 1949, had fully complied with the
cultivation and residence requirement of the homestead law.
Finally, on December 3, 1954, after a protracted litigation with the former
applicant, Simeon Lopez, the Assistant Director of Lands approved appellant's
final proof and subsequently issued an order for the issuance of his patent on
December 13, 1955, Then, on December 15, 1955, Homestead Patent No. V62617 was ultimately issued in the name of Ricardo Ramos, which also became
the basis of Original Certificate of Title No. P-5619 that was correspondingly
issued by the Register of Deeds of Isabela. Said Original Certificate of Title No.
P-5619 was later used by the appellant as security for the payment of the loan
which he secured from his co-defendant, the Philippine National Bank.
After the issuance of his second homestead patent, Appellant Ramos discovered
the presence of several people in his land. Hence, he filed a complaint for the
recovery of possession against them (Civil Case No. Br. 11- 162 of the Court of
First Instance of Isabela, entitled "Ricardo Ramos v. Eleuterio Viernes et al.")
wherein a decision ordering the ejectment of the defendants were rendered.
Believing that they had a right to stay put in the land and acquire their respective
sub-lots, defendants, led by Jose Ganadin sent a petition to the Secretary of
Agriculture and Natural Resources. They alleged that Patent No. V-62617 and
Original Certificate No. P-5619 are null and void as they were obtained in
violation of Section 19 of the Public Land Law, as amended by Act No. 456.
They, therefore, demanded the cancellation of said patent and title and the
reversion of the property through the Solicitor General. In an order dated July 22,
1968, the Director of Lands acted favorably on their petition and accordingly
issued the following directive to wit:
IN THE LIGHT OF THE FOREGOING, it is ordered that the
Homestead Application No. 4-617 (E-4-610) of Ricardo Ramos be,
as it is hereby, cancelled and Patent No. V- 62617 issued to him
thereunder, declared inoperative over the land in question.
Accordingly, steps shall forthwith be taken for the filing in the
proper court, an action for the cancellation of said patent and the
corresponding certificate of title issued therefor. For the purpose
of the final disposition of the land, the District Land Officer of
Ilagan, Isabela shall conduct an immediate investigation in
accordance with Sections 6 and 7 of Lands Administrative Order
No. 6 and thereafter, submit the corresponding report to the office
within thirty (30) days from receipt hereof.
Hence, the institution of the present proceedings before the lower court.
After the filing of the original complaint on August 2, 1958, the plaintiff filed an
amended complaint adding another paragraph, alleging another supposed
disqualification of the appellant to own a second homestead. Paragraph 8-a
states:

That at the time (a) Homestead Application No. 4-167 E-4 610
(Exh. A) was approved on December 3, 1954; (b) defendant
Ricardo Ramos filed his Final Proof (Exh. "D") on January 31,
1954; (c) Homestead Patent No. V-62617 Exh. "F") was issued on
December 15, 1955; and (d) Original Certificate of Title No. P5619 (Exh. "9") was issued on December 24. 1955 in the name of
defendant Ricardo Ramos, all covering the lot involved in this
case located in San Mateo, Isabela, defendant Ricardo Ramos
was already as of August 4, 1952 the absolute owner of more than
eighty-eight (88) hectares of Friar Lands by virtue of Transfer
Certificate of Title No. T-3767 Exhs. "O", "O-1" to "O-7" and as
such, defendant Ricardo Ramos was disqualified under Sec. 12
of. CA 141, for a homestead entry under the provisions of said
Act, and which disqualification, defendant concealed when he
made his final proof (Exh. "D"), as he stated therein that he was
not the owner of more than twenty four hectares of land in the
Philippines, when in truth and in fact as he very well knew, he was
already the owner (of more than twenty four hectares of land in
the Philippines) in fee simple of more than 88 hectares of
agricultural lands, making defendant Ricardo Ramos liable to the
consequences of his concealment and/or false statement under
Sec. 91, Commonwealth Act 14 1. 2
After due trial, the lower court rendered judgment, the dispositive portion of which reads:
WHEREFORE, ALL PREMISES CONSIDERED, the court hereby renders
judgment (A) declaring defendant Ricardo Ramos' homestead patent and title,
Exhibits F and F-1, null and void ab initio; (B) ordering the reversion of the five
lots described in the said patent and title in favor of the Republic of the
Philippines; (C) ordering Ricardo Ramos to reconvey the title over the said five
subdivisional lot, free of the mortgages recorded in favor of the Republic of the
Philippines; (D) declaring the two mortgages executed by Ricardo Ramos as to
said five lots, OCT No. P-5619, in favor of the Philippine National Bank, Exhibits
4 and 8-Bank not valid as against the Republic of the Philippines; (E) declaring
the theater, stores and other improvements introduced by defendant Ricardo
Ramos, or their agents forfeited in favor of the Republic; and (F) ordering the five
lots described in the said patent and title be disposed of by the government in
public bidding under Title V, Chapter XI, Re: Town Site Reservations, giving the
seventeen defendants in Civil Case No. Br. 11-162, Ramos vs. Manuela Lachica,
et al., who are among the fifty petitioners in the letter Exhibit N and petition
Exhibit O, praying for the filing by the government of an action for the annulment
of the homestead patent and title of Ricardo Ramos and the reversion of the land
to the Government, the privilege and preference to equal the highest bid. 3
Upon appeal to the Court of Appeals, the decision was reversed and a new one was entered
dismissing the complaint. 4
Hence, the instant recourse.
The Solicitor General claims that the Court of Appeals erred:

