PROPERTY

CASES:
A. PUBLIC PROPERTY
CASE DIGEST
1. Province
of Zamboanga
del
Norte vs Zamboanga City 22
SCRA 1334
Facts:
Prior to its incorporation as a chartered city,
the Municipality of Zamboanga used to be
the provincial
capital
of
the
then
ZamboangaProvince.On October 12, 1936,
Commonwealth Act 39 was approved
converting the Municipality of Zamboanga
into ZamboangaCity. Sec. 50 of the Act also
provided that

Buildings and properties which the province

shall abandon upon the transfer of the
capital to another place will be acquired
and paid for by the City of Zamboanga at a
price to be fixed by the Auditor General.
The properties and buildings referred to
consisted of 50 lots and some buildings
constructed there on, located in the City of
Zamboanga and covered individually by
Torrens certificates of title in the name of
Zamboanga Province. On June 6, 1952,
Republic Act 711 was approved dividing the
province of Zamboanga into two (2):
Zamboanga del Norte and Zamboanga del
Sur. Properties and the obligations of
the province of Zamboanga shall be divided
equitably
between
the
Province of Zamboanga del Norte and the
Province of Zamboanga del Sur by the
President of the Philippines, upon the
recommendation of the Auditor General.
However, on June 17, 1961, Republic Act
3039 was approved amending Sec. 50 of
Commonwealth Act 39 by providing that

all buildings,
properties
and
assets
belonging to the former province of
Zamboanga and located within the City of
Zamboanga are hereby transferred, free of
charge, in favor of the said City
of Zamboanga.

Issue: WON Zamboanga del Norte is

deprived of its private properties without
due process and just compensation.
Ruling: The fact that the 26 lots are
registered strengthens the proposition that
they are truly private in nature. On the
other hand, that the 24 lots used
for governmental
purposes
are
also
registered is of no significance since
registration cannot convert public property
to private. Applying, Art.424 of NCC, all the
properties in question, except the two (2)
lots used as High School playgrounds, could
be considered as patrimonial properties of
the former Zamboanga province. Even the
capital site, the hospital and leprosarium
sites, and the school sites will be
considered patrimonial for they are not for
public use. They would fall under the
phrase "public works for public service"
PROVINCE OF ZAMBOANGA DEL NORTE
VS. CITY OF ZAMBOANGA, digested
FACTS: After the incorporation of the
Municipality of Zamboanga as a chartered
city, petitioner province contends that
facilities belonging to the latter and located
within the City of Zamboanga will be
acquired and paid for by the said city.
However, respondent city avers that
pursuant to RA No. 3039 providing for the
transfer free of charge of all buildings,
properties and assets belonging to the
former province of Zamboanga and located
within the City of Zamboanga to the said
City.
ISSUE: Whether or not facilities which the
province shall abandon will be acquired by
the city upon just compensation.
HELD: Yes, If the property is owned by the
municipality in its public and governmental
capacity, the property is public and can be
transferred free of charge. But if the
property is owned in its private or
proprietary capacity, then it is patrimonial
and can be expropriated upon payment of
just compensation.
2. RAFAEL S. SALAS, in his capacity
as
Executive
Secretary;
CONRADO F. ESTRELLA, in his
capacity as Governor of the Land
Authority; and LORENZO GELLA,
in his capacity as Register of

Deeds
of
appellants, vs.

Manila, petitioners-

HON. HILARION U. JARENCIO, as

Presiding Judge of Branch XXIII,
Court of First Instance of Manila;
ANTONIO
J.
VILLEGAS,
in
his
capacity as Mayor of the City of
Manila;
and
the
CITY
OF
MANILA, respondents-appellees.
Facts:
City of Manila owner in fee simple of a
parcel of land known as Lot 1, Block 557 of
Cadastral Survey of City of Manila,
containing an area of 9689.80 sqm. On
various dates in 1927, City of Manila sold
portions of the parcel of land. When the last
sale was effected August 1924, Transfer
Certificate of Title 22547 covering the
residue of the land 7490.10 sam was issued
in the name of City of Manila.
On September 1960, Municipal Board of
Manila adopted a resolution requesting the
President to consider the feasibility of
declaring
the
land
under
Transfer
Certificate of
Title 25545-25547 as
patrimonial property of Manila for the
purpose of selling these lots to the actual
occupants thereof. The resolution was then
transmitted to the Congress. The bill was
then passed by Congress and approved by
President, and became Republic Act 4118,
converting the land from communal
property to disposable and alienable land of
State.
To implement RA 4118, Land Authority
requested City of Manila to deliver the
Citys TCT 22547 in order to obtain title
thereto in the name of Land Authority. The
request was granted with the knowledge
and consent of City mayor, cancelling TCT
22547 and issuing TCT 80876 in the name
of Land Authority.
City of Manila, for some reasons, brought
an action to restrain, prohibit, and enjoin
Land Authority and Register of Deeds from
implementing RA 4118, and praying for the
declaration of RA 4118 as unconstitutional.

Trial court declared RA 4118 to be

unconstitutional and invalid on the ground
that it deprived City of its property without
due process of law and payment of just
compensation.
Land Authority and Register of Deeds
argued that the land is a communal land, or
a portion of public domain owned by State;
that the land has not been used by City of
Manila for any public purpose; that it was
originally a communal land not because it
was needed in connection with its
organisation as a municipality but rather for
the common use of its inhabitants; that the
City mayor merely enjoys the usufruct over
said land and its exercise of acts of
ownership by selling parts thereof did not
necessarily convert the land into a
patrimonial property of City of Manila nor
divert the State of its paramount title.
Issue:
Whether the aforementioned land is a
private or patrimonial property of the City
of Manila.
Held: The land is public property.
As a general rule, regardless of the source
or classification of the land in the
possession of municipality, excepting those
which it acquired in its own funds in its
private or corporate capacity, such
property is held for the State for the benefit
of its inhabitants, whether it be for
governmental or proprietary purposes. The
legal situation is the same if the State itself
holds the property and puts it to a different
use.
When it comes to property of municipality
which it did not acquire in its private or
corporate capacity with its own funds (the
land was originally given to City by Spain),
the
legislature
can
transfer
its
administration and disposition to an agency
of the National Government to be disposed
of according to its discretion. Here it did so
in obedience to the constitutional mandate
of promoting social justice to insure the
well-being and economic security of the
people.

The property was not acquired by the City

of Manila with its own funds in its private or
proprietary capacity. The land was part of
the territory of City of Manila granted by
sovereign in its creation. Furthermore, City
expressly recognised the paramount title of
the State over its land when it requested
the President to consider the feasibility of
declaring the lot as patrimonial property for
selling.
There could be no more blatant recognition
of the fact that said land belongs to the
State and was simply granted in usufruct to
the City of Manila for municipal purposes.
But since the City did not actually use said
land for any recognized public purpose and
allowed it to remain idle and unoccupied for
a long time until it was overrun by
squatters, no presumption of State grant of
ownership in favor of the City of Manila
may be acquiesced in to justify the claim
that it is its own private or patrimonial
property.
WHEREFORE, the appealed decision is
hereby reversed, and petitioners shall
proceed with the free and untrammeled
implementation of Republic Act No. 4118
without any obstacle from the respondents.
Without costs.
3. CHAVEZ
V.
PUBLIC
AUTHORITY 384 SCRA 152

ESTATES

FACTS:
President Marcos through a presidential
decree created PEA, which was tasked
with the development, improvement,
and acquisition, lease, and sale of all
kinds of lands. The then president also
transferred to PEA the foreshore and
offshore lands of Manila Bay under the
Manila-Cavite
Coastal
Road
and
Reclamation
Project.
Thereafter, PEA was granted patent to
the reclaimed areas of land and then,
years later, PEA entered into a JVA with
AMARI for the development of
the
Freedom Islands.
These two entered

into a joint venture in the absence of

any
public
bidding.
Later, a privilege speech was given
by
Senator
President
Maceda
denouncing the JVA as the grandmother of
all scams. An investigation was conducted
and it was concluded that the lands that
PEA was conveying to AMARI were lands
of the public domain; the certificates of
title
over
the
Freedom Islands were void; and the JVA
itself was illegal. This prompted Ramos to
form an investigatory committee on the
legality
of
the
JVA.
Petitioner now comes and contends that
the government stands to lose billions
by the conveyance or sale of the
reclaimed areas to AMARI.
He also
asked for the full disclosure of the
renegotiations happening between the
parties.
ISSUE:
W/N stipulations in the amended JVA
for the transfer to AMARI of the lands,
reclaimed or to be reclaimed, violate the
Constitution.
HELD:
The ownership of lands reclaimed from
foreshore and submerged areas is rooted in
the Regalian doctrine, which holds that the
State owns all lands and waters of the
public
domain.
The 1987 Constitution recognizes the
Regalian doctrine. It declares that all
natural resources are owned by the
State
and
except
for
alienable
agricultural lands of the public domain,
natural resources cannot be alienated.
The Amended JVA covers a reclamation
area of 750 hectares. Only 157.84 hectares
of the 750 hectare reclamation project have
been reclaimed, and the rest of the area
are still submerged areas forming part of
Manila Bay. Further, it is provided that
AMARI will reimburse the actual costs in

reclaiming the areas of land and it will

shoulder the other reclamation costs to be
incurred.
The foreshore and submerged areas of
Manila Bay are part of the lands of the
public domain, waters and other natural
resources and consequently owned by the
State. As such, foreshore and submerged
areas shall not be alienable unless they
are classified as agricultural lands of
the public domain. The mere reclamation
of these areas by the PEA doesnt convert
these inalienable natural resources of
the State into alienable and disposable
lands of the public domain. There must be
a
law
or
presidential
proclamation officially classifying these
reclaimed
lands
as
alienable
and
disposable if the law has reserved
them for some public or quasi-public
use.

CEBU OXYGEN AND ACETYLENE CO. V.

