[G.R. Nos. L-10817-18. February 28, 1958.

ENRIQUE LOPEZ,  petitioner, vs. VICENTE OROSA, JR., and

PLAZA THEATRE, INC., respondents.

Nicolás Belmonte and Benjamín T. de Peralta  for petitioner.

Tolentino & Garcia  and  D. R. Cruz  for respondent Luzon Surety Co., Inc.
Jose B. Macatañgay for respondent Plaza Theatre, Inc.

SYLLABUS

1. PROPERTY; REAL ESTATE; MATERIALMAN'S LIEN; DOES NOT EXTEND

TO THE LAND; BUILDING SEPARATE AND DISTINCT FROM LAND. —
Appellant's contention that the lien executed in favor of the furnisher of the
materials used for the construction, repair or refection of a building is also
extended to land on which the construction was made is without merit,
because while it is true that generally, real estate connotes the land and the
building constructed thereon, it is obvious that the inclusion of the building,
separate and distinct from the land, in the enumeration of what constitute real
properties (Art. 415 of the New Civil Code [Art. 334 of the old]) could mean
only one thing, that a building is by itself an immovable property. (Leung Yee
vs. Strong Machinery Co., 37 Phil. 644.)
2. ID.; ID.; ID.; BUILDING AS IMMOVABLE PROPERTY; IRRESPECTIVE OF
OWNERSHIP OF LAND AND BUILDING. — A building is an immovable property
irrespective of whether or not said structure and the land on which it is
adhered to belong to the same owner.
3. PREFERENCE AND PRIORITIES; MATERIALMAN'S LIEN AND MORTGAGE
CREDIT ON LAND WHERE BUILDING CONSTRUCTED. — Materialman's lien
attaches merely to the immovable property for the construction or repair of
which the obligation was incurred and in the case at bar, the lien in favor of
appellant for the unpaid value of the lumber used in the construction of the
building attaches only to said structure and to no other property of the obligor.
Thus, the interest of the mortgagee over the land is superior to and cannot be
made subject to the said materialman's lien.

DECISION

FELIX,  J p:

Enrique Lopez is a resident of Balayan, Batangas, doing business under

the trade name of Lopez-Castelo Sawmill. Sometime in May, 1946, Vicente
Orosa, Jr., also a resident of the same province, dropped at Lopez' house and
invited him to make an investment in the theatre business. It was intimated
that Orosa, his family and close friends were organizing a corporation to be
known as Plaza Theatre, Inc., that would engage in such venture. Although
Lopez expressed his unwillingness to invest on the same, he agreed to supply
the lumber necessary for the construction of the proposed theatre, and at
Orosa's behest and assurance that the latter would be personally liable for any
account that the said construction might incur, Lopez further agreed that
payment therefor would be on demand and not cash on delivery basis.
Pursuant to said verbal agreement, Lopez delivered the lumber which was used
for the construction of the Plaza Theatre on May 17, 1946, up to December 4
of the same year. But of the total cost of the materials amounting to
P62,255.85, Lopez was paid only P20,848.50, thus leaving a balance of
P41,771.35.
We may state at this juncture that the Plaza Theatre was erected on a
piece of land with an area of 679.17 square meters formerly owned by Vicente
Orosa, Jr., and was acquired by the corporation on September 25, 1946, for
P6,000. As Lopez was pressing Orosa for payment of the remaining unpaid
obligation, the latter and Belarmino Rustia, the president of the corporation,
promised to obtain a bank loan by mortgaging the properties of the Plaza
Theatre, Inc., out of which said amount of P41,771.35 would be satisfied, to
which assurance Lopez had to accede. Unknown to him, however, as early as
November, 1946, the corporation already got a loan for P30,000 from the
Philippine National Bank with the Luzon Surety Company as surety, and the
corporation in turn executed a mortgage on the land and building in favor of
said company as counter-security. As the land at that time was not yet brought
under the operation of the Torrens System, the mortgage on the same was
registered on November 16, 1946, under Act No. 3344. Subsequently, when
the corporation applied for the registration of the land under Act 496, such
mortgage was not revealed and thus Original Certificate of Title No. O-391 was
correspondingly issued on October 25, 1947, without any encumbrance
appearing thereon.
Persistent demand from Lopez for the payment of the amount due him
caused Vicente Orosa, Jr. to execute on March 17, 1947, an alleged "deed of
assignment" of his 420 shares of stock of the Plaza Theater, Inc., at P100 per
share or with a total value of P42,000 in favor of the creditor, and as the
obligation still remained unsettled, Lopez filed on November 12, 1947, a
complaint with the Court of First Instance of Batangas (Civil Case No. 4501
which later became R-57) against Vicente Orosa Jr. and Plaza Theatre, Inc.,
praying that defendants be sentenced to pay him jointly and severally the sum
of P41,771.35 with legal interest from the filing of the action; that in case
defendants fail to pay the same, that the building and the land covered by
OCT No. O-391 owned by the corporation be sold at public auction and the
proceeds thereof be applied to said indebtedness; or that the 420 shares of the
capital stock of the Plaza Theatre, Inc., assigned by Vicente Orosa, Jr., to said
plaintiff be sold at public auction for the same purpose; and for such other
remedies as may be warranted by the circumstances. Plaintiff also caused the
annotation of a notice of lis pendens on said properties with the Register of
Deeds.
Defendants Vicente Orosa, Jr., and Plaza Theatre, Inc., filed separate
answers, the first denying that the materials were delivered to him as a
promoter and later treasurer of the corporation, because he had purchased
and received the same on his personal account; that the land on which the
movie house was constructed was not charged with a lien to secure the
payment of the aforementioned unpaid obligation; and that the 420 shares of
stock of the Plaza Theatre, Inc. was not assigned to plaintiff as collaterals but
as direct security for the payment of his indebtedness. As special defense, this
defendant contended that as the 420 shares of stock assigned and conveyed
by the assignor and accepted by Lopez as direct security for the payment of
the amount of P41,771.35 were personal properties, plaintiff was barred from
recovering any deficiency if the proceeds of the sale thereof at public auction
would not be sufficient to cover and satisfy the obligation. It was thus prayed
that he be declared exempted from the payment of any deficiency in case the
proceeds from the sale of said personal properties would not be enough to
cover the amount sought to be collected.
 Defendant Plaza Theatre, Inc., on the other hand, practically set up the
same line of defense by alleging that the building materials delivered to Orosa
were on the latter's personal account; and that there was no understanding
that said materials would be paid jointly and severally by Orosa and the
corporation, nor was a lien charged on the properties of the latter to secure
payment of the same obligation. As special defense, defendant corporation
averred that while it was true that the materials purchased by Orosa were sold
by the latter to the corporation, such transactions were in good faith and for
valuable consideration thus when plaintiff failed to claim said materials within
30 days from the time of removal thereof from Orosa, said lumber became a
different and distinct specie and plaintiff lost whatever rights he might have in
the same and consequently had no recourse against the Plaza Theatre, Inc.;
that the claim could not have been refectionary credit, for such kind of
obligation referred to an indebtedness incurred in the repair or reconstruction
of something already existing and this concept did not include an entirely new
work; and that the Plaza Theatre, Inc., having been incorporated on October
14, 1946, it could not have contracted any obligation prior to said date. It was,
therefore, prayed that the complaint be dismissed; that said defendant be
awarded the sum of P5,000 for damages, and such other relief as may be just
and proper in the premises.
The surety company, in the meantime, upon discovery that the land was
already registered under the Torrens System and that there was a notice of lis
pendens thereon, filed on August 17, 1948, or within the 1-year period after
the issuance of the certificate of title, a petition for review of the decree of the
land registration court dated October 18, 1947, which was made the basis of
OCT No. 0-319, in order to annotate the lights and interests of the surety
company over said properties (Land Registration Case No. 17 GLRO Rec. No.
296). Opposition thereto was offered by Enrique Lopez, asserting that the
amount demanded by him constituted a preferred lien over the properties of
the obligors; that the surety company was guilty of negligence when it failed to
present an opposition to the application for registration of the property; and
that if any annotation of the rights and interest of said surety would ever be
made, same must be subject to the lien in his favor.
The two cases were heard jointly and in a decision dated October 30,
1952, the lower Court, after making an exhaustive and detailed analysis of the
respective stands of the parties and the evidence adduced at the trial, held
that defendants Vicente Orosa, Jr., and the Plaza Theatre, Inc.,
were  jointly liable for the unpaid balance of the cost of lumber used in the
construction of the building and the plaintiff thus acquired the materialman's
lien over the same. In making the pronouncement that the lien was merely
confined to the building and did not extend to the land on which the
construction was made, the trial judge took into consideration the fact that
when plaintiff started the delivery of lumber in May, 1946, the land was not yet
owned by the corporation; that the mortgage in favor of Luzon Surety
Company was previously registered under Act No. 3344; that the codal
provision (Art. 1923 of the old Spanish Civil Code) specifying that refection
credits are preferred could refer only to buildings, which are also classified as
real properties, upon which said refection was made. It was, however, declared
that plaintiff's lien on the building was superior to the right of the surety
company. And finding that the Plaza Theatre, Inc., had noobjection to the
review of the decree issued in its favor by the land registration court and the
inclusion in the title of the encumbrance in favor of the surety company, the
court a quo granted the petition filed by the latter company. Defendants Orosa
and the Plaza Theatre, Inc., were thus required to pay jointly the amount of
P41,771.35 with legal interest and costs within 90 days from notice of said
decision; that in case of default, the 420 shares of stock assigned by Orosa to
plaintiff be sold at public auction and the proceeds thereof be applied to the
payment of the amount due the plaintiff, plus interest and costs; and that the
encumbrance in favor of the surety company be endorsed at the back of
OCT No. 0-391, with the notation that with respect to the building, said
mortgage was subject to the materialman's lien in favor of Enrique Lopez.
 
Plaintiff tried to secure a modification of the decision in so far as it
declared that the obligation of therein defendants was joint instead of solidary
and that the lien did not extend to the land, but same was denied by order of
the court of December 23, 1952. The matter was thus appealed to the Court of
Appeals, which affirmed the lower court's ruling, and then to this Tribunal. In
this instance, plaintiff-appellant raises 2 issues: (1) whether a materialman's
lien for the value of the materials used in the construction of a building
attaches to said structure alone and does not extend to the land on which the
building is adhered to; and (2) whether the lower court and the Court of
Appeals erred in not providing that the materialman's lien is superior to the
mortgage executed in favor of the surety company not only on the building but
also on the land.
It is to be noted in this appeal that Enrique Lopez has not raised any
question against the part of the decision sentencing defendants Orosa and
Plaza Theatre, Inc., to pay jointly the sum of P41,771.35, so We will not take
up or consider anything on that point. Appellant, however, contends that the
lien created in favor of the furnisher of the materials used for the construction,
repair or refection of a building, is also extended to the land on which the
construction was made, and in support thereof he relies on Article 1923 of the
Spanish Civil Code, the pertinent law on the matter, which reads as follows:
ART. 1923. With respect to determinate real property and real
rights of the debtor, the following are preferred:
xxx xxx xxx
5. Credits for refection, not entered or recorded, with respect to
the real estate upon which the refection was made, and only with
respect to other credits different from those mentioned in four next
preceding paragraphs.
It is argued that in view of the employment of the phrase real estate or
immovable property, and inasmuch as said provision does not contain any
specification delimiting the lien to the building, said article must be construed
as to embrace both the land and the building or structure adhering thereto. We
cannot subscribe to this view, for while it is true that generally, real estate
connotes the land and the building constructed thereon, it is obvious that the
inclusion of the building, separate and distinct from the land, in the
enumeration of what may constitute real properties 1 could mean only one
thing — that a building is by itself an immovable property, a doctrine already
pronounced by this Court in the case of Leung Yee vs. Strong Machinery Co.,
37 Phil., 644. Moreover, and in view of the absence of any specific provision of
law to the contrary, a building is an immovable property, irrespective of
whether or not said structure and the land on which it is adhered to belong to
the same owner.
A close examination of the provision of the Civil Code invoked by
appellant reveals that the law gives preference to unregistered refectionary
credits only with respect to the real estate upon which the refection or work
was made. This being so, the inevitable conclusion must be that the lien so
created attaches merely to the immovable property for the construction or
repair of which the obligation was incurred. Evidently, therefore, the lien in
favor of appellant for the unpaid value of the lumber used in the construction
of the building attaches only to said structure and to no other property of the
obligors.

