THIRD DIVISION

[G.R. No. 137705. August 22, 2000]

SERG’S PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI

LEASING AND FINANCE, INC., respondent.

DECISION

PANGANIBAN, J.:

After agreeing to a contract stipulating that a real or immovable property be considered

as personal or movable, a party is estopped from subsequently claiming otherwise.
Hence, such property is a proper subject of a writ of replevin obtained by the other
contracting party.

The Case

Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision
of the Court of Appeals (CA) in CA-GR SP No. 47332 and its February 26, 1999
Resolution denying reconsideration. The decretal portion of the CA Decision reads as
follows:

“WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby
AFFIRMED. The writ of preliminary injunction issued on June 15, 1998 is hereby
LIFTED.”

In its February 18, 1998 Order, the Regional Trial Court (RTC) of Quezon City (Branch
218) issued a Writ of Seizure. The March 18, 1998 Resolution denied petitioners’
Motion for Special Protective Order, praying that the deputy sheriff be enjoined “from
seizing immobilized or other real properties in (petitioners’) factory in Cainta, Rizal and
to return to their original place whatever immobilized machineries or equipments he may
have removed.”

The Facts

The undisputed facts are summarized by the Court of Appeals as follows:

“On February 13, 1998, respondent PCI Leasing and Finance, Inc. (“PCI Leasing” for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex ‘E’), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.

“On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex ‘B’) 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.

“On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioner’s
factory, seized one machinery with [the] word that he [would] return for the other
machineries.

“On March 25, 1998, petitioners filed a motion for special protective order (Annex ‘C’),
invoking the power of the court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff to defer enforcement of the
writ of replevin.

“This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the
properties [were] still personal and therefore still subject to seizure and a writ of
replevin.

“In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties’ agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was]
estopped from treating these machineries as personal because the contracts in which
the alleged agreement [were] embodied [were] totally sham and farcical.

“On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.

“On April 7, 1998, they went to [the CA] via an original action for certiorari.”

Ruling of the Court of Appeals

Citing the Agreement of the parties, the appellate court held that the subject machines
were personal property, and that they had only been leased, not owned, by petitioners.
It also ruled that the “words of the contract are clear and leave no doubt upon the true
intention of the contracting parties.” Observing that Petitioner Goquiolay was an
experienced businessman who was “not unfamiliar with the ways of the trade,” it ruled
that he “should have realized the import of the document he signed.” The CA further
held:

“Furthermore, to accord merit to this petition would be to preempt the trial court in ruling
upon the case below, since the merits of the whole matter are laid down before us via a
petition whose sole purpose is to inquire upon the existence of a grave abuse of
discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The
issues raised herein are proper subjects of a full-blown trial, necessitating presentation
of evidence by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other – a matter x x x which respondent court is in the best position to
determine.”

Hence, this Petition.

The Issues

In their Memorandum, petitioners submit the following issues for our consideration:

“A. Whether or not the machineries purchased and imported by SERG’S became real
property by virtue of immobilization.

B. Whether or not the contract between the parties is a loan or a lease. ”

In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly the procedural points raised by
respondent.

The Court’s Ruling

The Petition is not meritorious.

Preliminary Matter:Procedural Questions

Respondent contends that the Petition failed to indicate expressly whether it was being
filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition
erroneously impleaded Judge Hilario Laqui as respondent.

There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is “Petition for Review on Certiorari.”

While Judge Laqui should not have been impleaded as a respondent, substantial justice
requires that such lapse by itself should not warrant the dismissal of the present
Petition. In this light, the Court deems it proper to remove, motu proprio, the name of
Judge Laqui from the caption of the present case.

Main Issue: Nature of the Subject Machinery

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.
Serious policy considerations, they argue, militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery
of personal property only. Section 3 thereof reads:
“SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take
such property into his custody.”

On the other hand, Article 415 of the Civil Code enumerates immovable or real property
as follows:

“ART. 415. The following are immovable property:

x x x....................................x x x....................................x x x

(5) 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;

x x x....................................x x x....................................x x x”

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. Indisputably, they were
essential and principal elements of their chocolate-making 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.” In that sense, petitioners are correct in arguing that the said machines are
real, not personal, property pursuant to Article 415 (5) of the Civil Code.

Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.

The Court has held that 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.

Hence, in Tumalad v. Vicencio, the Court upheld the intention of the parties to treat a
house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled:

“x x x. Although there is no specific statement referring to the subject house as

personal property, yet by ceding, selling or transferring a property by way of chattel
mortgage defendants-appellants could only have meant to convey the house as chattel,
or at least, intended to treat the same as such, so that they should not now be allowed
to make an inconsistent stand by claiming otherwise.”

Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills also held that the machinery used in a factory and essential to the industry, as in
the present case, was a proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Court’s ruling are reproduced
hereunder:

“x x x. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel
mortgage thereon as long as the parties to the contract so agree and no innocent third
party will be prejudiced thereby, there is absolutely no reason why a machinery, which
is movable in its nature and becomes immobilized only by destination or purpose, may
not be likewise treated as such. This is really because one who has so agreed is
estopped from denying the existence of the chattel mortgage.”

In the present case, the Lease Agreement clearly provides that the machines in
question are to be considered as personal property. Specifically, Section 12.1 of the
Agreement reads as follows:

“12.1 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.”

Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of
the Writ of Seizure.

It should be stressed, however, that our holding -- that the machines should be deemed
personal property pursuant to the Lease Agreement – is good only insofar as the
contracting parties are concerned. Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its stipulation
characterizing the subject machinery as personal. In any event, there is no showing that
any specific third party would be adversely affected.

Validity of the Lease Agreement

In their Memorandum, petitioners contend that the Agreement is a loan and not a lease.
Submitting documents supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement suffers from “intrinsic
ambiguity which places in serious doubt the intention of the parties and the validity of
the lease agreement itself.” In their Reply to respondent’s Comment, they further allege
that the Agreement is invalid.

These arguments are unconvincing. The validity and the nature of the contract are the
lis mota of the civil action pending before the RTC. A resolution of these questions,
therefore, is effectively a resolution of the merits of the case. Hence, they should be
threshed out in the trial, not in the proceedings involving the issuance of the Writ of
Seizure.

Indeed, in La Tondeña Distillers v. CA, the Court explained that the policy under Rule
60 was that questions involving title to the subject property – questions which petitioners
are now raising -- should be determined in the trial. In that case, the Court noted that
the remedy of defendants under Rule 60 was either to post a counter-bond or to
question the sufficiency of the plaintiff’s bond. They were not allowed, however, to
invoke the title to the subject property. The Court ruled:

“In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or
of the grounds relied upon therefor, as in proceedings on preliminary attachment or
injunction, and thereby put at issue the matter of the title or right of possession over the
specific chattel being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits.”

Besides, these questions require a determination of facts and a presentation of

evidence, both of which have no place in a petition for certiorari in the CA under Rule 65
or in a petition for review in this Court under Rule 45.

Reliance on the Lease Agreement

It should be pointed out that the Court in this case may rely on the Lease Agreement,
for nothing on record shows that it has been nullified or annulled. In fact, petitioners
assailed it first only in the RTC proceedings, which had ironically been instituted by
respondent. Accordingly, it must be presumed valid and binding as the law between the
parties.

Makati Leasing and Finance Corporation is also instructive on this point. In that case,
the Deed of Chattel Mortgage, which characterized the subject machinery as personal
property, was also assailed because respondent had allegedly been required “to sign a
printed form of chattel mortgage which was in a blank form at the time of signing.” The
Court rejected the argument and relied on the Deed, ruling as follows:

“x x x. Moreover, even granting that the charge is true, such fact alone does not render
a contract void ab initio, but can only be a ground for rendering said contract voidable,
or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court.
There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. x x x”

Alleged Injustice Committed on the Part of Petitioners

Petitioners contend that “if the Court allows these machineries to be seized, then its
workers would be out of work and thrown into the streets.” They also allege that the
seizure would nullify all efforts to rehabilitate the corporation.
Petitioners’ arguments do not preclude the implementation of the Writ. As earlier
discussed, law and jurisprudence support its propriety. Verily, the above-mentioned
consequences, if they come true, should not be blamed on this Court, but on the
petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60,
which allows the filing of a counter-bond. The provision states:

“SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicant’s bond, or of the surety or sureties thereon, he cannot immediately require the
return of the property, but if he does not so object, he may, at any time before the
delivery of the property to the applicant, require the return thereof, by filing with the
court where the action is pending a bond executed to the applicant, in double the value
of the property as stated in the applicant’s affidavit for the delivery thereof to the
applicant, if such delivery be adjudged, and for the payment of such sum to him as may
be recovered against the adverse party, and by serving a copy bond on the applicant.”

WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners.

SO ORDERED.

Fels Energy vs. Batangas

Fels Energy, Inc. vs. Province of Batangas
G.R. No. 168557. February 16, 2007.

Callejo Sr., J.

Doctrine: In Consolidated Edison Company of New York, Inc., et al. v. The City of New York,
et al., a power company brought an action to review property tax assessment. On the city’s
motion to dismiss, the Supreme Court of New York held that the barges on which were mounted
gas turbine power plants designated to generate electrical power, the fuel oil barges which
supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges
were subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that “docks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river, lake,
or coast” are considered immovable property. Thus, power barges are categorized as immovable
property by destination, being in the nature of machinery and other implements intended by the
owner for an industry or work which may be carried on in a building or on a piece of land and
which tend directly to meet the needs of said industry or work.
Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3×30
MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as an Energy Conversion Agreement, was for a period of five years. Article 10
states that NPC shall be responsible for the payment of taxes. (other than (i) taxes imposed or
calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees
and (ii) construction permit fees, environmental permit fees and other similar fees and charges.
Polar Energy then assigned its rights under the Agreement to Fels despite NPC’s initial
opposition.

FELS received an assessment of real property taxes on the power barges from Provincial
Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to NPC, reminding it of
its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power
and authority to represent it in any conference regarding the real property assessment of the
Provincial Assessor. NPC filed a petition with the LBAA. The LBAA ordered Fels to pay the
real estate taxes. The LBAA ruled that the power plant facilities, while they may be classified as
movable or personal property, are nevertheless considered real property for taxation purposes
because they are installed at a specific location with a character of permanency. The LBAA also
pointed out that the owner of the barges–FELS, a private corporation–is the one being taxed, not
NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and
assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC
and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of
time.

Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges belong to
NPC; since they are actually, directly and exclusively used by it, the power barges are covered
by the exemptions under Section 234(c) of R.A. No. 7160. As to the other jurisdictional issue,
the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax
exemption in accordance with Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed
itself.

Issue: Whether or not the petitioner may be assessed of real property taxes.

Held: YES. The CBAA and LBAA power barges are real property and are thus subject to real
property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was
dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners
are presumed correct and made in good faith, with the taxpayer having the burden of proving
otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in
their field, are generally binding and conclusive upon the Court; we will not assume to interfere
with the sensible exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed.
We find no reason to depart from this rule in this case.

In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al., a
power company brought an action to review property tax assessment. On the city’s motion to
dismiss, the Supreme Court of New York held that the barges on which were mounted gas
turbine power plants designated to generate electrical power, the fuel oil barges which supplied
fuel oil to the power plant barges, and the accessory equipment mounted on the barges were
subject to real property taxation.

Moreover, Article 415 (9) of the New Civil Code provides that “docks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river, lake,
or coast” are considered immovable property. Thus, power barges are categorized as immovable
property by destination, being in the nature of machinery and other implements intended by the
owner for an industry or work which may be carried on in a building or on a piece of land and
which tend directly to meet the needs of said industry or work.

Petitioners maintain nevertheless that the power barges are exempt from real estate tax under
Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by
petitioner NPC, a government- owned and controlled corporation engaged in the supply,
generation, and transmission of electric power.

We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is
petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated
under Section 2.11, Article 2 of the Agreement:

“OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures,
fittings, machinery and equipment on the Site used in connection with the Power Barges which
have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power
Barges for the purpose of converting Fuel of NAPOCOR into electricity.”

It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its
exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states that the machinery must be
actually, directly and exclusively used by the government owned or controlled corporation;
nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5,
Article 5 of the Agreement provides:

“OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply
of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the
Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7.

It is a basic rule that obligations arising from a contract have the force of law between the
parties. Not being contrary to law, morals, good customs, public order or public policy, the
parties to the contract are bound by its terms and conditions.

Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception. The law does not look with favor on tax exemptions and the entity that would seek to
be thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted. Thus, applying the rule of strict construction of laws granting tax exemptions,
and the rule that doubts should be resolved in favor of provincial corporations, we hold that
FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be
responsible for the payment of all real estate taxes and assessments, does not justify the
exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant
is between FELS and NPC and does not bind a third person not privy thereto, in this case, the
Province of Batangas.

It must be pointed out that the protracted and circuitous litigation has seriously resulted in the
local government’s deprivation of revenues. The power to tax is an incident of sovereignty and is
unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against
its abuse is to be found only in the responsibility of the legislature which imposes the tax on the
constituency who are to pay for it. The right of local government units to collect taxes due must
always be upheld to avoid severe tax erosion. This consideration is consistent with the State
policy to guarantee the autonomy of local governments and the objective of the Local
Government Code that they enjoy genuine and meaningful local autonomy to empower them to
achieve their fullest development as self-reliant communities and make them effective partners in
the attainment of national goals.

In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed
revenues to finance and support myriad activities of the local government units for the delivery
of basic services essential to the promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people.

Davao Sawmill v. Castillo

DAVAO SAW MILL vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC. G.R. No. L-40411
August 7, 1935

Facts:
Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine
Islands. However, the land upon which the business was conducted belonged to another person. On the
land the sawmill company erected a building which housed the machinery used by it. Some of the
implements thus used were clearly personal property, the conflict concerning machines which were
placed and mounted on foundations of cement. In the contract of lease between the sawmill company
and the owner of the land there appeared the following provision: That on the expiration of the period
agreed upon, all the improvements and buildings introduced and erected by the party of the second
part shall pass to the exclusive ownership of the lessor without any obligation on its part to pay any
amount for said improvements and buildings; which do not include the machineries and accessories in
the improvements.

In another action wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill
Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the
defendant; a writ of execution issued thereon, and the properties now in question were levied upon as
personalty by the sheriff. No third party claim was filed for such properties at the time of the sales
thereof as is borne out by the record made by the plaintiff herein

It must be noted also that on number of occasion, Davao Sawmill treated the machinery as personal
property by executing chattel mortgages in favor of third persons. One of such is the appellee by
assignment from the original mortgages.

The lower court rendered decision in favor of the defendants herein. Hence, this instant appeal.

Issue:

whether or not the machineries and equipments were personal in nature.

Ruling/ Rationale:
Yes. The Supreme Court affirmed the decision of the lower court.

Machinery which is movable in its nature only becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person
having only a temporary right, unless such person acted as the agent of the owner.

Davao Sawmill Co. vs Castillo

Posted on June 21, 2013 by shirosekai

Davao Sawmill Co. vs Castillo

61 PHIL 709
GR No. L-40411
August 7, 1935

A tenant placed machines for use in a sawmill on the landlord's land.

FACTS
Davao Sawmill Co., operated a sawmill. The land upon which the business was conducted was
leased from another person. On the land, Davao Sawmill erected a building which housed the
machinery it used. Some of the machines were mounted and placed on foundations of cement. In
the contract of lease, Davo Sawmill agreed to turn over free of charge all improvements and
buildings erected by it on the premises with the exception of machineries, which shall remain
with the Davao Sawmill. In an action brought by the Davao Light and Power Co., judgment was
rendered against Davao Sawmill. A writ of execution was issued and the machineries placed on
the sawmill were levied upon as personalty by the sheriff. Davao Light and Power Co.,
proceeded to purchase the machinery and other properties auctioned by the sheriff.
ISSUE
Are the machineries real or personal property?

HELD
Art.415 of the New Civil Code provides that Real Property consists of:

(1) Lands, buildings, roads and constructions of all kinds adhered to the soil;

xxx

(5) Machinery, receptacles, instruments or implements intended by the owner pf the

tenement for an industry ot 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;

Appellant should have registered its protest before or at the time of the sale of the property.
While not conclusive, the appellant's characterization of the property as chattels is indicative of
intention and impresses upon the property the character determined by the parties.

Machinery is naturally movable. However, machinery may be immobilized by destination or

purpose under the following conditions:

General Rule: The machinery only becomes immobilized if placed in a plant by the owner of
the property or plant.

Immobilization cannot be made by a tenant, a usufructuary, or any person having only a

temporary right.

Exception: The tenant, usufructuary, or temporary possessor acted as agent of the owner of the
premises; or he intended to permanently give away the property in favor of the owner.

As a rule, therefore, the machinery should be considered as Personal Property, since it was not
placed on the land by the owner of the said land.

LANZAR V. DIRECTOR OF LANDS

FACTS:

Petitioner Ramon Lanzar filed an application for registration of title to a parcel of land, alleging
that he is the owner in fee simple of the lad in question and asking that the title thereto be
registered in his name. The Director of Lands filed an opposition on the ground that the land is a
foreshore which forms a part of public domain. RTC decided in favor of Lanzar holding that the
property in question has been possessed by the applicant publicly, continuously and adversely for
more that 30 years. CA reversed, holding that the land, being an accretion formed by the action
of sea, is property of public domain and not susceptible of appropriation.

ISSUE:

Whether or not the title to the land may be registered on the basis of adverse possession for over
30 years?

HELD:

No. The shores and lands reclaimed from the sea, while they continue to be devoted to public
uses and no grant whatever has been made of any portion of them to private persons, remain part
of the public domain and are of public uses, and, until they are converted to patrimonial property
of the State, such lands, thrown up by the action of the sea, and the shores adjacent thereto, are
not susceptible of prescription, inasmuch as, being dedicated to the public uses, they are not
subject of commerce among men, in accordance with the provisions of article 1936 of the civil
code.

LANZAR V. DIRECTOR OF LANDS

78 SCRA 130

FACTS:
Lanzar filed for application for registration of title over a parcel of land, to which the Director of Lands
objected to as the land in question, according to him, was part of the foreshore lands. The trial
court adjudicated the land to Lanzar as the said land wasn’t necessary for public utility or
establishment of special industries.

The CA reversed the decision.

HELD:
Lands added to the shore by accretion and alluvial deposits caused by the action of the sea, form part of
the public domain. When they are no longer washed by the water of the sea and are not
necessary for purposes of public utility, or for the establishment of special industries, or for
coastguard services, then the Government shall declare them to be property of the owners of
the estate adjacent thereto and as increment thereof.
 EN BANC

G.R. No. L-11964 April 28, 1962

REGISTER of DEEDS OF MANILA, petitioner-appellee,

vs.
CHINA BANKING CORPORATION, respondent-appellant.

Office of the Solicitor General for petitioner-appellee.

Sycip-Salazar, Luna and Associates for respondent-appellant.
Alfonso Ponce Enrile as Amicus Curiae.

DIZON, J.:

Appeal from a resolution of the Land Registration Commission holding "that the deed of transfer
in favor of an alien bank, subject of the present Consulta, is unregisterable for being in
contravention of the Constitution of the Philippines".