(1) In declaring homestead patent No. V-62617 and OCT No. P-5619 validly
issued to respondent Ricardo Ramos despite the fact that at the time of the
issuance thereof, there was already entered in the name of said respondent
Homestead Patent No. V-1833 covering a parcel of land situated in Rizal, Nueva
Ecija with an area of 3 hectares, in violation -i of Sec. 19, Com. Act No. 141, as
amended;
(2) In not considering respondent Ricardo Ramos to have made false statements
in that he did not divulge in his application and in the final proof for the
Homestead Application covering a parcel of land in San Mateo, Isabela, with an
area of 14 hectares, that he has already secured an entry for a parcel of land in
Rizal, Nueva Ecija, and another 88 hectares or more of private agricultural lands
in Aurora, Isabela, in violation of Section 91 of Commonwealth Act No. 141, as
amended; and
(3) In not declaring the respondent Philippine National Bank in bad faith when it
accepted the land covered by OCT No. P-5619, issued pursuant to Homestead
Patent No. V- 62617, as collateral to a loan secured from it by respondent
Ricardo Ramos, thus making such transactions null and void.
1. The principal controversy is on the interpretation and application of the law governing the
acquisition of homesteads, more particularly Section 19 of the Public Land Law, Commonwealth
Act No. 141, as amended, which reads as follows:
SEC. 19. Not more than one homestead entry shall be allowed to any one
person, and no person to whom a homestead patent has been issued by virtue of
the provisions of this Act regardless of the area of his original homestead. may
again acquire a homestead; Provided, however, That any previous homesteader
who has been otherwise qualified to make a homestead entry, may be issued a
patent for less than twenty-four hectares and allowed another homestead, which,
together with his previous homestead shall not exceed an area of twenty-four
hectares.
The Solicitor General contends that said section forbids the acquisition by a person of another
homestead regardless of the area of his original homestead so that the respondent Ricardo
Ramos is disqualified from acquiring a second homestead in San Mateo, Isabela because of his
original homestead in Rizal, Nueva Ecija; and that while the law allows a homesteader to
acquire an additional homestead, the respondent Ricardo Ramos is not qualified to a second
homestead because he obtained the patent on his original homestead after the effectivity of
Commonwealth Act No. 456 on June 8, 1939 which amended Section 19 of Commonwealth Act
No. 141, not prior thereto, and the homesteads acquired by him are located in different
provinces, namely, Nueva Ecija and Isabela, which are far apart from each other and separated
by the province of Nueva Vizcaya. The Solicitor General argues that a homesteader may
acquire an additional homestead provided that he acquired his patent for an original homestead
before June 8, 1939; that the total area of both the original and additional homesteads does not
exceed 24 hectares; and that the land desired to be acquired as an additional homestead
should be in the same municipality where the original homestead is located or in an adjacent
municipality. To reinforce his argument, he cites the opinions of the late Sen. Vicente J.
Francisco, former Director of Lands Zoilo Castrillo, and ex-Land Registration Commissioner
Antonio Noblejas.