Considering the conclusion thus arrived at, i.e., that the materialman's
lien could be charged only to the building for which the credit was made or
which received the benefit of refection, the lower court was right in holding
that the interest of the mortgagee over the land is superior and cannot be
made subject to the said materialman's lien. Wherefore, and on the strength of
the foregoing considerations, the decision appealed from is hereby affirmed,
with costs against appellant. It is so ordered. ||| (Lopez v. Orosa, G.R. Nos. L-
10817-18, [February 28, 1958], 103 PHIL 98-106)
 [G.R. No. L-30173. September 30, 1971.]

GAVINO A. TUMALAD and GENEROSA R. TUMALAD, plaintiffs-

appellees, vs. ALBERTA VICENCIO and EMILIANO
SIMEON, defendants-appellants.

Castelo & Suck  for plaintiffs-appellees.

Jose Q. Calingo  for defendants-appellants.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; UNLAWFUL DETAINER;

CLAIM OF OWNERSHIP IS A MATTER OF DEFENSE THEREIN. — In detainer
cases the claim of ownership "is a matter of defense and raises an issue of fact
which should be determined from the evidence at the trial."
2. CIVIL LAW; CONTRACTS; FRAUD OR DECEIT RENDERS CONTRACT
VOIDABLE, NOT VOID AB INITIO. — Fraud or deceit does not render a contract
void ab initio, and can only be a ground for rendering the contract voidable or
annullable pursuant to Article 1390 of the New Civil Code, by a proper action in
court.
3. ID.; ID.; PARTIES THERETO MAY TREAT AS PERSONAL PROPERTY
THAT WHICH IS REAL PROPERTY. — In the case of Manarang and Manarang
vs. Ofilada (99 Phil. 109), this Court stated that "it is undeniable that the
parties to a contract may by agreement treat as personal property that which
by nature would be real property," citing Standard Oil Company of New York
vs. Jaramillo (44 Phil. 632).
4. ID.; ID.; ID.; CASE AT BAR. — In the contract now before Us, the
house on rented land is not only expressly designated as Chattel Mortgage; it
specifically provides that "the mortgagor. . . voluntarily CEDES, SELLS and
TRANSFERS by way of Chattel Mortgage the property together with its
leasehold rights over the lot on which it is constructed and participation . . ."
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. Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as lessee, and although
this can not in itself alone determine the status of the property, it does so
when combined with other factors to sustain the interpretation that the parties,
particularly the mortgagors, intended to treat the house as personality.
5. ID.; ID.; PARTIES ESTOPPED TO ASSAIL VALIDITY THEREOF. — It is
the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of
 estoppel therefore applies to the herein defendants-appellants, having treated
the subject house as personality.
6. ID.; ID.; MORTGAGE; FORECLOSURE; MORTGAGOR MAY BE ALLOWED
POSSESSION DURING THE ONE-YEAR PERIOD OF REDEMPTION. — Section 6
of the Act referred to (Act No. 3135) provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and
after the date of the auction sale, redeem the property sold at the extra
judicial foreclosure sale. Section 7 of the same Act allows the purchaser of the
property to obtain from the court the possession during the period of
redemption: but the same provision expressly requires the filing of a petition
with the proper Court of First Instance and the furnishing of a bond. It is only
upon filing of the proper motion and the approval of the corresponding bond
that the order for a writ of possession issues as a matter of
course. No discretion is left to the court. In the absence of such a compliance,
as in the instant case, the purchaser can not claim possession during the
period of redemption as a matter of right.
7. ID.; ID.; ID.; ID.; PURCHASER RECEIVING RENTALS DURING
REDEMPTION PERIOD IS ACCOUNTABLE TO MORTGAGOR; RATIONALE. — "In
other words, before the expiration of the 1-year period within which the
judgment-debtor or mortgagor may redeem the property, the purchaser
thereof is not entitled, as a matter of right, to possession of the same. Thus,
while it is true that the Rules of Court allow the purchaser to receive the
rentals if the purchased property is occupied by tenants, he is, nevertheless,
accountable to the judgment-debtor or mortgagor as the case may be, for the
amount so received and the same will be duly credited against the redemption
price when the said debtor or mortgagor effects the redemption. Differently
stated, the rentals receivable from tenants, although they may be collected by
the purchaser during the redemption period, do not belong to the latter but
still pertain to the debtor or mortgagor. The rationale for the Rule, it seems, is
to secure for the benefit of the debtor or mortgagor, the payment of the
redemption amount and the consequent return to him of his properties sold at
public auction." (Italics supplied)

DECISION

REYES, J.B.L., J  p:

Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-

R) for the reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the
municipal court of Manila in Civil Case No. 43073, for ejectment. Having lost
therein, defendants-appellants appealed to the court a quo(Civil Case No.
30993) which also rendered a decision against them, the dispositive portion of
which follows:
"WHEREFORE, the court hereby renders judgment in favor of
the plaintiffs and against the defendants, ordering the latter to pay
jointly and severally the former a monthly rent of P200.00 on the
house, subject-matter of this action, from March 27, 1956, to
January 14, 1967, with interest at the legal rate from April 18, 1956,
the filing of the complaint, until fully paid, plus attorney's fees in the
sum of P300.00 and to pay the costs."
 It appears on the records that on 1 September 1955 defendants-
appellants executed a chattel mortgage 1 in favor of plaintiffs-appellees over
their house of strong materials located at No. 550 Int. 3, Quezon Boulevard,
Quiapo, Manila, over Lot No. 6-B and 7-B, Block No. 2554, which were being
rented from Madrigal & Company, Inc. The mortgage was registered in the
Registry of Deeds of Manila on 2 September 1955. The herein mortgage was
executed to guarantee a loan of P4,800.00 received from plaintiffs-appellees,
payable within one year at 12% per annum. The mode of payment was
P150.00 monthly, starting September, 1955, up to July 1956, and the lump
sum of P3,150 was payable on or before August, 1956. It was also agreed that
default in the payment of any of the amortizations would cause the remaining
unpaid balance to become immediately due and payable and —
"the Chattel Mortgage will be enforceable in accordance with the
provisions of Special Act No. 3135, and for this purpose, the Sheriff
of the City of Manila or any of his deputies is hereby empowered and
authorized to sell all the Mortgagor's property after the necessary
publication in order to settle the financial debts of P4,500.00, plus
12% yearly interest, and attorney's fees. . ." 2
When defendants-appellants defaulted in paying, the mortgage was
extrajudicially foreclosed, and on 27 March 1956, the house was sold at public
auction pursuant to the said contract. As highest bidder, plaintiffs-appellees
were issued the corresponding certificate of sale. 3 Thereafter, on 18 April
1956, plaintiffs-appellees commenced Civil Case No. 43073 in the municipal
court of Manila, praying, among other things, that the house be vacated and
its possession surrendered to them, and for defendants-appellants to pay rent
of P200.00 monthly from 27 March 1956 up to the time the possession is
surrendered. 4 On 21 September 1956, the municipal court rendered its
decision —
". . . ordering the defendants to vacate the premises described
in the complaint; ordering further to pay monthly the amount of
P200.00 from March 27, 1956, until such (time that) the premises is
(sic) completely vacated; plus attorney's fees of P100.00 and the
costs of the suit." 5
Defendants-appellants, in their answers in both the municipal court and
court a quo impugned the legality of the chattel mortgage, claiming that they
are still the owners of the house; but they waived the right to introduce
evidence, oral or documentary. Instead, they relied on their memoranda in
support of their motion to dismiss, predicated mainly on the grounds that: (a)
the municipal court did not have jurisdiction to try and decide the case because
(1) the issue involved is ownership, and (2) there was no allegation of prior
possession; and (b) failure to prove prior demand pursuant to Section 2, Rule
72, of the Rules of Courts. 6
During the pendency of the appeal to the Court of First Instance,
defendants-appellants failed to deposit the rent for November, 1956 within the
first 10 days of December, 1956 as ordered in the decision of the municipal
court. As a result, the court granted plaintiffs-appellees' motion for execution,
and it was actually issued on 24 January 1957. However, the judgment
regarding the surrender of possession to plaintiffs-appellees could not be
executed because the subject house had been already demolished on 14
January 1957 pursuant to the order of the court in a separate civil case (No.
25816) for ejectment against the present defendants for non-payment of
rentals on the land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the
supersedeas bond and withdrawal of deposited rentals was denied for the
reason that the liability therefor was disclaimed and was still being litigated,
and under Section 8, Rule 72, rentals deposited had to be held until final
disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its
decision, the dispositive portion of which is quoted earlier. The said decision
was appealed by defendants to the Court of Appeals which, in turn, certified
the appeal to this Court. Plaintiffs-appellees failed to file a brief and this appeal
was submitted for decision without it.
Defendants-appellants submitted numerous assignments of error which
can be condensed into two questions, namely:
(a) Whether the municipal court from which the case originated had
jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay
rentals to the plaintiffs during the period of one (1) year provided by law for
the redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the
municipal court from which the case originated, and consequently, the
appellate jurisdiction of the Court of First Instance a quo, on the theory that
the chattel mortgage is void ab initio; whence it would follow that the
extrajudicial foreclosure, and necessarily the consequent auction sale, are also
void. Thus, the ownership of the house still remained with defendants-
appellants who are entitled to possession and not plaintiffs-appellees.
Therefore, it is argued by defendants-appellants, the issue of ownership will
have to be adjudicated first in order to determine possession. It is contended
further that ownership being in issue, it is the Court of First Instance which has
jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel
mortgage on two grounds, which are: (a) that their signatures on the chattel
mortgage were obtained through fraud, deceit, or trickery; and (b) that the
subject matter of the mortgage is a house of strong materials, and, being an
immovable, it can only be the subject of a real estate mortgage and not a
chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance
found defendants-appellants' contentions as not supported by evidence and
accordingly dismissed the charge, 8 confirming the earlier finding of the
municipal court that "the defense of ownership as well as the allegations of
fraud and deceit . . . are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the
answer is a mere statement of the facts which the party filing it expects to
prove, but it is not evidence; 11 and further, that when the question to be
determined is one of title, the Court is given the authority to proceed with the
hearing of the cause until this fact is clearly established. In the case of Sy vs.
Dalman, 12 wherein the defendant was also a successful bidder in an auction
sale, it was likewise held by this Court that in detainer cases the claim of
ownership "is a matter of defense and raises an issue of fact which should be
determined from the evidence at the trial." What determines jurisdiction are
the allegations or averments in the complaint and the relief asked for. 13
Moreover, even granting that the charge is true, fraud or deceit does not
render a contract void ab initio, and can only be a ground for rendering the
contract voidable or annullable pursuant to Article 1390 of the New Civil Code,
by a proper action in court. 14 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. Hence, defendants-appellants' claim of ownership on the
basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there
was no fraud, deceit or trickery, the chattel mortgage was still null and void ab
initio because only personal properties can be subject of a chattel mortgage.
The rule about the status of buildings as immovable property is stated in Lopez
vs. Orosa, Jr. and Plaza Theatre, Inc., 15 cited in Associated Insurance Surety
Co., Inc. vs. Iya, et al. 16 to the effect that —
". . . it is obvious that the inclusion of the building, separate
and distinct from the land, in the enumeration of what may constitute
real properties (art. 415, New Civil Code) could only mean one thing
— that a building is by itself an immovable property irrespective of
whether or not said structure and the land on which it is adhered to
belong to the same owner."
Certain deviations, however, have been allowed for various reasons. In
the case of Manarang and Manarang vs. Ofilada, 17 is Court stated that "it is
undeniable that the parties to a contract may by agreement treat as personal
property that which by ,nature would be real property", citing Standard Oil
Company of New York vs. Jaramillo. 18 In the latter case, the mortgagor
conveyed and transferred to the mortgagee by way of mortgage "the following
described personal property." 19 The "personal property" consisted of
leasehold rights and a building. Again, in the case of Luna vs.
Encarnacion, 20 the subject of the contract designated as Chattel Mortgage
was a house of mixed materials, and this Court held therein that it was a valid
Chattel mortgage because it was so expressly designated and specifically that
the property given as security "is a house of mixed materials, which by its very
nature is considered personal property." In the later case of Navarro vs.
Pineda, 21 this Court stated that —
"The view that parties to a deed of chattel mortgage may agree
to consider a house as personal property for the purposes of said
contract, 'is good only insofar as the contracting parties are
concerned. It is based, partly, upon the principle of estoppel'
(Evangelista vs. Alto Surety, No. L-11139, 23 April 1958). In a case,
a mortgaged house built on a rented land was held to be a personal
property, not only because the deed of mortgage considered it as
such, but also because it did not form part of the land (Evangelista
vs. Abad, [CA]; 36 O.G. 2913), for it is now settled that an object
placed on land by one who had only a temporary right to the same,
such as the lessee or usufructuary, does not become immobilized by
attachment (Valdez vs. Central Altagracia, 222 U.S. 58, cited in
Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if a
house belonging to a person stands on a rented land belonging to
another person, it may be mortgaged as a personal property as so
stipulated in the document of mortgage. (Evangelista vs.
Abad, supra.) It should be noted, however that the principle is
predicated on statements by the owner declaring his house to be a
chattel, a conduct that may conceivably estop him from subsequently
claiming otherwise." (Ladera vs. C.N. Hodges, [CA] 48 O.G.
5374). 22
In the contract now before Us, the house on rented land is not only
expressly designated as Chattel Mortgage; it specifically provides that "the
mortgagor . . . voluntarily CEDES, SELLS and TRANSFERS by way of Chattel
Mortgage 23 the property together with its leasehold rights over the lot on
which it is constructed and participation . . ." 24 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. Moreover, the subject
house stood on a rented lot to which defendants-appellants merely had a
temporary right as lessee, and although this can not in itself alone determine
the status of the property, it does so when combined with other factors to
sustain the interpretation that the parties, particularly the mortgagors,
intended to treat the house as personality. Finally, unlike in the Iya cases,
Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L. Strong
Machinery and Williamson, 26 wherein third persons assailed the validity of the
chattel mortgage, 27 it is the defendants-appellants themselves, as debtors-
mortgagors, who are attacking the validity of the chattel mortgage in this case.
The doctrine of estoppel therefore applies to the herein defendants-appellants,
having treated the subject house as personalty.
(b) Turning now to the question of possession and rentals of the premises
in question. The Court of First Instance noted in its decision that nearly a year
after the foreclosure sale the mortgaged house had been demolished on 14
and 15 January 1957 by virtue of a decision obtained by the lessor of the land
on which the house stood. For this reason, the said court limited itself to
sentencing the erstwhile mortgagors to pay plaintiffs a monthly rent of
P200.00 from 27 March 1956 (when the chattel mortgage was foreclosed and
the house sold) until 14 January 1957 (when it was torn down by the Sheriff),
plus P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were
entitled to remain in possession without any obligation to pay rent during the
one year redemption period after the foreclosure sale, i.e., until 27 March
1957. On this issue, We must rule for the appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage
Law, Act No. 1508. 28 Section 14 of this Act allows the mortgagee to have the
property mortgaged sold at public auction through a public officer in almost the
same manner as that allowed by Act No. 3135, as amended by Act No. 4118,
provided that the requirements of the law relative to notice and registration
are complied with. 29 In the instant case, the parties specifically stipulated
that "the chattel mortgage will be enforceable in accordance with the
provisions of Special Act  No. 3135 . . ." 30 (Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor
(defendants-appellants herein) may, at any time within one year from and
after the date of the auction sale, redeem the property sold at the extra
judicial foreclosure sale. Section 7 of the same Act 32 allows the purchaser of
the property to obtain from the court the possession during the period of
redemption: but the same provision expressly requires the filing of a petition
with the proper Court of First Instance and the furnishing of a bond. It is only
upon filing of the proper motion and the approval of the corresponding bond
that the order for a writ of possession issues as a matter of
course. No discretion is left to the court. 33 In the absence of such a
compliance, as in the instant case, the purchaser can not claim possession
during the period of redemption as a matter of right. In such a case, the
governing provision is Section 34, Rule 39, of the Revised Rules of
Court 34 which also applies to properties purchased in extrajudicial foreclosure
proceedings. 35 Construing the said section, this Court stated in the
aforestated case of Reyes vs. Hamada,
 "In other words, before the expiration of the 1-year period
within which the judgment-debtor or mortgagor may redeem the
property, the purchaser thereof is not entitled, as a matter of right,
to possession of the same. Thus, while it is true that the Rules of
Court allow the purchaser to receive the rentals if the purchased
property is occupied by tenants, he is, nevertheless, accountable to
the judgment-debtor or mortgagor as the case may be, for the
amount so received and the same will be duly credited against the
redemption price when the said debtor or mortgagor effects the
redemption. Differently stated, the rentals receivable from tenants,
although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to the
debtor of mortgagor. The rationale for the Rule, it seems, is to secure
for the benefit of the debtor or mortgagor, the payment of the
redemption amount and the consequent return to him of his
properties sold at public auction." (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of
the auction sale, they are entitled to remain in possession during the period of
redemption or within one year from and after 27 March 1956, the date of the
auction sale, and to collect the rents or profits during the said period.
It will be noted further that in the case at bar the period of redemption
had not yet expired when action was instituted in the court of origin, and that
plaintiffs-appellees did not choose to take possession under Section 7, Act No.
3135, as amended, which is the law selected by the parties to govern the
extrajudicial foreclosure of the chattel mortgage. Neither was there an
allegation to that effect. Since plaintiffs-appellees' right to possess was not yet
born at the filing of the complaint, there could be no violation or breach
thereof. Wherefore, the original complaint stated no cause of action and was
prematurely filed. For this reason, the same should be ordered dismissed, even
if there was no assignment of error to that effect. The Supreme Court is
clothed with ample authority to review palpable errors not assigned as such if
it finds that their consideration is necessary in arriving at a just decision of the
case. 37
It follows that the court below erred in requiring the mortgagors to pay
rents for the year following the foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed
and another one entered, dismissing the complaint. With costs against
plaintiffs-appellees.
|||  (Tumalad v. Vicencio, G.R. No. L-30173, [September 30, 1971], 148-
B PHIL 625-638)
 [G.R. No. L-46245. May 31, 1982.]

MERALCO SECURITIES INDUSTRIAL

CORPORATION, petitioner, vs. CENTRAL BOARD OF
ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF
LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.

Camilo D. Quiason for petitioner.

Francisco A. Donato  for respondents.

SYNOPSIS

Petitioner, pursuant to a pipeline concession, installed a pipeline system

from Batangas to Manila consisting of cylindrical steel pipes joined together
and buried not less than one meter below the surface along the shoulder of the
public highway. The pipes are embedded in the soil and are firmly and solidly
welded together. However, segments of the pipeline can be moved from one
place to another. The provincial assessor of Laguna treated the pipeline as
machinery or improvements under the Assessment Law, and issued
corresponding tax declarations containing the assessed values of portions of
the pipeline. The Board of Assessment Appeals of Laguna and the Central
Board of Assessment Appeals affirmed the ruling of the provincial assessor.
Petitioner filed a motion for reconsideration but the same was denied. Hence,
this petition.
The Supreme Court held that the pipeline system, a construction
adhering to the soil, is real property under Article 415(1) and (3) of the Civil
Code and a machinery within the meaning of the Assessment Law and the Real
Property Tax Code insofar as the pipeline uses valve, pumps and control
devices to maintain the flow of oil and therefore subject to realty tax. LibLex
Petition dismissed. Questioned decision and resolution affirmed.