In an information filed on June 16, 1953 in the Court of First Instance of Manila (Criminal Case
No. 22908) Alfonso Pangilinan and one Guillermo Chua were charged with qualified theft, the
money involved amounting to P275,000.00. On September 18, 1956, Pangilinan and his wife,
Belen Sta. Ana, executed a public instrument entitled DEED OF TRANSFER whereby, after
admitting his civil liability in favor of his employer, the China Banking Corporation, in relation
to the offense aforesaid, he ceded and transferred to the latter, in satisfaction thereof, a parcel of
land located in the City of Manila, registered in the name of "Belen Sta. Ana, married to Alfonso
Pangilinan" (Transfer Certificate of Title No. 32230). On October 24, 1956 the deed was
presented for registration to the Register of Deeds of the City of Manila, but because the
transferee — the China Banking Corporation — was alien-owned and, as such, barred from
acquiring lands in the Philippines, in accordance with the provisions of Section 5, Article XIII of
the Constitution of the Philippines, said officer submitted the matter of its registration to the
Land Registration Commission for resolution. After granting the parties concerned ample
opportunity to submit their views upon the issue, the Commission issued the resolution appealed
from.

Plainly stated, the question before Us is whether appellant — an alien-owned bank — can
acquire ownership of the residential lot covered by Transfer Certificate of Title No. 32230 by
virtue of the deed of transfer mentioned heretofore (Vide pages 1-6 of the Record on Appeal).

Maintaining the affirmative, appellant argues that: (a) the temporary holding of land by an alien-
owned commercial bank under a public instrument such as the deed of transfer in question "bears
no reasonable connection with the constitutional purpose" underlying the provisions of Section 5,
Article XIII of the Constitution of the Philippines; hence, such holding or acquisition "was not
within the contemplation of the framers of the Constitution"; (b) by judicial as well as by
executive-administrative an legislative construction, the constitutional prohibition against alien
landholding does not preclude enjoyment by aliens of temporary rights and land; (c) under the
provisions of Section 25 of Republic Act No. 337 (General Banking Act) an alien or an alien-
owned commercial bank may acquire land in the Philippines subject to the obligation of
disposing of it within 5 years from the date of its acquisition. 1äwphï1.ñët

Upon the other hand, the argument supporting the appealed resolution is that the privilege of
acquiring real estate granted to commercial banks under the provisions of Section 25 of Republic
Act No. 337 was not intended as an amendment, much less as a nullification of the constitutional
prohibition against alien acquisition of lands in the Philippines, the same being merely an
exception to the general rule, under existing banking and corporation laws, that banks and
corporations can engage only in the particular business for which they were specifically created;
that a mere statute, like the republic act relied upon by, appellant, cannot amend the Constitution;
that in connection with the particular constitutional prohibition involved herein, it is the
character and nature of the possession — whether in strict ownership or otherwise — and not
the length of possession that is material, the result being that, if real property is to be held in
ownership, an alien may not legally do so even for a single day.

After considering the arguments adduced by appellant in its brief, jointly with those expounded
in the briefs submitted by Alfonso Ponce Enrile and William H. Quasha and Associates, as amici
curiae, on the one hand, and on the other, those relied upon in the brief submitted by the Office
of the Solicitor General on behalf of the Commission, we are inclined to uphold, as we do
uphold, the appealed resolution.

To support its view appellant relies particularly upon paragraphs (c) and (d), Section 25 of
Republic Act 337 which read as follows: .

SEC. 25. Any commercial bank may purchase, hold, and convey real estate for the
following purposes:

xxx xxx xxx

(c) Such shall be conveyed to it in satisfaction of debts previously contracted in the

course of its dealings; .

(d) Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds
held by it and such as it shall purchase to secure debts due to it.

But no such bank shall hold the possession of any real estate under mortgage or trust
deed, or the title and possession of any real estate purchased to secure any debt due to it,
for a longer period than five years.

Assuming, arguendo, that under the provisions of the aforesaid Act any commercial bank,
whether alien-owned or controlled or not, may purchase and hold real estate for the specific
purposes and in the particular cases enumerated in Section 25 thereof, we find that the case
before Us does not fall under anyone of them.
Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold
such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the
course of its dealings, We deem it quite clear and free from doubt that the "debts" referred to in
this provision are only those resulting from previous loans and other similar transactions made or
entered into by a commercial bank in the ordinary course of its business as such. Obviously,
whatever "civil liability" — arising from the criminal offense of qualified theft — was admitted
in favor of appellant bank by its former employee, Alfonso Pangilinan, was not a debt resulting
from a loan or a similar transaction had between the two parties in the ordinary course of
banking business.

Neither do the provisions of paragraph (d) of the Same section apply to the present case because
the deed of transfer in question can in no sense be considered as a sale made by virtue of a
judgment, decree, mortgage, or trust deed held by appellant bank. In the same manner it cannot
be said that the real property in question was purchased by appellant "to secure debts due to it",
considering that, as stated heretofore, the term debt employed in the pertinent legal provision can
logically refer only to such debts as may become payable to appellant bank as a result of a
banking transaction.

That the constitutional prohibition under consideration has for its purpose the preservation of the
patrimony of the nation can not be denied, but appellant and the amici curiae claim that it should
be liberally construed so that the prohibition be limited to the permanent acquisition of real estate
by aliens — whether natural or juridical persons. This, of course, would make legal the
ownership acquired by appellant bank by virtue of the deed of transfer mentioned heretofore,
subject to its obligation to dispose of it in accordance with law, within 5 years from the date of
its acquisition. We can not give assent to this contention, in view of the fact that the
constitutional prohibition in question is absolute in terms. We have so held in Ong Sui Si Temple
vs. The Register of Deeds of Manila (G. R. No. L-6776, prom. May 21, 1955) where we said,
inter alia, the following:

We are of the opinion that the Court below has correctly held that in view of the absolute
terms of section 5, Title XIII, of the Constitution, the provisions of Act 271 of the old
Philippine Commission must be deemed repealed since the Constitution was enacted, in
so far as incompatible therewith. In providing that —

Save in cases of hereditary succession no private agricultural land shall be

transferred or assigned except to individuals, corporations or associations
qualified to acquire or hold lands of the public domain in the Philippines.

the Constitution makes no exception in favor of religious associations. Neither is there

any such saving found in Sections 1 and 2 of Article XIII, restricting the acquisition of
public agricultural lands and other natural resources to "corporations or associations at
least sixty per centum of the capital of which is owned by such citizens" (of the
Philippines). (Emphasis ours) .

Even in the case of Smith Bell & Co. vs. Register of Deeds of Davao (50 O.G., 5239) where a
lease of a parcel of land for a total period of 50 years in favor of an alien corporation was held to
be registerable, the reason we gave for such ruling was that a lease — unlike a sale — does not
involve the transfer of dominion over the land, the clear implication from this being that transfer
of ownership over land, even for a limited period of time, is not permissible in view of the
constitutional prohibition. The reason for this is manifestly the desire and purpose of the
Constitution to place and keep in the hands of the people the ownership over private lands in
order not to endanger the integrity of the nation. Inasmuch as when an alien buys land he
acquires and will naturally exercise ownership over the same, either permanently or temporarily,
to that extent his acquisition jeopardizes the purpose of the Constitution.

Some may say that this construction is too narrow and unwise; to this we answer that it is not our
privilege to determine the wisdom or lack of wisdom of this constitutional mandate. It is, rather,
Our sworn duty to enforce it free from qualifications and distinctions that tend to render futile the
constitutional intent.

WHEREFORE, the resolution appealed from is hereby affirmed, with costs.

G.R. No. L-20330 December 22, 1966

ADOLFO RACAZA, petitioner,

vs.
SUSANA REALTY, INC., respondent.

Fortunato M. Ejercito for petitioner.

Bausa, Ampil and Associates and Alfredo G. Palacol for respondent.

REGALA, J.:

Petitioner is the lessee of a portion of a piece of land located at San Juan St., Pasay City, and
owned by respondent corporation. He started renting this portion of the lot in 1952 when his
wife, Evarista P. Racaza, bought an unfinished house that had been built on it. On assurance of
respondent that petitioner's family could stay on the land by paying a monthly rent of P15,
petitioner finished the construction of the house and he and his family lived in it. On December
16, 1955, however, petitioner was asked to vacate the land because respondent needed it. The
demand was followed by the filing on February 10, 1956 of a complaint for ejectment in the
Municipal Court of Pasay City. Petitioner and his family remained in the premises as the case
was dismissed for failure of respondent to proceed to trial.

On December 17, 1957, petitioner received another letter from respondent demanding anew the
surrender of the premises. On February 19, 1958, another ejectment suit was filed against him,
the complaint alleging that respondent needed the lot "for the purpose of constructing
improvements thereon and for other uses but that despite repeated demands petitioner refused to
leave the premises.

In his answer, petitioner denied that the lease was on a month-to-month basis and claimed that
his understanding with respondent was that he would be allowed to stay on the premises as long
as he paid a monthly rent of P15. As counterclaim, petitioner demanded the payment of P12,000
which he said he had spent to finish the construction of his house.

After trial, the court ordered petitioner to vacate the premises and pay P15 a month until he had
done so, even as it dismissed his counterclaim for lack of merit.

Petitioner appealed to the Court of First Instance of Pasay, reiterating his counterclaim. He asked
for the dismissal of the complaint on the ground of lack of jurisdiction of the municipal court to
try it, claiming that the complaint was filed more than one year after the alleged unlawful
detainer.1 According to petitioner, the first complaint for ejectment was dismissed on November
23, 1956, while the complaint in this case was not filed until February 19, 1958.

Again, petitioner was ordered evicted; his counterclaim was thrown out for lack of jurisdiction. It
was held that petitioner's illegal possession should be deemed to have started on December 17,
1957, when the second demand to vacate was made on him, because the complaint in this case
was not intended to revive the one previously dismissed for lack of prosecution. Since the
complaint was filed on February 19, 1958, jurisdiction over the case was properly acquired by
the municipal court. At the same time, it was held that the counterclaim was correctly dismissed
as the amount of the demand (P12,000) was beyond the jurisdiction of the municipal court to
grant.

Petitioner asked for a reconsideration and, failing to secure one, appealed to the Court of
Appeals. First, he contended that the municipal court did not have jurisdiction because by
respondent's own evidence rents had not been paid since July, 1955 and it should be from this
date that the one-year period should be counted. Second, petitioner claimed that, instead of
dismissing his counterclaim, the lower court should have assumed original jurisdiction over it,
considering that evidence to support the counterclaim had been allowed without objection from
the respondent.

After stating that in actions for unlawful detainer, notice to vacate need not be alleged but may
merely be shown by evidence, the appellate court ruled that the one year period should not be
counted from July, 1955 because the parties had stipulated that petitioner was up to date in the
payment of rents. Neither should it be reckoned from November 23, 19562 when the first demand
to vacate was made because it was respondent's privilege, as lessor, to waive the right to bring an
action based on the first demand. (Zobel v. Abreu, 98 Phil. 343 [1956]) Rather, the starting point
should be December 17, 1958 when the second demand to quit was made by respondent because,
as held in Cruz vs. Atencio, G.R. No. L-11276, February 28, 1959,

Where despite the lessee's failure to pay rent after the first demand, the lessor did not
choose to bring an action in court but suffered the lessee to continue occupying the land
for nearly two years, after which the lessor made a second demand, the one-year period
for bringing the detainer case in the justice of the peace court should be counted not from
the day the lessee refused the first demand for payment of rent but from the time the
second demand for rents and surrender of possession was not complied with.

On this score, the court overruled petitioner's first assignment of error.

But the court found merit in petitioner's other contention that evidence having been admitted
without objection from respondent, the Court of First Instance, pursuant to Rule 40, section 11,
could take cognizance of the counterclaim in the exercise of its original jurisdiction. Citing
article 1678 of the Civil Code, the court held that petitioner should be reimbursed one-half of
what he had spent in building his house. While petitioner claimed that he had spent P12,000 for
the improvement of his house, the appellate court found that the fair market value of the house
was P7,000 and, on the basis of this amount, awarded P3,500 to petitioner.

Still not satisfied, petitioner asked the appellate court to reconsider its decision. When his motion
was denied, he appealed to this Court.

It is contended that respondent's complaint is defective and did not vest jurisdiction in the
municipal court because it does not state the date when the alleged unlawful detainer started so
as to afford a basis for determining whether the case was filed within a year from the accrual of
the cause of action. In this connection, it is claimed that, according to the evidence, petitioner
stopped paying rents in July, 1955 and that it should be from this date that the one-year period
should be counted.

To begin with, this case was brought not on the theory that petitioner, as lessee, failed to pay
rents, but on the theory that the lease had expired and that respondent had asked petitioner to
vacate the land. Thus, the complaint states that respondent needs the land but that despite his
demands petitioner refused to vacate it. The averment that the lease was on a month-to-month
basis is equivalent to an allegation that the lease expired at the end of every month.3 It is
therefore immaterial that rents had not been paid since July, 1955, since what made petitioner
liable for ejectment was the expiration of the lease. This being the case, demand to vacate was
unnecessary. As this Court explained in Co Tiamco v. Diaz, 78 Phil. 672 (1946), Rule 70, section
2 requires previous demand only when the action is "for failure to pay rent due or to comply with
the conditions of his lease." Where the action is to terminate the lease because of the expiration
of its term, no such demand is necessary.4 In the latter case, upon the expiration of the term of
the lease, the landlord may go into the property and occupy it, and if the lessee refuses to vacate
the premises, an action for unlawful detainer may immediately be brought against him even
before the expiration of the fifteen or five days provided in Rule 70, section 2.

Accordingly, upon the expiration of the lease in this case, petitioner became a deforciant
unlawfully withholding possession of the property. There was no need for a demand to be served
on him, except to negate any inference that respondent, as lessor, had agreed to an extension of
the term of the lease under article 1687 of the Civil Code.

This brings us to petitioner's next point. As earlier stated, petitioner was twice asked to quit the
premises. The first was on December 16, 1955, but as pointed out in the beginning, the complaint
filed afterwards was dismissed for non-suit. The second time he was asked to move out was on
December 19, 1958. Petitioner insists that respondent's cause of action must be deemed to have
accrued on December 16, 1955. But, as already stated, respondent's action is not based on non-
profit of rent coupled with a demand; its action is based on the expiration of the term of the lease
and the demand made by it to vacate the premises merely evidences its determination not to
extend the lease. Moreover, even if the action were based on non-payment of rent, the one-year
period should be reckoned from the second notice, on the theory that respondent has the right to
waive his action based on the first demand and to let the lessee remain in the premises.

Nor is there merit in petitioner's last point that he should have been allowed full reimbursement
for what he had spent by applying to this case article 448 of the Civil Code. It is now settled that
article 448, in relation to article 546, applies only to possessors in good faith and since lessees,
like petitioner, are not possessors in good faith, because they know that their occupation of the
premises continues only during the life of the lease, they cannot recover the value of their
improvements from the lessor, much less retain the premises until they are reimbursed. Their
rights are governed by article 1678 which allows reimbursement of lessees up to one-half of the
value of their useful improvements. (Lopez, Inc. vs. Philippine & Eastern Trading Co., 98 Phil.
348 [1956]) The Court of Appeals correctly applied article 1678 to this case.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and
Castro, JJ., concur.

BALLATAN v. CA
Details

Category: Property, Ownership and Its Modifications

BALLATAN v. CA
-Land Owner in Good faith, Builder in Good faith scenario -The right to choose between
appropriating the improvement or selling the land on which the improvement of the builder,
planter or sower stands, is given to the owner.

-If the option chooses is to sell the lot, the price must be fixed at the prevailing market value at
the time of payment.

FACTS:

Eden Ballatan, together with other petitioners, is living in and registered owners of Lot No. 24.
Respondent Winston Go is living in and registered owners of Lot No. 25 and 26. And Li Ching
Yao is living in and the registered owner of Lot. 27. The Lots are adjacent to each other.

When Ballatan constructed her house in her lot, she noticed that the concrete fence and side
pathway of the adjoining house of respondent Winston Go encroached on the entire length of the
eastern side of her property. She was informed by her contractor of this discrepancy, who then
told respondent Go of the same. Respondent, however, claims that his house was built within the
parameters of his father’s lot; and that this lot was surveyed by engineer Jose Quedding, the
authorized surveyor of Araneta Institute of Agriculture (AIA). Petitioner called the attention of
AIA on the matter and so the latter authorized another survey of the land by Engineer Quedding.
The latter then did the survey twice which led to the conclusion that Lots Nos 25, 26 (owned by
respondent Go) and 27 (owned by Li Ching Yao) moved westward to the eastern boundary of
Lot 24 (owned by petitioner Ballatan.) –(it was later on discovered by the courts that Go
encroached 42 square meters from the property of Ballatan and Yao encroached 37 square meters
on Go’s property, all of which were in GOOD FAITH) Ballatan made written demands to the
respondent to dismantle and move their improvements and since the latter wasn’t answering the
petitioner filed accion publiciana in court. Go’s filed their “Answer with Third-Party Complaint”
impleading as third party defendants respondents Li Ching Yao, the AIA and Engineer
Quedding.

RTC ruled in favor of the petitioner ordering respondent Go to demolish their improvements and
pay damages to Petitioner but dismissing the third-party complaint. CA affirmed the dismissal of
the third party-complaint as to AIA but reinstated the the complaint against Yao and the
Engineer. CA also affirmed the demolition and damages awarded to petitioner and added that
Yao should also pay respondent for his encroachment of respondent Go’s property. Jose
Quedding was also ordered to pay attorney’s fees for his negligence which caused all this fuzz.

ISSUE: What is the proper remedy in this situation (everyone was in good faith)?

RULING:

Art 448 is the proper remedy (Lower Courts are wrong in awarding the damages). It was
established in the case that the parties had no knowledge of the encroachment until Ballatan
noticed it there all of them were builders in Good faith. In that scenario they have two options.
1st option is that the land owner will buy the improvements and the 2nd option is to oblige the
builders to buy the land given that the value of the land is not considerably more than the
buildings or tree; other wise the owner may remove the improvements thereon.

The builder, planter or sower, however, is not obliged to purchase the land if its value is
considerably more than the building, planting or sowing. In such case, the builder, planter or
sower must pay rent to the owner of the land. If the parties cannot come to terms over the
conditions of the lease, the court must fix the terms thereof. The right to choose between
appropriating the improvement or selling the land on which the improvement of the builder,
planter or sower stands, is given to the owner. If the option chooses is to sell the lot, the price
must be fixed at the prevailing market value at the time of payment.
Petitioner was given by SC 30 days to decide on what to do or which right to exercise. Likewise,
Go was also given time to do the regarding Yao’s encroachment. Engineer Quedding was still
asked to pay attorney’s fees

G.R. No. L-17652 June 30, 1962

IGNACIO GRANDE, ET AL., petitioners,

vs.
HON. COURT OF APPEALS, DOMINGO CALALUNG, and ESTEBAN CALALUNG,
respondents.

Bartolome Guirao and Antonio M. Orara for petitioners.

Gonzales and Fernandez for respondents.

BARRERA, J.:

This is an appeal taken by petitioners Ignacio, Eulogia, Alfonso, Eulalia, and Sofia Grande, from
the decision of the Court of Appeals (CA-G.R. No. 25169-R) reversing that of the Court of First
Instance of Isabela (Civil Case No. 1171), and dismissing petitioners' action against respondents
Domingo and Esteban Calalung, to quiet title to and recover possession of a parcel of land
allegedly occupied by the latter without petitioners' consent.

The facts of the case, which are undisputed, briefly are: 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, by inheritance from their deceased mother Patricia
Angui (who inherited it from her parents Isidro Angui and Ana Lopez, in whose name said land
appears registered, as shown by Original Certificate of Title No. 2982, issued on June 9, 1934).