The contention is without merit. The language of the statute is very simple and clear. Section 19
of the Public Land Law, as amended, enunciates the rule that a homesteader is entitled to only
one homestead and he may not file another application for an additional homestead if he has
already been issued a homestead patent even if its total area is less than the maximum allowed
by law. However, a previous homesteader who is qualified to make a homestead entry, i.e.,
"Any citizen of the Philippines over the age of eighteen years, or head of a family who does not
own more than twenty-four hectares of land in the Philippines or who has not had the benefits of
any gratuitous allotment of more than twenty-four hectares of land in the Philippines since the
occupation of the Philippines by the United States," 5 but has not yet been issued a patent for
his homestead, may be issued a patent for his previous homestead and allowed another
homestead which, together with the previous homestead does not exceed twenty-four hectares.
It is essential, in order to be allowed another homestead, that the homesteader has not yet been
issued a homestead patent for his previous homestead at the time he filed his second
application for an additional homestead; and that the total area of both homesteads does not
exceed the maximum allowed by law. If the homesteader has already been issued a patent for
his previous homestead. he is disqualified from acquiring an additional homestead regardless of
the area of his previous homestead.
In this particular case, it is not disputed that the respondent Ricardo Ramos had not yet been
issued a patent for his homestead in Rizal, Nueva Ecija when he filed a homestead application
for that parcel of land in San Mateo, Isabela; and that the total area of both homesteads does
not exceed the maximum allowed by law. Accordingly, said respondents is not disqualified from
acquiring the additional homestead in San Mateo, Isabela.
With respect to the claim that the original and subsequent homestead should be located in the
same municipality or in an adjacent municipality, it is well to note that the original provisions of
Section 19 of the Public Land Law did, indeed, require that the land applied for as an additional
homestead should be in the same municipality where the original homestead is located or in an
adjacent municipality. Said section then provided, as follows:
SEC. 19. Not more than one homestead shall be allowed to any person; but if a
homesteader has made final proof as provided in this chapter and is occupying
and cultivating at least one-fifth of the land applied for and the area thereof is
less than twenty-four hectares, he may apply successively for additional
homesteads which must lie in the same municipality or municipal district or in an
adjacent municipality or municipal district, until the total area of said homesteads
shall reach twenty-four hectares, but not more, with the understanding that he
shall, with regard to the new tracts or additional homesteads, comply with the
same conditions as prescribed by this Act for an original homestead entry.
(Emphasis supplied)
Similar conditions were imposed for the purchase and lease of public agricultural lands. Thus,
Section 32 of the Public Land Law reads, as follows:
SEC. 32. This chapter shall be held to authorize only one purchase of the
maximum amount of land hereunder by the same person, corporation,
association, or partnership; and no corporation, association, or partnership, any
member of which shall have received the benefits of this chapter or of the next
following chapter, either as an individual or as a member of any other