BERCILLES 66 SCRA 431
FACTS:
The land sought to be registered in
this case was formerly a part of a
street.
Through a resolution, it was
declared to be an abandoned road and not
part of the City development plan.
Thereafter, it was sold through a public
bidding and petitioner was the highest
bidder. He then sought to register said
land but his application was dismissed.
HELD:
The portion of the city street subject
to petitioners application for registration
of title was withdrawn from public
use.
Then
it
follows
that such
withdrawn portion becomes patrimonial
property of the State.
It is also very
clear from the Charter that property thus
withdrawn from public servitude may be
used or conveyed for any purpose for
which other real property belonging to the
City may be lawfully used or conveyed.
4. IMMOVABLES PROPERTIES

Berkenkotter v. Cu UnjiengFacts:
On 26 April 1926, the Mabalacat
Sugar Company obtained from Cu
Unjieng e Hijos, a loan securedby a
first mortgage constituted on 2
parcels of land "with all its buildings,
improvements,
sugar-canemill,
steel railway, telephone line,
apparatus, utensils and whatever
forms
part
or
is
a
necessarycomplement
of
said
sugar-cane mill, steel railway,
telephone line, now existing or
that may in thefuture exist in said
lots.On 5 October 1926, the
Mabalacat
Sugar
Company
decided to increase the capacity
of its sugar central by buying
additional
machinery
and
equipment, so that instead of
milling 150 tons daily, itcould
produce 250. Green proposed to the
Berkenkotter,
to
advance
the
necessary amount for thepurchase of
said machinery and equipment,
promising to reimburse him as soon
as he could obtainan additional
loan from the mortgagees, Cu
Unjieng e Hijos, and that in case
Green should fail toobtain an
additional loan from Cu Unjieng e
Hijos,
said
machinery
and
equipment would becomesecurity
therefore, said Green binding himself
not to mortgage nor encumber them
to anybody untilBerkenkotter be fully
reimbursed
for the
corporation's
indebtedness to him.Having agreed
to said proposition made in a
letter dated
5
October
1926,
Berkenkotter, on 9 October 1926,
delivered the sum of P1,710 to
Green, the total amount supplied by
him to Green having beenP25,750.
Furthermore, Berkenkotter had a
credit of P22,000 against said
corporation for unpaidsalary. With
the loan of P25,750 and said credit of
P22,000, the Mabalacat Sugar Co., Inc.,
purchasedthe additional machinery and
equipment.On 10 June 1927, Green
applied to Cu Unjieng e Hijos for an
additional loan of P75,000 offering
assecurity the additional machinery
and equipment acquired by said
Green
and
installed
in
the
sugar central after the execution of
the original mortgage deed, on 27
April 1927, together with whatever
a d d i t i o n a l e q u i p m e n t a c q u i re

d w i t h s a i d l o a n . G re e n f a i l e d
to obtain said loan.
H e n c e , a b o v e mentioned mortgage
was in effect.

Case Digest:

Issue:
Are the additional machines
considered mortgaged?

FACTS:

also

Held:
Article 1877 of the Civil Code provides
that mortgage includes all natural
accessions,
improvements,g ro w i n g f r u i t s , a n d r
ents not collected when the obli
gation falls due, and the amount
o f a n y indemnities paid or due the
owner by the insurers of the
mortgaged property or by virtue of
the
exercise of the
power of eminent domain,
with the declarations,
amplifi cations, and
limitations
established by law, whether the state
continues in the possession of the
person
who
mortgaged
it
or
w h e t h e r
i t
p a s s e s
i n t o
t h e
h a n d s
o
f
a
t h i r d
p e
r s o n . It is a rule, that in a
mortgage
of
real
estate,
the
improvements
on
the
same are
included;
therefore,
allobjects
permanently attached to a mortgaged
building or land, although they may
have been placedthere after the
mortgage was constituted, are also
included.Article 334, paragraph 5, of the
Civil Code gives the character of real
property
to
machinery,
liquidcontainers,
instruments
or
implements intended by the owner
of any building or land for use
inconnection with any industry or trade
being carried on therein and which are
expressly
adapted
tomeet
the
requirements of such trade or industry.
The installation of a machinery and
equipment in amortgaged
sugar
central, in lieu of another of less
capacity,
for
the
purpose
of
carrying out theindustrial functions of
the latter and increasing production,
constitutes a permanent improvement
onsaid sugar central and subjects said
machinery and equipment to the mortgage
constituted thereon.

PHILIPPINE
JARQUE

REFINING

COMPANY

V.

Plaintiff Philippine Refining Co. and

defendant
Jarque
executed
three
mortgages on the motor vessels Pandan
and
Zargazo.
The
documents
were
recorded as transfer and encumbrances of
the vessels for the port of Cebu and each
was denominated a chattel mortgage.

The first two mortgages did not have an

affidavit of good faith. A fourth mortgage
was executed by Jarque and Ramon Aboitiz
over motorship Zaragoza and was entered
in the Chattel Mortgage Registry on May
12, 1932, within the period of 30 days prior
to the foreclosure/institution of the
insolvency proceedings.
Jose Curaminas filed with the CFI of Cebu a
petition praying that Francisco Jarque be
declared an insolvent debtor. This was
granted and Jarques properties were then
assigned to Curaminas.
A problem arose when Judge Jose
Hontiveros declined to order the foreclosure
of the mortgages, and instead, ruled that
they were defective because they did not
have affidavits of good faith.
ISSUE:
1. Whether or not the mortgages of the
vessels are governed by the Chattel
Mortgage Law
2. Whether or not an affidavit of good
faith is needed to enforce achattel
mortgage on a vessel
RULING:
Yes. Personal property includes vessels.
They are subject to the provisions of the
Chattel
Mortgage
Law.
The
Chattel
Mortgage Law says that a good chattel
mortgage includes an affidavit of good
faith. The absence of such affidavit makes
mortgage unenforceable against creditors
and subsequent encumbrances. The judge
was correct.

G.R. No. L-17870 29 September 1962

Note: A mortgage on a vessel is generally
like other chattel mortgages. The only
difference between a chattel mortgage of a
vessel and a chattel mortgage of other
personalty is that the first must be noted in
the registry of the register of deeds.
Case Digest:
MINDANAO BUS COMPANY V. CITY
ASSESSOR AND TREASURER 6 SCRA 197
FACTS:
Petitioner is engaged in a public utility
business, solely engaged in transporting
passengers and cargoes by motor trucks,
over its authorized lines in Mindanao. It
owns a main office and branch offices. To
be found in their offices are machineries
and equipment, which were assessed by
the City Assessor as real properties.
HELD:
Movable equipments to be immobilized in
contemplation
of law must first be
essential and principal elements of an
industry or works without which such
industry or works would be unable to
function or carry on the industrial
purpose for which it was established. We
may
here
distinguish
those movables, which are essential and
principal elements of an industry, from
those which may not be so considered
immobilized by destination because they
are merely incidental, not essential and
principal.
In the case at bar, the tools and
equipments in question are by their nature
not essential and principal elements of
petitioners
business
of
transporting
passengers and cargoes by motor trucks.
They are merely incidentals.
Case Digest:
Mindanao Bus Co. v. City Assessor
Digest

Facts: Petitioner is a public utility company

engaged in the transport of passengers and
cargo by motor vehicles in Mindanao with
main offices in Cagayan de Oro (CDO).
Petitioner likewise owned a land where it
maintains a garage, a repair shop and
blacksmith or carpentry shops. The
machineries are placed thereon in wooden
and cement platforms. The City Assessor of
CDO then assessed a P4,400 realty tax on
said machineries and repair equipment.
Petitioner appealed to the Board of Tax
Appeals but it sustained the City Assessor's
decision, while the Court of Tax Appeals
(CTA) sustained the same.
Note: This is merely a case digest to aid in
remembering the important points of a
case. It is still advisable for any student of
law to read the full text of assigned cases.
Issue: Whether or not the machineries and
equipments are considered immobilized
and thus subject to a realty tax
Held:
The
Supreme
Court
decided
otherwise and held that said machineries
and equipments are not subject to the
assessment of real estate tax.
Said equipments are not considered
immobilized as they are merely incidental,
not esential and principal to the business of
the petitioner. The transportation business
could be carried on without repair or
service shops of its rolling equipment as
they can be repaired or services in another
shop
belonging
to
another
.

DAVAO SAW MILL CO. VS. CASTILLO

G.R. No. L-40411
August 7, 1935
MALCOLM, J.:
FACTS:
Petitioner is the holder of a lumber
concession. It operated a sawmill on a
land, which it doesnt own. Part of the
lease agreement was a stipulation in which
after the lease agreement, all buildings and
improvements would pass to the ownership
of the lessor, which would not include
machineries
and
accessories.
In
connection to this, petitioner had in its
sawmill machineries and other equipment

wherein some were bolted in foundations of

cement.
Issue:
Whether or not the trial judge erred in
finding that the subject properties are
personal in nature.
HELD:
The machinery must
personal property.

be

classified

as

The lessee placed the machinery in the

building erected on land belonging to
another, with the understanding that the
machinery was not included in the
improvements which would pass to the
lessor on the expiration of the lease
agreement.
The lessee also treated
the machinery as personal
property in executing chattel mortgages
in
favor
of
third
persons.
The
machinery was levied upon by the sheriff
as personalty pursuant to a writ of
execution obtained without any protest
being registered.

Furthermore, machinery only becomes

immobilized when placed in a plant by the
owner of the property or plant, but not
when so placed by a tenant, usufructuary,
or any person having temporary right,
unless such person acted as the agent of
the owner.

PRUDENTIAL BANK V. PANIS, 153 SCRA

390
FACTS:
Spouses Magcale secured a loan from
Prudential Bank. To secure payment, they
executed a real estate mortgage over a
residential building. The mortgage included
also the right to occupy the lot and the
information about the sales patent applied
for by the spouses for the lot to which the
building stood. After securing the first loan,
the spouses secured another from the
same bank. To secure payment, another
real estate mortgage was executed over

the

same

properties.