Said property is identified as Lot No. 1, Plan PSU-83342. When it was surveyed for purposes of
registration sometime in 1930, its northeastern boundary was the Cagayan River (the same
boundary stated in the title). Since then, and for many years thereafter, a gradual accretion on the
northeastern side took place, by action of the current of the Cagayan River, so much so, that by
1958, the bank thereof had receded to a distance of about 105 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 against respondents, 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-in-interest, were formerly in peaceful and continuous 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 as
attorney'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 the year 1933 to the present.

After trial, the Court of First Instance of Isabela, on May 4, 1959, rendered a decision adjudging
the ownership of the portion in question to petitioners, and ordering respondents to vacate the
premises and deliver possession thereof to petitioners, and to pay to the latter P250.00 as
damages and costs. Said decision, in part, reads:

It is admitted by the parties that the land involved in this action was formed by the
gradual deposit of alluvium brought about by the action of the Cagayan River, a
navigable river. We are inclined to believe that the accretion was formed on the
northeastern side of the land covered by Original Certificate of Title No. 2982 after the
survey of the registered land in 1931, because the surveyors found out that the
northeastern boundary of the land surveyed by them was the Cagayan River, and not the
land in question. Which is indicative of the fact that the accretion has not yet started or
begun in 1931. And, as declared by Pedro Laman, defendant witness and the boundary
owner on the northwest of the registered land of the plaintiffs, the accretion was a little
more than one hectare, including the stony portion, in 1940 or 1941. Therefore, the
declarations of the defendant Domingo Calalung and his witness, Vicente C. Bacani, to
the effect that the land in question was formed by accretion since 1933 do not only
contradict the testimony of defendants' witness Pedro Laman, but could not overthrow the
incontestable fact that the accretion with an area of 4 hectare more or less, was formed in
1948, reason for which, it was only declared in that same year for taxation purposes by
the defendants under Tax Dec. No. 257 (Exh. "2") when they entered upon the land. We
could not give credence to defendants' assertion that Tax Dec. No. 257 (Exh. "2")
cancelled Tax Dee. No. 28226 (Exh. "1"), because Exh. "2" says that "tax under this
declaration begins with the year 1948. But, the fact that defendants declared the land for
taxation purposes since 1948, does not mean that they become the owner of the land by
mere occupancy, for it is a new provision of the New Civil Code that ownership of a
piece of land cannot be acquired by occupation (Art. 714, New Civil Code). The land in
question being an accretion to the mother or registered land of the plaintiffs, the accretion
belongs to the plaintiffs (Art. 457, New Civil Code; Art. 366, Old Civil Code). Assuming
arguendo, that the accretion has been occupied by the defendants since 1948, or earlier, is
of no moment, because the law does not require any act of possession on the part of the
owner of the riparian owner, from the moment the deposit becomes manifest (Roxas v.
Tuason, 9 Phil. 408; Cortez v. City of Manila, 10 Phil. 567). Further, no act of
appropriation on the part of the reparian owner is necessary, in order to acquire
ownership of the alluvial formation, as the law does not require the same (3 Manresa,
C.C., pp. 321-326).

This brings us now to the determination of whether the defendants, granting that they
have been in possession of the alluvium since 1948, could have acquired the property by
prescription. Assuming that they occupied the land in September, 1948, but considering
that the action was commenced on January 25, 1958, they have not been in possession of
the land for ten (10) years; hence, they could not have acquired the land by ordinary
prescription (Arts. 1134 and 1138, New Civil Code). Moreover, as the alluvium is, by
 law, part and parcel of the registered property, the same may be considered as registered
property, within the meaning of Section 46 of Act No. 496: and, therefore, it could not be
acquired by prescription or adverse possession by another person.

Unsatisfied, respondents appealed to the Court of Appeals, which rendered, on September 14,
1960, the decision adverted to at the beginning of this opinion, partly stating:

That the area in controversy has been formed through a gradual process of alluvium,
which started in the early thirties, is a fact conclusively established by the evidence for
both parties. By law, therefore, unless some superior title has supervened, it should
properly belong to the riparian owners, specifically in accordance with the rule of natural
accession in Article 366 of the old Civil Code (now Article 457), which provides that "to
the owner of lands adjoining the banks of rivers, belongs the accretion which they
gradually receive from the effects of the current of the waters." The defendants, however,
contend that they have acquired ownership through prescription. This contention poses
the real issue in this case. The Court a quo, has resolved it in favor of the plaintiffs, on
two grounds: First, since by accession, the land in question pertains to the original estate,
and since in this instance the original estate is registered, the accretion, consequently,
falls within the purview of Section 46 of Act No. 496, which states that "no title to
registered land in derogation to that of the registered owner shall be acquired by
prescription or adverse possession"; and, second, the adverse possession of the defendant
began only in the month of September, 1948, or less than the 10-year period required for
prescription before the present action was instituted.

As a legal proposition, the first ground relied upon by the trial court, is not quite correct.
An accretion to registered land, while declared by specific provision of the Civil Code to
belong to the owner of the land as a natural accession thereof, does not ipso jure become
entitled to the protection of the rule of imprescriptibility of title established by the Land
Registration Act. Such protection does not extend beyond the area given and described in
the certificate. To hold otherwise, would be productive of confusion. It would virtually
deprive the title, and the technical description of the land given therein, of their character
of conclusiveness as to the identity and area of the land that is registered. Just as the
Supreme Court, albeit in a negative manner, has stated that registration does not protect
the riparian owner against the erosion of the area of his land through gradual changes in
the course of the adjoining stream (Payatas Estate Development Co. v. Tuason, 53 Phil.
55), so registration does not entitle him to all the rights conferred by Land Registration
Act, in so far as the area added by accretion is concerned. What rights he has, are
declared not by said Act, but by the provisions of the Civil Code on accession: and these
provisions do not preclude acquisition of the addition area by another person through
prescription. This Court has held as much in the case of Galindez, et al. v. Baguisa, et al.,
CA-G.R. No. 19249-R, July 17, 1959.

We now proposed to review the second ground relied upon by the trial court, regarding
the length of time that the defendants have been in possession. Domingo Calalung
testified that he occupied the land in question for the first time in 1934, not in 1948 as
claimed by the plaintiffs. The area under occupancy gradually increased as the years went
 by. In 1946, he declared the land for purposes of taxation (Exhibit 1). This tax declaration
was superseded in 1948 by another (Exhibit 2), after the name of the municipality
wherein it is located was changed from Tumauini to Magsaysay. Calalung's testimony is
corroborated by two witnesses, both owners of properties nearby. Pedro Laman, 72 years
of age, who was Municipal president of Tumauini for three terms, said that the land in
question adjoins his own on the south, and that since 1940 or 1951, he has always known
it to be in the peaceful possession of the defendants. Vicente C. Bacani testified to the
same effect, although, he said that the defendants' possession started sometime in 1933 or
1934. The area thereof, he said, was then less than one hectare.

We find the testimony of the said witnesses entitled to much greater weight and credence
than that of the plaintiff Pedro Grande and his lone witness, Laureana Rodriguez. The
first stated that the defendants occupied the land in question only in 1948; that he called
the latter's attention to the fact that the land was his, but the defendants, in turn, claimed
that they were the owners, that the plaintiffs did not file an action until 1958, because it
was only then that they were able to obtain the certificate of title from the surveyor,
Domingo Parlan; and that they never declared the land in question for taxation purposes
or paid the taxes thereon. Pedro Grande admitted that the defendants had the said land
surveyed in April, 1958, and that he tried to stop it, not because he claimed the accretion
for himself and his co-plaintiffs, but because the survey included a portion of the property
covered by their title. This last fact is conceded by the defendants who, accordingly,
relinquished their possession to the part thus included, containing an area of some 458
square meters.1äwphï1.ñët

The oral evidence for the defendants concerning the period of their possession — from
1933 to 1958 — is not only preponderant in itself, but is, moreover, supported by the fact
that it is they and not the plaintiffs who declared the disputed property for taxation, and
by the additional circumstance that if the plaintiff had really been in prior possession and
were deprived thereof in 1948, they would have immediately taken steps to recover the
same. The excuse they gave for not doing so, namely, that they did not receive their copy
of the certificate of title to their property until 1958 for lack of funds to pay the fees of
the surveyor Domingo Parlan, is too flimsy to merit any serious consideration. The
payment of the surveyor's fees had nothing to do with their right to obtain a copy of the
certificate. Besides, it was not necessary for them to have it in their hands, in order to file
an action to recover the land which was legally theirs by accession and of which, as they
allege, they had been illegally deprived by the defendants. We are convinced, upon
consideration of the evidence, that the latter, were really in possession since 1934,
immediately after the process of alluvion started, and that the plaintiffs woke up to their
rights only when they received their copy of the title in 1958. By then, however,
prescription had already supervened in favor of the defendants.

It is this decision of the Court of Appeals which petitioners seek to be reviewed by us.

The sole issue for resolution in this case is whether respondents have acquired the alluvial
property in question through prescription.
There can be no dispute that both under Article 457 of the New Civil Code and Article 366 of the
old, petitioners are the lawful owners of said alluvial property, as they are the registered owners
of the land which it adjoins. The question is whether the accretion becomes automatically
registered land just because the lot which receives it is covered by a Torrens title thereby making
the alluvial property imprescriptible. We agree with the Court of Appeals that it does not, just as
an unregistered land purchased by the registered owner 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 over the
accretion received by the land adjoining a river is governed by the Civil Code. Imprescriptibility
of registered land is provided in the registration law. Registration under the Land Registration
and Cadastral Acts does not vest or 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 placed under the operation of the
registration laws wherein certain judicial procedures have been provided. The fact remain,
however, that petitioners never sought registration of said alluvial property (which was formed
sometime after petitioners' property covered by Original Certificate of Title No. 2982 was
registered on June 9, 1934) up to the 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 to acquisition through
prescription by third persons.

The next issue is, did respondents acquire said alluvial property through acquisitive prescription?
This is a question which requires determination of facts: physical possession and dates or
duration of such possession. The Court of Appeals, after analyzing the evidence, found that
respondents-appellees were in possession of the alluvial lot since 1933 or 1934, openly,
continuously and adversely, under a claim of ownership up to the filing of the action in 1958.
This finding of the existence of these facts, arrived at by the Court of Appeals after an
examination of the evidence presented by the parties, is conclusive as to them and can not be
reviewed by us.

The law on prescription applicable to the case is that provided in Act 190 and not the provisions
of the Civil Code, since the possession started in 1933 or 1934 when the pertinent articles of the
old Civil Code were not in force and before the effectivity of the new Civil Code in 1950. Hence,
the conclusion of the Court of Appeals that the respondents acquired alluvial lot in question by
acquisitive prescription is in accordance with law.

The decision of the Court of Appeals under review is hereby affirmed, with costs against the
petitioners. So ordered.

SPS. ALBERTO and JOCELYN G.R. No. 157593

AZANA,
 Petitioners, Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,

- versus- CORONA,

AZCUNA and

GARCIA, JJ.

CRISTOPHER LUMBO and

ELIZABETH LUMBO-JIMENEZ,

Respondents. Promulgated:

March 22, 2007

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

DECISION
CORONA, J.:

In this appeal by certiorari, spouses Alberto and Jocelyn Azana assail the

decision dated September 17, 2002 and resolution dated March 12, 2003 of the

Court of Appeals (CA) in CA-G.R. CV No. 60973. After a re-evaluation of the

evidence on record, the appellate court held that the trial court’s factual findings

were contrary to the evidence presented and, on that basis, reversed the latter’s

ruling.

Originally, respondents filed an action for quieting of title in the Regional

Trial Court (RTC) of Kalibo, Aklan. The subject matter of the action was a piece of

real property located in the island of Boracay, a prime tourist destination. It was

designated as Lot 64 during the national reservation survey of Boracay on April

14, 1976.

Respondents alleged that they were the owners of Lot 64. They claimed

that, in a deed of absolute sale dated December 1, 1996, the spouses Emilio and

Estela Gregorio sold Lot 64 to petitioners. This cast a cloud over their title.
 To support their claim of ownership, respondents stated that Lot 64 was

originally part of the 8.0488-hectare land bought in a public auction by their

parents, which they inherited entirely; that such sale in the public auction was

evidenced by a final bill of sale dated September 18, 1939; that Lot 64 was

separately designated during the national reservation survey only because it was

also being claimed by the spouses Gregorio; and that, if Lots 63 and 64 were

combined, the boundaries of the resulting lot coincided with the boundaries of

the lot purchased under the final bill of sale.

For their part, petitioners claim that they purchased Lot 64 from the spouses

Gregorio in good faith; that the spouses Gregorio became the lawful owners of

Lot 64 by virtue of a deed of absolute sale dated March 25, 1976 executed by

Ignacio Bandiola in favor of Estela Gregorio whereby Bandiola transferred to

Gregorio a parcel of land with an area of 3.4768 hectares; and that Lot 64 was

part of this 3.4768-hectare land.

 According to the RTC of Kalibo, Aklan, respondents failed to establish the

identity of the lot sold under the final bill of sale. Consequently, their claim of title

over Lot 64 also had to fail. In the words of the court a quo:

Assaying the evidence presented by the parties in relation to their respective

submissions, the Court noted that the land acquired by [respondents’] parents at the
public auction is not solely bounded on the North and East by [the] Visayan Sea, but also
by Anunciacion Gelito and Guillermo Sualog, respectively. Indeed, [respondents] own
survey plan discloses that Lots 63 and 64 [are] bounded by Lot 62 and seashore.

Hence, it is not clear that the land acquired by [respondents’] parents at an

auction sale includes Lot 64. The Court could probably sustain [respondents’] theory if
the said land is solely bounded on the North and East by [the] Visayan Sea or seashore.
There would be no space for any intervening lot. (citations omitted)

Finding equiponderance of evidence, the trial court ruled in favor of petitioners

and upheld the validity of the sale of Lot 64 to them.

On review, the CA arrived at a different conclusion. It declared respondents

as owners of Lot 64 and nullified the sale by the spouses Gregorio to petitioners.

The appellate court agreed with respondents that Lot 64 was part of the 8.0488-

hectare property described in the final bill of sale. As opposed to the findings of
the trial court, the appellate court was satisfied that the boundaries of the lot

resulting from the merger of Lots 63 and 64 coincided with the boundaries of the

8.0488 hectare property. Moreover, the CA noted that the areas of Lots 63 and 64

were 7.0300 hectares and 1.2012 hectares respectively, meaning that the area

resulting from the combination of the two lots was equivalent to “8.0000

hectares, more or less, which [was] the total area being claimed by the

[respondents]”.

Aggrieved, the spouses Gregorio and the spouses Azana filed in this Court

separate petitions for review on certiorari under Rule 45 of the Rules of Court.

The petitions were separately docketed as G.R. No. 157617 and G.R. No. 157593,

respectively. The Court instantly denied both petitions for essentially raising

questions of fact which are generally beyond our review.

Thereafter, both the Gregorios and petitioners filed their respective motions

for reconsideration. The Court denied the MR of the spouses Gregorio, in effect

denying G.R. No. 157617 with finality.

Meanwhile, the MR of the spouses Azana was granted. As a general rule, it is not the Supreme
Court’s function to review, examine and evaluate or weigh the probative value of the evidence
presented. The factual findings of the trial and appellate courts are binding on this Court and are
given great weight and respect. However, the rule is not absolute. In instances where there is
divergence in the findings and conclusions of the trial court, on one hand, and the appellate
court, on the other, the Court may give the petition due course and re-examine the evidence on
record. Satisfied that the foregoing exception applies to this case, the Court ordered the
reinstatement of G.R. No. 157593 (this petition).

Respondents oppose the petition on the ground that it is already barred by

prior judgment. They argue that the dismissal of the Gregorios’ petition (G.R. No.

157617) was a final judgment constituting a bar to the institution of a similar

petition.

Respondents’ position is incorrect. Res judicata calls for the concurrence of

the following requisites: (1) there is final judgment or order; (2) the court

rendering it has jurisdiction over the subject matter and the parties; (3) the

judgment or order is on the merits and (4) there is, between the two cases,

identity of parties, subject matter and causes of action. Here, the first requisite is

absent. The Court’s resolution denying the spouses Gregorio’s petition is not the

final judgment contemplated by the first requisite. Rather, “final judgment”

entails a decision which perpetually settles the controversy and lays to rest all

questions raised. At that point, there was no final judgment because the spouses
Azana’s appeal of the CA decision was still pending before us. Stated differently,

there was yet no final judgment which could be entered and executed.

We now proceed to consider the documents relied upon by the parties.

To prove their claim, petitioners submitted a deed of absolute sale of real

property dated March 25, 1976 to show that Ignacio Bandiola sold to Estela

Gregorio 3.4768 hectares of land located in Manoc-Manoc, Malay, Aklan. The

property was particularly described as follows:

THE PORTION SOLD CONSISTS of 3.4768 hectares, more or less, located at the
southern side of the whole parcel and with the following pertinent boundaries: on the
North by Visayan Sea and Ernesto Bandiola; on the East by Visayan Sea; on the South by
Felicitas Lumbo, D. Pelayo, and D. Magapi; and on the West by Teodorica Bandiola.

They also presented the corresponding tax declaration which reiterated the same

property boundaries.
 Petitioners point out that a portion of this property was separately declared

for realty tax purposes under ARP/TD No. 93-011-1020/1021 as Lot 64 with an

area of 1.48 hectares. The tax declaration indicated that the boundaries of Lot 64

were:

North: Visayan Sea South: Lot 63

West: lot 99-pt East: Visayan Sea

In the hope of strengthening their case, petitioners narrated the supposed

origin of the disputed property. They claimed that the 3.4768-hectare property

was taken from the consolidated lots owned by Ignacio Bandiola, i.e., three

contiguous parcels of land with individual areas of 8.7766 hectares, 6550 square-

meters and 4994 square-meters. From this land mass, Ignacio Bandiola carved out

3.4768 hectares and sold the same to Estela Gregorio. Allegedly, this portion

included Lot 64 which Estela Gregorio, in turn, sold to petitioners.

 Granting for the sake of argument that petitioners’ preceding allegations are

true, it follows that Ignacio Bandiola’s lots, if taken as one, must have extended to

the Visayan Sea in the east to have roped in Lot 64. It also follows that at least

one of the lots should have the Visayan Sea as its eastern boundary. However,

this conclusion is belied by the tax declarations petitioners themselves presented.

Not one of the tax declarations stated that any of Bandiola’s lots was bound in the

east by the Visayan Sea. On the contrary, all the tax declarations stated that each

of the lots was bound in the east by a particular land mass:

Tax Declaration No. 3066

Land Area: 8.7766 hectares

Boundaries: North – Visayan Sea

East – Lorenzo Lumbo,

Vanancio Maming

West – Conchita Tirol, Visayan Sea

South – Moises Pelayo, Paula Gelito

Tax Declaration No. 3087

 Land Area: 0.6550 hectare

Boundaries: North – Visayan Sea

East – Felicitas Alag de Lumbo

West – Felicitas Alag de Lumbo

South – Quirica Lumbo

Tax Declaration No. 3068

Land Area: 0.4994 hectare

Boundaries: North – Ignacio Bandiola

East – Anunciacion Gelito and

F.A. Lumbo

West – Ignacio Bandiola

South – Gertrudes Casimero &

Salvador Magapi

Petitioners strained to explain the discrepancy by pointing out that “Lot 64

was but a mere portion of the three parcels of land covered by the [three] tax
declarations. xxx. It [was] therefore, quite unlikely that Lot 64 would have the

exact same boundaries as any or all of these [three] parcels.”