corporation, association, or partnership, shall purchase any other lands of the

public domains under this chapter.
But any purchaser of public land, after having made the last payment upon and
cultivated at least one-fifth of the land purchased, if the same shall be less than
the maximum allowed by this Act, may purchase successively additional
agricultural public land adjacent to or not distant from the land first purchased,
until the total area of such purchases shall reach the maximum established in this
chapter:Provided, That in making such additional purchase or purchases, the
same conditions shall be complied with as prescribed by this Act for the first
purchase.
For leases of additional public agricultural lands, Section 42 of the Public Land Law provides, as
follows:
SEC. 42. After having paid rent for at least the first two years of the lease, and
having complied with the requirements prescribed in section thirty-nine, the
lessee of agricultural public land with an area less than the maximum allowed by
law, may lease successively additional agricultural public land adjacent to or near
the land originally leased until the total area of such leases shall reach the
maximum established in this chapter: Provided, That in making such lease, the
same conditions shall be complied with as prescribed by this Act for the first
lease.
But, while the provisions of Sections 32 and 42 were retained, Section 19 was radically changed
by Commonwealth Act No. 456. As amended, this section no longer requires that the additional
homestead should be in the same municipality where the original homestead is located in an
adjacent municipality. It is very obvious that the legislature purposely removed such
requirement. To give this section a limited connotation as to retain its previous meaning would
render the amendatory act of no value. Homestead laws, which are founded on considerations
of public policy, their purpose being to promote the stability and welfare of the State by
encouraging property ownership, should be construed liberally with a view to accomplishing
their beneficient object.
2. The petitioner also contends that the homestead patent covering the homestead in San
Mateo, Isabela is void because the respondent Ricardo Ramos made false statements in his
homestead application, as well as in the final proof, when he denied having filed a previous
homestead application although he had in fact filed a homestead application for the land in
Rizal, Nueva Ecija; and stated that he is not the owner of more than twenty-four hectares of land
in the Philippines although said "respondent Ramos was already issued TCT No. T-3767,
covering the 88 hectare lot in Aurora, Isabela on August 2, 1952, when (a) Homestead
Application No. 4-617 (Exh. "H") was approved on December 3, 1954; when (b) Homestead
Patent No. 61617 (Exh. "F") was issued on December 15, 1955, and when (c) Original
Certificate of Title No. P-5619, covering the 14-hectare lot in San Mateo, Isabela, was issued by
the Register of Deeds of Isabela on December 24, 1955, all in the name of respondent Ramos
(see par. 8-a Amended Complaint in Civil Case No. Br. II-391, pp. 223-224, Annex "D", Printed
Record on Appeal). 6 contrary to Section 91 of the Public Land Law which reads, as follows:
SEC. 91. The statements made in the application shall be considered as
essential conditions and parts of any concession, title, or permit issued on the

basis of such application, and any false statement therein or omission of facts
altering, changing, or modifying the consideration of the facts set forth in such
statements, and any subsequent modification, alteration or change of the
material facts set forth in the application shall ipso facto produce the cancellation
of the concession, title, or permit granted. It shall be the duty of the Director of
Lands, from time to time and whenever he may deem it advisable, to make the
necessary investigations for the purpose of ascertaining whether the material
facts set out in the application are true, or whether they continue to exist and are
maintained and preserved in good faith, and for the purposes of such
investigation, the Director of Lands is hereby empowered to
issue subpoenas and subpoena duces tecum and, if necessary, to obtain
compulsory process from the courts. In every investigation made in accordance
with this section, the existence of bad faith, fraud, concealment, or fraudulent and
illegal modification of essential facts shall be presumed if the grantee or
possessor of the land shall refuse or fail to obey a subpoena and subpoena
duces tecum lawfully issued by the Director of Lands or his authorized delegates
or agents, or shall refuse or fail to give direct and specific answers to pertinent
questions, and on the basis of such presumption, an order of cancellation may
issue without further proceedings.
The contention is likewise without merit. What section 91 of the Public Land Law considers as
fatal are false statements of material and essential facts knowingly made by the homesteader in
the application and not in the final proof. In the instant case, it appears that the respondent
Ricardo Ramos had only a primary education. He is not conversant with the law because he is
not a lawyer. When he filed his homestead application for that parcel of land situated in San
Mateo, Isabela, he was assisted by District Land Officer Agustin Navarro, whom he informed of
all the material facts, and his final proof was prepared by Public Lands Inspector Jose Abaya,
who had also knowledge of the facts necessary for its accomplishment, and he merely affixed
his signature to the documents. Since the erroneous information contained in the application are
the acts of persons who prepared the documents, rather than the wilfull and deliberate intent on
the part of the said respondent to conceal material facts and mislead the land officers, whatever
error may be found in the application are excused.
Anyhow, the total area of the original and the subsequent homesteads did not exceed the
maximum allowed by law and no damage resulted therefrom.
The respondent Ricardo Ramos could not have also made a false statement in his application
when he stated that he is not the owner of more than 24 hectares of land in the Philippines
because he was not yet the owner of the parcel of land situated in Aurora, Isabela when he filed
his homestead application for the land in San Mateo, Isabela, on November 22. 1947 since the
final deed of sale for the said land in Aurora, Isabela was issued to him only on May 22,1950.
3. Finally, it is claimed that the respondent Philippine National Bank is a mortgagee in bad faith
because it deliberately closed its eyes to the constructions and occupants of the land offered as
a security for a loan.
The Philippine National Bank, upon the other hand, contends that there is nothing in the
certificate of title of the mortgagor Ricardo Ramos which would excite suspicion so that the bank
need not look beyond the certificate and investigate the title of the mortgagor.