The Secretary of Agriculture then issued a

Miscellaneous Sales Patent over the land
which was later on mortgaged to the bank.
The spouses then failed to pay for the loan
and the REM was extrajudicially foreclosed
and sold in public auction despite
opposition
from
the
spouses.
The
respondent court held that the REM was
null
and
void.
ISSUE:
Whether or not a valid RE mortgage can be
constituted on the building erected on the
belonging
to
another.
HELD:
A real estate mortgage can be constituted
on the building erected on the land
belonging
to
another.
The inclusion of building distinct and
separate from the land in the Civil Code can
only mean that the building itself is an
immovable
property.
While it is true that a mortgage of land
necessarily includes in the absence of
stipulation of the improvements thereon,
buildings, still a building in itself may be
mortgaged by itself apart from the land on
which it is built. Such a mortgage would still
be considered as a REM for the building
would still be considered as immovable
property even if dealt with separately and
apart
from
the
land.
The original mortgage on the building and
right to occupancy of the land was
executed before the issuance of the sales
patent and before the government was
divested of title to the land. Under the
foregoing, it is evident that the mortgage
executed by private respondent on his own
building
was
a
valid
mortgage.
As to the second mortgage, it was done
after the sales patent was issued and thus
prohibits pertinent provisions of the Public
Land Act.

Berkenkotter vs Cu Unjieng
Facts: that on April 26, 1926, the Mabalacat
Sugar Co., Inc., owner of the sugar central
situated in Mabalacat, Pampanga, obtained
from the defendants, Cu Unjieng e Hijos, a
loan secured by a first mortgage
constituted on two parcels and land "with
all its buildings, improvements, sugar-cane
mill, steel railway, telephone line,
apparatus, utensils and whatever forms
part or is necessary complement of said
sugar-cane mill, steel railway, telephone
line, now existing or that may in the future
exist is said lots."
On October 5, 1926, shortly after said
mortgage had been constituted, the
Mabalacat Sugar Co., Inc., decided to
increase the capacity of its sugar central by
buying additional machinery and
equipment. The estimated cost of said
additional machinery and equipment was
approximately P100,000. In order to carry
out this plan, B.A. Green, president of said
corporation, proposed to the plaintiff, B.H.
Berkenkotter, to advance the necessary
amount for the purchase of said machinery
and equipment, promising to reimburse him
as soon as he could obtain an additional
loan from the mortgagees, the herein
defendants Cu Unjieng e Hijos. Having
agreed to said proposition made in a letter
dated October 5, 1926 (Exhibit E), B.H.
Berkenkotter, on October 9th of the same
year, delivered the sum of P1,710 to B.A.
Green, president of the Mabalacat Sugar
Co., Inc., the total amount supplied by him
to said B.A. Green having been P25,750.
Furthermore, B.H. Berkenkotter had a credit
of P22,000 against said corporation for
unpaid salary. With the loan of P25,750 and
said credit of P22,000, the Mabalacat Sugar
Co., Inc., purchased the additional
machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of
the Mabalacat Sugar Co., Inc., applied to Cu
Unjieng e Hijos for an additional loan of
P75,000 offering as security the additional
machinery and equipment acquired by said
B.A. Green and installed in the sugar

central after the execution of the original

mortgage deed, on April 27, 1927, together
with whatever additional equipment
acquired with said loan. B.A. Green failed to
obtain said loan.
The appellant contends that the installation
of the machinery and equipment claimed
by him in the sugar central of the
Mabalacat Sugar Company, Inc., was not
permanent in character inasmuch as B.A.
Green, in proposing to him to advance the
money for the purchase thereof, made it
appear in the letter, Exhibit E, that in case
B.A. Green should fail to obtain an
additional loan from the defendants Cu
Unjieng e Hijos, said machinery and
equipment would become security therefor,
said B.A. Green binding himself not to
mortgage nor encumber them to anybody
until said plaintiff be fully reimbursed for
the corporation's indebtedness to him.
Upon acquiring the machinery and
equipment in question with money
obtained as loan from the plaintiff-appellant
by B.A. Green, as president of the
Mabalacat Sugar Co., Inc., the latter
became owner of said machinery and
equipment, otherwise B.A. Green, as such
president, could not have offered them to
the plaintiff as security for the payment of
his credit.
Issue: WON the installation of machinery
constitutes a real property or a personal
property?
Held: Real Property. For the foregoing
considerations, we are of the opinion and
so hold: (1) That the installation of a
machinery and equipment in a mortgaged
sugar central, in lieu of another of less
capacity, for the purpose of carrying out
the industrial functions of the latter and
increasing production, constitutes a
permanent improvement on said sugar
central and subjects said machinery and
equipment to the mortgage constituted
thereon (article 1877, Civil Code); (2) that
the fact that the purchaser of the new
machinery and equipment has bound

himself to the person supplying him the

purchase money to hold them as security
for the payment of the latter's credit, and
to refrain from mortgaging or otherwise
encumbering them does not alter the
permanent character of the incorporation of
said machinery and equipment with the
central; and (3) that the sale of the
machinery and equipment in question by
the purchaser who was supplied the
purchase money, as a loan, to the person
who supplied the money, after the
incorporation thereof with the mortgaged
sugar central, does not vest the creditor
with ownership of said machinery and
equipment but simply with the right of
redemption.
Benguet Corporation vs Central Board of
Assessment
Facts: The realty tax assessment involved
in this case amounts to P11,319,304.00. It
has been imposed on the petitioner's
tailings dam and the land thereunder over
its protest.
The controversy arose in 1985 when the
Provincial Assessor of Zambales assessed
the said properties as taxable
improvements. The assessment was
appealed to the Board of Assessment
Appeals of the Province of Zambales. On
August 24, 1988, the appeal was dismissed
mainly on the ground of the petitioner's
"failure to pay the realty taxes that fell due
during the pendency of the appeal."
The petitioner seasonably elevated the
matter to the Central Board of Assessment
Appeals, 1 one of the herein respondents. In
its decision dated March 22, 1990, the
Board reversed the dismissal of the appeal
but, on the merits, agreed that "the tailings
dam and the lands submerged thereunder
(were) subject to realty tax."
This petition for certiorari now seeks to
reverse the above ruling.
Issue: WON tailing dams are subject to
realty tax?

Held: The petitioner does not dispute that

the tailings dam may be considered realty
within the meaning of Article 415.
The Real Property Tax Code does not carry
a definition of "real property" and simply
says that the realty tax is imposed on "real
property, such as lands, buildings,
machinery and other improvements affixed
or attached to real property." In the
absence of such a definition, we apply
Article 415 of the Civil Code
From the definitions and the cases cited
above, it would appear that whether a
structure constitutes an improvement so as
to partake of the status of realty would
depend upon the degree of permanence
intended in its construction and use. The
expression "permanent" as applied to an
improvement does not imply that the
improvement must be used perpetually but
only until the purpose to which the principal
realty is devoted has been accomplished. It
is sufficient that the improvement is
intended to remain as long as the land to
which it is annexed is still used for the said
purpose.
The Court is convinced that the subject
dam falls within the definition of an
"improvement" because it is permanent in
character and it enhances both the value
and utility of petitioner's mine. Moreover,
the immovable nature of the dam defines
its character as real property under Article
415 of the Civil Code and thus makes it
taxable under Section 38 of the Real
Property Tax Code.

PHILIPPINE
REFINING
CO.
vs.
JARQUE,COROMINAS G.R. No. L-41506
FACTS: Plaintiff Philippine Refining Co. and
defendant
Jarque
executed
three
mortgages on the motor vessels Pandan
and
Zargazo.
The
documents
were
recorded as transfer and encumbrances of
the vessels for the port of Cebu and each
was denominated a chattel mortgage.
The first two mortgages did not have an
affidavit of good faith. A fourth mortgage

was executed by Jarque and Ramon Aboitiz

over motorship Zaragoza and was entered
in the Chattel Mortgage Registry on May
12, 1932, within the period of 30 days prior
to the foreclosure/institution of the
insolvency
proceedings.
Jose Curaminas filed with the CFI of Cebu a
petition praying that Francisco Jarque be
declared an insolvent debtor. This was
granted and Jarques properties were then
assigned
to
Curaminas.
A problem arose when Judge Jose
Hontiveros declined to order the foreclosure
of the mortgages, and instead, ruled that
they were defective because they did not
have
affidavits
of
good
faith.
ISSUE: 1. Whether or not the mortgages of
the vessels are governed by the Chattel
Mortgage
Law
2. Whether or not an affidavit of good faith
is needed to enforce achattel mortgage on
a
vessel

information about the Sales Patent applied

for by the spouses for the lot to which the
building stood. The spouses got another
loan, which was secured by another Real
Estate
Mortgage over
the
same
properties.

The
Sec.
of
Agriculture
issued
a
Miscellaneous Sales Patent over the lot
which was then mortgaged to the bank in
favor of the Macales.

The spouses defaulted on both loans. Thus,

the Real
Estate
Mortgage was
extrajudicially foreclosed, and sold in a
public auction.

The RTC held that the Real

Mortgage was null and void.

Estate

RULING: Yes. Personal property includes

vessels. They are subject to the provisions
of the Chattel Mortgage Law. The Chattel
Mortgage Law says that a good chattel
mortgage includes an affidavit of good
faith. The absence of such affidavit makes
mortgage unenforceable against creditors
and subsequent encumbrances. The judge
was
correct.

ISSUE:

Note: A mortgage on a vessel is generally

like other chattel mortgages. The only
difference between a chattel mortgage of a
vessel and a chattel mortgage of other
personalty is that the first must be noted in
the registry of the register of deeds.

Yes. The fact that the spouses executed

the Real
Estate
Mortgage over the
building before executing the second Real
Estate Mortgageover the land proved
that the spouses intended for the building
to be an immovable separate and distinct
from the land on which it is built.