We find their explanation wanting. If, indeed, Lot 64 was part of Ignacio

Bandiola’s mass of properties it would have been in its south-east corner,

occupying part of its southern and eastern perimeter. Therefore, the parcels of

land covered by the three tax declarations must reflect southern and/or eastern

boundaries similar to those of Lot 64. But, as explained earlier, none of the lots

was enclosed or partly enclosed in the east by the sea. It is highly unlikely that

the corner portion of the mother property would not have similar boundaries as

those of the latter on at least two sides.

The Court is not inclined to pronounce which of the documents presented

by petitioners is true and correct. It is enough to say that the evidence they

presented cast doubt on the validity of their claim. Petitioners failed to establish,

by preponderance of evidence, the exact perimeters of the land which they claim

as their own.
 On the other hand, respondents anchor their claim over Lot 64 on a final bill

of sale dated September 18, 1939. Apparently, the document was executed in

favor of Lorenzo and Felicitas Lumbo who bought an 8.0488-hectare property in a

public auction. It stated:

That on September 30, 1937, the real property under Tax Declaration No. 6523
was forfeited to the Government in the manner and form prescribed by Act 3995 known
as the Assessment Law, for non-payment of land taxes corresponding to the years 1931
to 1937, inclusive, the description of which follows:

A parcel of cocal land situated in the barrio of Manocmanoc,

municipality of Buruanga, province of Capiz, Philippines, having an area
of 80, 488 square meters more or less. Bounded on the North by
Visayan Sea; on the East by the property of Guillermo Sualog and
Visayan Sea; on the South by the property of Moises Pelayo; and on the
West by the properties of Venancio Maming and Lucino Gelito, and
assessed at P1040.00. x x x.

The trial court discredited the final bill of sale by highlighting the fact that

the property bought at the public auction was not solely bound on the north and

east by the Visayan Sea but also by the properties of Anuncion Gelito and

Guillermo Sualog, respectively. With this, the trial court deduced that there was

an intervening space which should not have been there if the lot referred to in the
document included Lot 64. Thus, the final bill of sale must pertain to a different

parcel of land.

We find the trial court’s conclusion inaccurate. The Gelito and Sualog

properties were not located between the Visayan Sea and the disputed property.

Otherwise, the tax declarations and final bill of sale would have indicated that the

Lumbo property was solely bound in the north by the Gelito property and in the

east by the Sualog property. A cursory look at the survey map reveals that the

perimeter of the Lumbo property ran along the Visayan Sea and Gelito’s property

in the north, and the Visayan Sea and Sualog’s property in the east. Naturally, the

tax declarations and final bill of sale included the two properties mentioned as

part of the boundaries of the Lumbo property.

Petitioners underscore the seeming irregularities in the description of the

property under the final bill of sale, a deed of sale dated May 20, 1939 and the tax

declarations for the years 1991 and 1993 in the names of respondents. They posit

that these irregularities negate respondents’ claim of legal or equitable title and

ultimately justify the resolution of the case in their favor.

 A deed of absolute sale was executed on May 20, 1939 between Pantaleon

Maming and the respondents’ parents, stipulating the sale to the Lumbos of “an

approximate area of [five hectares], being a part of the land under Tax No. 6523

in the name of Pantaleon Maming…”. Petitioners emphasize the fact that the

property sold under the final bill of sale was the same lot under Tax Declaration

No. 6523. This discrepancy supposedly blurred the identification of the property

claimed by respondents.

We disagree.

The CA sufficiently reconciled the difference in the land areas in the two

deeds:

xxx. It may be asked why there were two deeds of sale covering the same
property. We find credence in [respondents’] explanation. The public auction was held
on 13 September 1938 and therefore Pantaleon Maming had up to 13 September 1939
to redeem the property. Before the expiration of the period of redemption, Lorenzo
Lumbo bought [five] hectares of the [eight]-hectare property in an attempt, as
[respondents] put it, to persuade Maming not to redeem the property. This can be
inferred from the price of P500.00 he paid for the [five] hectares while in the auction
sale held, he bought the entire 8.0488 hectares for only P56.78. xxx.
 Next, petitioners highlight the tax declarations filed by respondents for the

years 1991 and 1993 covering Lot 63 only. In the absence of contrary evidence,

tax declarations, being official documents, enjoy a presumption of truth as to

their contents. Petitioners contend that, unlike them, respondents never actually

declared Lot 64 as theirs and cannot therefore claim ownership of the property.

Jurisprudence is consistent that tax declarations are not conclusive evidence

of ownership of the properties stated therein. A disclaimer is even printed on

their face that they are “issued only in connection with real property taxation

[and] should not be considered as title to the property.” At best, tax declarations

are an indicia of possession in the concept of an owner. However, non-declaration

of a property for tax purposes does not necessarily negate ownership.

From the foregoing, the fact that both tax declarations in the names of

respondents covered Lot 63 only did not necessarily mean they did not own Lot

64 as they were in fact able to present a document evidencing ownership of both

properties ― the final bill of sale.

 Clearly, respondents have been able to establish by preponderance of

evidence that they are the rightful owners of Lot 64.

When an owner of real property is disturbed in any way in his rights over the

property by the unfounded claim of others, he may bring an action for quieting of

title. The purpose of the action is to remove the cloud on his title created by any

instrument, record, encumbrance or proceeding which is apparently valid or

effective but is in truth and in fact invalid and prejudicial to his title.

Here, the deeds of sale executed in favor of petitioners and the spouses

Gregorio were prima facie valid and enforceable. However, further scrutiny and

investigation established that petitioners’ predecessor-in-interest, Ignacio

Bandiola, could not have owned the disputed lot. Consequently, the subsequent

conveyances of Lot 64 to the spouses Gregorio and thereafter, to petitioners,

were null and void. Therefore, respondents, as the adjudged owners of Lot 64, are

entitled to have the aforementioned deeds of sale nullified to remove any doubt

regarding their ownership of the lot.

 While the appellate court adequately explained its decision, it failed to

categorically declare the deeds of sale as null and void in its dispositive portion.

Since it is the dispositive portion of the decision which shall be carried out, it is

important that the status of the deeds of sale be clearly stated therein.

WHEREFORE, the petition is hereby DENIED. The decision dated September

17, 2002 and resolution dated March 12, 2003 of the Court of Appeals are

AFFIRMED with the MODIFICATION that the deed of absolute sale dated March

25, 1976, in so far as it covers Lot 64, and the deed of absolute sale dated

December 1, 1996 are hereby declared null and void.

Costs against petitioners.

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner,

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

SARMIENTO, J.:

In issue herein are property and property rights, a familiar subject of controversy and a
wellspring of enormous conflict that has led not only to protracted legal entanglements
but to even more bitter consequences, like strained relationships and even the forfeiture
of lives. It is a question that likewise reflects a tragic commentary on prevailing social
and cultural values and institutions, where, as one observer notes, wealth and its
accumulation are the basis of self-fulfillment and where property is held as sacred as life
itself. "It is in the defense of his property," says this modern thinker, that one "will
mobilize his deepest protective devices, and anybody that threatens his possessions
will arouse his most passionate enmity." 1

The task of this Court, however, is not to judge the wisdom of values; the burden of
reconstructing the social order is shouldered by the political leadership-and the people
themselves.

The parties have come to this Court for relief and accordingly, our responsibility is to
give them that relief pursuant to the decree of law.

The antecedent facts are quoted from the decision 2 appealed from:

xxx xxx xxx

... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City
with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as her own
private property; she married twice in her lifetime;

the first, with one Bernabe Adille, with whom she had as an only child, herein defendant
Rustico Adille;

in her second marriage with one Procopio Asejo, her children were herein plaintiffs, —
now,

sometime in 1939, said Felisa sold the property in pacto de retro to certain 3rd persons,
period of repurchase being 3 years, but she died in 1942 without being able to redeem
and after her death, but during the period of redemption, herein defendant repurchased,
by himself alone, and after that, he executed a deed of extra-judicial partition
representing himself to be the only heir and child of his mother Felisa with the
consequence that he was able to secure title in his name alone also, so that OCT. No.
21137 in the name of his mother was transferred to his name,

that was in 1955; that was why after some efforts of compromise had failed, his half-
brothers and sisters, herein plaintiffs, filed present case for partition with accounting on
the position that he was only a trustee on an implied trust when he redeemed,-and this is
the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo was
occupying a portion, defendant counterclaimed for her to vacate that, —

Well then, after hearing the evidence, trial Judge sustained defendant in his position that
he was and became absolute owner, he was not a trustee, and therefore, dismissed case
and also condemned plaintiff occupant, Emeteria to vacate; it is because of this that
plaintiffs have come here and contend that trial court erred in:

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

II. ... not ordering the partition of the property; and

III. ... ordering one of the plaintiffs who is in possession of the portion of the property to
vacate the land, p. 1 Appellant's brief.
which can be reduced to simple question of whether or not on the basis of evidence and
law, judgment appealed from should be maintained. 3

xxx xxx xxx

The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-
appellants, the private respondents herein. The petitioner now appeals, by way of
certiorari, from the Court's decision.

We required the private respondents to file a comment and thereafter, having given due
course to the petition, directed the parties to file their briefs. Only the petitioner,
however, filed a brief, and the private respondents having failed to file one, we declared
the case submitted for decision.

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership
over the property held in common?

Essentially, it is the petitioner's contention that the property subject of dispute devolved
upon him upon the failure of his co-heirs to join him in its redemption within the period
required by law. He relies on the provisions of Article 1515 of the old Civil Article 1613
of the present Code, giving the vendee a retro the right to demand redemption of the
entire property.

There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to his share alone.
5
While the records show that the petitioner redeemed the property in its entirety,
shouldering the expenses therefor, that did not make him the owner of all of it. In other
words, it did not put to end the existing state of co-ownership.

Necessary expenses may be incurred by one co-owner, subject to his right to collect
reimbursement from the remaining co-owners. 6 There is no doubt that redemption of
property entails a necessary expense. Under the Civil Code:

ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute
to the expenses of preservation of the thing or right owned in common and to the taxes.
Any one of the latter may exempt himself from this obligation by renouncing so much of
his undivided interest as may be equivalent to his share of the expenses and taxes. No
such waiver shall be made if it is prejudicial to the co-ownership.

The result is that the property remains to be in a condition of co-ownership. While a

vendee a retro, under Article 1613 of the Code, "may not be compelled to consent to a
partial redemption," the redemption by one co-heir or co-owner of the property in its
totality does not vest in him ownership over it. Failure on the part of all the co-owners to
redeem it entitles the vendee a retro to retain the property and consolidate title thereto
in his name. 7 But the provision does not give to the redeeming co-owner the right to the
entire property. It does not provide for a mode of terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over the parcel
in his name terminate the existing co-ownership. While his half-brothers and sisters are,
as we said, liable to him for reimbursement as and for their shares in redemption
expenses, he cannot claim exclusive right to the property owned in common.
Registration of property is not a means of acquiring ownership. It operates as a mere
notice of existing title, that is, if there is one.

The petitioner must then be said to be a trustee of the property on behalf of the private
respondents. The Civil Code states:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.

We agree with the respondent Court of Appeals that fraud attended the registration of
the property. The petitioner's pretension that he was the sole heir to the land in the
affidavit of extrajudicial settlement he executed preliminary to the registration thereof
betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole
dominion over the property. The aforequoted provision therefore applies.

It is the view of the respondent Court that the petitioner, in taking over the property, did
so either on behalf of his co-heirs, in which event, he had constituted himself a
negotiorum gestor under Article 2144 of the Civil Code, or for his exclusive benefit, in
which case, he is guilty of fraud, and must act as trustee, the private respondents being
the beneficiaries, under the Article 1456. The evidence, of course, points to the second
alternative the petitioner having asserted claims of exclusive ownership over the
property and having acted in fraud of his co-heirs. He cannot therefore be said to have
assume the mere management of the property abandoned by his co-heirs, the situation
Article 2144 of the Code contemplates. In any case, as the respondent Court itself
affirms, the result would be the same whether it is one or the other. The petitioner would
remain liable to the Private respondents, his co-heirs.

This Court is not unaware of the well-established principle that prescription bars any
demand on property (owned in common) held by another (co-owner) following the
required number of years. In that event, the party in possession acquires title to the
property and the state of co-ownership is ended . 8 In the case at bar, the property was
registered in 1955 by the petitioner, solely in his name, while the claim of the private
respondents was presented in 1974. Has prescription then, set in?

We hold in the negative. Prescription, as a mode of terminating a relation of co-

ownership, must have been preceded by repudiation (of the co-ownership).

The act of repudiation, in turn is subject to certain conditions:

(1) a co-owner repudiates the co-ownership;

(2) such an act of repudiation is clearly made known to the other co-owners;
(3) the evidence thereon is clear and conclusive, and

(4) he has been in possession through open, continuous, exclusive, and notorious
possession of the property for the period required by law. 9

The instant case shows that the petitioner had not complied with these requisites. We
are not convinced that he had repudiated the co-ownership; on the contrary, he had
deliberately kept the private respondents in the dark by feigning sole heirship over the
estate under dispute. He cannot therefore be said to have "made known" his efforts to
deny the co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is
occupying a portion of the land up to the present, yet, the petitioner has not taken pains
to eject her therefrom. As a matter of fact, he sought to recover possession of that
portion Emeteria is occupying only as a counterclaim, and only after the private
respondents had first sought judicial relief.

It is true that registration under the Torrens system is constructive notice of title, 10 but it
has likewise been our holding that the Torrens title does not furnish a shield for fraud. 11
It is therefore no argument to say that the act of registration is equivalent to notice of
repudiation, assuming there was one, notwithstanding the long-standing rule that
registration operates as a universal notice of title.

For the same reason, we cannot dismiss the private respondents' claims commenced in
1974 over the estate registered in 1955. While actions to enforce a constructive trust
prescribes in ten years, 12 reckoned from the date of the registration of the property, 13
we, as we said, are not prepared to count the period from such a date in this case. We
note the petitioner's sub rosa efforts to get hold of the property exclusively for himself
beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial
settlement that he is "the only heir and child of his mother Feliza with the consequence
that he was able to secure title in his name also." 14 Accordingly, we hold that the right of
the private respondents commenced from the time they actually discovered the
petitioner's act of defraudation. 15 According to the respondent Court of Appeals, they
"came to know [of it] apparently only during the progress of the litigation." 16 Hence,
prescription is not a bar.

Moreover, and as a rule, prescription is an affirmative defense that must be pleaded

either in a motion to dismiss or in the answer otherwise it is deemed waived, 17 and
here, the petitioner never raised that defense. 18 There are recognized exceptions to this
rule, but the petitioner has not shown why they apply.

WHEREFORE, there being no reversible error committed by the respondent Court of

Appeals, the petition is DENIED. The Decision sought to be reviewed is hereby
AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED,
Feliza Alzul owned a certain property. She married twice in her lifetime, her first married with who she
has only one child and the second marriage whom the plaintiffs in this case.

Feliza sold the property in pacto de retro sale, she has a period of 3 years to redeem the property.
However, she died before redeeming it. Her son on the first marriage redeem the property and cause its
registration with the exclusion on his other siblings.

The children of the second marriage filed before the rtc for partition and accounting of the said
property.RTC ruled in favor of the respondent but on appeal, it was overturned in favor of the children
of the second marriage.

Hence this present petition

Issue:

May the co-owner acquires exclusive ownership over a common property when he redeemed the
property

Ruling:

The right to repurchase can only be exercised by the aspect of his share alone. If he redeemed the
property, it does not automatically grant him exclusive ownership because the provision talks about a
vendee who can consolidate the title in his name incase the co-owners failed to redeem it.

The registration does not grant him exclusive owner over the title if it was duly proven the attendance of
fraud.
G.R. No. 79899 April 24, 1989

D. ANNIE TAN, petitioner,

vs.
COURT OF APPEALS, CHINA BANKING CORPORATION, GEORGE LAUREL TAN,
TEODORA TAN ONG, ROSA TAN, ROSITA TAN, and MAURO UMALI TAN,
respondents.

Tabaquero, Albano & Evangelista for petitioner.

Del Rosario, Lim, Telan De Vera & Vigilia for respondent China Banking Corporation.
Estela B. Perlas for respondents Tan.

GUTIERREZ, JR., J.:

Tan Tiong Tick, married to Tan Ong Hun, was the registered owner of a 178 square
meter parcel of land and its improvements located at Lot No. 5, Block No. 2021 of the
Cadastral Survey of Manila, Carvajal Street, Binondo, Manila.

Mr. and Mrs. Tan had six children - respondents George Laurel Tan, Teodora Tan Ong,
Rosa Tan, Rosita Tan, Mauro Umali Tan, and the petitioner, D. Annie Tan.

On February 6, 1963, in order to secure payment of various obligations with respondent

China Banking Corporation or China Bank for short, Mr. and Mrs. Tan Tiong Tick
mortgaged the disputed property to the bank. Tan Tiong Tick died on December 22,
1969 without having paid his obligations.

On June 27, 1972, China Bank foreclosed the mortgage and purchased the property at
public auction as the highest bidder for the sum of P186,100.00.

On August 31, 1972, the widow and children of Tan Tiong Tick filed a complaint against
China Bank with the Court of First Instance of Manila praying for the nullity of the real
estate mortgage executed by the spouses Tan and the foreclosure sale conducted by
the Sheriff. They also asked that the redemption period be suspended.

The one year period for redemption expired on July 6, 1973 without the Tan heirs
having exercised the right to redeem the property. The widow Tan Ong Hun having
died, only the children were left to redeem the lot and building. China Bank consolidated
its ownership over the land and improvements and a new title, Transfer Certificate Title
No. 112924 was issued in the name of the bank on August 16, 1973.
About two weeks earlier, however, the heirs of Tan and China Bank agreed to amicably
settle the action for nullity of mortgage before the Court of First Instance of Manila. The
parties filed a joint motion to dismiss.

The verbal agreement regarding the disposition of the property was confirmed in a letter
of China Bank signed by four of the children and one daughter-in-law on August 3,
1973. The heirs were given the right to repurchase the property for P180,000.00
provided it was done on or before August 31,1974. The agreement reads in part:

xxx xxx xxx

It is understood, that should you fail to pay us in full the aforesaid sum of P180,000.00 on
or before August 31, 1974, your right to repurchase the property shall terminate and we
shall be free to dispose of the property to any other party. (p. 81, Folder of Exhibits;
Exhibit 2, CBC)

There are allegations that some of the heirs tried to buy the property in the ensuing one
year period but for one reason or another, were unable to do so.

Finally, on August 30, 1974, or one day before the end of the period to buy back,
petitioner D. Annie Tan went to the office of Mr. Dee K. Chiong of China Bank and
tendered her China Bank Manager's Check for P180,000.00 as payment. Upon the
insistence of the bank official, the deed of sale returning the property to the heirs was
executed in favor, not of D. Annie Tan who alone paid for the property but of all the six
heirs of Tan Tiong Tick who would, therefore, share and share alike.

This led to the filing of the action by D. Annie Tan against her brothers and sisters and
the China Banking Corporation, now respondents in this petition. The petitioner prayed
the trial court to order the respondents-(1) to reconvey the disputed property to her and
(2) to pay actual damages in the amount of P300,000.00, moral damages in the amount
of P100,000.00, exemplary damages in the amount of P50,000.00, and attorney's fees
in the amount of P10,000.00.