In the case of Conspecto vs. Fruto, 7 the Court ruled: "One who purchases real property which
is in the actual possession of others should, at least, make some inquiry concerning the rights of
those in possession. The actual possession by others than the vendor should, at least, put the
purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be regarded as a bona
fide purchaser as against such possessions." There can be no doubt, therefore, that the
Philippine National Bank is in bad faith. But, since the title of the respondent Ricardo Ramos
over the land mortgaged is valid, the mortgage constituted upon said land should be upheld
between the parties.
WHEREFORE, the petition should be, as it is hereby, DENIED for lack of merit. Without costs.
SO ORDERED.
Barredo (Chairman), Fernandez, * Guerrero,** and De Castro, JJ., concur.
Aquino and Abad Santos, JJ., took no part.

G.R. No. 96914 July 23, 1992

CECILIA U. LEDESMA, petitioner,
vs.
THE HON. COURT OF APPEALS, and JOSE T. DIZON, respondents.

NOCON, J.:
Petitioner Cecilia U. Ledesma prays before this Court for the reversal of the Decision of the
respondent Court of Appeals of August 30, 1990 1 ordering the dismissal of her ejectment
complaint before the Manila Metropolitan Trial Court for lack of cause of action due to noncompliance with Sections 6 and 9 of P.D. 1508 (Katarungang Pambarangay Law) as well as the
Resolution of January 7, 1991 2 denying petitioner's Motion for Reconsideration of said
Decision.
The facts of this case as summarized by the petitioner in her Memorandum are as follows:
Petitioner is the owner-lessor of an apartment building located at 800-802
Remedios Street, Malate, Manila. Two (2) units of said apartment building were
leased (now being unlawfully occupied) to private respondent at monthly rates of
P3,450.00 for the unit/apartment located at 800 Remedios Street, Malate, Manila
and P2,300.00 for the unit/apartment located at 802 Remedios Street, Malate,
Manila, respectively. . . .
Said lease was originally covered by written contracts of lease both dated
December 10, 1984 and except for the rates and duration, the terms and
conditions of said contracts were impliedly renewed on a "month-to-month" basis
pursuant to Article 1670 of the Civil Code.
One of the terms and conditions of the said Contract of Lease, that of monthly
rental payments, was violated by private respondent and that as of October 31,
1988, said private respondent has incurred arrears for both units in the total sum
of P14,039.00 for which letters of demand were sent to, and received by, private
respondent.
Upon failure of private respondent to honor the demand letters, petitioner
referred the matter to the Barangay for conciliation which eventually issued a
certification to file action. Petitioner was assisted by her son, Raymond U.
Ledesma, (who is not a lawyer) during the barangay proceeding as she was
suffering from recurring psychological and emotional ailment as can be seen
from the receipts and prescriptions issued by her psychiatrist, copies of which are
attached as Annexes "E-E10" of the said Petition.
Due to the stubborn refusal of the private respondent to vacate the premises,
petitioner was constrained to retain the services of counsel to initiate this
ejectment proceeding. 3