Whether
or
not
a Real
Estate
Mortgage can be constituted on the
building erected on a lot belonging to
another?
HELD:

PRUDENTIAL BANK v. PANIS

An Real Estate Mortgage can be
constituted on the building erected on
the land belonging to another.
FACTS:
Spouses Magcale secured a loan with
Prudential Bank. To further secure said loan,
the spouses executed a Real Estate
Mortgageover the residential building,
with a right to occupy the lot. The Real
Estate
Mortgage also
included

Case Digest:
Caltex (Philippines), Inc. vs. Central
Board of Assessment Appeals and City
Assessor of Pasay
G.R. No. L-50466
May 31,
1982

FACTS:
Various machines and equipments are
loaned by Caltex to gas station operators
under an appropriate lease agreement or
receipt. These are underground tanks,
gasoline pumps, water pumps, car washer
and air compressors, among others. It is
stipulated in the lease contract that the
operators, upon demand, shall return to
Caltex the machines and equipment in
good condition as when received. The
lessor of the land, where the gas station is
located, does not become the owner of the
machines and equipment installed therein.
Caltex retains the ownership thereof during
the term of the lease. The city assessor of
Pasay City characterized the said items of
gas station equipment and machinery as
taxable realty. However, the city board of
tax appeals ruled that they are personalty.
The City Board of Tax Appeals decided that
the definitions of realty and personalty
under the Civil Code do not apply in this
case. Instead, the definition under the Real
Property Tax Code should be followed.
Thus, the property in controversy are real in
nature and subject to realty tax.
ISSUE:
Whether the pieces of gas station
equipment
and
machinery
already
enumerated are subject to realty tax.
HELD:
The Court held that the said equipment and
machinery, as appurtenances to the gas
station building or shed owned by Caltex
(as to which it is subject to realty tax) and
which fixtures are necessary to the
operation of the gas station, for without
them the gas station would be useless, and
which have been attached or affixed
permanently to the gas station site or
embedded
therein,
are
taxable
improvements and machinery within the
meaning of the Assessment Law and the
Real Property Tax Code. Under the Real
Property Tax Code, improvements are
defined as valuable addition made to
property or an amelioration in its condition,
amounting to more than mere repairs or
replacement of waste, costing labor or
capital and intended to enhance its value,
beauty or utility or to adapt it for new or
further purposes. On the other hand,
machinery is embraces machines,
mechanical
contrivances,
instruments,

appliances and apparatus attached to the

real estate. Improvements on land are
commonly taxed as realty even though for
some purposes they might be considered
personalty.

TUMALAD V. VICENCIO 41 SCRA 143

FACTS:
Vicencio and Simeon executed a chattel
mortgage in favor of plaintiffs Tumalad over
their house, which was being rented by
Madrigal and company. This was executed
to guarantee a loan, payable in one year
with
a
12%
per
annum
interest.
The
mortgage
was
extrajudicially
foreclosed upon failure to pay the loan. The
house was sold at a public auction and the
plaintiffs were the highest bidder. A
corresponding certificate of sale was
issued. Thereafter, the plaintiffs filed an
action
for
ejectment
against
the
defendants, praying that the latter vacate
the house as they were the proper owners.
ISSUE: W/N the chattel mortgage was null
and void ab initio because only personal
properties can be subject of a chattel
mortgage.
HELD:
Certain deviations have been allowed from
the general doctrine that buildings are
immovable property such as when through
stipulation, parties may agree to treat as
personal property those by their nature
would be real property. This is partly based
on the principle of estoppel wherein the
principle is predicated on statements by
the owner declaring his house as chattel, a
conduct that may conceivably stop him
from subsequently claiming otherwise.
In the case at bar, though there be no
specific statement referring to the subject
house as personal property, yet by ceding,
selling or transferring a property through
chattel mortgage could only have meant
that defendant conveys the house as
chattel, or at least, intended to treat the
same as such, so that they should not now
be allowed to make an inconsistent stand
by claiming otherwise.

Serg's v. PCI Leasing

Sergs Products, Inc. vs. PCI Leasing G.R.
No.
137705.
August
22,
2000
FACTS:
PCI Leasing and Finance filed a complaint
for sum of money, with an application for a
writ of replevin.
Judge issued a writ of replevin directing its
sheriff to seize and deliver the machineries
and equipment to PCI Leasing after 5 days
and upon the payment of the necessary
expenses.
The sheriff proceeded to petitioner's
factory, seized one machinery, with word
that he would return for other machineries.
Petitioner (Sergs Products) filed a motion
for special protective order to defer
enforcement of the writ of replevin.
PCI Leasing opposed the motion on the
ground that the properties were still
personal and therefore can still be
subjected to seizure and writ of replevin.
Petitioner asserted that properties sought
to be seized were immovable as defined in
Article 415 of the Civil Code.
Sheriff was still able to take possession of
two more machineries
In its decision on the original action for
certiorari filed by the Petitioner, the
appellate court, Citing the Agreement of
the parties, held that the subject machines
were personal property, and that they had
only been leased, not owned, by
petitioners; and ruled that the "words of the
contract are clear and leave no doubt upon
the true intention of the contracting
parties."
ISSUE: Whether or not the machineries
became real property by virtue of
immobilization.
Ruling:
Petitioners contend that the subject
machines used in their factory were not
proper subjects of the Writ issued by the
RTC, because they were in fact real
property.
Writ of Replevin: Rule 60 of the Rules of
Court provides that writs of replevin are
issued for the recovery of personal property
only.
Article 415 (5) of the Civil Code provides
that machinery, receptacles, instruments or
implements intended by the owner of the

tenement for an industry or works which

may be carried on in a building or on a
piece of land, and which tend directly to
meet the needs of the said industry or
works
In the present case, the machines that were
the subjects of the Writ of Seizure were
placed by petitioners in the factory built on
their own land.They were essential and
principal elements of their chocolatemaking industry.Hence, although each of
them was movable or personal property on
its own, all of them have become
immobilized by destination because they
are essential and principal elements in the
industry.
However, contracting parties may validly
stipulate that a real property be considered
as personal. After agreeing to such
stipulation, they are consequently estopped
from claiming otherwise.Under the principle
of estoppel, a party to a contract is
ordinarily precluded from denying the truth
of any material fact found therein.
Section 12.1 of the Agreement between the
parties provides The PROPERTY is, and
shall at all times be and remain, personal
property
notwithstanding
that
the
PROPERTY or any part thereof may now be,
or hereafter become, in any manner affixed
or attached to or embedded in, or
permanently resting upon, real property or
any building thereon, or attached in any
manner
to
what
is
permanent.
The machines are personal property and
they are proper subjects of the Writ of
Replevin
b. MOVABLES
US V. TAMBUNTING
FACTS:
The
Manila
Gas
Company
installed
equipment for the transmission of gas in a
house at Evangelista. After the original
subscriber left, the apparatus was sealed
and the services discontinued.

Later Mr Tambunting moved in. He was a

cheapskate and spliced the tubing to leech

free gas for household use. Alas, the crime

was discovered by the gas company. The
prosecutor filed charges and hailed Mr.
Tambunting to court
ISSUE: Whether or not gas can be the
subject of larceny.
HELD:
Yes. Gas is a substance which lends itself to
felonious appropriation. It is a valuable
merchandise that can be bought and sold
like other personal property, susceptible of
being siphoned from a larger mass and
transported from place to place. Articles
517 and 518 sets parameters for the theft
of gas and it is a valid ordinance.
Spouses Ricardo and
Anastacia Cristobal

Ferma

Portic

vs

( Digested)
456 SCRA 577 Civil Law Law on Sales
Contract to Sell vs Contract of Sale
In 1968, spouses Ricardo and Ferma
Portic acquired a parcel of land with a 3
door apartment from spouses Alcantara
even though theyre aware that the land
was mortgaged to the SSS. Portic defaulted
in paying SSS. The Portics then executed a
contract with Anastacia Cristobal and the
latter agreed to buy the said property for
P200k. Cristobals down payment was P45k
and she also agreed to pay SSS. The
contract between them states:
That
while
the
balance
of
P155,000.00 has not yet been fully paid the
FIRST PARTY OWNERS shall retain the
ownership of the above described parcel of
land together with its improvements but
the SECOND PARTY BUYER shall have the
right to collect the monthly rentals due on
the first door (13-A) of the said apartment;
(payment is due 22 May 1985, if Cristobal
will not be able to pay Portic will reimburse)
A transfer certificate was executed in favor
of Cristobal. Cristobal was not able to pay

on the due date. A suit ensued to lift the

cloud on the title.
ISSUE: Who is the rightful owner of
the parcel of land?
HELD: The Portics insofar as there
was no contract of sale. What transpired
between the parties was a contract to sell.
The provision of the contract characterizes
the agreement between the parties as a
contract to sell, not a contract of sale.
Ownership is retained by the vendors, the
Portics; it will not be passed to the vendee,
the Cristobals, until the full payment of the
purchase price. Such payment is a positive
suspensive condition, and failure to comply
with it is not a breach of obligation; it is
merely an event that prevents the
effectivity of the obligation of the vendor to
convey the title. In short, until the full price
is paid, the vendor retains ownership.
The mere issuance of the Certificate
of Title in favor of Cristobal did not vest
ownership in her. Neither did it validate the
alleged absolute purchase of the lot.
Registration does not vest, but merely
serves as evidence of, title. Our land
registration laws do not give the holders
any better title than that which they
actually have prior to registration.
Under Article 1544 of the Civil Code,
mere registration is not enough to acquire a
new title. Good faith must concur. Clearly,
Cristobal has not yet fully paid the
purchase price. Hence, as long as it
remains unpaid, she cannot feign good
faith. She is also precluded from asserting
ownership against the Portics. The CAs
finding that she had a valid title to the
property must be set aside.

A special civil action for quieting of title is

not the proper remedy for settling a
boundary dispute, and that petitioners
should have instituted an ejectment suit
instead. An action for forcible entry,
whenever
warranted
by
the
period
prescribed in Rule 70, or for recovery of

possession de facto, also within the

prescribed period, may be availed of by the
petitioners, in which proceeding the
boundary dispute may be fully threshed
out.

ISSUE: WON A&L Industries can be held

liable for the obligations contracted by the
husband.

HELD:
BA Finance Corp vs. CA
GR 61464, May 28 1988

FACTS:

Augusto Yulo secured a loan from the

petitioner in the amount of P591,003.59 as
evidenced by a promissory note he signed
in his own behalf and as a representative of
A&L Industries. Augusto presented an
alleged special power of attorney executed
by his wife, Lily Yulo, who managed the
business and under whose name the said
business
was
registered,
purportedly
authorized the husband to procure the loan
and sign the promissory note. 2months
prior the procurement of the loan, Augusto
left Lily and their children which in turn
abandoned their conjugal home. When the
obligation became due and demandable,
Augusto failed to pay the same.