On September 1, 1980, the Court of First Instance of Manila rendered a decision, the
dispositive portion of which reads:

ACCORDINGLY, judgment is hereby rendered as follows:

(1) Dismissing the complaint as well as defendants' counter-claim;

(2) Ordering each of the defendants, namely George Laurel Tan, Teodora Tan Ong,
Rosa Tan and Rosita Tan to reimburse the plaintiff the sum of P30,000.00 plus 12%
interest from August 20, 1974 until the whole amount is fully paid;

(3) Ordering the defendant Mauro Umali Tan who had been ordered in default to execute
the deed of sale of his rights and interests over the property covered in Transfer
Certificate of Title No. 64806 in favor of the plaintiff in accordance with his instrument of
waiver dated June 25, 1974, and
 (4) Without pronouncement as to costs. (Annex B, Rollo, pp. 43-44)

On October 17, 1986, the Court of Appeals affirmed the decision of the trial court. On
September 7, 1987, a motion for reconsideration was denied. Hence this petition.

The petitioner gives the following grounds why her petition should be given due course:

1. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN

AFFIRMING THE DECISION OF THE TRIAL COURT ORDERING
REIMBURSEMENT TO THE PETITIONER INSPITE OF THE FACT THAT
THE LEGAL BASIS FOR THE REIMBURSEMENT, WHICH WAS NOT
CLEARLY EXPLAINED IN THE DECISION, MAY HAVE BEEN THE
ALLEGED EXISTENCE OF (1) A CO-OWNERSHIP AMONG THE HEIRS,
AND (2) CREDITOR-DEBTOR RELATIONSHIP BETWEEN THE HEIRS
AND THE BANK, WHICH HAVE NOT BEEN FULLY ESTABLISHED BY
EVIDENCE.

2. ASSUMING, WITHOUT ADMITTING, THE EXISTENCE AMONG THE

HEIRS OF A CO-OWNERSHIP AND/OR A CREDITOR/ DEBTOR
RELATIONSHIP BETWEEN THE RESPONDENT BANK AND THE
HEIRS, RESPONDENT COURT GRAVELY ERRED IN NOT HOLDING
THAT THE CO-HEIRS OF PETITIONER, THE PRIVATE
RESPONDENTS HEREIN, HAVE IMPLIEDLY WAIVED THEIR RIGHT
TO BUY BACK THE PROPERTY BY THEIR FAILURE TO RAISE THE
MONEY FOR THEIR RESPECTIVE SHARES UP TO THE LAST DAY
GIVEN THEM BY THE RESPONDENT BANK ON AUGUST 31, 1974,
THUS WHEN PETITIONER BOUGHT THE PROPERTY BY HER
EXCLUSIVE FUNDS, IT BENEFITED HER ALONE AND NOT HER CO-
HEIRS.

3. RESPONDENT COURT OF APPEALS, GRAVELY ERRED IN NOT

HOLDING THAT THE LETTER-AGREEMENT DATED AUGUST 3, 1973,
FOR WHICH THE RIGHTS OF THE PETITIONER AND HER CO-HEIRS
TO BUY BACK THE FORECLOSED PROPERTY AROSE, IS ACTUALLY
NOT A RIGHT TO REPURCHASE BUT IS AN OPTION TO BUY BACK
THE PROPERTY WHICH MAY BE EXERCISED BY THE HEIRS SINGLY
OR COLLECTIVELY. (Rollo, pp. 21-22)

The decision of the trial court, affirmed by the Court of Appeals, is based on the
principle that the heirs of Mr. and Mrs. Tan Tiong Tick being co- owners of the
foreclosed property, a repurchase or reconveyance effected by only one of those heirs
redounds to the co-ownership. This explains why the courts below ordered four of the
heirs - George Laurel Tan, Teodora Tan Ong, Rosa Tan and Rosita Tan - to reimburse
D. Annie Tan the sum of P30,000.00 each plus 12% interests while the share of the fifth
heir who was in default and who had waived his interest would go to the petititioner.
The petitioner contends that there was no co-ownership and no creditor/debtor
relationship between her and the other children.

The petitioner states:

This controversy addresses itself to the question of whether or not the co- ownership
among the heirs over a parcel of land formerly belonging to their parents had been
dissolved by the foreclosure and consolidation of title by a bank after the redemption
period of one (1) year had expired, such that a unilateral obligation given by the bank to
the heirs to buy back the foreclosed property out of liberality is actually an option to buy
given to the heirs as group of persons singly or collectively, and not strictly a right of
repurchase to be exercised by the heirs as co-owners. If it is admitted that the co-
ownership of the heirs over the foreclosed property of their parents had been dissolved
by the consolidation of the title in the mortgagee's name, which in this case is respondent
Bank and that there exists no creditor-debtor relationship between respondent Bank and
the heirs, then the bank may not impose an obligation to the heirs that they should
purchase back the property only as former co-owners or as solidary debtors, but as
groups of persons, singly or collectively. The bank would then be imposing an onerous
condition upon the heirs of going back to the dissolved co- ownership which the law
frowns upon. To settle this case once and for all, herein petitioner anchors her claim on
the theory that when the respondent Bank foreclosed the property and consolidated its
title on August 16, 1973 and T.C.T. No. 112924 was issued in its name, the co-ownership
of the heirs of the deceased parents of petitioner and private respondents over the
property in question have been dissolved. In this wise, the decision of the respondent
court premised on the existence of a co-ownership or in a creditor-debtor relationship,
and ordering the reimbursement to petitioner of the money for the purchase of the
property in question which allegedly redounded to the benefits of her co-heirs as co-
owners or solidary debtors has no leg to stand on. It is this erroneous decision of
respondent court based on a misapprehension of facts and contrary to settled
jurisprudence that petitioner comes to this Honorable Court, for relief. (Sese v.
Intermediate Appellate Court, G.R. No. 66186, July 31, 1987; Moran, Jr. v. Court of
Appeals, 133 SCRA 88; Manero v. Court of Appeals, 102 SCRA 817; Carolina Industries
v. CMS Brokerage, 97 SCRA 734; Sacay v. Sandiganbayan, 142 SCRA 593) (Rollo, pp.
7-9)

The first question which arises is the correctness of the assumption that there was a co-
ownership among the children of Tan Tiong Tick and Tan Ong Hun when the petitioner
purchased the property.

Since the lot and its improvement were mortgaged by the deceased parents, there can
be no question that a co-ownership existed among the heirs during the period given by
law to redeem the foreclosed property. Redemption by one during this period would
have inured to the benefit of all (Adille v. Court of Appeals, G.R. No. 44546, 157 SCRA
455 [1988]; and De Guzman v. Court of Appeals, G.R. No. 47378, 148 SCRA 75
[1987]).

The records show, however, that when the petitioner purchased the disputed property
on August 30, 1974, any co-ownership among the brothers and sisters no longer
existed. The period to redeem had expired more than one year earlier, on July 6, 1973.
The respondent China Bank consolidated its ownership and a new title was issued in
the bank's name. When the heirs allowed the one year redemption period to expire
without redeeming their parents' former property and permitted the consolidation of
ownership and the issuance of a new title, the co-ownership was extinguished. The
challenged ruling of the respondent court is, therefore, based on erroneous premises.

Under Section 63-B of Presidential Decree No. 1529, the Property Registration Decree,
in case of non-redemption, the purchaser at the foreclosure sale, meaning the
respondent Bank in this case, is entitled to a new certificate of title in its name after filing
the necessary papers with the Register of Deeds (Spouses Teofisto and Eulalia
Verceles v. Court of First Instance of Rizal, et al., G.R. No. 62219, February 28, 1989).
It becomes a ministerial duty to place the buyer in possession of the property he now
owns (Banco Filipino v. Intermediate Appellate Court, G.R. No. 68878,142 SCRA 44
[1986]). Ownership, therefore, passed to China Bank and there was no more co-
ownership among the heirs.

The non-existence of a common inheritance of the Tan children at the time the disputed
property was purchased from China Bank is moreover supported by the evidence
showing that there was no more inheritance to divide. It had already been divided. Tan
Tiong Tick left other properties in addition to the property disputed in this petition. The
eldest son, George Laurel Tan, inherited practically all the properties consisting of
several hectares of real estate in Novaliches, Metro Manila; a furnished house in
Greenhills, Mandaluyong; and a cigar factory (t.s.n., November 18, 1976, p. 24). The
petitioner also claims that stock certificates went to another sister, Teodora Tan Ong
because she "forced" the other heirs to sign a deed of sale in her favor.

May the heirs be considered as debtors in common, substituting for their parents in
liquidating the latter's obligations?

The answer is again, No.

Upon the foreclosure of the mortgaged property and its purchase by China Bank as the
highest bidder, the proceeds of the auction sale were applied to the various debts of the
Tan spouses. The parents' debts were paid. The obligation having been extinguished,
there was no more common debt and no legal subrogation arising when one pays the
debts properly accruing to several others.

Respondent China Bank contends that the letter agreement dated August 3, 1973
called for the reconveyance of the land and improvements to all the heirs "in equal
undivided shares."

There is no such stipulation in the letter. There is reference to a verbal agreement to

reconvey to the "heirs of your late father" but no requirement that everybody must share
in the purchase or the offer would be withdrawn.

What is clear is that the bank's general manager, Mr. Dee K. Chiong tried to impose the
above requirement when the one year period to buy back was about to expire. Mr. Dee
rejected the offer of D. Annie Tan to buy the property for herself alone. He insisted that
the money brought by the petitioner would be considered a joint fund of all the heirs and
ordered the same annotated on the back of the check given as payment for the
property.

This attitude of Mr. Dee K. Chiong is in sharp contrast to the bank's official stand
embodied in a letter to the Central Bank.

Asked to comment on a letter-complaint filed by D. Annie Tan with Malacañang and

forwarded to the Central Bank, the respondent bank through its Legal Officer wrote the
Director, Department of Commercial and Savings Bank, Central Bank an explanation,
part of which states:

To our mind, the dispute is not between the Bank and the heirs or any one of them, but
among the heirs themselves, for as far as the Bank is concerned, it makes no difference
whether the property is reconveyed to all the heirs or to any one of them alone as they
may agree. As a matter of fact the complainant has already filed a Petition under the
Cadastral Case now pending in the CFI, Manila, involving the property and all the heirs.
(Copy of the Petition is hereto attached as Annex "l0").

At any rate, it is our honest conviction that the charges filed by the complainant and the
interpretation of Articles 1302 and 1303 of the New Civil Code properly belong to the
Courts where the complainant can always have her right, if any, vindicated, and if only to
resolve the issue, we shall welcome any court action to clear the matter. (Folder of
Exhibits, pp. 97- 98)

The petitioner questions the unusual interest shown by China Bank in the case when its
stand should be one of neutrality. She claims that there is an orchestrated alliance
between the bank and the other private respondents as shown by the fact that the bank
seems to be more eager and vigorous than the other heirs to win the case. (Rollo, p.
310).

As earlier stated, there is nothing in the August 3, 1973 letter-agreement which called
for either a purchase by all the heirs or no purchase at all. But could not Mr. Dee K.
Chiong validly impose such a requirement at the time the tender of money to buy the
property was made?

Again, the answer is in the negative.

We agree with the petitioner that her agreeing to sign an annotation at the back of the
check was a case of vitiated consent. She states that her conformity was null and void
because it was made under duress. The records show that up to the last hour the
petitioner was pleading with Mr. Dee K. Chiong to buy the property for herself alone as
the money she had raised was not in any way owned by the other heirs. Since the
period was expiring, the petitioner had no choice. It was a case of either agreeing to the
bank executive's requirement or losing the family property forever to strangers.

Mr. Dee could not impose a new co-ownership upon the petitioner, her brothers and
sisters. Co-ownership is discouraged by law.
As held in the case of Basa v. Aguilar (G.R. No. L-30994, 117 SCRA 128, 130-131
[1982]):

Legal redemption is in the nature of a privilege created by law partly for reasons of public
policy and partly for the benefit and convenience of the redemptioner, to afford him a way
out of what might be a disagreeable or inconvenient association into which he has thrust.
(10 Manresa, 4th Ed., 317.) It is intended to minimize co-ownership. The law grants a co-
owner the exercise of the said right of redemption when the shares of the other owners
are sold to "a third person." A third person, within the meaning of this Article, is anyone
who is not a co-owner. (Sentencia of February 7, 1944 as cited in Tolentino, Comments
on the Civil Code, Vol. V, p. 160.) (Emphasis supplied)

The records show that the annotation at the back of the P180,000.00 manager's check
that the funds were contributed by all the heirs was made by a China Bank
representative and that D. Annie Tan was told by Dee K Chiong that if she would not
sign it, he would not accept the manager's check and she would lose her right to buy the
lot within the period offered by the bank. The petitioner, at first, refused but being placed
between the difficulty of agreeing to the condition or losing the property, she decided to
agree. (t.s.n., September 27, 1976, pp. 24-25; t.s.n., November 18, 1976, p. 36) The
petitioner was also aware that a certain Mr. Ang who operated a travel agency in the
next door building was eager to buy the property at double the price stated in the letter-
agreement executed more than a year earlier. (Court of Appeals Rollo, Brief for Plaintiff-
Appellant, p. 77)

The petitioner further argues:

The insistence by respondent Bank that the said letter-agreement is a right to re-
purchase given to all the heirs of the late Tan Tiong Tick to be exercised only collectively
cannot legally stand considering the following circumstances:

a) What will happen if one of the heirs of the late Tan Tiong Tick refuses or fails to
exercise his right to purchase for whatever reason? Cannot any of the other heirs, but all,
raise sufficient funds for the full amount of the purchase price because the other heirs
could not let him or her borrow money to cover his or her share? Would such refusal then
prejudice the other heirs?

b) Cannot two or more heirs, but not all, who have sufficient funds exercise the right of
purchase?

c) Would all the heirs then who signed the letter-agreement as in the case at bar lose
their right to purchase the property because of the refusal of one heir?

d) If only one of the heirs has sufficient funds to purchase the property and the others do
not have, and this particular heir does not want to lend her or his money to the other heirs
who have none, can the offer of the other heir to exercise the option to buy in her or his
own name alone be legally refused?

e) Finally, can the buying back of the property by one heir alone be disallowed
considering that she is the one who has enough or sufficient funds and that her action will
prevent the property from going to third persons, like respondent Bank, for failure to pay
the purchase price on the last day of the period given by respondent Bank?'
 It is petitioner's submission that to follow the arguments of respondent Bank that the
letter-agreement can only be exercised collectively and not singly would render the said
agreement a useless piece of paper, and gravely prejudicial to the property itself.

What is more, even the respondent bank's legal officer, Atty. Arsenio Sy Santos, when
asked to comment on the case of the petitioner, admitted that indeed the letter-
agreement of August 3,1973 is actually an option to buy. Said legal officer gave the
following observations and comments, to wit:

xxxxxxxxx

Observations and comments -

It may be interesting to note that the provisions of Articles 1302 and 1303 which read as
follows:

"Art. 1302. It is presumed that there is legal subrogation:

(1) When a creditor pays another creditor who is preferred even without
the debtor's knowledge;

(2) When a third person, not interested in the obligation, pays with the
express or tacit approval of the debtor.

(3) When even without the knowledge of the debtor, a person interested
in the fulfillment of the obligation pays, without prejudice to the effects of
confusion as to the latter's share.

Art. 1303. Subrogation transfers to the person subrogated the credit with
all the rights thereto appertaining, either against the debtor or against
third person, be they guarantors or possessors of mortgages, subject to
stipulated in a conventional subrogations (sic)."

refer to cases where the creditor-debtor relationship exists among the

parties. (Rollo, pp. 243-246)
xxx xxx xxx

There was no creditor-debtor relationship existing among the heirs and Mr. Dee had no
legal authority to create one.

China Bank contends that when it told the petitioner that the property could not be
reconveyed to her alone, she was likewise informed that a similar offer from some of the
other co-heirs had also been politely turned down. (Exhibit 7, China Bank, Folder of
Exhibits, p. 87)

The petitioner disputes this claim. She states that there was no such offer by her co-
heirs because she was the only one willing to buy back the lot and the only one with the
means to do so at that time. It was only on September 12, 1974 that the individual
respondents offered to repurchase. By that time, D. Annie Tan had already paid for the
lot and was already insisting on a conveyance of the property in her name alone.

The petitioner states:

There is, therefore, no doubt that the money used in buying back the property belongs
exclusively to the petitioner. Private respondents' in action in not contributing the
necessary money up to the last day of the buy back period is fatal to their cause. To
paraphrase one case decided by this Honorable Court, courts cannot look with favor at
parties who, by their silence, delay and inaction, knowingly induce another to spend time,
effort and expense in protecting their interests over the property by paying the buy back
money only to spring from ambush and claim title or interest over the property when the
land and building value have become higher. (See Lola v. Court of Appeals, G.R. No.
46575, November 13, 1986). Moreover, the laws aid the vigilant, not those who slumber
on their rights. (Miraflor v. Court of Appeals, G.R. Nos. 40151-52, April 8, 1986).

Definetly, the effects of a waiver militates against the private respondents. Having
forfeited, abandoned and/or waived their rights, private respondents are now estopped
from taking an inconsistent position. They cannot now assert that they are still CO-
owners of the property with the petitioner. (Sec. 65, Rule 123, Rules of Court; Hernaez v.
Hernaez, 32 Phil. 214) (See also Banco de Oro Savings & Mortgage Bank v. Equitable
Banking Corporation, G.R. No. 74917, January 20, 1988, citing Saura Import and Export
Co. v. Court of Appeals, 24 SCRA 974). All the elements of a valid waiver (1) the
existence of a right; (2) the knowledge of the existence thereof; and (3) the intention to
relinquish such right, either expressly or impliedly are present. (Director of Lands v.
Abiertas, 44 O.G. 928). ... (Rollo, pp. 238-239)

The claim of the respondents Tan in their memorandum that they gave their individual
contributions to the petitioner to raise the P180,000.00 is not worthy of credence. At the
time of the repurchase, the petitioner was already estranged from the respondents Tan
and they would not have given her any money without corresponding receipts or given
her money under any circumstance, for that matter. In fact, there is no reason why the
petitioner should be the one to collect the money of the heirs and bring it to China Bank.
She was neither a son nor the eldest. Neither did the others feel kindly towards her. The
petitioner had called for a conference on July 23, 1974 at 619 Carvajal Street, Binondo,
Manila to discuss compliance with the letter-agreement considering the fast
approaching deadline. Not one showed up. (Rollo, pp. 44-45) The money was raised by
D. Annie Tan through her connections with Jardine Davies because of her construction
business. The decision of the respondent court confirmed the factual findings of the trial
court. It declared that the respondents Tan became debtors of petitioner Tan and
ordered them to reimburse the P30,000.00 each which were advanced by the petitioner.
There was no pooling of resources up to August 30,1974 when at 4:00 in the afternoon,
D. Annie Tan went to Mr. Dee K. Chiong with the China Bank manager's check for
P180,000.00.