The Metropolitan Trial Court, Branch 10, Manila, rendered a decision on June 21, 1989 ordering
private respondent to vacate the premises, to pay rentals falling due after May 1989 and to pay
attorney's fees in the amount of P2,500.00. 4 The Regional Trial Court of Manila, Branch IX, on
appeal, affirmed the MTC ruling except for the award of attorney's fees which it reduced to
P1,000.00. 5
Private respondent, however, found favor with the respondent Court of Appeals when he
elevated the case in a Petition for Review, when it ruled, thus:
IN VIEW WHEREOF, the Decision dated October 13, 1989 of the RTC of Manila,
Br. IX in Civil Case No. 89-49672 is reversed and set aside and the Complaint for
Ejectment against petitioner is dismissed for lack of cause of action. No costs. 6
Thus, this appeal, raising several assignments of error, namely, that the Court of Appeals erred

1. In holding that private respondent raised the issue of non-compliance with

Sections 6 and 9 of P.D. 1508 in the lower court when in fact and in truth his
answer and position paper failed to do so, contrary to evidence on record;
2. In failing to consider that private respondent had waived his right to question
the lack of cause of action of the complaint, if there is any, contrary to law,
established jurisprudence, and evidence on record;
3. In giving undue weight and credence to the self-serving allegations of the
private respondent that summons was not served him, contrary to law,
established jurisprudence and evidence on record.
4. In disregarding the well-known principle of law that barangay authorities are
presumed to have performed their official duties and to have acted regularly in
issuing the certificate to file action and grossly and manifestly erred in making an
opposite conclusion to this effect, contrary to law, established jurisprudence and
evidence on record.
5. In not holding that the settlement was repudiated, contrary to law and evidence
on record.
6. In not affirming the judgment rendered by the Metropolitan Trial Court and
Regional Trial Court below.
Petitioner assails private respondent for raising the issue of non-compliance with Sections 6 and
9 of P.D. 1508 only in his petition for review with the appellate court and which mislead the court
to erroneously dismiss her complaint for ejectment.
Section 6 of P.D. 1508 states:
Sec. 6. Conciliation pre-condition to filing of complaint. No complaint, petition,
action or proceeding involving any matter within the authority of the Lupon as
provided in Section 2 hereof shall be filed or instituted in court or any other

government office for adjudication unless there has been a confrontation of the
parties before the Lupon Chairman or the Pangkat and no conciliation or
settlement has been reached as certified by the Lupon Secretary or the Pangkat
Secretary, attested by the Lupon or Pangkat Chairman, or unless the settlement
has been repudiated. . . .
xxx xxx xxx
while Section 9 states that:
Sec. 9. Appearance of parties in person. In all proceedings provided for
herein, the parties must appear in person without the assistance of
counsel/representative, with the exception of minors and incompetents who may
be assisted by their next of kin who are not lawyers.
Petitioner submits that said issue, not having been raised by private respondent in the court
below, cannot be raised for the first time on appeal, specially in the Court of Appeals,
citing Saludes vs. Pajarillo. 7 Private respondent had waived said objection, following the line of
reasoning in Royales vs. Intermediate Appelate Court. 8
Private respondent denies having waived the defenses of non-compliance with Sections 6 and 9
of P.D. 1508. His Answer before the Metropolitan Trial Court, specifically paragraphs 4, 7, & 8,
substantially raised the fact of non-compliance by petitioner with Sections 6 and 9 of P.D. 1508
and consequently, subjected petitioner's complaint to dismissal for lack of cause of action, to
wit:
xxx xxx xxx
4. Answering defendant denies the allegations of paragraph 8, the truth of the
matter being that he was not duly summoned nor subpoenaed by the Barangay
Chairman, who issued the alluded certification, to appear for hearing. 9
xxx xxx xxx
7. Plaintiff has no cause of action against answering defendant.
8. The certification to file action (annex D of the complaint) was improperly or
irregularly issued as the defendant was never summoned nor subpoenaed by the
Barangay Chairman to appear for hearing in connection with the alleged
complaint of the plaintiff. In effect the mandatory provision of P.D. 1508 was not
complied with warranting the dismissal of the instant complaint.
xxx xxx xxx 10
We do not agree with petitioner that the issue of non-compliance with Sections 6 and 9 of P.D.
1508 was raised only for the first time in the Court of Appeals. When private respondent stated
that he was never summoned or subpoenaed by the Barangay Chairman, he, in effect, was
stating that since he was never summoned, he could not appear in person for the needed
confrontation of the parties before the Lupon Chairman for conciliation and/or amicable