SYLLABUS

1. REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; POWER TO

REVIEW DEClSION OF A BOARD OR OFFICER EXERCISING JUDICIAL OR
QUASI-JUDICIAL FUNCTIONS. — Certiorari was properly assailed in this case.
It is a writ issued by a superior court to an inferior court, board or officer
exercising judicial or quasi-judicial functions whereby the record of a particular
case ordered to be elevated for review and correction in matters of law (14
C.J.S. 121.122; 14 Am Jur. 2nd 777). The rule is that as to administrative
agencies exercising quasi-judicial power there is an underlying power in the
courts to scrutinize the acts of such agencies on questions of law and
jurisdiction even though no right of review is given by the statute. (73 C.J.S.
506, note 56).
2. ID.; ID.; ID.; PURPOSE OF JUDICIAL REVIEW. — The purpose of
judicial review is to keep the administrative agency within its jurisdiction and
protect substantial rights of parties affected by its decisions (73 C.J.S. 507,
Sec. 165). The review is part of the system of checks and balances which is a
limitation on the separation of powers and which for stalls arbitrary and unjust
adjudications.
3. ADMINISTRATIVE LAW; TAXATION; REALTY TAX; PROPERTIES
SUBJECT THERETO. — Section 2 of the Assessment Law provides that the
realty tax is due "on real property, including land, buildings, machinery and
other improvements" not specifically exempted in Section 3 thereof. This
provision is reproduced with some modification in Section 38 of the Real
Property Tax Code which provides; "There shall be levied, assessed and
collected in all provinces, cities and municipalities an annual ad valorem tax on
real property such as land, buildings. machinery and other improvements
affixed or attached to real property not hereinafter specifically exempted."
4. CIVIL LAW; PROPERTY; CLASSIFICATION; PIPELINE SYSTEM IS REAL
PROPERTY. — Article 415(1) and (3) provides that real property may consist of
constructions of all kinds adhered to the soil and everything attached to an
immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object. The
pipeline in question is indubitably a construction adhering to the soil. It is
attached to the land in such a way that it cannot be separated therefrom
without dismantling the steel pipes which were welded to form the pipeline.
5. ADMINISTRATIVE LAW; TAXATION; REALTY TAX; PROPERTIES
SUBJECT THERETO; PIPELINE SYSTEM HELD SUBJECT TO REALTY TAX IN CASE
AT BAR. — Pipeline mean sa line of pipe connected to pumps, valves and
control devices conveying liquids, gases or finely divided solids. It is a line of
the pipe running upon or in the earth, carrying with it the right to the use of
the soil in which it is placed (Note 21(10), 54 C.J.S. 561). Insofar as the
pipeline uses valves, pumps and control devices to maintain the flow of oil, it is
in a sense machinery within the meaning of the Real Property Tax Code. It is
incontestable that the pipeline of Meralco Securities does not fall within any of
the classes of exempt real property enumerated in Section 3 of
the Assessment Law and Section 40 of the Real Property Tax Code. A pipe-line
for conveying petroleum has been regarded as real property for tax purposes.
6. ID.; ID.; ID.; A TAX OF GENERAL APPLICATION; MERALCO
SECURITIES AS CONCESSIONAIRE UNDER THE PETROLEUM ACT IS NOT
EXEMPT FROM PAYMENT THEREOF. — Under Article 102 of thepetroleum Act,
Meralco Securities, as concessionaire thereunder, is exempt from payment of
local taxes or levies but not of such taxes as are of general application. It is,
however, untenable for Meralco Securities to argue that it is exempt from
payment of realty tax on the ground that said tax is a local tax or levy,
because the realty tax has always been imposed by the lawmaking body and
later by the President of the Philippines in the exercise of his lawmaking
powers, as shown in Sections 342 et seq. of the Revised Administrative
Code, Act No. 3995, Commonwealth Act No. 470 and Presidential Decree No.
464. The realty tax is enforced throughout the Philippines and not merely in a
particular municipality or city but the proceeds of the tax accrue to the
province, city, municipality and barrio where the realty taxed is situated (Sec.
186,P.D. No. 464). In contrast, a local tax is imposed by the municipal or city
council by virtue of the Local Tax Code, Presidential Decree No. 231, which
took effect on July 1, 1973 (69 O.G. 6197). cda

DECISION

AQUINO, J p:

In this special civil action of certiorari, Meralco Securities Industrial

Corporation assails the decision of the Central Board of Assessment Appeals
(composed of the Secretary of Finance as chairman and the Secretaries of
Justice and Local Government and Community Development as members)
dated May 6, 1976, holding that Meralco Securities' oil pipeline is subject to
realty tax.
The record reveals that pursuant to a pipeline concession issued under
the Petroleum Act of 1949, Republic Act No. 387, Meralco Securities installed
from Batangas to Manila a pipeline system consisting of cylindrical steel pipes
joined together and buried not less than one meter below the surface along the
shoulder of the public highway. The portion passing through Laguna is about
thirty kilometers long.
The pipes for white oil products measure fourteen inches in diameter by
thirty-six feet with a maximum capacity of 75,000 barrels daily. The pipes for
fuel and black oil measure sixteen inches by forty-eight feet with a maximum
capacity of 100,000 barrels daily.
The pipes are embedded in the soil and are firmly and solidly welded
together so as to preclude breakage or damage thereto and prevent leakage or
seepage of the oil. The valves are welded to the pipes so as to make the
pipeline system one single piece of property from end to end. cdasia
In order to repair, replace, remove or transfer segments of the pipeline,
the pipes have to be cold-cut by means of a rotary hard-metal pipe-cutter after
digging or excavating them out of the ground where they are buried. In points
where the pipeline traversed rivers or creeks, the pipes were laid beneath the
bed thereof. Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be
moved from one place to another as shown in the permit issued by the
Secretary of Public Works and Communications which permit provides that the
government reserves the right to require the removal or transfer of the pipes
by and at the concessionaire's expense should they be affected by any road
repair or improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the
provincial assessor of Laguna treated the pipeline as real property and issued
Tax Declarations Nos. 6535-6537, San Pedro; 7473-7478, Cabuyao; 7967-
7971, Sta. Rosa; 9882-9885, Biñan and 15806-15810, Calamba, containing
the assessed values of portions of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment
Appeals of Laguna composed of the register of deeds as chairman and the
provincial auditor as member. That board in its decision of June 18, 1975
upheld the assessments (pp. 47-49, Rollo).
 Meralco Securities brought the case to the Central Board of Assessment
Appeals. As already stated, that Board, composed of Acting Secretary of
Finance Pedro M. Almanzor as chairman and Secretary of Justice Vicente Abad
Santos and Secretary of Local Government and Community Development Jose
Roño as members, ruled that the pipeline is subject to realty tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on
August 27, 1976. Section 36 of the Real Property Tax Code, Presidential
Decree No. 464, which took effect on June 1, 1974, provides that the Board's
decision becomes final and executory after the lapse of fifteen days from the
date of receipt of a copy of the decision by the appellant.
Under Rule III of the amended rules of procedure of the Central Board of
Assessment Appeals (70 O.G. 10085), a party may ask for the reconsideration
of the Board's decision within fifteen days after receipt. On September 7, 1976
(the eleventh day), Meralco Securities filed its motion for reconsideration.
Secretary of Finance Cesar Virata and Secretary Roño (Secretary Abad
Santos abstained) denied the motion in a resolution dated December 2, 1976,
a copy of which was received by appellant's counsel on May 24, 1977 (p. 4,
Rollo). On June 6, 1977, Meralco Securities filed the instant petition for
certiorari.
The Solicitor General contends that certiorari is not proper in this case
because the Board acted within its jurisdiction and did not gravely abuse its
discretion and Meralco Securities was not denied due process of law.
Meralco Securities explains that because the Court of Tax Appeals
has no jurisdiction to review the decision of the Central Board of Assessment
Appeals and because no judicial review of the Board's decision is provided for
in the Real Property Tax Code, Meralco Securities' recourse is to file a petition
for certiorari.
We hold that certiorari was properly availed of in this case. It is a writ
issued by a superior court to an inferior court, board or officer exercising
judicial or quasi-judicial functions whereby the record of a particular case is
ordered to be elevated for review and correction in matters of law (14 C.J.S.
121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial
power there is an underlying power in the courts to scrutinize the acts of such
agencies on questions of law and jurisdiction even thoughno right of review is
given by the statute (73 C.J.S. 506, note 56). LibLex
"The purpose of judicial review is to keep the administrative agency
within its jurisdiction and protect substantial rights of parties affected by its
decisions" (73 C.J.S. 507, Sec. 165). The review is a part of the system of
checks and balances which is a limitation on the separation of powers and
which forestalls arbitrary and unjust adjudications.
Judicial review of the decision of an official or administrative agency
exercising quasi-judicial functions is proper in cases of lack of jurisdiction,
error of law, grave abuse of discretion, fraud or collusion or in case the
administrative decision is corrupt, arbitrary or capricious (Mafinco Trading
Corporation vs. Ople, L-37790, March 25, 1976, 70 SCRA 139, 158; San
Miguel Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA
56, 60; Mun. Council of Lemery vs. Prov. Board of Batangas, 56 Phil. 260,
268).
The Central Board of Assessment Appeals, in confirming the ruling of the
provincial assessor and the provincial board of assessment appeals that
Meralco Securities' pipeline is subject to realty tax, reasoned out that the pipes
are machinery or improvements, as contemplated in the Assessment Law and
the Real Property Tax Code; that they do not fall within the category of
property exempt from realty tax under those laws; that articles 415 and 416 of
the Civil Code, defining real and personal property, have no application to this
case; that even under article 415, the steel pipes can be regarded as realty
because they are constructions adhered to the soil and things attached to the
land in a fixed manner and that Meralco Securities is not exempt from realty
tax under the Petroleum Law (pp. 36-40). cdphil
Meralco Securities insists that its pipeline is not subject to realty tax
because it is not real property within the meaning of article 415. This
contention is not sustainable under the provisions of theAssessment Law,
the Real Property Tax Code and the Civil Code.
Section 2 of the Assessment Law provides that the realty tax is due "on
real property, including land, buildings, machinery, and other improvements"
not specifically exempted in section 3 thereof. This provision is reproduced
with some modification in the Real Property Tax Code which provides:
"SEC. 38. Incidence of Real Property Tax. — There shall be
levied, assessed and collected in all provinces, cities and
municipalities an annual ad valorem tax on real property, such as
land, buildings, machinery and other improvements affixed or
attached to real property not hereinafter specifically exempted." *
It is incontestable that the pipeline of Meralco Securities does not fall
within any of the classes of exempt real property enumerated in section 3 of
the Assessment Law and section 40 of the Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control
devices for conveying liquids, gases or finely divided solids. It is a line of pipe
running upon or in the earth, carrying with it the right to the use of the soil in
which it is placed (Note 21[10], 54 C.J.S. 561).
Article 415[1] and [3] provides that real property may consist
of constructions of all kinds adhered to the soil and everything attached to an
immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object.
The pipeline system in question is indubitably a construction adhering to
the soil (Exh. B, p. 39, Rollo). It is attached to the land in such a way that it
cannot be separated therefrom without dismantling the steel pipes which were
welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to
maintain the flow of oil, it is in a sense machinery within the meaning of
the Real Property Tax Code.
It should be borne in mind that what are being characterized as real
property are not the steel pipes but the pipeline system as a whole. Meralco
Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real property
for tax purposes (Miller County Highway, etc., Dist. vs. Standard Pipe Line Co.,
19 Fed. 2nd 3; Board of Directors of Red River Levee Dist. No. 1 of Lafayette
County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note 86).
The other contention of Meralco Securities i8 that the Petroleum Law
exempts it from the payment of realty taxes. The alleged exemption is
predicated on the following provisions of that law which exempt Meralco
Securities from local taxes and make it liable for taxes of general application:
 "ART. 102. Work obligations, taxes, royalties not to be charged.
— Work obligations, special taxes and royalties which are fixed by the
provisions of this Act or by the concession for any of the kinds of
concessions to which this Act relates, are considered as inherent on
such concessions after they are granted, and shall not be increased
or decreased during the life of the concession to which they apply;
nor shall any other special taxes or levies be applied to such
concessions, nor shall concessionaires under this Act be subject to
any provincial, municipal or other local taxes or levies; nor shall any
sales tax be charged on any petroleum produced from the concession
or portion thereof, manufactured by the concessionaire and used in
the working of his concession. All such concessionaires, however,
shall be subject to such taxes as are of general application, in
addition to taxes and other levies specifically provided in this Act."
Meralco Securities argues that the realty tax is a local tax or levy and not
a tax of general application. This argument is untenable because the realty tax
has always been imposed by the lawmaking body and later by the President of
the Philippines in the exercise of his lawmaking powers, as shown in section
342 et seq. of the Revised Administrative Code, Act No. 3995, Commonwealth
Act No. 470 and Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely in a
particular municipality or city but the proceeds of the tax accrue to the
province, city, municipality and barrio where the realty taxed is situated (Sec.
86, P.D. No. 464). In contrast, a local tax is imposed by the municipal or city
council by virtue of the Local Tax Code, Presidential Decree No. 231, which
took effect on July 1, 1973 (69 O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act with
grave abuse of discretion, did not commit any error of law and acted within its
jurisdiction in sustaining the holding of the provincial assessor and the local
board of assessment appeals that Meralco Securities' pipeline system in
Laguna is subject to realty tax. LibLex
WHEREFORE, the questioned decision and resolution are affirmed. The
petition is dismissed. No costs.
SO ORDERED.
|||  (Meralco Securities Industrial Corp. v. Central Brd. of Assessment
Appeals, G.R. No. L-46245, [May 31, 1982], 199 PHIL 453-462)
 [G.R. No. 41643. July 31, 1935.]