The equities of this case also favor the grant of the petition. D. Annie Tan went to plenty
of trouble in her effort to buy back the property formerly owned by her parents. There is
nothing in the records to show that, beyond making some perfunctory allegations, the
respondents Tan did anything to save the property from falling into the hands of other
persons. The petitioner states that she has now spent substantial sums to pay for real
estate taxes and to renovate, and improve the premises. According to her she has
"spent her little fortunes to preserve the patrimony left by her parents." She alone
deserves to be entitled to the property, in law and equity. (Rollo, p. 317)

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the Court
of Appeals is REVERSED and SET ASIDE. The respondent China Banking Corporation
is ordered to execute the deed of sale over the disputed property in favor of the
petitioner alone.

SO ORDERED.

Fernan, C.J., Felician

FIRST DIVISION

METRO MANILA TRANSIT G.R. No. 147594

CORPORATION,*

Petitioner,

Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,

-versus- CORONA,

AZCUNA and
 GARCIA, JJ.

D.M. CONSORTIUM, INC.,

Respondent. Promulgated:

March 7, 2007

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

DECISION

CORONA, J.:

On appeal by certiorari under Rule 45 of the Rules of Court are the decision

of the Court of Appeals (CA) dated December 6, 1999 in CA-G.R. CV No. 54294 and

its resolution dated March 16, 2001, affirming the judgment of the Regional Trial

Court (RTC) of Quezon City, Branch 93.

In 1981, the national government, through petitioner Metro Manila Transit Corporation
(MMTC), launched a bus assistance program to aid private bus operators in acquiring new bus
units through a “lease–purchase on easy installment payment” scheme. Respondent D.M.
Consortium, Inc. (DMCI) availed of the program and entered into a lease–purchase agreement
(LPA) with MMTC for the acquisition of 228 buses. Both parties agreed that, pending full
payment, the monthly installments were to be treated as rentals. The salient features of the
agreement included, among others, the following:

4.05 The operation and use of the [L]eased [E]quipment shall be at the risk of the
LESSEE and not of the LESSOR, and the obligation of the LESSEE to pay the rent
hereunder to the LESSOR shall be unconditional.

xxx xxx xxx

11.01 It shall be a violation of the Lease Purchase Agreement [:] (a) if the LESSEE shall
default in the payment of any rent hereunder and such default shall continue
unremedied for a period of three (3) consecutive months;

11.02 In the event of a violation or breach of this lease, as herein defined: (a) the
leased equipment shall, upon the LESSOR’s option and demand, forthwith be
delivered to the LESSOR, at the LESSEE’s expense, at such place as the LESSOR
may designate, and the LESSOR, and/or its agents may, without notice or
liability or legal process, enter upon the premises where such leased
equipment is situated, and repossess all or any of the leased equipment, using
such force as may be necessary and permitted under the law applicable;

xxx xxx xxx

14.01 Title of the [L]eased [E]quipment shall, at all times, remain with the LESSOR.
The [L]eased [E]quipment is, and shall remain, personal property of the
 LESSOR. The original registration of title thereto in the name of the LESSOR or
any subsequent registration in the name of the LESSOR shall be effected by the
LESSEE at its expense.

xxx xxx xxx

15. 01 The LESSEE shall have the option to purchase or otherwise acquire title to or
ownership of any of the [L]eased [E]quipment, upon expiration of the lease
period, or prior to the expiration of said lease period, provided, that the LESSEE
shall have paid in full all outstanding obligations to the LESSOR.

After an alleged default in its amortizations, DMCI was informed by MMTC

that it was taking immediate possession of all the bus units and accessories.

Meanwhile, because of the national emergency caused by a coup d’ etat

attempt, then President Corazon Aquino issued Memorandum Order (MO) No.

267 on December 7, 1989 directing the Secretary of Transportation and

Communication to temporarily take over the operations of DMCI. Under the MO,

the DOTC Secretary was to recommend payment of “just compensation to the

owner for the use of their buses and facilities.”

 On December 9, 1989, MMTC repossessed the buses by occupying the

premises of DMCI, including its offices.

Consequently, MMTC took steps to sell the repossessed buses at a public

auction. Before the public bidding, however, DMCI filed a petition for injunction

with prayer for the issuance of a temporary restraining order (TRO) and/or writ of

preliminary injunction in the RTC of Quezon City, Branch 93.

On April 11, 1990, a TRO was issued enjoining the scheduled public auction

of the buses. After due notice and hearing, the lower court later issued a writ of

preliminary injunction in favor of DMCI.

MMTC filed a motion for reconsideration (MR) of said order but this was

denied. It subsequently filed a petition for certiorari in the CA questioning the

issuance of the writ of preliminary injunction but it was likewise dismissed for lack

of merit.
 Thereafter, trial of the main case ensued.

On September 11, 1995, the RTC decided in favor of DMCI and found no

basis for MMTC to repossess the buses or to sell them at public auction.

According to the trial court, under 11.01 of the LPA, repossession was possible

only if there was failure on the part of DMCI to pay within three consecutive

months but, contrary to MMTC’s claim, DMCI made partial payments which were

accepted without protest. The trial court added that long before the December 9,

1989 takeover, DMCI had already paid about P106 million or more than its

original obligation of P71 million under the LPA. The dispositive portion of the

decision read:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

[DMCI] and the [MMTC] is hereby ordered to:

1. Pay [DMCI] the amount of P200,000.00 by way of moral damages.

2. Pay the [DMCI] the amount of P100,000.00 for the use of the
furniture[s], fixtures and other equipments.

3. [Pay] the [DMCI] the amount of P500,000.00 for the reasonable rent for
the use of DMC[I]’s buses from December 9, 1989 up to the present.

4. [Return] all DMC[I]’s buses that were taken by [MMTC].

5. [Pay] attorney’s fees in the amount of P100,000.00[;] and

 6. [Pay] the costs.

SO ORDERED.

On appeal to the CA, the appellate court sustained the RTC’s order for MMTC

to return the buses to DMCI. However, it deleted the award to DMCI of moral

damages, payment for the use of its buses and office facilities and attorney’s

fees. The decretal portion of the decision read:

WHEREFORE, foregoing considered, a new decision is hereby entered by (1)

AFFIRMING the return of all the DMC[I] buses taken by the [MMTC] as embodied in no. 4
of the dispositive portion of the appealed decision; and (2) we REVERSED and SET ASIDE
the rest of the dispositive portion of the questioned decision as appearing in no. 1,2,3,5
and 6.

SO ORDERED.

MMTC and DMCI filed their respective MRs of the CA decision.

 In its MR, MMTC contended that it owned the buses and its

takeover/repossession of said buses was justified under the LPA. On the other

hand, DMCI insisted that it was not the LPA that was involved but MO No. 267

which expressly called for payment of just compensation on account of the

government’s takeover of its facilities during the national emergency declared by

then President Aquino. It also argued that it was entitled to damages since the

buses could no longer be returned in their original condition.

On March 16, 2001, the CA issued a resolution modifying its questioned

decision. It held:

1. Adjudging … MMTC liable to pay [DMCI] the value of the subject 228 DMC[I] buses
as of December, 1989, to be determined by the lower court after appropriate
proceedings. For this purpose[,] the case is remanded to the lower court only for
this purpose and thereafter to enforce this judgment.

2. Requiring … MMTC to pay [DMCI] the amount of P2,000,000.00 for the

appropriation and use of its furniture, fixtures and other equipments.

Except as herein modified, the dispositive part of the Decision of December 6,

1999 is maintained.

SO ORDERED. (emphasis supplied)

The appellate court’s bases for modifying its previous decision read:

There is preponderant evidence that MMTC took over not only of the transport
facilities of [DMCI], but also the latter’s furniture, equipments, fixtures….It is not
disputed that MMTC did not have the semblance of authority whether under the LPA or
MO 267 to appropriate the said properties thus listed. MMTC in fact admitted that
[DMCI was] entitled to reasonable compensation for the use of these properties.

xxx xxx xxx

While the total value of the items listed by [DMCI] was P5,220,997.59 …, MMTC
pray[ed] in their Brief and Motion for Reconsideration for an award of P2,000,000.00.
We now find this reasonable and supported by evidence.

xxx xxx xxx

The last matter to be resolved is DMCI’s assertion that MMTC should pay the
market value of the 228 bus units as of December 9, 1989, the date of the repossession.

The lower court decreed that the subject buses should be returned to DMCI as
a necessary consequence of the absence of legal and factual basis for the taking
thereof. On this, we sustained the lower court.

DMCI…pointed out, however, that the subject buses can no longer be returned in
the same condition that they were at the time of repossession, understandably so
considering that eleven (11) years had lapsed. In any event, there seems to be no
disagreement on this point. It is then posited that DMCI … should be paid the
 corresponding value of the repossessed buses as of the time of the taking, the return
thereof having become impractical, if not possible.

We agree.

Only MMTC appealed the CA decision and resolution to us.

In this petition, MMTC raises the following issues: (1) whether it can be

ordered to return the repossessed buses after exercising its right of possession as

owner/lessor thereof and (2) whether the award of P2 million as payment for the

use and appropriation of DMCI’s furniture, fixture and other equipment was

warranted.

On the first issue, MMTC argues that the assailed CA decision and

resolution were contrary to the provisions of Article 1485 in relation to Article

1484 of the Civil Code. On the second issue, MMTC insists that the lower courts

had no basis for holding it liable for P2 million for the use of DMCI’s furniture,

fixtures and equipment.

 We deny the petition.

It is futile for MMTC to challenge the CA’s order to return the repossessed

buses to DMCI because the CA already vacated this pronouncement in its assailed

resolution of March 16, 2001. Instead, the CA directed MMTC to reimburse DMCI

the value of the buses at the time of their unlawful seizure considering that they

could no longer be returned in their original condition.

MMTC’s invocation of Articles 1484 and 1485 is misplaced. Although these

refer to the installment sales of personal properties and to lease, respectively,

both provisions find no application in this case.

First, the records indicate that MMTC did not avail of the options set forth

in Article 1484; instead it utilized the option to repossess the buses under 11.02

of the LPA. Second, the LPA governed the rights of the parties, hence, the CA and

the RTC correctly resolved their conflicting claims based on the LPA’s provisions.

Well-settled is the rule that a contract voluntarily entered into by the parties is
the law between them and all issues or controversies shall be resolved mainly by

the provisions thereof.

At any rate, MMTC may still be ordered to return the repossessed buses

notwithstanding that, as owner/lessor, it had the right to possess them in the first

place.

Undeniably, under the law, jus possidendi is a necessary incident of

ownership. However, the owner cannot exercise this right to the prejudice of a

party whose possession is predicated on a contract like agency, trust, pledge or

lease, as in this case. Under the LPA between MMTC and DMCI, the latter, as

lessee, had a right of possession over the buses and it may be deprived of said

right only if it failed to pay its dues for three consecutive months. Both the trial

court and the appellate court established that there was actually no default on

the part of DMCI justifying MMTC’s seizure of the buses. MMTC cannot now use

the principle of jus possidendi as an excuse for its unwarranted act and frustrate

the redelivery of the vehicles to DMCI.

 In addition, a party vested with the right of possession to the property may

set up this right even against the owner thereof. Under Article 539 of the Civil

Code, every possessor has a right to be respected in his possession and, if

deprived of such right, the law shall restore it to him. In the case at bar, after

having been unjustly denied of its right of possession to the buses, DMCI is

entitled to get them back from MMTC. But since the buses can no longer be

returned in their original state and considering further that DMCI has already paid

their full amount, the CA resolution ordering MMTC to instead pay DMCI their

value at the time of repossession is correct.

In particular, we agree with the CA’s disquisition on the reimbursement

order that:

Although the payments made by DMCI were in the concept of rentals, in

reality, these form part of the purchase price because the agreement provided for the
transfer of ownership from MMTC to DMCI upon full payment of the value of the buses
supposedly under lease, it being expressly provided that “the sum total of all the
rentals of the [L]eased [E]quipment…shall constitute as the purchase price of the
equipment[s].

Considering the payment of the P 106 Million and MMTC’s conduct that
rendered it impossible for DMCI to fully comply with its remaining obligations under
 the LPA, if any, we find applicable and so apply Article 1234 of the Civil Code, which
reads:

“ART. 1234. If the obligation has been substantially performed in

good faith, the obligor may recover as though there had been strict and
complete fulfillment, less damages suffered by the oblige.”

For all intents and purposes…DMCI has acquired ownership of the 228 buses
and therefore[,] it is entitled to the value thereof as of the date of unlawful seizure by
MMTC. xxx

On the second issue, we hold that the determination of whether the award

of P2 million was warranted requires a review of this case’s facts and evidence.

This Court is not a trier of facts and it shall only pass upon them for compelling

reasons which unfortunately are not present here.

WHEREFORE, the assailed decision of the Court of Appeals dated

December 6, 1999 in CA-G.R. CV No. 54294 and its resolution dated March 6,

2001 are hereby AFFIRMED. Let the records of this case be REMANDED to the

Regional Trial Court of Quezon City, Branch 93 for the purpose of determining the

value of the buses to be paid by petitioner Metro Manila Transit Corporation to

respondent D.M. Consortium, Incorporated.

 Costs against petitioner.

G.R. No. L-18536 March 31, 1965

JOSE B. AZNAR, plaintiff-appellant,

vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.

Florentino M. Guanlao for plaintiff-appellant.

Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.

REGALA, J.:

This is an appeal, on purely legal questions, from a decision of the Court of First Instance of
Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the
possession of the car in dispute.

The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in
two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28,
1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos
residence to answer the ad. However, Teodoro Santos was out during this call and only the
latter's son, Irineo Santos, received and talked with De Dios. The latter told the young Santos that
he had come in behalf of his uncle, Vicente Marella, who was interested to buy the advertised
car.

On being informed of the above, Teodoro Santos instructed his son to see the said Vicente
Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting,
Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid
only after the car had been registered in his name.

Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a
certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's favor.
The parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City
where the registration of the car in Marella's name was effected. Up to this stage of the
transaction, the purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration
papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them
until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then
proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former demanded the
payment from Vicente Marella. Marella said that the amount he had on hand then was short by
some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly
living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to
the said sister and suggested that Irineo Santos go with him. At the same time, he requested the
registration papers and the deed of sale from Irineo Santos on the pretext that he would like to
show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the
latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded to
the alleged house of Marella's sister.

At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house
while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo
Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of him.
For, after a considerable length of time waiting in vain for De Dios to return, Irineo went down
to discover that neither the car nor their unidentified companion was there anymore. Going back
to the house, he inquired from a woman he saw for L. De Dios and he was told that no such
name lived or was even known therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to
see Marella. He found the house closed and Marella gone. Finally, he reported the matter to his
father who promptly advised the police authorities.

That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car
in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the above
incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar
acquired the said car from Vicente Marella in good faith, for a valuable consideration and
without notice of the defect appertaining to the vendor's title.

While the car in question was thus in the possession of Jose B. Aznar and while he was attending
to its registration in his name, agents of the Philippine Constabulary seized and confiscated the
same in consequence of the report to them by Teodoro Santos that the said car was unlawfully
taken from him.

In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the
head of the Philippine Constabulary unit which seized the car in question Claiming ownership of
the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro
Santos moved and was allowed to intervene by the lower court.

At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle
to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had been
unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiff-
appellant traced his right. Consequently, although the plaintiff-appellant acquired the car in good
faith and for a valuable consideration from Vicente Marella, the said decision concluded, still the
intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the New Civil
Code which provides:
 ART. 559. The possession of movable property acquired in good faith is equivalent to
title. Nevertheless, one who lost any movable or has been unlawfully deprived thereof,
may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived,
has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

From this decision, Jose B. Aznar appeals.

The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant,
Jose B. Aznar, who has a better right to the possession of the disputed automobile?

We find for the intervenor-appellee, Teodoro Santos.

The plaintiff-appellant accepts that the car in question originally belonged to and was owned by
the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the same
by Vicente Marella. However, the appellant contends that upon the facts of this case, the
applicable provision of the Civil Code is Article 1506 and not Article 559 as was held by the
decision under review. Article 1506 provides:

ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not
been voided at the time of the sale, the buyer acquires a good title to the goods, provided
he buys them in good faith, for value, and without notice of the seller's defect of title.

The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the
seller should have a voidable title at least. It is very clearly inapplicable where, as in this case,
the seller had no title at all.

Vicente Marella did not have any title to the property under litigation because the same was
never delivered to him. He sought ownership or acquisition of it by virtue of the contract.
Vicente Marella could have acquired ownership or title to the subject matter thereof only by the
delivery or tradition of the car to him.

Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired
and transmitted by law, by donation, by testate and intestate succession, and in consequence of
certain contracts, by tradition." As interpreted by this Court in a host of cases, by this provision,
ownership is not transferred by contract merely but by tradition or delivery. Contracts only
constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is
the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v.
International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle &
Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).

For the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, according to settled jurisprudence, the
tradition of the thing is a necessary and indispensable requisite in the acquisition of said
 ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff
of Albay, supra.)

So long as property is not delivered, the ownership over it is not transferred by contract
merely but by delivery. Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the method of accomplishing the
same, the title and the method of acquiring it being different in our law. (Gonzales v.
Roxas, 16 Phil. 51)

In the case on hand, the car in question was never delivered to the vendee by the vendor as to
complete or consummate the transfer of ownership by virtue of the contract. It should be recalled
that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the
former, as vendee, took possession of the subject matter thereof by stealing the same while it was
in the custody of the latter's son.

There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the
key to the car to the unidentified person who went with him and L. De Dios to the place on
Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the
delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that
he turned it over to the unidentified companion only so that he may drive Irineo Santos and De
Dios to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of
Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of
delivering the thing. (10 Manresa 132)

The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for
under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully
deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from
third persons who may have acquired it in good faith from such finder, thief or robber. The said
article establishes two exceptions to the general rule of irrevindicability, to wit, when the owner
(1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor
cannot retain the thing as against the owner, who may recover it without paying any indemnity,
except when the possessor acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535;
Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46.
Tolentino, id., Vol. II, p. 261.)

In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled
that —

Under Article 559 of the new Civil Code, a person illegally deprived of any movable may
recover it from the person in possession of the same and the only defense the latter may
have is if he has acquired it in good faith at a public sale, in which case, the owner cannot
obtain its return without reimbursing the price paid therefor. In the present case, plaintiff
has been illegally deprived of his car through the ingenious scheme of defendant B to
enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can
still recover possession of the car even if it is in the possession of a third party who had
acquired it in good faith from defendant B. The maxim that "no man can transfer to
 another a better title than he had himself" obtains in the civil as well as in the common
law. (U.S. v. Sotelo, 28 Phil. 147)

Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who
had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella, he, the
intervenor-appellee, should be made to suffer the consequences arising therefrom, following the
equitable principle to that effect. Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another, is based on his being dispossessed
without his consent. The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which
is covered by an express provision of the new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz
v. Pahati, supra)

UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the
lower court affirmed in full. Costs against the appellant.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Makalintal,
Bengzon, J.P., and Zaldivar, JJ., concur.

AZNAR v. YAPDIANGCO- Stolen Goods

True owner has a better right than a buyer in good faith to possession of a stolen good.

FACTS:

Teodoro Santos advertised the sale of his FORD FAIRLANE 500 in a newspaper. On L. De Dios
went to the house of Teodoro and talked to his son Ireneo Santos and said that his uncle Vicente
Marella is interested in buying the said car.

The next day, Ireneo went to the house of Marella and they agreed to the price of P14,700 on the
understanding that it will be paid after the car has been registered in the latter’s name.
A deed of sale was executed and the registration was changed to the name of Marella. Ireneo
went to Marella to get the payment and deliver the car who informed him that he is P2,000 short
of the money and that they need to go to his sister to get it. Ireneo, together with De Dios and an
unidentified man went to a house.