The petitioner prayed for the issuance of a

writ of attachment alleging that said
spouses were guilty of fraud consisting of
the execution of Deed of Assignment
assigning the rights, titles and interests
over a construction contract executed by
and between the spouses and A. Soriano
Corporation. The writ hereby prayed for
was issued by the trial court and not
contented with the order, petitioner filed a
motion for the examination of attachment
debtor alleging that the properties attached
by the sheriff were not sufficient to secure
the satisfaction of any judgment which was
likewise granted by the court.

A&L Industries is a single proprietorship,

whose registered owner is Lily Yulo. The
said proprietorship was established during
the marriage and assets were also acquired
during the same. Hence, it is presumed
that the property forms part of the conjugal
partnership of the spouses and be held
liable for the obligations contracted by the
husband. However, for the property to be
liable, the obligation contracted by the
husband must have redounded to the
benefit of the conjugal partnership. The
obligation was contracted by Augusto for
his own benefit because at the time he
incurred such obligation, he had already
abandoned his family and left their conjugal
home. He likewise made it appear that he
was duly authorized by his wife in behalf of
the company to procure such loan from the
petitioner. Clearly, there must be the
requisite showing that some advantage
accrued to the welfare of the spouses.

Thus, the Court ruled that petitioner cannot

enforce the obligation contracted by
Augusto against his conjugal properties
with Lily. Furthermore, the writ of
attachment cannot be issued against the
said properties and that the petitioner is
ordered to pay Lily actual damages
amouting to P660,000.00.
PHILIPPINE ECONOMIC ZONE AUTHORITY
(PEZA) V. FERNANDEZ
ACTS:
Lot 4673 was registered in the names of
Florentina Rapaya, Victorino Cuizon among
others covered by an OCT. Sometime
thereafter, Jorgea Igot-Soro o et al
executed an Extra-judicial Partition claiming

to be the only surviving heirs of the

registered owners, through which they were
issued a TCT.

Said lot was among the object of an

expropriation proceeding before the RTC.
Said RTC approved the compromise
Agreement b/w the Export Processing Zone
Authority (EPZA) and Igot-Soroo et al
wherein EPZA would pay a certain amount
in exchange for the subject property.

EPZA acquired title to said land by virtue of

the RTC decision and was issued a
corresponding
TCT.
The Heirs of the Florentina Rapaya and Juan
Cuizon filed a complaint to nullify several
documents including the TCT issued to
EPZA for they were excluded from the
extrajudicial settlement of the estate.
EPZA filed a motion to dismiss on the
ground of prescription and was denied thus
elevated the case to the CA wherein the CA
ruled that the heirs of Igot-Soroo
defrauded the other heirs by falsely
representing that they were the only heirs
enabling them to appropriate the land in
favor of EPZA. This method of acquiring
property created a constructive trust in
favor of the defrauded party and grants
them the right to vindicate regardless of
the lapse of time. Thus, the case at bar.

ISSUE/S:
1) Whether or not private respondents
claim over the expropriated land has
prescribed
2) Whether or not reconveyance lies
against expropriated property

HELD:
1) YES. As provided in the Rules of Court,
persons unduly deprived of their lawful

participation in a settlement may assert

their claim only w/in the 2-year period after
the settlement and distribution of the
estate. However, this prescriptive period
will not apply to those who had not been
notified of the settlement.

The Private respondents are deemed to

have been notified of the extrajudicial
settlement since it was registered and
annotated on the certificate of title over the
lot.

The only exception to this rule is when the

title still remains in the hands of the heirs
who have fraudulently caused the partition
of the said property. In the case at bar, the
title has already passed to an innocent
purchaser for value, the govt through
EPZA.

Their remedies of action for reconveyance

resulting from fraud, and action for
reconveyance based on an implied
constructive trust has already prescribed as
well the former having prescribed 4 years
from the discovery and the latter
prescribing 10 years from the alleged
fraudulent registration.

2) NO. Reconveyance is a remedy for those

whose property has been wrongfully or
erroneously registered in anothers name.
However, this cannot be availed once the
property has passed to an innocent
purchaser for value. Since the property has
already passed to the govt in an
expropriation proceeding, EPZA is entitled
to enjoy the security afforded innocent 3rd
persons and their title to the property must
be preserved.

However, the private respondents are not

w/o remedy. They can sue for damages
their co-heirs.

Notes
(Case Digests Property)
IGNACIO VS. DIRECTOR OF LANDS AND
VALERIANO:
Case Doctrine: Article 457 of the New Civil Code
(Article 366, Old Civil Code), which provides
that:To the owners of lands adjoining the banks of
rivers belong the accretion which they gradually
receivefrom the effects of the current of the
waters.The article cited is clearly inapplicable
because it refers to accretion or deposits on the
banks of rivers, while theaccretion in the present
case was caused by action of the Manila Bay.
FACTS:
Ignacio applied for registration of a parcel of land
adjacent to his land, claiming that he has acquired
theland by right of accretion. Director of Lands,
Valeriano opposed, instead it avers that portion
sought to beregistered is property of public
domain.ARGUMENTS:1.
Appellant contends that the parcel belongs to him
by the law of accretion, having been formed by
gradualdeposit by action of the Manila Bay, and
he cites Article 457 of the New Civil Code2.
Appellant next contends that Articles 1, 4 and 5 of
the Law of Waters are not applicable because
theyrefer to accretions formed by the sea, and
that Manila Bay cannot be considered as a sea.
ISSUE/S:
WON the land subject of the dispute can be
acquired by right of accretion of Ignacio.
HELD:
NO.The land cannot be acquired by right of
accretion.Article 457 is not applicable.The article
cited is clearly inapplicable because it refers to
accretion or deposits on the banks of rivers, while
theaccretion in the present case was caused by
action of the Manila Bay.Manila bay is not a river.A
bay is a part of the sea, being a mere indentation
of the same:Bay.

An opening into the land where the water is shut

in on all sides except at the entrance; an inlet
of the sea; an arm of the sea, distinct from a river,
a bending or curbing of the shore of the sea or of
a lake. 7C.J. 1013-1014 (Cited in Francisco,
Philippine Law of Waters and Water Rights p. 6)
State shall grant these lands to the adjoining
owners only when they are no longer needed for
the purposesmentioned therein. In the case at
bar, the trial court found that plaintiff's evidence
failed to prove that the land inquestion is no
longer needed by the government, or that the

essential conditions for such grant under Article 4

of the Spanish Law of Waters, exists.The
revocable permit issued by the Director of Lands
was not an implied declaration that the land is no
longerneeded for public use. In the letter of
approval by the Director of Lands, it has expressly
reserved the right of thegovernment to use it
when it is deemed necessary. The state therefor
did not relinquish ownership over the land.
GRANDE, ET. AL. VS. COURT OF APPEALS:
Case Doctrine: accretion does not ipso facto
becomes registered land just because the lot
which receives it is aregistered land.
FACTS:
Petitioners are the owners of a parcel of
land, with an area of 3.5032 hectares,
located at barrio Ragan,municipality of
Magsaysay (formerly Tumauini), province of
Isabela. When it was surveyed for purposes
of registration sometime in 1930, its northeastern
boundary was the Cagayan River (the same
boundary stated in thetitle). Since then, and for
many years thereafter, a gradual accretion on the
northeastern side took place, by actionof the
current of the Cagayan River, so much so, that by
1958, the bank thereof had receded to a distance
of about105 meters from its original site, and an
alluvial deposit of 19,964 square meters (1.9964
hectares), more or less,had been added to the
registered area (Exh. C-1).On January 25, 1958,
petitioners instituted the present action in
the Court of First Instance of Isabela
againstrespondents, to quiet title to said portion
(19,964 square meters) formed by accretion,
alleging in their complaint(docketed as Civil Case
No. 1171) that they and their predecessors-ininterest, were formerly in peaceful andcontinuous
possession thereof, until September, 1948, when
respondents entered upon the land under claim
of ownership. Petitioners also asked for damages
corresponding to the value of the fruits of the land
as well asattorney's fees and costs. In their answer
(dated February 18, 1958), respondents claim
ownership in themselves,asserting that they have
been in continuous, open, and undisturbed
possession of said portion, since prior to theyear
1933 to the present.It is admitted by the
parties that the land involved in this action
was formed by the gradual deposit of
alluviumbrought about by the action of the
Cagayan River, a navigable river.
ISSUE:
Whether the accretion becomes automatically
registered land just because the lot which receives
it is covered by aTorrens title thereby making the
alluvial property imprescriptible.