B. H. BERKENKOTTER, plaintiff-appellant, vs. CU UNJIENG E
HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE
COMPANY, MABALACAT SUGAR COMPANY and THE
PROVINCIAL SHERIFF OF PAMPANGA,  defendants-appellees.

Briones & Martinez for appellant.

Araneta, Zaragoza & Araneta for appellees Cu Unjieng e Hijos.
No appearance for the other appellees.

SYLLABUS

1. MORTGAGE; IMPROVEMENT ON THE MORTGAGED PROPERTY,

INCLUDED IN THE MORTGAGE. — The installation of a machinery and
equipment in a mortgaged sugar central, in lieu of another of less capacity, for
the purpose of carrying out the industrial functions of the latter and increasing
production, constitutes a permanent improvement on said sugar central and
subjects said machinery and equipment to the mortgage constituted thereon.
(Article 1877, Civil Code.)
2. ID.; ID.; PERMANENT CHARACTER OF THE IMPROVEMENT. — The fact
that the purchaser of the new machinery and equipment has bound himself to
the person supplying him the purchase money to hold them as security for the
payment of the latter's credit, and to refrain from mortgaging or otherwise
encumbering them does not alter the permanent character of the incorporation
of said machinery and equipment with the central.
3. ID.; ID.; OWNERSHIP OF THE IMPROVEMENT. — The sale of the
machinery and equipment in question by the purchaser who was supplied the
money, after the incorporation thereof with the mortgaged sugar central, does
not vest the creditor with ownership of said machinery and equipment but
simply with the right of redemption.

DECISION

VILLA-REAL,  J p:

This is an appeal taken by the plaintiff, B. H. Berkenkotter, from the

judgment of the Court of First Instance of Manila, dismissing said plaintiff's
complaint against Cu Unjieng e Hijos et al., with costs.
In support of his appeal, the appellant assigns six alleged errors as
committed by the trial court in its decision in question, which will be discussed
in the course of this decision.
The first question to be decided in this appeal, which is raised in the first
assignment of alleged error, is whether or not the lower court erred in
declaring that the additional machinery and equipment as improvement
incorporated with the central are subject to the mortgage deed executed in
favor of the defendants Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar
Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga,
obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first
mortgage constituted on two parcels of land "with all its buildings,
improvements, sugar-cane mill, steel railway, telephone line, apparatus,
utensils and whatever forms part or is a necessary complement of said sugar-
cane mill, steel railway, telephone line, now existing or that may in the future
exist in said lots."
On October 5, 1926, shortly after said mortgage had been constituted,
the Mabalacat Sugar Co., Inc., decided to increase the capacity of its sugar
central by buying additional machinery and equipment, so that instead of
milling 150 tons daily, it could produce 250. The estimated cost of said
additional machinery and equipment, so that instead of milling 150 tons daily,
it could produce 250. The estimated cost of said additional machinery and
equipment was approximately P100,000. In order to carry out this plan, B. A.
Green, president of said corporation, proposed to the plaintiff, B. H.
Berkenkotter, to advance the necessary amount for the purchase of said
machinery and equipment, promising to reimburse him as soon as he could
obtain an additional loan from the mortgagees, the herein defendants Cu
Unjieng e Hijos. Having agreed to said proposition made in a letter dated
October 5, 1926 (Exhibit E), B. H. Berkenkotter, on October 9th of the same
year, delivered the sum of P1,710 to B. A. Green, president of the Mabalacat
Sugar Co., Inc., the total amount supplied by him to said B. A. Green having
been P25,750. Furthermore, B. H. Berkenkotter had a credit of P22,000
against said corporation for unpaid salary. With the loan of P25,750 and said
credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional
machinery and equipment now in litigation.
On June 10, 1927, B. A. Green, president of the Mabalacat Sugar Co.,
Inc., applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as
security the additional machinery and equipment acquired by said B. A. Green
and installed in the sugar central after the execution of the original mortgage
deed, on April 27, 1927, together with whatever additional equipment acquired
with said loan. B. A. Green failed to obtain said loan.
Article 1877 of the Civil Code provides as follows.
 "ART. 1877. A mortgage includes all natural accessions,
improvements, growing fruits, and rents not collected when the
obligation falls due, and the amount of any indemnities paid or due
the owner by the insurers of the mortgaged property or by virtue of
the exercise of the power of eminent domain, with the declarations,
amplifications, and limitations established by law, whether the state
continues in the possession of the person who mortgaged it or
whether it passes into the hands of a third person."
In the case of Bischoff vs. Pomar and Compañia General de Tabacos (12
Phil., 690), cited with approval in the case of Cea vs. Villanueva (18 Phil.,
538), this court laid down the following doctrine:
"1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES
IMPROVEMENTS AND FIXTURES. — It is a rule, established by the
Civil Code and also by the Mortgage Law, with which the decisions of
the courts of the United States are in accord, that in a mortgage of
real estate, the improvements on the same are included; therefore,
all objects permanently attached to a mortgaged building or land,
although they may have been placed there after the mortgage was
constituted, are also included. (Arts. 110 and 111 of the Mortgage
Law, and 1877 of the Civil Code; decision of U.S. Supreme Court in
the matter of Royal Insurance Co. vs. R. Miller, liquidator, and
Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)
"2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC.
— In order that it may be understood that the machinery and other
objects placed upon and used in connection with a mortgaged estate
are excluded from the mortgage, when it was stated in the mortgage
that the improvements, buildings, and machinery that existed
thereon were also comprehended, it is indispensable that the
exclusion thereof be stipulated between the contracting parties."
The appellant contends that the installation of the machinery and
equipment claimed by him in the sugar central of the Mabalacat Sugar
Company, Inc., was not permanent in character inasmuch as B. A. Green, in
proposing to him to advance the money for the purchase thereof, made it
appear in the letter, Exhibit E, that in case B. A. Green should fail to obtain an
additional loan from the defendants Cu Unjieng e Hijos, said machinery and
equipment would become security therefor, said B. A. Green binding himself
not to mortgage nor encumber them to anybody until said plaintiff be fully
reimbursed for the corporation's indebtedness to him.
Upon acquiring the machinery and equipment in question with money
obtained as loan from the plaintiff-appellant by B. A. Green, as president of the
Mabalacat Sugar Co., Inc., the latter became owner of said machinery and
equipment, otherwise B. A. Green, as such president, could not have offered
them to the plaintiff as security for the payment of his credit.
Article 334, paragraph 5, of the Civil Code gives the character of real
property to "machinery, liquid containers, instruments or implements intended
by the owner of any building or land for use in connection with any industry or
trade being carried on therein and which are expressly adapted to meet the
requirements of such trade or industry."
If the installation of the machinery and equipment in question in the
central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity
existing therein, for its sugar industry, converted them into real property by
reason of their purpose, it cannot be said that their incorporation therewith
was not permanent in character because, as essential and principal elements
of a sugar central, without them the sugar central would be unable to function
or carry on the industrial purpose for which it was established. Inasmuch as
the central is permanent in character, the necessary machinery and equipment
installed for carrying on the sugar industry for which it has been established
must necessary be permanent.
Furthermore, the fact that B. A. Green bound himself to the plaintiff B. H.
Berkenkotter to hold said machinery and equipment as security for the
payment of the latter's credit and to refrain from mortgaging or otherwise
encumbering them until Berkenkotter has been fully reimbursed therefor, is
not incompatible with the permanent character of the incorporation of said
machinery and equipment with the sugar central of the Mabalacat Sugar Co.,
Inc., as nothing could prevent B. A. Green from giving them as security at
least under a second mortgage.
As to the alleged sale of said machinery and equipment to the plaintiff
and appellant after they had been permanently incorporated with the sugar
central of the Mabalacat Sugar Co., Inc., and while the mortgage constituted
on said sugar central to Cu Unjieng e Hijos remained in force, only the right of
redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with
which said machinery and equipment had been incorporated, was transferred
thereby, subject to the right of the defendants Cu Unjieng e Hijos under the
first mortgage.
For the foregoing considerations, we are of the opinion and so hold: (1)
That the installation of a machinery and equipment in a mortgaged sugar
central, in lieu of another of less capacity, for the purpose of carrying out the
industrial functions of the latter and increasing production, constitutes a
permanent improvement on said sugar central and subjects said machinery
and equipment to the mortgage constituted thereon (article 1877, Civil Code);
(2) that the fact that the purchaser of the new machinery and equipment has
bound himself to the person supplying him the purchase money to hold them
as security for the payment of the latter's credit, and to refrain from
mortgaging or otherwise encumbering them does not alter the permanent
character of the incorporation of said machinery and equipment with the
central; and (3) that the sale of the machinery and equipment in question by
the purchaser who was supplied the money, after the incorporation thereof
with the mortgaged sugar central, does not vest the creditor with ownership of
said machinery and equipment but simply with the right of redemption.
Wherefore, finding no error in the appealed judgment, it is affirmed in all
its parts, with costs to the appellant. So ordered.
|||  (Berkenkotter v. Cu Unjieng e Hijos, G.R. No. 41643, [July 31, 1935],
61 PHIL 663-669)
 [G.R. No. 40411. August 7, 1935.]

DAVAO SAW MILL CO., INC.,  plaintiff-appellant, vs. APRONIANO

G. CASTILLO and DAVAO LIGHT & POWER CO.,
INC., defendants-appellees.

Arsenio, Suazo & Jose L. Palma Gil  and  Pablo Lorenzo & Delfin Joven  for
appellant.
J. W. Ferrier for appellees.

SYLLABUS

1. PROPERTY; MACHINERY AS PERSONAL PROPERTY; CIVIL CODE,

ARTICLE 334, PARAGRAPHS 1 and 5, CONSTRUED. — A lessee placed
machinery in a building erected on land belonging to another, with the
understanding that the machinery was not included in the improvements which
would pass to the lessor on the expiration or abandonment of the land leased.
The lessee also treated the machinery as personal property by executing
chattel mortgages in favor of third persons. The machinery was levied upon by
the sheriff as personalty pursuant to a writ of execution obtained without any
protest being registered. Held: That the machinery must be classified as
personal property.
2. ID.; ID.; ID. — 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.