Once inside, De Dios asked Ireneo to wait in the sale. After waiting in vain, he went down and
discovered that the car was gone.
Marella was able to sell the car to plaintiff-appellant Jose Aznar and while attending to
registration, the car was seized by Phil. Constabulary due to the report of the incident.

ISSUE:

Between the two parties, who has the better right?

HELD:

Teodoro Santos has the better right. Marella did not have any title to the property under litigation
because the same was never delivered to him. He may have the contract but he never acquired
valid title. Although the keys to the car may have been given to the unidentified companion, it
may be done only because that companion took them to the place where the sister of Marella was
supposed to live. The car was evidently stolen and that the buyer did not acquire any valid title
thereto.

Dizon vs. Suntay

47 SCRA 160
September 1972

FACTS:

Respondent Lourdes G. Suntay and one Clarita R. Sison entered into a transaction wherein the
Suntay’s three-carat diamond ring, valued at P5,500.00, was delivered to Sison for sale on
commission. Upon receiving the ring, Sison executed and delivered to the receipt to Suntay.
After the lapse of a considerable time without Clarita R. Sison having returned to the ring to her,
Suntay made demands on Clarita R. Sison for the return of said jewelry. Clarita R. Sison,
however, could not comply with Suntay’s demands because on June 15, 1962, Melia Sison, niece
of the husband of Clarita R. Sison, evidently in connivance with the latter, pledged the ring with
the petitioner Dominador Dizon's pawnshop for P2,600.00 without Suntay’s knowledge. When
Suntay found out that Clarita R. Sison pledged the ring, she filed a case of estafa against the
latter with the fiscal's office. Subsequently, Suntay wrote a letter to Dizon on September 22,
1962 asking for the return of her ring which was pledged with the latter’s pawnshop under its
Pawnshop Receipt serial B No. 65606, dated June 15, 1962.

Dizon refused to return the ring, so Suntay filed an action for its recovery with the CFI of
Manila, which declared that she had the right to its possession. The Court of Appeals likewise
affirmed said decision.
ISSUE:

Who has the right title over the subject property?

COURT RULING:

The Supreme Court affirmed the decision of the lower courts. The controlling provision is
Article 559 of the Civil Code which provides that “[T]he 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.” 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. Hanging on to said exception as his basis, Dizon insisted that the principle of estoppel
should apply in this case but the Supreme Court ruled otherwise.

In the present case not only has the ownership and the origin of the jewels misappropriated been
unquestionably proven but also that Clarita R. Sison, 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 Suntay, who was illegally deprived of said jewels and who, as the owner, has an
absolute right to recover the jewels from the possession of whosoever holds them, which in this
case is Dizon’s pawnshop. Dizon ought to have been on his guard before accepting the pledge in
question, but evidently there was no such precaution availed of and he has no one to blame but
himself. 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.

DIZON V. SUNTAY
47 SCRA 160
FACTS:
Suntay was the owner of a diamond ring. On a relevant date, she and Sison entered into a transaction
wherein Sison would sell the diamond ring on a commission basis. Both parties knew each other for a
long time and that there was already a prior transaction between the two wherein Sison sold on
commission another piece of jewelry owned by Suntay. As days
passed with no return of Sison, Suntay made demands. The ring could not be returned since it was
pledged to Dizon’s pawnshop, without the consent of Suntay. Suntay insisted on the return of her ring
and Sison then gave her the pawnshop ticket. Upon knowledge of the pledge, she filed a case of estafa
against Sison as well as sent a written demand to Dizon for the return of the ring. Dizon refused to do so.

HELD:
One who has lost or has been unlawfully deprived of a movable may recover the same 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
therefore. Suntay who was unlawfully deprived of the ring
was entitled to recover it from Dizon who was found in possession of the same. In the present case, not
only has the ownership and the origin of the ring misappropriated been unquestionably proven but also
that Sison has fraudulently and in bad faith, disposed of and pledged them contrary to agreement, with
no ownership, and to the prejudice of Suntay, who was thereby illegally deprived of said jewels. The
owner has the right to recover. He is not estopped when his property has been unlawfully pledged by
another

G.R. No. 109910 April 5, 1995

REMEDIOS G. SALVADOR and GRACIA G. SALVADOR, petitioners,

vs.
COURT OF APPEALS, ALBERTO and ELPIA YABO, FRANCISCA YABO, et al.,
respondents.

DAVIDE, JR., J.:

Assailed in this petition is the legal determination made by the Court of Appeals on the
issues of which portion of Lot No. 6080 and Lot No. 6180 formed part of the conjugal
assets of the spouses Pastor Makibalo and Maria Yabo, and of whether or not the rights
of Pastor's co-heirs in the estate of Maria Yabo were extinguished through prescription
or laches.

Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180 situated in Barrio Bulua,
Cagayan de Oro City, containing an area of 1,267 and 3,816 square meters,
respectively. Title thereto devolved upon his nine children, namely, Victoriano, Procopio,
Lope, Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death
sometime before or during the second world war.
On 28 April 1976, Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's
children, filed with the then Court of First Instance of Misamis Oriental a complaint,
docketed as Civil Case No. 5000, against the spouses Alberto and Elpia Yabo for
"Quieting of Title, Annulment of Documents, and Damages." In the complaint, he
alleged that he owned a total of eight shares of the subject lots, having purchased the
shares of seven of Alipio's children and inherited the share of his wife, Maria, and that
except for the portion corresponding to Gaudencia's share which he did not buy, he
occupied, cultivated, and possessed continuously, openly, peacefully, and exclusively
the two parcels of land. He then prayed that he be declared the absolute owner of 8/9 of
the lots in question. 1

On 8 October 1976, the grandchildren and great-grandchildren of the late Alipio Yabo 2
lodged with the same court a complaint for partition and quieting of title with damages, 3
docketed as Civil Case No. 5174, against Pastor Makibalo, Enecia Cristal, and the
spouses Eulogio and Remedies Salvador. They alleged that Lot No. 6080 and Lot No.
6180 are the common property of the heirs of Alipio Yabo, namely, the plaintiffs,
defendant Enecia Cristal, Maria Yabo and Jose Yabo, whose share had been sold to
Alberto Yabo; that after Alipio's death, the spouses Pastor and Maria Makibalo, Enecia
Cristal and Jose Yabo became the de facto administrators of the said properties; and
that much to their surprise, they discovered that the Salvador spouses, who were
strangers to the family, have been harvesting coconuts from the lots, which act as a
cloud on the plaintiffs' title over the lots.

The plaintiffs then prayed that (a) they, as well as defendant Pastor Makibalo, in
representation of his wife, and Enecia Cristal, in representation of Gaudencia, be
declared as the owners of the lots; (b) the Salvador spouses be declared as having no
rights thereto except as possible assignees of their co-defendants, Pastor Makibalo and
Enecia Cristal; (c) the lots be partitioned according to law among the aforementioned
co-owners; and (d) the defendants be made to pay for the value of the fruits they
harvested from the lots and for moral and exemplary damages, attorney's fees,
expenses of the litigation, and costs of the suit.

The two cases were consolidated and jointly heard by Branch 5 of the Court of First
Instance of Cagayan de Oro City.

By evidence, Pastor, Makibalo sought to prove the following allegations:

He was married to Maria Yabo who died on 17 March 1962. 4 In August 1949, Jose and
Victoriano, both surnamed Yabo, sold their respective shares in the disputed lots to one
Pedro Ebarat, and in 1952 the latter sold both shares to Pastor Makibalo. 5 Ebarat
formalized this conveyance by executing an Affidavit of Waiver and Quitclaim dated 30
May 1969 in favor of Pastor. 6

On 16 January 1951, the heirs of the late Lope Yabo sold Lope's shares in the litigated
properties to one Dominador Canomon, 7 who, in turn, sold the same to Pastor. 8
Canomon afterwards executed an Affidavit of Waiver and Quitclaim in favor of the latter.
9
Pastor Makibalo likewise purchased the shares of Baseliza in the two lots in 1942, of
Procopio in 1957, of Francisca in 1958, and of Pelagia in 1967. The only share he did
not buy was that of Gaudencia. After every purchase, he took possession of the
portions bought and harvested the products thereof. 10

In 1966, Pastor sold back to Alberto a portion of Lot No. 6180 which was formerly the
share of Alberto's father, Procopio. 11

In December 1968, Pastor mortgaged the two lots to the spouses Eulogio and
Remedios Salvador. 12 On 26 September 1978, he executed a document denominated
as a "Confirmation and Quitclaim" whereby he waived all his rights, interests, and
participation in the lots in favor of the Salvador spouses. 13

On the other hand, by their evidence, l4 the spouses Alberto and Elpia Yabo tried to
prove that they had repurchased from Pastor Makibalo the share of Procopio, which
was previously sold to Pastor, and had bought the shares of Jose and Maria. 15

Filoteo Yabo denied having sold the share of his father, Lope Yabo, in the contested
lots and disowned his signature and those of his mother, brothers, and sisters
appearing at the back of Exhibit "C". 16

Ignacio Yabo testified that his father, Victoriano Yabo, did not know how to write and
sign his name. He further declared that he had no knowledge that his father affixed his
thumbmark in the document marked as Exhibit "A" purporting to alienate his father's
share in the disputed lots. l7

On 15 January 1983, the trial court rendered its decision 18

holding as follows:

Assuming that the thumbmark on the typewritten name "Jose Yabo" in Exh. 3 was that of
Jose Yabo, Alberto Yabo and Elpia R. Yabo purchased the share of Jose Yabo in bad
faith because they knew before and up to the execution of Exh. 3 on October 24, 1972
that Jose Yabo was no longer the owner of that area because from the documents she
borrowed from Mrs. Salvador they came to know that Jose Yabo had sold his shares to
Pedro Ebarat, and they have seen that Pastor Makibalo has been in possession of those
shares together with the seven others exclusively as owner, he having mortgaged them
to Mrs. Salvador.

As Jose Yabo was no longer the owner of the one-ninth (1/9) shares which he sold to
Alberto Yabo and Elpia Yabo under Exh. 3, the sale is null and void, and Alberto and
Elpia acquired nothing because Jose Yabo had no more title, right or interest to dispose
of.

...

Pastor Makibalo had been in possession of Jose Yabo's share since 1949 after
purchasing it from Ebarat, and has been in possession thereof up to September 26, 1978
when he sold it to the spouses Eulogio Salvador and Remedios Salvador, who are now in
possession of the same.
Exh. A, evidencing the sale of Victoriano Yabo's share to Pedro Ebarat was identified by
the latter who testified that he sold it to Pastor Makibalo in 1951. Exh. A is an ancient
document — 1949 when the document came to existence up to now is more than 30
years, and the document had been in the possession of Pastor Makibalo, then Remedios
Salvador who had interest in its preservation.

As regards the shares of Lope Yabo, the same had been sold by his surviving spouse
Juana Legaspi, and his children Filoteo, Andresa, Jovita, Bonifacio, and Rundino for
P105.00 on January 16, 1951 to Dominador Conomon (Exh. C and C-1), who in turn sold
it to Pastor Makibalo in 1952, executing a formal Deed of Waiver and Quitclaim on May
30, 1969
(Exh. D).

Exh. C is an ancient document, being more than 30 years old and has been in the
possession of Pastor Makibalo and then the spouses Eulogio and Remedios Salvador —
who had an interest in its preservation. The claim of Filoteo Yabo that the signatures
appearing in Exh. C are not his and those of his brothers and sisters are of no avail, for if
they were not the ones who affixed those signatures and so they did not sell the shares
of their father Lope Yabo, why did they not then take possession of said shares — they
remained silent from 1951 to September 16, 1976 a period of 25 years. They are now
[e]stopped by laches.

And as regards the shares of Baseliza, Francisca and Pelagia, there is no evidence
presented to effectively rebut the testimony of Pastor Makibalo that he acquired the
shares of Baseliza Yabo in 1942 by changing it with a buffalo; that he bought the shares
of Francisca Yabo in 1958 and that he bought the shares of Pelagia Yabo in 1967; Pastor
Makibalo had been in possession of these shares from the time he acquired them,
continuously, adversely, openly, and peacefully, as owner up to the time he sold his
rights and interest therein to the spouses Eulogio and Remedies Salvador. The heirs of
Baseliza, Francisca and Pelagia have not taken any step to protect their rights over those
shares for over 40 years in the case of Baseliza's share, for about 20 years in the case of
Francisca's share, and for more than 10 years in the case of Pelagia's share. Laches,
likewise has rendered their rights stale.

On March 10, 1966 Pastor Makibalo sold back to Alberto Yabo the share of Procopio
Yabo in Lot 6180 (Exh. 1 and 2), but there is nothing to show that. Pastor Makibalo also
sold back Procopio's share in Lot 6080.

So then, by purchase, Pastor Makibalo and Maria Yabo acquired the shares of Baseliza,
Victoriano, Jose, Lope, Procopio and Francisca, or six (6) shares from Lots 6080 and
6180. These belonged to the conjugal partnership of Pastor Makibalo and Maria Yabo.
Maria Yabo had also a share from Lots 6080 and 6180, and Pastor Makibalo acquired
the shares of Pelagia Yabo in both Lots 6080 and 6180. All in all; Pastor Makibalo
acquired eight shares in both Lot 6080 and 6180.

While Maria Yabo died on March 17, 1962, and so one-fourth (1/4) of the shares of
Baseliza, Victoriano, Jose, Lope, and Francisca, or one-fourth of five-ninth (5/9) of both
lots and one-fourth (1/4) of Lot 6080 should go to the children of the brothers and sisters
of Maria Yabo by virtue of the provisions of Article 1001 of the New Civil Code, the latter
have lost their rights thereto by laches for their inaction for a very long period and their
rights have become stale. On the other hand, Pastor Makibalo who had been in
possession of the whole of the eight shares in both Lots 6080 and 6180, enjoying the
fruits thereof exclusively, uninterruptedly, publicly, peacefully, and continuously from the
death of Maria Yabo up to the filing of the complaint in Civil Case No. 5174 on October 8,
1976, or a period of 14 years, had acquired title to the whole of the eight shares in Lot
 6080 and seven shares in Lot 6180 (the share of Procopio in Lot 6180 had been sold
back to Alberto Yabo).

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered finding Pastor

Makibalo, now Eulogio Salvador and Remedios Salvador the owner of eight (8) shares,
equivalent to eight-ninth (8/9) of Lot No. 6080, and of seven (7) shares, equivalent to
seven-ninth (7/9) of Lot No. 6180, and therefore, ordering the partition of Lot 6080 so that
the one-ninth (1/9) alloted to Gaudencia Yabo will go to her heirs or their assigns, and the
remaining eight-ninth (8/9) will go to the spouses Eulogio Salvador and Remedios
Salvador, as successor of Pastor Makibalo, and the partition of Lot 6180 so that the
seven-ninth (7/9) portion which formerly belonged to Baseliza, Victoriano, Jose, Lope,
Maria, Francisca, and Pelagia will go to the spouses Eulogio and Remedios Salvador, the
one-ninth (1/9) which formerly belonged to Procopio, will go to Alberto Yabo, and the
remaining one-ninth (1/9) which formerly belonged to Gaudencia, will go to Gaudencia's
heirs or their assigns.

Doc. No. 720, recorded on page 28 of Notarial Register No. VII, and acknowledged
before Notary Public Isidro S. Baculio (Exh. E) [purportedly executed by Maria Yabo and
Pastor Makibalo] is hereby declared null and void, and so the Office of the City Fiscal is
directed to cause an investigation of this matter to find out the person or persons
responsible for the falsification of the said document, and if the evidence warrants, to file
the corresponding criminal action in court. The Office of the City Assessor of Cagayan de
Oro City is, likewise, directed to cause the cancellation of Tax Declarations Nos. 33553,
marked as Exh. H-3, 33557, marked as Exh. H-2, both in the name of Alberto Yabo, for
having been issued on the basis of a falsified document. Let copies of this decision be
furnished the Offices of the City Fiscal and City Assessor, both of Cagayan de Oro City.

No pronouncement as to damages, attorney's fees and costs.

SO ORDERED. 19

The defendants in Civil Case No. 5000 and the plaintiffs in Civil Case No. 5174
appealed from the decision to the Court of Appeals on 19 August 1983. 20

In its decision of 3 February 1993, 21 the Court of Appeals held that (a) Maria Yabo did
not sell her share to Alberto and Elpia Yabo; (b) prescription and laches have not run
against the private respondents with respect to the 1/9 share of Maria Yabo in the
estate of her father and to her conjugal share in the portions acquired from her brothers
and sisters; and (c) Procopio never sold his share in Lot No. 6080 to Pastor Makibalo.
More specifically it stated:

Exh. E is the document found by the lower court to be a falsification. This finding
appellants do not dispute and have not raised an error.

...

While acknowledging. that upon the death of Maria Yabo on March 17, 1962, one-half
(1/2) of the share of Maria Yabo in Lots 6080 and 6180 and one-half (1/2) of Maria
Yabo's conjugal share in the portions bought from Basiliza, Victoriano, Jose, Lope,
Pelagia and Francisca should go to the children of the brothers and sisters of Maria in
accordance with Article 1001 of the Civil Code, the lower court rule that said children
have lost their rights by laches "for their inaction for a very long period and their rights
have become stale" (Decision, p. 16; Record, Vol. 2, p. 158).

Appellants in their second assignment of error aver that this is an error.

We agree that the lower court erred.

While between March 17, 1962 when Maria Yabo died and October 8, 1976, when Civil
Case No. 5174 for partition was filed, was a period of more than fourteen (14) years, that
alone to our mind would not suffice to establish laches or prescription. Upon the death of
Maria Yabo, appellee Pastor Makibalo and appellants and the other children of the
brothers and sisters of Maria, by operation of law become co-owners of the one-ninth
(1/9) share of Maria as heir of her father Alipio and the conjugal share of Maria in the
portions acquired from Basiliza, Victoriano, Jose, Lope, Pelagia and Francisca. Time
alone is not a decisive factor. Appellee Pastor Makibalo, it must be remembered, is the
husband of Maria and, therefore, an uncle in-law of appellants. In our culture, a demand
by an heir or heirs for partition immediately upon the death of a relative is more often
taken not as a legitimate assertion of a right but of something else, like greed. It must
also be noted that the spouses, the appellee Pastor Makibalo and his deceased wife
Maria, were childless and, therefore, appellants and the other children of the brothers and
sisters of Maria must have felt that at any rate the property would go to them in the
course of time. This probably explains why appellants started asserting their right over
the property only after appellee Pastor Makibalo sold the same to the spouses Eulogio
and Remedios Salvador. Besides, Lots 6080 and 6180 have a combined area only of
5,083 square meters and before the development of Northern Mindanao, and even in
1962 when Maria Yabo died, were not that valuable. This is shown by the fact that each
heir sold his other share only for P110.00.

As we have said not time alone. In the early case of Cortes v. Oliva, 33 Phil. 480, it was
held that"(o)rdinarily, possession by one joint owner will not be presumed to be adverse
to the others, but will, as a rule, be held to be for the benefit of all. Much stronger
evidence is required to show an adverse holding by one of several joint owners than by a
stranger; and in such cases, to sustain a plea of prescription, it must always clearly
appear that one who was originally a joint owner has repudiated the claims of his co-
owners, and that his co-owners were apprised or should have been apprised of his claim
of adverse and exclusive ownership before the alleged prescription began to run (at page
484). This ruling on prescription should apply with equal force to laches.