HELD:
We agree with the Court of Appeals that it does
not, just as an unregistered land purchased by the
registeredowner of the adjoining land does not, by
extension, become
ipso facto
registered land. Ownership of a piece of land is
one thing, and registration under the Torrens
system of that ownership is quite another.
Ownership overthe accretion received by the land
adjoining a river is governed by the Civil Code.
Imprescriptibility of registeredland is provided in
the registration law. Registration under the Land
Registration and Cadastral Acts does not vestor
give title to the land, but merely confirms and
thereafter protects the title already possessed by
the owner,making it imprescriptible by occupation
of third parties. But to obtain this protection, the
land must be placedunder the operation of the
registration laws wherein certain judicial
procedures have been provided. The factremain,
however, that petitioners never sought
registration of said alluvial property (which was
formed sometimeafter petitioners' property
covered by Original Certificate of Title No. 2982
was registered on June 9, 1934) up tothe time
they instituted the present action in the Court of
First Instance of Isabela in 1958. The
increment,therefore, never became registered
property, and hence is not entitled or subject to
the protection of imprescriptibility enjoyed by
registered property under the Torrens system.
Consequently, it was subject toacquisition through
prescription by third persons
HILARIO VS. CITY OF MANILA
FACTS: Petitioner Jose Hilario is the heir of
a land located at Barrio Guinayang, San
Mateo, Rizal. Said land was leaping on the
western part by the San Mateo River. A
stone wall was built on the northwestern
side to prevent entry into the land.
Unfortunately, a great flood destroyed said
wall and the river had its course inside
Hilarios land. The US Army opened sand
and gravel plant within the premises
sometime in 1945. They begin scraping,
excavating and extracting soil, gravel and
sand. A case for damages was filed against
the US Army and they paid. The
management was consequently turned
over to the City of Manila. Hilario filed a
complaint for injunction and damages
against defendants but the latter alleged
that the extractions were made from the
riverbed which is a part of public domain.
ISSUE: Whether or not the new riverbanks
formed, by reason of the occurrence of
alteration of the route of a river through a

private property, are part of public

ownership?
HELD: The Supreme Court is of the opinion
that all riverbank are of public ownership in
accordance with the provisions of the old
Civil Code and the Law of Waters of 1866.
Under State v. Ricardson, A river consists
of water, a bed, and banks, these several
parts constituting a river, the whole river. It
is a compound idea; it cannot exist without
all its parts. Therefore, it is concluded that
the riverbanks from which the City of
Manila extracted soil, gravel, and sand,
form part of the public domain absolving
the defendants herein from liability to
plaintiff

BINALAY VS. MANALO

A sudden and forceful action like that of
flooding is not the alluvial process
contemplated
in
Art.
457.
The
accumulation of the soil deposits must be
slow and hardly imperceptible in order for
the riparian owner to acquire ownership
thereof. Also, the land where the accretion
takes place is adjacent to the banks of the
rivers (or the sea coast).
FACTS
Manalo acquired 2 lots which were
originally owned by Judge Taccad from 2
different people (the latters daughter and
from an earlier purchaser). These lots were
later consolidated into Lot 307, a total of
10.45 hectares. The lot was beside the
Cagayan River, which, due to flooding,
would place a portion of the land
underwater during the rainy season
(September to December). On sunny days,
however, the land would be dried up for the
entire dry season (January to August).
When a survey of the land was conducted
on a rainy month, a portion of the land that
Manalo bought was then underwater and
was thus left unsurveyed and excluded
from Lot 307.

The big picture is this: Cagayan River

running from south to north, forks at a

certain point to form two braches (western

and eastern) and then unites at the other
end, further north, to form a narrower strip
of land. The eastern branch of the river cuts
through Lot 307, and is flooded during the
rainy season. The unsurveyed portion, on
the other hand, is the bed of the eastern
branch. Note that the fork exists only
during the rainy season while the
island/elongated strip of land formed in
the middle of the forks becomes dry and
perfect for cultivation when the Cagayan
river is at its ordinary depth. The strip of
land in the middle of the fork totaled 22.7
hectares and was labeled Lot 821-822. Lot
821 is directly opposite Lot 307 and is
separated by the eastern branch of the
rivers fork.

Manalo claims that Lot 821 belongs to him

by way of accretion to the submerged
portion of the land to which it is adjacent.
Petitioners (Binalay, et al) who possess the
Lot 821, on the other hand, insist that they
own it. They occupy the other edges of the
lot along the river bank (i.e. the fertile
portions on which they plant tobacco and
other agricultural products) and also
cultivate the western strip during the
summer.

Manalo filed 2 cases for forcible entry which

were both dismissed. Later on, he filed a
complaint for quieting of title, possession,
and damages against petitioner. The trial
court and the CA ruled in favor of Manalo,
saying that Lot 821 and Lot 307 cannot be
considered separate and distinct from each
other. They reasoned that when the land
dries up for the most part of the year, the
two are connected. [Note: The CA applied
the ruling in Govt of the Phil Islands vs.
Colegio de San Jose, which was actually
inappropriate because the subject matter in
this case was a lake so that the definition of
a bed was different.]

ISSUE:
Whether or not Manalo owns Lot 821 by
way of accretion

RULING: No.
The disputed property is not an accretion. It
is the action of the heavy rains that cause
the highest ordinary level of waters of the
Cagayan River during the rainy season. The
depressed portion is a river bed and is thus
considered property of public domain.
The SC observed the following:
a) The pictures identified by Manalo during
his direct examination depict the depressed
portion as a river bed. The dried up portion
had dike-like slopes (around 8m) on both
sides connecting it to Lot 307 and Lot 821
that are vertical and very prominent.
b) The eastern bed already existed even
before Manalo bought the land. It was
called Rio Muerte de Cagayan.
c) Manalo could not have acquire ownership
of the land because article 420 of the civil
code states that rivers are property of
public dominion. The word river includes
the running waters, the bed, and the banks.
[The seller never actually owned that part
of the land since it was public property]
d) The submerged area (22.72 ha) is twice
the area of the land he actually bought. It is
difficult to suppose that such a sizable area
could have been brought about by
accretion.
More
importantly,
the
requisites
of
accretion in article 457 were not satisfied.
These are: 1) that the deposition of the soil
or sediment be gradual and imperceptible;
2) that it be the result of the action of the
waters of the river (or sea); and 3) the land
where the accretion takes place is adjacent
to the banks of the rivers (or the sea coast).
The accretion shouldve been attached to
Lot 307 for Manalo to acquire its ownership.

BUT, the claimed accretion lies on the bank

of the river; not adjacent to Lot 307 but
directly opposite it across the river. Aside
from that, the dike-like slopes which were
very steep may only be formed by a
sudden and forceful action like flooding.
The steep slopes could not have been
formed by the river in a slow and gradual
manner.

BAES V. COURT OF APPEALS

The rules on alluvion do not apply to manmade or artificial accretions nor to

accretions to lands that adjoin canals or
esteros or artificial drainage systems. If the
riparian owner is entitled to compensation
for the damage to or loss of his property
due to natural causes, there is all the more
reason to compensate him when the
change in the course of the river is effected
through artificial means.
FACTS:
In 1962, the Government dug up a canal on
a private estate in order to streamline the
Tripa de Gallina creek (in other words, there
was a mand-made change of river course).
Said private estate was acquired by
petitioner Baes, and was subdivided in to
three lots. It was lot 2958-C which was
totally occupied by the canal so the
Government in exchange granted him a lot
near but not contiguous to C. The old river
bed was filled up by soil from Lot C.
Petitioner now claims ownership over the
old river bed on the basis of Article 461
which says that abandoned river beds
belong to the riparian owners whose land is
occupied by the new course of water.

ISSUE: Whether or not Article 461 applies

RULING: YES!
If the riparian owner is entitled to
compensation for the damage to or loss of
his property due to natural causes, there is
all the more reason to compensate him
when the change in the course of the river
is effected through artificial means. The
loss to the petitioners of the land covered
by the canal was the result of a deliberate
act on the part of the government when it
sought to improve the flow of the Tripa de
Gallina creek. It was therefore obligated to
compensate the Baeses for their loss.

We find, however, that the petitioners have

already been so compensated. Felix Baes
was given Lot 3271-A in exchange for the
affected Lot 2958-B through the Deed of
Exchange of Real Property dated June 20,
1970. This was a fair exchange because the
two lots were of the same area and value
and the agreement was freely entered into
by the parties.

Vda de Nazareno vs. CA

Facts:The husband and wife, in order to
avoid paying estate tax, while they are
alive, executed several Deeds of Sale in
favor of their children. The sale was proven
to be without consideration.
Issue:Whether or not the subject properties
of the Deeds of Sale are part of the estate
of the deceased.
Held:No, the children never acquired
ownership because the sale was void for
lack of consideration. The sale to a
Natividad, one of the children, is deemed in
trust for the other children of the deceased.
The properties should be collated as part of
the estate.
DESAMPARADO VDA. DE NAZARENO
vs. C.A]
Facts: Sometimes in 1979, PR Salasalan
and Rabaya leased the subject lots on
which their houses stood from one Antonio
Nazareno, petitioners predecessor-ininterest. In the latter part of 1982, PR
allegedly stopped paying rentals. As a

result, petitioners filed a case for ejectment

with the MTC of CDO. A decision was
rendered against PR, which decision was
affirmed by the RTC of Misamis Oriental,
before he died, Antonio Nazareno caused
the approval by the Bureau of Lands of the
Survey plan with a view of perfecting his
title over the accretion are being claimed
by him. Before the approved survey plan
could be released to the applicant, however
it was protested by PR before the Bureau of
Land. Upon investigating of the RD of
Bureau of Land, it was recommended that
Survey Plan in the name of Antonio
Nazareno
who
denied
the
motion,
Respondent Director of Land then ordered
him to vacate the portion adjudicated to
private respondent be placed in possession
thereof. Upon the denial of the late Antonio
Nazareno's motion for reconsideration,
petitioners Desamparado Vda. de Nazareno
and Leticia Tapia Nazareno, filed a case
before the RTC, Branch 22 for annulment of
the following: order of investigation by
respondent
Gillera,
report
and
recommendation by respondent Labis,
decision by respondent Hilario, order by
respondent Ignacio affirming the decision of
respondent Hilario and order of execution
by respondent Palad. The RTC dismissed
the complaint for failure to exhaust
administrative remedies which resulted in
the finality of the administrative decision of
the Bureau of Lands, On Appeal, the CA
affirmed the decision of the RTC dismissing
the complain.
Issue: W/N the subject land is public land
Ruling: Petitioners claim that the subject
land is private land being an accretion to
his titled property, applying Art. 457 of the
Civil Code which provides: To the owner
of lands adjoining the banks of river belong
the accretion which they gradually receive
from the effect of the current of the water.
In the case of Meneses v. CA, 2 this Court
held that accretion, as a mode of acquiring
property under Art. 457 of the Civil Code,
requires
the
concurrence
of
these
requisites. a. That the deposition of soil or
sediment be gradual and imperceptible; b.
That it be the result of the action of the
waters of the river (or sea). c. That the land
where takes place is adjacent to the bank
of river (or the sea cost). These are called
the rules on alluvion which if present in a
case, give to the owner of lands adjoining
the bank of rivers or stream any accretion
gradually received from the effect of the
current of waters. Furthermore, the Bureau
of Lands, classified the subject land as an