DECISION

MALCOLM,  J p:
 The issue in this case, as announced in the opening sentence of the
decision in the trial court and as set forth by counsel for the parties on appeal,
involves the determination of the nature of the properties described in the
complaint. The trial judge found that those properties were personal in nature,
and as a consequence absolved the defendants from the complaint, with costs
against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from
the Government of the Philippine Islands. It has operated a sawmill in
the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao.
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 party of
the first part without any obligation on its part to pay any amount for
said improvements and buildings; also, in the event the party of the
second part should leave or abandon the land leased before the time
herein stipulated, the improvements and buildings shall likewise pass
to the ownership of the party of the first part as though the time
agreed upon had expired: Provided, however, That the machineries
and accessories are not included in the improvements which will pass
to the party of the first part on the expiration or abandonment of the
land leased."
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 in that
action; 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. Indeed the bidder, which was the plaintiff in that
action, and the defendant herein having consummated the sale, proceeded to
take possession of the machinery and other properties described in the
corresponding certificates of sale executed in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the
Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery
as personal property by executing chattel mortgages in favor of third persons.
One of such persons is the appellee by assignment from the original
mortgagees.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According
to the Code, real property consists of —
"1. Land, buildings, roads and constructions of all kinds
adhering to the soil;
xxx xxx xxx
"5. Machinery, liquid containers, instruments or implements
intended by the owner of any building or land for use in connection
with any industry or trade being carried on therein and which are
expressly adapted to meet the requirements of such trade or
industry."
 Appellant emphasizes the first paragraph, and appellees the last
mentioned paragraph. We entertain no doubt that the trial judge and the
appellees are right in their appreciation of the legal doctrines flowing from the
facts.
In the first place, it must again be pointed out that the appellant should
have registered its protest before or at the time of the sale of this property. It
must further be pointed out that while not conclusive, the characterization of
the property as chattels by the appellant is indicative of intention and
impresses upon the property the character determined by the parties. In this
connection the decision of this court in the case of Standard Oil Co. of New
York vs. Jaramillo ([1923], 44 Phil., 630), whether obiter dicta or not,
furnishes the key to such a situation.
It is, however, not necessary to spend overly much time in the resolution
of this appeal on side issues. It is machinery which is involved; moreover,
machinery not intended by the owner of any building or land for use in
connection therewith, but intended by a lessee for use in a building erected on
the land by the latter to be returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal being taken to the
United States Supreme Court, it was held that 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. In the opinion written by Chief Justice White, whose
knowledge of the Civil Law is well known, it was in part said:
"To determine this question involves fixing the nature and
character of the property from the point of view of the rights of
Valdes and its nature and character from the point of view of Nevers
& Callaghan as a judgment creditor of the Altagracia Company and
the rights derived by them from the execution levied on the
machinery placed by the corporation in the plant. Following the Code
Napoleon, the Porto Rican Code treats as immovable (real) property,
not only land and buildings, but also attributes immovability in some
cases to property of a movable nature, that is, personal property,
because of the destination to which it is applied. 'Things,' says
section 334 of the Porto Rican Code, 'may be immovable either by
their own nature or by their destination or the object to which they
are applicable.' Numerous illustrations are given in the fifth
subdivision of section 335, which is as follows: 'Machinery, vessels,
instruments or implements intended by the owner of the tenements
for the industry or works that they may carry on in any building or
upon any land and which tend directly to meet the needs of the said
industry or works.' (See also Code Nap., articles 516, 518 et seq. to
and inclusive of article 534, recapitulating the things which, though in
themselves movable, may be immobilized.) So far as the subject-
matter with which we are dealing — machinery placed in the plant —
it is plain, both under the provisions of the Porto Rican Law and of
the Code Napoleon, that machinery which is movable in its nature
only becomes immobilized when placed in a plant by the owner of the
property or plant. Such result would not be accomplished, therefore,
by the placing of machinery in a plant by a tenant or a usufructuary
or any person having only a temporary right. (Demolombe, Tit.
9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit.
5, No. 447; and decisions quoted in Fuzier-Herman ed. Code
Napoleon under articles 522 et seq.) The distinction rests, as pointed
 out by Demolombe, upon the fact that one only having a temporary
right to the possession or enjoyment of property is not presumed by
the law to have applied movable property belonging to him so as to
deprive him of it by causing it by an act of immobilization to become
the property of another. It follows that abstractly speaking the
machinery put by the Altagracia Company in the plant belonging to
Sanchez did not lose its character of movable property and become
immovable by destination. But in the concrete immobilization took
place because of the express provisions of the lease under which the
Altagracia held, since the lease in substance required the putting in
of improved machinery, deprived the tenant of any right to charge
against the lessor the cost of such machinery, and it was expressly
stipulated that the machinery so put in should become a part of the
plant belonging to the owner without compensation to the lessee.
Under such conditions the tenant in putting in the machinery was
acting but as the agent of the owner in compliance with the
obligations resting upon him, and the immobilization of the
machinery which resulted arose in legal effect from the act of the
owner in giving by contract a permanent destination to the
machinery.
xxx xxx xxx
"The machinery levied upon by Nevers & Callaghan, that is, that
which was placed in the plant by the Altagracia Company, being, as
regards Nevers & Callaghan, movable property, it follows that they
had the right to levy on it under the execution upon the judgment in
their favor, and the exercise of that right did not in a legal sense
conflict with the claim of Valdes, since as to him the property was a
part of the realty which, as the result of his obligations under the
lease, he could not, for the purpose of collecting his debt, proceed
separately against." (Valdes vs. Central Altagracia [1912], 225 U. S.,
58.)
Finding no reversible error in the record, the judgment appealed from will
be affirmed, the costs of this instance to be paid by the appellant.
|||  (Davao Saw Mill Co., Inc. v. Castillo, G.R. No. 40411, [August 7,
1935], 61 PHIL 709-714)
 [G.R. No. 183416. October 5, 2016.]

PROVINCIAL ASSESSOR OF AGUSAN DEL

SUR,  petitioner, vs. FILIPINAS PALM OIL PLANTATION,
INC., respondent.