settlement. Without the mandatory personal confrontation, no complaint could be filed with the
MTC. Private respondent's allegation in paragraph 4 of his Answer that he was never
summoned or subpoenaed by the Barangay Chairman; that plaintiff has no cause of action
against him as alleged in paragraph 7 of the Answer; and that the certification to file action was
improperly issued in view of the foregoing allegations thereby resulting in non-compliance with
the mandatory requirements of P.D. No. 1508, as stated in paragraph 8 of the Answer are in
substantial compliance with the raising of said issues and/or objections in the court below.
Petitioner would like to make it appear to this Court that she appeared before the Lupon
Chairman to confront private respondent. She stated in her Petition 11 and her
Memorandum 12 that:
Upon failure of private respondent to honor the demand letters, petitioner
referred the matter to the barangay for conciliation which eventually issued a
certification to file action. Petitioner was assisted by her son, Raymond U.
Ledesma, (who is not a lawyer) during the barangay proceeding as she was
suffering from recurring psychological and emotional ailment as can be seen
from the receipt and prescriptions issued by her psychiatrist copies of which are
attached herewith as Annexes
"E-E10."
However, as found out by the respondent court:
We agree with the petitioner that private respondent Cecile Ledesma failed to
comply with section 6 of P.D. 1508. The record of the case is barren showing
compliance by the private respondent. Indeed, the documentary evidence of the
private respondent herself attached to the complaint buttresses this conclusion.
They show that it is not the private respondent but her son. Raymund U.
Ledesma, and her lawyer, Atty. Epifania Navarro who dealt with the petitioner
regarding their dispute. Thus, the demand letter dated October 18, 1988 sent to
the petitioner for payment of rentals in the sum of P14,039.00 was signed by
Raymund Ledesma. On the other hand, the demand letter dated November 14,
1988 was signed by Atty. Epifania Navarro. More telling is the Certification to File
Action signed by Barangay Chairman, Alberto A. Solis where it appears that the
complainant is Raymund U. Ledesma and not the private respondent. 13
As stated earlier, Section 9 of P.D. 1508 mandates personal confrontation of the parties
because:
. . . a personal confrontation between the parties without the intervention of a
counsel or representative would generate spontaneity and a favorable disposition
to amicable settlement on the part of the disputants. In other words, the said
procedure is deemed conducive to the successful resolution of the dispute at the
barangay level. 14
Petitioner tries to show that her failure to personally appear before the barangay Chairman was
because of her recurring psychological ailments. But for the entire year of 1988 15 specifically
September to December 6 there is no indication at all that petitioner went to see her
psychiatrist for consultation. The only conclusion is that 1988 was a lucid interval for petitioner.
There was, therefore, no excuse then for her non-appearance at the Lupon Chairman's office.

Petitioner, not having shown that she is incompetent, cannot be represented by counsel or even
by attorney-in-fact who is next of kin. 16
As explained by the Minister of Justice with whom We agree:
To ensure compliance with the requirement of personal confrontation between
the parties, and thereby, the effectiveness of the barangay conciliation
proceedings as a mode of dispute resolution, the above-quoted provision is
couched in mandatory language. Moreover, pursuant to the familiar maxim in
statutory construction dictating that "expressio unius est exclusio alterius", the
express exceptions made regarding minors and incompetents must be construed
as exclusive of all others not mentioned. 17
Petitioner's non-compliance with Secs. 6 and 9 of P.D. 1508 legally barred her from pursuing
the ejectment case in the MTC of Manila. 18 Having arrived at this conclusion, there is no need
for Us to discuss the other issues involved.
WHEREFORE, the questioned decision and resolution of the respondent Court are affirmed in
toto with treble costs against petitioner.
SO ORDERED.
Narvasa, C.J., Padilla and Regalado, JJ., concur.