accretion are which was formed by deposits

of sawdust in Balacanas Creek and the
Cagayan river, in accordance with the
ocular inspection conducted by the Bureau
of Land
LIWANAG vs. YU-SONGQUIAN
FACTS: Yu-Chiocco leased a land on Calle
Lemery, Tondo in 1901. The property,
however, was later claimed by Leoncia
Liuanag, on behalf of the estate of YuChingco, who had died in China on Oct. 30
1901. Yu-Chiocco himself died in August
1902.
The lower court found that Yu-Chiocco
contributed the labor, while the materials
used belonged to the estate of Yu-Chingco,
and ruled that the estate of Yu-Chingco
owned half of the buildings.
The Supreme Court overturned the ruling,
saying that even if the materials belonged
to Yu-Chingco, it does not follow, as a
conclusion of law, that the owner of the
material thereby became the owner of any
part
of
the
buildings.
Instead, Liuanag should be paid for the
materials that were used to construct the
building.
It cited Art. 360 of the Civil Code, which
says that a landowner who builds on his
land using the materials of another is
obliged to pay for the value of the material.
Saying that the provision would also apply
to a leasehold in real estate, the Court said
Liuanag has a claim for the value of the
materials
that
were
used
in
the
construction of the building.
Judgment:
Ruling
REVERSED.
Case
remanded to lower court with directions to
enter judgment in favor of defendant,
without prejudice to present claim against
the person or estate bound to pay it.
Carmen Liwanag v. CA and People
G.R. No. 114398 October 24, 1997
Romero, J.
Facts:
Liwanag asked Isidora Rosales to join her
and Thelma Tagbilaran in the business
of buyingand selling cigarettes. Under their
agreement, Rosales would give the money
needed
tob u y t h e c i g a r e t t e s w h i l e L i w a
n a g a n d Ta b l i g a n w o u l d a c t a s
h e r a g e n t s , w i t h a corresponding
40% commission to her if the goods are

sold; otherwise the money wouldbe

returned to Rosales.
Rosales gave several cash advances
amounting to 633,650.
Money was misappropriated. Rosales files a
complaint of estafa against them.
Issue:
1. WON the parties entered into a
partnership agreement; 2. if in the
negative, WONthe transaction is a simple
loan
Held:
1. No. Even assuming that a contract of
partnership was indeed entered into by
andbetween the parties, when money or
property have been received by a partner
for
a specificpurpose
and
he
later
misappropriated it, such partner is guilty
of estafa.2. No. In a contract of loan
once the money is received by the
debtor, ownership over thesame is
transferred. Being the owner, the borrower
can dispose of it for whatever purposehe
may deem proper.
J.M. TUASON and CO., INC. V ESTRELLA
VDA. DE LUMANLAN and CA
G.R.
No:
L-23497
Petitioner/s: J.M. Tuason and Co., Inc.
Respondent/s: Estrella Vda. De Lumanlan
and the Court of Appeals (Fifth Division)
Ponente:
Acting
C.J.
JBL
Reyes
Action: Petition for review by certiorari
Date: April 26, 1968

FACTS
J.M. Tuason & Co Inc (Tuason) filed a case
against Lumanlan after the latter unlawfully
entered into its property known as Santa
Mesa Heights Subdivision (situated at
Barrio North Tatalon, Quezon
City).
Lumanlan took possession of 800 sq m land
and constructed her house on the said land.
Tuason prays for ejectment and damages
for occupancy.

Lumanlan argues that she had brought the

property from one Pedro Deudor and that
there is a Compromise Agreement between
Deudor and Tuason stating that she was
one of the buyers recognized therein.

CFI: Lower Court ruled in favor of Tuason,

holding that it is the registered owner and
the question being purely one of
possession.
Lumanlans
evidence
(Compromise Agreement) was completely
immaterial.

Upon appeal, CA ruled in favor of

Lumanlan, holding that the Compromise
Agreement was a valid defense against the
possessory action filed by Tuason. Under
paragraph 7 of the said agreement, Tuason
bound and committed itself to sell to
Lumanlan the lot occupied by her at a
reasonable price. Lumanlan has the right to
compel Tuason to accept payment for the
lot in question and that the agreement
legalized the possession of Lumanlan.
ISSUE
Whether or not J.M. Tuason and Co., Inc is
the rightful owner of the said land? YES
HELD
1. A careful analysis of the compromise
agreement will show that in no way did it
obligate Tuason to sell to those buyers the
lots occupied by them at the price
stipulated by the Deudors, but at the
current prices and terms specified by the
OWNERS (Tuason) in their sales of lots.
(See notes for paragraph 7 of compromise
agreement)
2. Paragraph 7 also imports that these
buyers of the Deudors must (1) recognize
the title of the OWNERS (Tuason) over the
property purportedly bought by them and
from the Deudors, and (2) sign, whenever
possible, new contracts of purchase for said
property. The agreement also states that
the sums paid by them to the
Deudors...shall be credited to the buyers.
3. All that Tuason agreed to was to grant
the Deudor buyers preferential right to
purchase at current prices and terms
upon recognizing the title of Tuason and
signing new contracts and to credit to them
for the amounts they had paid to the
Deudors.
4. Lumanlan never claimed that she had
signed a new contract with Tuason for the
puchase of the lot occupied. Instead of
recognizing the title of Tuason as required
by the agreement, she used paragraph 6 of
the agreement for her special defense,
arguing that Deudor and Tuason entered
into the compromise agreement where
Deudor and his co-owners renouced, ceded,
waived, and quitclaimed all their rights in
the property in favor of Tuason without her
knowledge and consent. Now she does not
rely on the compromise agreement but she
assails it. -_-

5. Without the compromise agreement,

Lumanlan must justify her possession on
the basis of a pretended superiority of the
Deudors old Spanish nformacion posesoria
over Tuasons Certificate of Title No. 1267.
But the Court has already ruled in previous
cases that Lumanlan is barred from
assailing the decree of registration in favor
of Tuasons predecessors 20 years after its
issuance.
6. The agreement provides that the Deudor
buyers should sign new contracts with it at
current prices specified for the sales of lots.
Article 1474 of the Civil Code does not
apply in this case because Lumanlan is not
a buyer from Tuason since there is no
contract between the two.
7. Lumanlans argument that she should be
deemed a builder in good faith does not
hold water. In a related case (Tuason v
Macalindong), the Court ruled that there
being a presumptive knowledge of the
Torrents titles issued to Tuason, the buyer
from the Deudors cannot say now that she
believer her vendor had rights of ownership
over the lot purchaser. She had chose to
ignore the Torrens title of Tuason and relied
instead upon the Deudors claim of
ownership, perhaps because such course
appeared to her as more advantageous;
hence, she has only herself to blame for the
consequences now that the Deudors' claim
has been abandoned by the Deudors
themselves, and can not pretend good
faith.
8. Lumanlan could have asked that she
recover or be credited with the amounts
paid by her to the Deudors. Equity
demands, however, that her right to claim
such return, or to have the amount offset
against the sums she was sentenced to pay
should be reserved.
DISPO
Petition granted. Decision of CA reversed.
Decision of CFI reinstated. Costs against
Lumanlan.
NOTES
Paragraph
7
of
the
Compromise
Agreement:
That the sales of the possessory
rights claimed by the DEUDORS, are
described in the lists submitted by
them to the OWNERS which are
attached hereto marked Annexes "B"

and "C" and made part hereof.

Whatever amounts may have been
collected by the DEUDORS on
account thereof, shall be deducted
from the total sum of P1,201,063.00
to be paid to them. It shall be the
joint and solidary obligation of the
DEUDORS to make the buyer of the
lots purportedly sold by them to
recognize the title of the OWNERS
over the property purportedly bought
by them, and to make them sign,
whenever possible, new contracts of
purchase for said property at the
current paces and terms specified by
the OWNERS in their sales of lots in
their subdivision known at "Sta. Mesa
Heights Subdivision." The DEUDORS
HEREBY advised the OWNERS that
the buyer listed in Annex "B" herein
with the annotation "continue" shall
buy the lots respectively occupied by
them and shall sign contracts, but
the sums already paid by them to
the
DEUDORS
amounting
to
P134,922.84 (subject to verification
by the Court) shall be credited to the
buyers and shall be deducted from
the sums to be paid to the DEUDORS
by the OWNERS. The DEUDORS also
advise the OWNERS that, the buyers
listed in Annex "C" herein with the
annotation "Refund" have decided
not to continue with their former
contracts or purchases with the
DEUDORS and the sums already paid
by them to the DEUDORS TOTALLING
P101,182.42 (subject to verification
by the Court) shall be refunded to
them by the OWNERS and deducted
from the sums that may be due to
the DEUDORS from the OWNERS
(J.M. Tuason & Co., Inc. vs. Jaramillo,
L-18932, Sept. 30, 1963);
Article 1474 of the Civil Code:
Where
the
price
cannot
be
determined in accordance with the
preceding articles, or in any other
manner, the contract is inefficacious.
However, if the thing or any part
thereof has been delivered to and
appropriated by the buyer, he must
pay a reasonable price therefor.
What is a reasonable price is a
question of fact dependent on the
circumstances of each particular
case.

GABOYA V. CUI- Usufruct

FACTS:

Don Mariano sold his 2 lots to two of his

children. Later on, he and his children
became co-owners of the property. Don
Mariano executed a deed authorizing the
children to apply for a loan w/ mortgage
with a stipulation reserving his right to the
fruits of the land. The children then
constructed a building on the land and
collected rent from the lessee thereof. Much
later, when Don Mariano died, his estate
was claiming the fruits of the building.

ISSUE:
Whether or not Don Mariano had a right to
fruits of the building?

RULING: NO.
The deed expressly reserved only to his
right to the fruits of the land. He only
owned the rent for the portion of land
occupied by the building; thus, the estate
could only claim the rent on that piece of
land and not on the entire parcel of land.
The children are entitled to the rents of the
building. (A usufruct on the land may be
separate from the building.