DECISION

LEONEN, J  p:
The exemption from real property taxes given to cooperatives applies
regardless of whether or not the land owned is leased. This exemption benefits
the cooperative's lessee. The characterization of machinery as real property is
governed by the Local Government Code and not the Civil Code.
This Petition 1 for review assails the Decision 2 dated September 26,
2007 and the Resolution 3 dated May 26, 2008 of the Court of Appeals in CA-
G.R. SP No. 74060. The Court of Appeals affirmed the Decision of the Central
Board of Assessment Appeals (CBAA) exempting Filipinas Palm Oil Plantation,
Inc. from payment of real property taxes. 4
Filipinas Palm Oil Plantation, Inc. (Filipinas) is a private organization
engaged in palm oil plantation 5 with a total land area of more than 7,000
hectares of National Development Company (NDC) lands in Agusan del
Sur. 6 Harvested fruits from oil palm trees are converted into oil through
Filipinas' milling plant in the middle of the plantation area. 7 Within the
plantation, there are also three (3) plantation roads and a number of
residential homes constructed by Filipinas for its employees. 8
 After the Comprehensive Agrarian Reform Law 9 was passed, NDC lands
were transferred to Comprehensive Agrarian Reform Law beneficiaries who
formed themselves as the merged NDC-Guthrie Plantations, Inc. — NDC-
Guthrie Estates, Inc. (NGPI-NGEI) Cooperatives. 10 Filipinas entered into a
lease contract agreement with NGPI-NGEI. 11
The Provincial Assessor of Agusan del Sur (Provincial Assessor) is a
government agency in charge with the assessment of lands under the public
domain. 12 It assessed Filipinas' properties found within the plantation
area, 13 which Filipinas assailed before the Local Board of Assessment Appeals
(LBAA) on the following grounds:
(1.) The [petitioner] Provincial Assessors of Agusan del Sur
ERRED in finding that the Market Value of a single fruit bearing oil
palm tree is P207.00 when it should only be P42.00 pesos per tree;
(2.) The [petitioner] ERRED in finding that the total number of
standing and fruit bearing oil palm tree is P110 [sic] trees per
hectare when it should be only 92 trees;
(3.) The [petitioner] ERRED in finding that the Market Value[s]
of the plantation roads are:
A.) P270,000.00 per kilometer for primary roads
B.) P135,000.00 for secondary roads
C.) P67,567.00 for tertiary roads constructed by
the company.
It should only be:
A.) P105,000.00 for primary roads
B.) P52,300.00 for secondary roads
C.) P26,250.00 for tertiary roads
Likewise, bridges, culverts, canals and pipes should not be
assessed separately from plantation roads, the same being
components of the roads thereof; SaCIDT
(4.)  The [petitioner] ERRED in imposing real property taxes
against the petitioner for roads, bridges, culverts, pipes and canals
as these belonged to the cooperatives;
([5].) The [petitioner] ERRED in finding that the Market Value
of NDC service area is P11,000.00 per hectare when it should only
be P6,000.00 per hectare;
([6].) The [petitioner] ERRED in imposing realty taxes on
Residential areas built by [respondent] except for three of them;
([7].)  The [petitioner] ERRED when it included haulers and
other equipments [sic] which are unmovable as taxable real
properties. 14 (Emphasis supplied)
In its Decision 15 dated June 8, 1999, the LBAA found that the P207.00
market value declared in the assessment by the Provincial Assessor was
unreasonable. 16 It found that the market value should not have been more
than P85.00 per oil palm tree. 17 The sudden increase of realty tax
assessment level from P42.00 for each oil palm tree in 1993 to P207.00 was
confiscatory. 18
The LBAA adopted Filipinas' claim that the basis for assessment should
only be 98 trees. 19 Although one (1) hectare of land can accommodate 124
oil palm trees, the mountainous terrain of the plantation should be
considered. 20 Because of the terrain, not every meter of land can be fully
planted with trees. 21 The LBAA found that roads of any kind, as well as all
their improvements, should not be taxed since these roads were intermittently
used by the public. 22 It resolved that the market valuation should be based
on the laws of the Department of Agrarian Reform since the area is owned by
the NDC, a quasi-governmental body of the Philippines. 23
The LBAA exempted the low-cost housing units from taxation except
those with a market value of more than P150,000.00 under the Local
Government Code. 24 Finally, the LBAA considered the road equipment and
mini haulers as movables that are vital to Filipinas' business. 25
Filipinas appealed before the CBAA on July 16, 1999. 26 On November
21, 2001, the CBAA rendered a decision, the dispositive portion of which
reads:
WHEREFORE, this Board has decided to set aside, as it does
hereby set aside, the decision rendered by the Local Board of
Assessment Appeals of the Province of Agusan del Sur on June 8,
1999 in an unnumbered case entitled "[F]ilipinas Palm Oil Co., Inc.
Petitioner, versus the Provincial Assessors Office of Agusan del Sur,
Respondent" and hereby orders as follows: cHECAS
A. The market value for each oil palm tree should be FIFTY-
SEVEN & 55/100 PESOS (57.55), effective January 1, 1991. The
assessment for each municipality shall be based on the
corresponding number of trees as listed in Petitioner-Appellee's
"Hectarage Statement" discussed hereinabove;
B.Petitioner-Appellee should not be made to pay for the real
property taxes due on the roads starting from January 1, 1991;
C.  Petitioner-Appellee is not liable to the Government for real
property taxes on the lands owned by the Multi-purpose
Cooperative;
D. The housing units with a market value of P175,000.00 or
less each shall be subjected to 0% assessment level, starting 1994;
E.Road Equipment and haulers are not real properties and,
accordingly, Petitioner-Appellee is not liable for real property tax
thereon;
F. Any real property taxes already paid by Petitioner-Appellee
which, by virtue of this decision, were not due, shall be applied to
future taxes rightfully due from Petitioner-Appellee.
SO ORDERED. 27 (Emphasis supplied)
The CBAA denied the Motion for Reconsideration filed by the Provincial
Assessor. 28 The Provincial Assessor filed a Petition for Review before the
Court of Appeals, which, in turn, sustained the CBAA's Decision. 29
The Court of Appeals held that the land owned by NGPI-NGEI, which
Filipinas has been leasing, cannot be subjected to real property tax since these
are owned by cooperatives that are tax-exempt. 30 Section 133 (n) of the
Local Government Code provides:
SECTION 133.Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:
xxx xxx xxx
 (n) Taxes, fees, or charges, on Countryside and Barangay
Business Enterprises and  cooperatives duly registered
under R.A.  No. 6810 and Republic Act Numbered Sixty-
nine hundred thirty-eight (R.A. No. 6938) otherwise
known as the "Cooperative Code of the Philippines."
(Emphasis supplied)
Section 234 (d) of the Local Government Code exempts duly registered
cooperatives, like NGPI-NGEI, from payment of real property taxes:
SECTION 234.Exemptions from Real Property Tax. — The following
are exempted from payment of the real property tax:
xxx xxx xxx
(d) All real property owned by duly registered cooperatives as
provided for under  R.A.  No. 6938[.] (Emphasis supplied)
The Court of Appeals held that the pertinent provisions "neither
distinguishes nor specifies" that the exemption only applies to real properties
used by the cooperatives. 31 It ruled that "[t]he clear absence of any
restriction or limitation in the provision could only mean that the exemption
applies to wherever the properties are situated and to whoever uses
them." 32 Therefore, the exemption privilege extends to Filipinas as the
cooperatives' lessee. 33 AHDacC
On the roads constructed by Filipinas, the Court of Appeals held that
although it is undisputed that the roads were built primarily for Filipinas'
benefit, the roads should be tax-exempt since these roads were also being
used by the cooperatives and the public. 34 It applied, by analogy,  Bislig Bay
Lumber Company, Inc. v. Provincial Government of Surigao: 35
We are inclined to uphold the theory of appellee. In the first
place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right
accession not only because it is inherently incorporated or attached
to the timber land leased to appellee but also because upon the
expiration of the concession, said road would ultimately pass to the
national government. In the second place, while the road was
constructed by appellee primarily for its use and benefit, the
privilege is not exclusive, for, under the lease contract entered into
by the appellee and the government and by public in by the
general. Thus, under said lease contract, appellee cannot prevent
the use of portions, of the concession for homesteading purposes. It
is also in duty bound to allow the free use of forest products within
the concession for the personal use of individuals residing in or
within the vicinity of the land. . . . In other words, the government
has practically reserved the rights to use the road to promote its
varied activities. Since, as above shown, the road in question
cannot be considered as an improvement which belongs to appellee,
although in part is for its benefit, it is clear that the same cannot be
the subject of assessment within the meaning of section 2 of
Commonwealth Act No. 470. 36 (Citations omitted)
Furthermore, the Court of Appeals agreed with the CBAA that the roads
constructed by Filipinas had become permanent improvements on the land
owned by NGPI-NGEI. 37 Articles 440 and 445 of the Civil Code provide that
these improvements redound to the benefit of the land owner under the right
of accession: 38
 Article 440. The ownership of property gives the right by accession
to everything which is produced thereby, or which is incorporated or
attached thereto, either naturally or artificially.
xxx xxx xxx
Article 445. Whatever is built, planted or sown on the land of
another and the improvements or repairs made thereon, belong to
the owner of the land, subject to the provisions of the following
articles.
On the road equipment and mini haulers as real properties subject to tax,
the Court of Appeals affirmed the CBAA's Decision that these are only
movables. 39 Section 199 (o) of the Local Government Codeprovides a
definition of machinery subject to real property taxation:
SECTION 199.Definition of Terms. — When used in this Title, the
term:
xxx xxx xxx
(o) "Machinery" embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus which
may or may not be attached, permanently or temporarily,
to the real property. It includes the physical facilities for
production, the installations and appurtenant service
facilities, those which are mobile, self-powered or self-
propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used
to meet the needs of the particular industry, business or
activity and which by their very nature and purpose are
designed for, or necessary to its manufacturing,
mining. IDSEAH
The Court of Appeals held that Section 199 (o) of the Local Government
Code should be construed to include machineries covered by the meaning of
real properties provided for under Article 415 (5) of theCivil Code: 40
Article 415. The following are immovable property:
xxx xxx xxx
(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[.]
The Court of Appeals cited Davao Sawmill Company v. Castillo, 41 where
it has been held that machinery that is movable by nature becomes
immobilized only when placed by the owner of the tenement, but not so when
placed by a tenant or any other person having a temporary right unless this
person acts as an agent of the owner. 42 Thus, the mini haulers and other
road equipment retain their nature as movables.43
The Provincial Assessor filed before this Court a Petition for Review
raising the following issues:
First, whether the exemption privilege of NGPI-NGEI from payment of
real property tax extends to respondent Filipinas Palm Oil Plantation, Inc. as
lessee of the parcel of land owned by cooperatives; and
Second, whether respondent's road equipment and mini haulers are
movable properties and have not been immobilized by destination for real
property taxation.
 Petitioner argues that based on Mactan Cebu International Airport
Authority v. Ferdinand J. Marcos, 44 cooperatives cannot extend its exemption
from real property tax to taxable persons. 45 It argues that Sections 198, 199,
205, and 217 of the Local Government Code provide that real property taxes
are assessed based on actual use. 46 Moreover, the exemption of cooperatives
applies only when it is the cooperative that actually, directly, and exclusively
uses and possesses the properties. 47 Sections 198, 199, 205, and 217 of the
Local Government Code provide:
SECTION 198.Fundamental Principles. — The appraisal, assessment,
levy and collection of real property tax shall be guided by the
following fundamental principles:
xxx xxx xxx
(b)  Real property shall be classified for assessment purposes on
the basis of its actual use[.]
xxx xxx xxx
SECTION 199.Definition of Terms. — When used in this Title, the
term:
xxx xxx xxx
(b) "Actual Use" refers to the purpose for which the property is
principally or predominantly utilized by the person in
possession thereof[.]
xxx xxx xxx
SECTION 205.Listing of Real Property in the Assessment Rolls. —
xxx xxx xxx
(d) Real property owned by the Republic of the Philippines, its
instrumentalities and political subdivisions,  the beneficial
use of which has been granted, for consideration or
otherwise, to a taxable person, shall be listed, valued and
assessed in the name of the possessor, grantee or of the
public entity if such property has been acquired or held for
resale or lease.
xxx xxx xxx
SECTION 217. Actual Use of Real Property as Basis for
Assessment. — Real property shall be classified, valued and
assessed on the basis of its actual use regardless of where located,
whoever owns it, and whoever uses it. (Emphasis supplied)
Petitioner claims that Section 199 (o) of the Local Government
Code specifically covers respondent's road equipment and mini haulers since
these are directly and exclusively used to meet the needs of respondent's
industry, business, or activity. 48 Article 415 (5) of the Civil Code, which
defines real property, should not be made to control the Local Government
Code, 49 a subsequent legislation that specifically defines "machinery" for
taxation purposes. 50
In the Resolution 51 dated October 13, 2008, this Court denied the
Petition for Review due to procedural missteps, which included the failure to
attach legible duplicate original or certified true copies of the assailed decision
and failure to pay proper fees. On November 25, 2008, petitioner moved for
reconsideration, 52 praying for the reversal of the Petition's denial due to mere
technicalities.
 On January 26, 2009, this Court granted Petitioner's Motion for
Reconsideration. 53 It directed the reinstatement of the Petition and required
respondent to comment. 54
On November 20, 2009, respondent filed its Comment. 55 AHCETa
Respondent reiterates the rulings of the CBAA and the Court of Appeals
that the exemption of cooperatives from real property taxes extends to it as
the lessee. 56 It asserts that under its lease agreement with NGPI-NGEI, it
pays an Annual Fixed Rental, which includes the payment of taxes. 57 It
claims that in case NGPI-NGEI is liable to the local government for real
property tax on the land, the tax should be taken from the Annual Fixed
Rental. 58 To make respondent pay real property taxes on the leased land
would be equivalent to assessing it twice for the same property. 59
On the road equipment and mini haulers being subjected to real property
taxation, respondent maintains that it should be spared from real property tax
since the equipment and mini haulers are movables. 60
The Petition is granted to modify the Court of Appeals Decision, but only
with respect to the nature of respondent's road equipment and mini haulers.
I
Under Section 133 (n) of the Local Government Code, the taxing power
of local government units shall not extend to the levy of taxes, fees, or charges
on duly registered cooperatives under the Cooperative Code. 61 Section 234
(d) of the Local Government Code specifically provides for real property tax
exemption to cooperatives:
SECTION 234.Exemptions from Real Property Tax. — The following
are exempted from payment of the real property tax:
xxx xxx xxx
(d) All real property owned by duly registered cooperatives as
provided for under [Republic Act] No. 6938[.] (Emphasis
supplied)
NGPI-NGEI, as the owner of the land being leased by respondent, falls
within the purview of the law. Section 234 of the Local Government