The third assignment of error challenges the finding of the lower court that "there is
nothing to show that Pastor Makibalo also sold back Procopio's share in Lot 6080"
(Decision, p. 16; Records, Vol. 2,p. 158).

Exhibits 1 and 2 cover only Procopio's share in Lot 6180. In other words, Exhibits 1 and.
2 conveyed back to Alberto Yabo only his father, Procopio's share in Lot 6180.

There is indeed no evidence that Pastor Makibalo also sold back to Alberto, his father
Procopio's share in Lot 6080.

But from the evidence it appears that Procopio Yabo never sold his share in Lot 6080 to
Pastor Makibalo. So there was no need to convey back Procopio's share in Lot 6080.

This fact is evident from the Affidavit of Confirmation of Sale (Exh. M) dated April 22,
1970, executed by Alberto Yabo, which is the very document relied upon by the lower
court (Decision, p. 11; Record, Vol. 2, p. 153) in finding that "Alberto Yabo admitted that
 the share of his father Procopio Yabo was previously bought by Pastor Makibalo." A look
at Exh. M, particularly par. 3 thereof, reveals that AlbertoYabo merely acknowledged or
confirmed the sale of his father's share to Pastor Makibalo in Lot 6180. In effect, it at the
same time proves that Lot 6080 was never sold by Procopio to appellee Pastor Makibalo;
otherwise, it would have been included in the said Affidavit of Confirmation of Sale. The
Deed of Absolute Sale (Exh. 2) subsequently executed by Pastor Makibalo in favor of
Alberto Yabo on April 23, 1970, further proves this point, since the latter merely bought
back what was previously sold, his father's share in Lot 6180. 22

The respondent court then concluded and held as follows:

In summary, appellee Pastor Makibalo and his assigns, the spouses Eulogio and
Remedios Salvador, are entitled only to one-half (½) of the one-ninth (1/9) share of Maria
and three-fourths (3/4) of the six-ninth (6/9) shares acquired from Basiliza, Victoriano,
Jose, Lope, Pelagia and Francisca. Accordingly, the partition should be done as follows:

(1) 1/9 of Lots 6080 end 6180 should be given to the heirs of Gaudencia
Yabo or their successors and assigns;

(2) 1/9 of Lot 6180 should go to Alberto Yabo and his wife Elpia Yabo;

(3) 1/9 of Lot 6080 should be given to the heirs of Procopio Yabo and
their successors end assigns, including Alberto Yabo;

(4) The 1/9 share of Maria Yabo in Lots 6080 and 6180 should be
partitioned: One-half (1/2) for the surviving spouse Pastor Makibalo (now
the spouses Eulogio Salvador and Remedios Salvador) and the other
half for the children of the brothers and sisters of Maria Yabo in equal
shares.

(5) The remaining 6/9, one-half (1/2) of which is conjugal between Maria
Yabo and appellee Pastor Makibalo should be partitioned three-fourths
(3/4) for Pastor Makibalo (now the spouses Eulogio Salvador and
Remedios Salvador) and one-fourth (1/4) for the children of the brothers
and sisters of Maria Yabo in equal shares.

(6) Jose Yabo if he is still alive should participate in the partition as heir
of Maria otherwise he shall be represented by his children.

WHEREFORE, premises considered, subject to the modification in the partition, as

indicated above, the decision appealed from is AFFIRMED, without pronouncement as to
costs. The lower court is directed if necessary to fully effect the partition, to conduct
further hearings and determine whether Jose Yabo is still alive and who are the children
of the brothers and sisters of Maria Yabo. 23

Unable to obtain a reconsideration of the said-decision, Remedios Salvador, together

with her daughter, Ma. Gracia Salvador, as one of the successors-in-interest of Eulogio
M. Salvador who died during the pendency of the appeal, 24 elevated the case to this
Court contending that the respondent court erred in ruling that: (1) the shares of Pelagia
Yabo should be included in the partition; (2) prescription and laches have not run
against the private respondents in relation to the 1/9 share of Maria Yabo in the estate
of her father and to her ½ conjugal share in those acquired by purchase; (3) Procopio
Yabo never sold to Pastor Makibalo his share in Lot No. 6080; and(4) Jose Yabo should
be allowed to participate as heir of Maria even as he had openly rejected this option by
refusing to participate in both civil cases. 25

Article 160 of the Civil Code provides that all property of the marriage is presumed to
belong to the conjugal partnership, unless it be proved that it pertains .exclusively to the
husband or to the wife. Since the shares of Jose, Victoriano, Lope, Baseliza, Procopio,
and Francisca in Lot No. 6180 and Lot No. 6080 had been purchased by Pastor during
his marriage with Maria, and there is no proof that these were acquired with his
exclusive money, the same are deemed conjugal properties. Not forming part of the
conjugal partnership are: (1) the 1/9 share inherited by Maria which remained as her
exclusive property pursuant to Article 146 (2) of the Civil Code; (2) the 1/9 share of
Gaudencia which was not sold to Pastor; and (3) the 1/9 share of Pelagia which was
acquired by Pastor in 1967 or five years after the death of his wife and which was
therefore his exclusive property.

There is, thus; merit in the petitioners' first assigned error. The Court of .Appeals should
have excluded from the conjugal partnership the share of Pelagia which Pastor had
acquired after his wife's death.

Upon Maria's death in 1962, the conjugal partnership of gains was dissolved. 26 Half of
the conjugal properties, together with Maria's l/9 hereditary share in the disputed lots,
constituted Maria's estate and should thus go to her surviving heirs. 27 Under Article
1001 of the Civil Code, her heirs are her spouse, Pastor Makibalo, who shall be entitled
to-one-half (1/2) of her estate, her brother, Jose, and the children of her other brothers
and sisters, who shall inherit the other half. There having been no actual partition of the
estate yet, the said heirs became co-owners thereof by operation of law. 28

We now determine whether prescription and laches can be applied against the co-heirs
of Pastor Makibalo.

It has been said that Article 494 of the Civil Code which provides that each co-owner
may demand at any time the partition of the common property implies that an action to
demand partition is imprescriptible or cannot be barred by laches. 29 The
imprescriptibility of the action cannot, however, be invoked when one of the co-owners
has possessed the property as exclusive owner and for a period sufficient to acquire it
by prescription. 30

What needs to be addressed first is whether or not Pastor Makibalo has acquired by
prescription the shares of his other co-heirs or co-owners. Prescription as a mode of
acquiring ownership requires a continuous, open, peaceful, public, and adverse
possession for a period of time fixed by law.

This Court has held that the possession of a co-owner is like that of a trustee and shall
not be regarded as adverse to the other co-owners but in fact as beneficial to all of
them. 31 Acts which may be considered adverse to strangers may not be considered
adverse insofar as co-owners are concerned. A mere silent possession by a co-owner,
his receipt of rents, fruits or profits from the property, the erection of buildings and
fences and the planting of trees thereon, and the payment of land taxes, cannot serve
as proof of exclusive ownership, if it is not borne out by clear and convincing evidence
that he exercised acts of possession which unequivocably constituted an ouster or
deprivation of the rights of the other co-owners. 32

Thus, in order that a co-owner's possession may be deemed adverse to the cestui que
trust or the other co-owners, the following elements must concur: (1) that he has
performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust
or the other co-owners; (2) that such positive acts of repudiation have been made
known to the cestui que trust or the other co-owners; and (3) that the evidence thereon
must be clear and convincing. 33

In Pangan vs. Court of Appeals, 34 this Court had occasion to lay down specific acts
which are considered as acts of repudiation:

Filing by a trustee of an action in court against the trustor to quiet title to property, or for
recovery of ownership thereof, held in possession by the former, may constitute an act of
repudiation of the trust reposed on him by the latter.

The issuance of the certificate of title would constitute an open and clear repudiation of
any trust, and the lapse of more than 20 years, open and adverse possession as owner
would certainly suffice to vest title by prescription.

An action for the reconveyance of land based on implied or constructive trust prescribes
within 10 years. And it is from the date of the issuance of such title that the effective
assertion of adverse title for purposes of the statute of limitation is counted.

The prescriptive period may only be counted from the time petitioners repudiated the trust
relation in 1955 upon the filing of the complaint for recovery of possession against private
respondents so that the counterclaim of the private respondents contained in their
amended answer wherein they asserted absolute ownership of the disputed realty by
reason of the continuous and adverse possession of the same is well within the l0-year
prescriptive period.

There is clear repudiation of a trust when one who is an apparent administrator of

property causes the cancellation of the title thereto in the name of the apparent
beneficiaries and gets a new certificate of title in his own name.

It is only when the defendants, alleged co-owners of the property in question, executed a
deed of partition and on the strength thereof obtained the cancellation of the title in the
name of their predecessor and the issuance of a new one wherein they appear as the
new owners of a definite area each, thereby in effect denying or repudiating the
ownership of one of the plaintiffs over his alleged share in the entire lot, that the statute of
limitations started to run for the purposes of the action instituted by the latter seeking a
declaration of the existence of the co-ownership and of their rights thereunder.

The records do not show that Pastor Makibalo adjudicated to himself the whole estate
of his wife by means of an affidavit filed with the Office of the Register of Deeds as
allowed under Section 1 Rule 74 of the Rules of Court, or that he caused the issuance
of a certificate of title in his name or the cancellation of the tax declaration in Alipio's
name and the issuance of a new one in his own name. The only act which may be
deemed as a repudiation by Pastor of the co-ownership over the lots is his filing on 28
April 1976 of an action to quiet title (Civil Case No. 5000). The period of prescription
started to run only from this repudiation. However, this was tolled when his co-heirs, the
private respondents herein, instituted on 8 October 1976 an action for partition (Civil
Case No. 5174) of the lots. Hence, the adverse possession by Pastor being for only
about six months would not vest in him exclusive ownership of his wife's estate, and
absent acquisitive prescription of ownership, laches and prescription of the action for
partition will not lie in favor of Pastor. 35

The issue presented by the petitioners in their third assigned error involves a question
of fact. This Court is not ordinarily a trier of facts, its jurisdiction being limited to errors of
law. Thus; the findings of facts of the Court of Appeals are as a rule deemed conclusive.
However, when the findings of facts of the appellate court vary with those of the trial
court, this Court has to review the evidence in order to arrive at the correct findings. 36

In the instant case, a conflict in the findings of facts of the lower courts exists. The trial
court found that Pastor was the owner of Procopio's share in Lot No. 6080, as there was
nothing to show that he sold it back to Alberto Yabo. The respondent court on the other
hand, held that Procopio Yabo never sold his share in Lot No. 6080 to pastor, thus,
there was no need to convey it back to Procopio's son, Alberto.

At this juncture, it is worthy to quote pertinent portions of the testimony of Pastor

Makibalo:

COURT: (To the witness.)

Q Where is AlbertoYabo living?

A It is there in their house at Bulua.

ATTY. JARAULA: (Continuing.)

Q In whose land?

A Alipio Yabo's land.

Q What relation has that land to the two (2) parcels of land under
litigation?

A I bought already.

Q So, will you please tell the Honorable Court, why Alberto Yabo is
staying on that land when you said you have bought that land already.

A So, I sold back a portion to them because they requested me.

COURT: (To the witness.)

Q When was that when you said that Alberto Yabo requested a portion?

A In 1967.

COURT:

Q Did you give that portion which they requested?

A Their share being inherited from their father Procopio was the portion
they requested.

COURT

Q Yes. Did you grant that?

A Yes.

Q That is the area you sold to Alberto Yabo, pursuant to his request?

A Because that was the land they inherited from their father that was
what they requested.

Q All right. So that, the area now being occupied by Alberto Yabo?

A Yes. That land in the Centro.

Q This is now identified as Lot No. 6180?

A Yes, Your Honor.

ATTY. JARAULA: (Continuing.)

Q Where did you sign a document ceding that portion requested by

Alberto Yabo?

A We did not make any receipt in favor of AlbertoYabo because they got
only the receipt of that of his father.

COURT: (To the witness.)

Q You mean to say, that the receipt which Procopio signed when he sold
his share for [sic] the document which Alberto got?

A Yes.

COURT:

All right.
 ATTY. JARAULA (Continuing.)

Q Now, for how much did you buy. the shares of each of the brothers
and sisters of your wife?

A One Hundred Ten (P110.00) Pesos.

Q When you sold back to Alberto Yabo, the portion corresponding to the
share of his father Procopio in the Poblacion, how much did he pay you?

A The same.

Q By the same, you are referring by the same amount of One Hundred
Ten (P110.00) Pesos?

A Yes, Sir. The same amount. 37

The petitioners contend that the sales or conveyances made by Alipio's heirs were for
their consolidated shares in the two lots. If this was so, and the receipt which Procopio
signed when he sold his consolidated share to Pastor was turned over to Alberto, the
inevitable conclusion is that Alberto redeemed his father's share in both lots, not only in
Lot: No. 6180. This conclusion is further buttressed by the above-quoted testimony of
Pastor that he bought the shares (consolidated) of each of Alipio's heirs for P110.00 and
that when he sold back to Alberto the former share of Procopio, Alberto paid him the
same amount of P110.00.

However, since the share of Procopio in the two litigated parcels of land was purchased
by Pastor during his marriage with Maria, the same became conjugal property, and half
of it formed part of Maria's estate upon her death in 1962. Accordingly, Pastor's resale
in favor of Alberto could only be valid with respect to Pastor's one-half (1/2) conjugal
share and one-fourth (1/4) hereditary share as heir of Maria. 38 The remaining one-fourth
(1/4) should go to Pastor's co-heirs, the private respondents herein.

Now on the fourth assigned error.

Section 1, Rule 69 of the Rules of Court requires that all persons interested in the land
sought to be partitioned must be joined as defendants in the complaints. All co-owners
and persons having an interest in the property are considered indispensable parties and
an action for partition will not lie without the joinder of said persons. 39 It has been held
that the absence of an indispensable party in a case renders ineffective all the
proceedings subsequent to the filing of the complaint including the judgment. 40

It must be recalled that in Civil Case No. 5174 the private respondents sought the
partition of the two lots based on the co-ownership which arose from the right of
succession to Alipio's estate. Since Jose Yabo confirmed, through his thumbmark in the
verification of the complaint, that he had already parted with his share in Alipio's estate,
he in effect admitted that he had ceased to be a co-owner of the two lots which
comprised his father's estate. Thus, his non-joinder as a party-plaintiff in the complaint
would appear to be proper. He does not, as well, appear to be an indispensable party in
Civil Case No. 5000.

As it turned out, however, the evidence and the issues which cropped up rendered
imperative the determination of the conjugal assets of Pastor Makibalo and Maria Yabo
and the partition of the latter's estate among her heirs. Her estate consists of one-
half(½) of the conjugal properties, which should then be divided pursuant to Article 1001
of the Civil Code since the marriage produced no child; thus: one-half (½) to Pastor, and
the other half to her brother Jose, and to her nephews and nieces.

Insofar as the partition of Maria Yabo's estate is concerned, Jose is an indispensable

party. Strictly, the rule on indispensable parties may bar a partition of Maria's estate.
Considering, however, that such estate or its partition are but incidents in Civil Case No.
5000 and Civil Case No. 5174, and the parties have not offered any objection to the
propriety of the determination and partition of her estate, then in the light of Section 11
of Rule 3 41 and Sections 1 and 5, Rule 10 42 of the Rules of Court, and following the
rulings of this Court in the 1910 case of Alonso vs. Villamor 43 and the 1947 case of
Cuyugan vs. Dizon, 44 an amendment of the complaint in Civil Case No. 5174 to implead
Jose Yabo as party plaintiff would be in order.

In Alonso, it was held that under Section 110 of the Code of Civil Procedure — whose
first paragraph is substantially the same as the aforesaid Section 1 of Rule 10 — and
Section 503 thereof, this Court "has full power, apart from that power and authority
which is inherent, to amend the process, pleadings, proceedings, and decision in this
case by substituting, as party plaintiff, the real party in interest." Our ruling in Cuyugan
states:

We, however, do not believe that the case should be dismissed for plaintiff's failure to join
her husband. (Sec. 11, Rule 2, Rules of Court). Nor should the case be remanded to the
court below and a new trial ordered on this account. The complaint may and should be
amended here, to cure the defect of party plaintiffs, after final decision is rendered.
Section 11, Rule 2, and Section 2, Rule 17, explicitly authorize such procedure. As this
Court had occasion to say in Quison vs. Salud, (12 Phil., 109, 116), "a second action
would be but a repetition of the first and would involve both parties, plaintiffs and
defendant, in much additional expense and would cause much delay, in that way
defeating the purpose of the section, which is expressly stated to be "that the actual
merits of the controversy may speedily be determined without regard to technicalities and
in the most expeditious and inexpensive manner." (See also Diaz vs. De la Rama, 73
Phil., 104)

To avoid further delay in the disposition of this case, we declare Civil Case No. 5174 as
thus duly amended. Consequently, Jose Yabo may participate in the partition of the
estate of Maria Yabo. The fourth assigned error must then be rejected.

In view of the foregoing disquisitions, the appealed judgment should be modified as

follows: (a) the former 1/9 share of Pelagia Yabo in Lots No. 6180 and 6080 which she
sold to Pastor should be treated as the latter's exclusive property which should now
pertain to the petitioners, his successors-in-interest; and (b) the former 1/9 share of
Procopio Yabo in both lots should be divided as follows: 3/4 (respondent Pastor's 1/2
conjugal share and 1/4 representing his share therein as Maria's heir) for the spouses
Alberto and Elpia Yabo, and 1/4 (representing the share therein of Maria's collateral
relatives as Maria's heirs) for the private respondents, including Alberto and Jose Yabo.
The partition of the two lots in controversy should therefore be made in this wise:

(1) 1/9 share of Gaudencia Yabo should be allotted to her heirs or successors-in-interest;

(2) 1/9 share formerly belonging to Pelagia Yabo — to the petitioners as successors-in-
interest of Pastor Makibalo;

(3) 1/9 hereditary share of Maria Yabo to be divided as follows:

(a) 1/2 for the petitioners (as successors-in-interest of Pastor Makibalo),

and

(b) 1/2 for the private respondents, including Jose Yabo or his heirs;

(4) 1/9 share formerly belonging to Procopio Yabo to be divided thus:

(a) 3/4 for Spouses Alberto and Elpia Yabo, and

(b) 1/4 for the other private respondents, including Jose Yabo or his
heirs;

(5) 5/9 shares which became the conjugal properties of Pastor Makibalo and Maria Yabo
to be divided thus:

(a) 3/4 for the petitioners (as successors-in-interest of Pastor Makibalo),

and

(b) ¼ for the private respondents, including Jose Yabo or his heirs.

In sum, Lots Nos. 6180 anid 6080 should be partitioned as follows:

1/9 or 4/36 — to Guadencia Yabo's heirs or successors-in-interest;

3/4 of 1/9 or 3/36 — to the spouses Alberto and Elpina Yabo;

8/36 — to the private respondents, including Jose Yabu or his heirs;

21/36 — to the petitioners as successors-in-interest of Pastor Makibalo.

WHEREFORE, the challenged decision of the Court of Appeals of 8 February 1993 in

CA-G.R. CV No. 12839 is AFFIRMED, subject to the modifications indicated above.
Upon the finality of this decision, let this case be forthwith remanded to the court a quo
for further proceedings on the partition of Lots Nos. 6180 and 6080 in conformity with
this decision.
No pronouncement as to costs.

SO ORDERED.