There should be no rescission of the

contract coz the exact amount of rent due
and owing to the Don Marianos estate is
still unliquidated and undetermined. The
trial court has the discretion to grant the
debtor (children) a period within which to
pay the rental income from the portion of
land owned by the building because the
same has not yet been determined. Article
1191 of the Civil Code grants the right to
rescind but subject to the period that the
court will grant.

Moreover, on the issue of co-ownership, the

court held that a co-owner cannot
simultaneously be a usufructuary of the
same land owned.

FLOREZA v EVANGELISTA
[96 SCRA 130 (February 21, 1980)]Nature:
Petition for review on certiorari of
the decision of the CA.Ponente: J. MelencioHerrera
Facts:
The Evangelistas were the owner of a
residential lot in Rizal with an area
of 204.08 sq. m. assessed at P410.
May
1945: Evangelistas
borrowed
P100 from Floreza.
November 1945: Floreza occupied the
residential lot and built a house of
lightmaterial
(barong-barong)
with
the consent of the Evangelistas.
Additional
Loans
made
by
the
Evangelistas: Sept. 1946 P100, August
1947 P200, January 1949 P200, April
1949 P140. TOTAL = P740 (including
firstloan)
January 1949: Floreza demolished the
house of light material and constructedone
of strong material assessed at P1400.
Floreza has not been paying any rentals
since the beginning of their transactions.
August 1949: Evangelistas sold, with
a
right
to
repurchase
within
6
years,their land to Floreza for P1000.
Seven months before the expiry of the
repurchase
period,
the
Evangelistaswere able to pay in full.
Floreza refused to vacate the lot unless he
was first reimbursed for the valueof the
house he built.
Evangelistas filed a complaint. CFI ruled
based on Art, 448 of the Civil Codesaying
that Evangelistas have the choice
between
purchasing
the
house
orselling the land to Floreza.
CA
ruled
that
Art.
448
was
inapplicable and that Floreza was not
entiled tot h e r e i m b u r s e m e n t o f h i s
house and
cou l d re move
t h e s a m e a t h i s o w n expense.
Issue: 1.WON Floreza was entitled to
reimbursement of the cost of his
house.
NO.
2.WON
he
(his
heirs
who
replaced him) should pay rental of the
land. YES

Held/Ratio:1 . I s s u e o f r e i m b u r s e
ment is not moot because if
F l o r e z a h a s n o r i g h t o f retentio
n, then he must pay damages in the form
of rentals.
Agree with CA that Art. 448 is inapplicable
because it applies only when thebuilder is
in good faith (he believed he had a
right to build).Art. 453 is also n o t
applicable
because
it
re q u i re s
both of the parties to be in bad
f a i t h . Neither is Art. 1616 applicable
because Floreza is not a vendee a retro
.
Theh o u s e w a s a l r e a d y c o n s t r u c t e d
in 1945 (light materials) even befo
r e t h e pacto de retro was entered into in
1949.Floreza cannot be classifi ed as a
builder in good faith nor a vendee a
retro,who made useful improvements
during the pacto de retro, he has no right
toreimbursement of the value of the
house, much less to the retention of
thepremises until he is paid
His
rights
are
more
akin to
a usufructury under Art. 579, who may
make onthe property useful improvements
but with no right to be indemnified
thereof,He may, however, remove such
improvements should it be possible to do
sowithout damage to the property.
2 . Fr o m t h e t i m e t h e
re d e mp ti on p ri ce
was
paid
i n J a n u a r y 3 , 1 9 5 5 , F l o r e z a s right to
use the residential lot without rent ceased.
He should be held liablefor damages in
the form of rentals for the continued
use of the lot for P10monthly from
January 3, 1955 until the house was
removed and the propertyvacated by
Floreza or his heirs. Judgment affirmed with
modification.
MANOTOK REALTY INC v. TECSON
FACTS:
In a complaint filed by the petitioner for
recovery of possession against defendants,
CFI ruled declaring respondent Nilo
Madlangawa a builder in good faith. CA
affirmed and SC dismissed for lack of merit.

Petitioner filed with the trial court motion

for the approval of the petitioner's exercise
of option and for satisfaction of
judgment(that is final and executory) which
was dismissed. Hence this petition for
mandamus. However, since there is a
pending case (Manotok v. NHA) involving
the expropriation of the land in question it
is better to suspend the current case til
after the outcome of the expropriation
proceedings is done. Moreover, a fire
engulfed the Tambunting estate covering
the disputed area of the land.The
expropriation case was not granted and the
law that provided for such was declared
unconstitutional.

Due to the fire, petitioner is contending

that the execution of the decision must now
involve the delivery of possession.
ISSUE
Whether or not there should be a delivery
of possession by the respondent to the
petitioner

RULING
When the decision of the trial court became
final and executory, it becomes incumbent
upon the respondent judge to issue the
necessary writ for the execution of the
same. Since the improvements have been
gutted by fire, and therefore, the basis for
private respondent's right to retain the
premises has already been extinguished
without the fault of the petitioner, there is
no other recourse for the private
respondent but to vacate the premises and
deliver the same to the petitioner.

MWSS V. CA
143 SCRA 20

FACTS:
FACTS:
MWSS had an account from PNB. Its
treasurer, auditor, and General Manager
are the ones authorized to sign checks.
During a period of time, 23 checks were
drawn and debited against the account
of petitioner. Bearing the same check
numbers, the amounts stated therein were
again
debited from the account of petitioner. The
amounts drawn were deposited in the
accounts of the payees in PCIB. It was
found out though that the names stated in
the drawn checks were all fictitious.
Petitioner demanded the return of the
amounts debited but the bank refused to
do so. Thus, it filed a complaint.
HELD:
There was no categorical finding that
the 23 checks were signed by persons
other than those authorized to sign.
On the contrary, the NBI reports shows
that the fraud was an inside job and that
the delay in the reconciliation of the
bank statements and the laxity and
loss of records
control in the printing of the personalized
checks facilitated the fraud. It further
doesnt provide that the signatures were
forgeries.
Forgery cannot be presumed. It should be
proven by clear, convincing and positive
evidence. This wasnt done in the present
case.
The petitioner cannot invoke Section 23
because it was guilty of negligence not only
before the questioned checks but even
after the same had already been
negotiated.
MWSS V. CA, CITY OF DAGUPAN, 143 SCRA
623

The City of Dagupan (CITY) filed a

complaint against the former National
Waterworks and Sewerage Authority
(NAWASA), now the Metropolitan
Waterworks and Sewerage System (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.
ISSUE:
Whether or not MWSS 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?
HELD: No.
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. 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).
PLEASANTVILLE DEVELOPMENT
CORPORATION VS. COURT OF
APPEALSG.R. NO. 79688 253 SCRA 10 FEBRU
ARY 1, 1996PONENTE: PANGANIBAN, J.
Doctrine:
Good faith consists in the belief of the builder that
he land he is building on is his and hisignorance
of any defect or flaw in his title. The burden
of proving bad faith belongs to the one asserting
it.
Facts:
Edith Robillo purchased from Pleasantville
Development Corporation, herein petitioner a
parcel ofland at Pleasantville Subdivision,
Bacolod City. The property was designated as Lot
9, Phase II. In 1975,herein respondent Eldred
Jardinico bought the said subject lot from the
former purchaser. Eldred laterdiscovered that the
property he purchased had improvements
introduced therein by respondent WilsonKee.Kee
on the other hand bought on installments Lot 8 of
the same subdivision from C.T. TorresEnterprises,
Inc. (CTTEI) which is the exclusive real estate
agent of the petitioner. Under the contract
Keewas allowed to take possession of the
property even before full payment of the price.
CTTEI through an
employee, Zenaida Octaviano accompanied
Kees wife Donabelle to inspec
t Lot No. 8. Octavianohowever mistakenly pointed
towards Lot 9. Hence spouses Kee had their
residence, an auto repair shop,a store and other
improvements constructed on the wrong lot.Upon
discovery of the blunder both Kee and Jardinico
tried to reach an amicable settlement butthey
failed. Jardinico demanded that the improvements
be removed but as Kee refused, Jardinico filed
acomplaint for ejectment with damages against
Kee at the Municipal Trial Court in Cities (MTCC)
ofBacolod City. Kee filed a third-party complaint
against herein petitioner and CTTEI.The MTCC
found that the error was attributable to CTTEI
also since at present the contract with

Kee has rescinded for Kees failure to pay

installments. Kee no longer had any right
over the subje
ctproperty and must pay rentals for its use. The
Regional Trial Court (RTC) of Bacolod City ruled
thatpetitioner and CTTEI were not at fault or were
not negligent. It argued that Kee was a builder in
bad faith.Even if assuming that he was in good
faith, he was no longer so and must pay rentals
from the time thathe was given notice to vacate
the lot. The Court of Appeals ruled that Kee was a
builder in good faith ashe was unaware of the
mix-up when he constructed the improvements. It
was in fact due to thenegligence and wrongful
delivery of CTTEI which included its principal the
herein petitioner. It furtherruled that the award of
rental was without basis.Pending the resolution of
the case at the Court of Appeals Jardinico and
Kee entered into a deedof sale, wherein Lot 9
was sold to Kee. In the said deed a provision
stating that regardless of the outcomeof the
decision, such shall not be pursued by the parties
and shall be considered dismissed and
withouteffect. The appellate court was not
informed of this deal.
Issue:
Whether or not a lot buyer who constructs
improvements on the wrong property erroneously
delivered by the owners agent, a builder in
good faith?
Held:
Yes. Article 527 of the Civil Code provides the
presumption that petitioner has the burden
ofproving that Kee was a builder in bad faith. Kee
may be made liable for the violation of the
contract withCTTEI but this may not be used as a
basis of bad faith and as a sufficient ground to
negate thepresumption of good faith. Jardinico is
presently only allowed to file a complaint for
unlawful detainer.Good faith is based on the belief
of the builder that the land he is building on is his
and his ignorance ofany flaw or defect in is title.
Since at the time when Kee constructed his
improvements on Lot 8, he wasnot aware that it
was actually Lot 9 that was delivered to him.
Petitioner further contends that Kee wasnegligent
as a provision in the Contract of Sale on
Installment stated that the vendee must have