Code exempts all real property owned by cooperatives without distinction.
Nothing in the law suggests that the real property tax exemption only applies
when the property is used by the cooperative itself. Similarly, the instance that
the real property is leased to either an individual or corporation is not a ground
for withdrawal of tax exemption. 62
In arguing the first issue, petitioner hinges its claim on a misplaced
reliance in  Mactan, which refers to the revocation of tax exemption due to the
effectivity of the Local Government Code. However, Mactandoes not refer to
the tax exemption extended to cooperatives. The portion that petitioner cited
specifically mentions that the exemption granted to cooperatives has not been
withdrawn by the effectivity of the Local Government Code:
[S]ection 232 must be deemed to qualify Section 133.
Thus, reading together Sections 133, 232, and 234 of the
L[ocal] G[overnment] C[ode], we conclude that as a general rule,
as laid down in Section 133, the taxing powers of local government
units cannot extend to the levy of, inter alia, "taxes, fees and
charges of any kind on the National Government, its agencies and
instrumentalities, and local government units"; however, pursuant
to Section 232, provinces, cities, and municipalities in the
Metropolitan Manila Area may impose the real property tax except
 on, inter alia, "real property owned by the Republic of the
Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or
otherwise, to a taxable person," as provided in item (a) of the first
paragraph of Section 234.
As to tax exemptions or incentives granted to or presently
enjoyed by natural or juridical persons, including government-
owned and controlled corporations, Section 193 of the L[ocal]
G[overnment] C[ode] prescribes the general rule,  viz., they
are  withdrawn upon the effectivity of the L[ocal] G[overnment]
C[ode], except those granted to local water districts, cooperatives
duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, and unless otherwise
provided in the L[ocal] G[overnment] C[ode]. The latter proviso
could refer to Section 234 which enumerates the properties exempt
from real property tax. But the last paragraph of Section 234
further qualifies the retention of the exemption insofar as real
property taxes are concerned by limiting the retention only to those
enumerated therein; all others not included in the enumeration lost
the privilege upon the effectivity of the L[ocal] G[overnment]
C[ode]. Moreover, even as to real property owned by the Republic
of the Philippines or any of its political subdivisions covered by item
(a) of the first paragraph of Section 234, the exemption is
withdrawn if the beneficial use of such property has been granted to
a taxable person for consideration or otherwise. ScHADI
Since the last paragraph of Section 234 unequivocally
withdrew, upon the effectivity of the L[ocal] G[overnment] C[ode],
exemptions from payment of real property taxes granted to natural
or juridical persons, including government-owned or controlled
corporations, except as provided in the said section, and the
petitioner is, undoubtedly, a government-owned corporation,  it
necessarily follows that its exemption from such tax granted it in
Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any
claim to the contrary can only be justified if the petitioner can seek
refuge under any of the exceptions provided in Section 234, but not
under Section 133, as it now asserts, since, as shown above, the
said section is qualified by Sections 232 and 234.
In short, the petitioner can no longer invoke the general rule
in Section 133 that the taxing powers of the local government units
cannot extend to the levy of:
(o) taxes, fees or charges of any kind on the National
Government, its agencies or instrumentalities, and local
government units.
It must show that the parcels of land in question, which are
real property, are any one of those enumerated in Section 234,
either by virtue of ownership, character, or use of the
property. 63 (Emphasis supplied)
The roads that respondent constructed within the leased area should not
be assessed with real property taxes. Bislig Bay  finds application here. Bislig
Bay Lumber Company, Inc. (Bislig Bay) was a timber concessionaire of a
portion of public forest in the provinces of Agusan and Surigao. 64 To aid in
developing its concession, Bislig Bay built a road at its expense from a barrio
leading towards its area. 65 The Provincial Assessor of Surigao assessed Bislig
Bay with real property tax on the constructed road, which was paid by the
company under protest. 66 It claimed that even if the road was constructed on
public land, it should be subjected to real property tax because it was built by
the company for its own benefit. 67 On the other hand, Bislig Bay asserted
that the road should be exempted from real property tax because it belonged
to national government by right of accession. 68 Moreover, the road
constructed already became an inseparable part of the land. 69 The records
also showed that the road was not only built for the benefit of Bislig Bay, but
also of the public. 70 This Court ruled for Bislig Bay, thus:
We are inclined to uphold the theory of appellee. In the first
place, it cannot be disputed that the ownership of the road that was
constructed by appellee belongs to the government by right
accession not only because it is inherently incorporated or attached
to the timber land leased to appellee but also because upon the
expiration of the concession, said road would ultimately pass to the
national government. . . . In the second place, while the road was
constructed by appellee primarily for its use and benefit, the
privilege is not exclusive, for, under the lease contract entered into
by the appellee and the government and by public in by the
general. Thus, under said lease contract, appellee cannot prevent
the use of portions, of the concession for homesteading
purposes. . . . It is also in duty bound to allow the free use of forest
products within the concession for the personal use of individuals
residing in or within the vicinity of the land. . . . In other words, the
government has practically reserved the rights to use the road to
promote its varied activities. Since, as above shown, the road in
question cannot be considered as an improvement which belongs to
appellee, although in part is for its benefit, it is clear that the same
cannot be the subject of assessment within the meaning of section
2 of Commonwealth Act No. 470. 71
This was reiterated in  Board of Assessment Appeals of Zamboanga del
Sur v. Samar Mining Company, Inc.  72 Samar Mining Company, Inc. (Samar
Mining) was a domestic corporation engaged in the mining industry. 73 Since
Samar Mining's mining site and mill were in an inland location entailing long
distance from its area to the loading point, Samar Mining was constrained to
construct a road for its convenience. 74Initially, Samar Mining filed
miscellaneous lease applications for a road right of way covering lands under
the jurisdiction of the Bureau of Lands and the Bureau of Forestry where the
proposed road would pass through. 75 Samar Mining was given a "temporary
permit to occupy and use the lands applied for by it"; 76 hence, it was able to
build what was eventually known as the Samico Road. Samar Mining was
assessed by the Provincial Assessor of Zamboanga del Sur with real property
taxes on the road, which prompted it to appeal before the Board of
Assessment Appeals. 77 Invoking  Bislig Bay, Samar Mining claimed that it
should not be assessed with real property tax since the road was constructed
on public land. 78 This Court ruled for Samar Mining, thus: aICcHA
There is no question that the road constructed by respondent
Samar on the public lands leased to it by the government is an
improvement. But as to whether the same is taxable under the
aforequoted provision of the Assessment Law, this question has
already been answered in the negative by this Court. In the case
of Bislig Bay Lumber Co., Inc. vs. Provincial Government of Surigao,
where a similar issue was raised. . . .
xxx xxx xxx
 . . . What is emphasized in the Bislig case is that the
improvement is exempt from taxation because it is an integral part
of the public land on which it is constructed and the improvement is
the property of the government by right of accession. Under Section
3(a) of the Assessment Law, all properties owned by the
government, without any distinction, are exempt from
taxation. 79 (Emphasis supplied, citations omitted)
The roads that respondent constructed became permanent improvements
on the land owned by the NGPI-NGEI by right of accession under the Civil
Code, thus:
Article 440. The ownership of property gives the right by accession
to everything which is produced thereby, or which is  incorporated
or attached thereto, either naturally or artificially.
xxx xxx xxx
Article 445. Whatever is built, planted or sown on the land of
another and the  improvements or repairs made thereon, belong to
the owner of the land[.]
Despite the land being leased by respondent when the roads were
constructed, the ownership of the improvement still belongs to NGPI-NGEI. As
provided under Article 440 and 445 of the Civil Code, the land is owned by the
cooperatives at the time respondent built the roads. Hence, whatever is
incorporated in the land, either naturally or artificially, belongs to the NGPI-
NGEI as the landowner.
Although the roads were primarily built for respondent's benefit, the
roads were also being used by the members of NGPI and the
public. 80 Furthermore, the roads inured to the benefit of NGPI-NGEI as
owners of the land not only by right of accession but through the express
provision in the lease agreement:
On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as
Lessor, and NDC-Guthrie Plantations, Inc., as Lessee, entered into a
"Lease Agreement" . . . covering the agricultural lands transferred
by NDC to the DAR, which lands the DAR ultimately distributed
undivided to qualified workers-beneficiaries. . . .
Clause No. 6.3 of the same lease agreement provides that "All
taxes due on the improvements on the Leased Property except
those improvements on the Area that the LESSOR shall have
utilized under Clause 1.2 hereof, shall be for the account of the
LESSEE."
Clause No. 9.4 of the same lease agreement provides that
". . . All fixed and permanent improvements, such as roads and
palm trees introduced on the Leased Property, shall automatically
accrue to the LESSOR upon termination of this Lease Agreement
without need of reimbursement."
All the above-cited stipulations in the lease agreement
between NGPI Multi-Purpose Cooperative and NDC-Guthrie
Plantations, Inc.  were reconfirmed and reaffirmed in the Addendum
to Lease Agreement entered into by and between NGPI Multi-
Purpose Cooperative and Filipinas Palmoil Plantations, Inc. on
January 30, 1998. . . . The main subject of the said Addendum was
the extension of the term of the lease agreement up to December
31, 2032, along with economic benefits to the lessor other than
rentals. EHaASD
 There is  no dispute that the roads are on the land owned by
NGPI Multi-Purpose Cooperative which leased the same to
Petitioner-Appellee. These roads belong to the Multi-Purpose
Cooperative, not only by right of accession but also by express
provisions of the Contract of Lease[.] 81 (Emphasis supplied)
Respondent claims that under its lease agreement with NGPI-NGEI, it
pays an Annual Fixed Rental, which includes the payment of taxes. 82 If NGPI-
NGEI were liable to the local government for real property tax on the land, the
tax should be taken from the Annual Fixed Rental:
"2.1. In consideration of this Lease Agreement, the LESSEE shall
pay the LESSOR the following annual rentals:
"1) An annual fixed rental, in the following amount — "SIX
HUNDRED THIRTY FIVE PESOS" (P635.00) PER HECTARE
PER ANNUM  which would cover the following:
 "(1)  All Taxes on the Land
 "(2) Administration Charges
 "(3) Amortization charges
 "It is understood that, if the annual fixed rental of "SIX
HUNDRED THIRTY FIVE PESOS" (P635.00) is insufficient to
pay any increase on the land taxes, the Lessee shall pay
the difference, provided such increase does not exceed ten
percent (10%) of the immediately preceding tax imposed
on the land; provided further, that any increase beyond
these percentage shall be borne equally by the LESSOR
and LESSEE. IDTSEH
 "The foregoing notwithstanding, it is understood and agreed
that at all times,  liability for realty taxes on the Leased
Property Primarily and principally lies with the LESSOR
and any reference herein to payment by LESSEE of said
taxes is only for purposes of earmarking the proceeds of
the rentals herein agreed upon."
Clause No. 6.3 of the same lease agreement provides that "All
taxes due on the improvements on the Leased Property except
those improvements on the Area that the LESSOR shall have
utilized under Clause 1.2 hereof, shall be for the account of the
LESSEE." 83 (Emphasis supplied)
Therefore, NGPI-NGEI, as owner of the roads that permanently became
part of the land being leased by respondent, shall be liable for real property
taxes, if any. However, by express provision of the Local Government Code,
NGPI-NGEI is exempted from payment of real property tax. 84
II
The road equipment and mini haulers shall be considered as real
property, subject to real property tax.
Section 199 (o) of the Local Government Code defines "machinery" as
real property subject to real property tax, 85 thus:
SECTION 199.Definition of Terms. — When used in this Title, the
term:
xxx xxx xxx
(o) "Machinery" embraces machines, equipment, mechanical
contrivances, instruments, appliances or apparatus which
 may or may not be attached, permanently or temporarily,
to the real property. It includes the physical facilities for
production, the installations and appurtenant service
facilities, those which are mobile, self-powered or self-
propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively used
to meet the needs of the particular industry, business or
activity and which by their very nature and purpose are
designed for, or necessary to its manufacturing, mining,
logging, commercial, industrial or agricultural purposes[.]
Article 415 (5) of the New Civil Code defines "machinery" as that which
constitutes an immovable property:
Article 415. The following are immovable property:
xxx xxx xxx
(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[.] (Emphasis supplied)
Petitioner contends that the second sentence of Section 199 (o) includes
the road equipment and mini haulers since these are directly and exclusively
used by respondent to meet the needs of its operations. 86 It further claims
that Article 415 (5) of the New Civil Code should not control the Local
Government Code, a subsequent legislation. 87
On the other hand, respondent claims that the road equipment and mini
haulers are movables by nature. It asserts that although there may be a
difference between the meaning of "machinery" under the Local Government
Code and that of immovable property under Article 415 (5) of the Civil Code,
"the controlling interpretation of Section 199 (o) of [the Local Government
Code] is the interpretation of Article 415 (5) of the Civil Code." 88
In  Manila Electric Company v. City Assessor, 89 a similar issue of which
definition of "machinery" prevails to warrant the assessment of real property
tax on it was raised.
Manila Electric Company (MERALCO) insisted on harmonizing the
provisions of the Civil Code and the Local Government Code and asserted that
"machinery" contemplated under Section 199 (o) of the Local Government
must still be within the contemplation of immovable property under Article 415
of the Civil Code.90 However, this Court ruled that harmonizing such laws
"would necessarily mean imposing additional requirements for classifying
machinery as real property for real property tax purposes not provided for, or
even in direct conflict with, the provisions of the Local Government
Code." 91 Thus:
While the Local Government Code still does not provide for a
specific definition of "real property," Sections 199(o) and 232 of the
said Code, respectively, gives an extensive definition of what
constitutes "machinery" and unequivocally subjects such machinery
to real property tax. The Court reiterates that the machinery subject
to real property tax under the Local Government Code "may or may
not be attached, permanently or temporarily to the real property";
and the physical facilities for production, installations, and
appurtenant service facilities, those which are mobile, self-powered
or self-propelled, or are not permanently attached must (a) be
actually, directly, and exclusively used to meet the needs of the
 particular industry, business, or activity; and (b) by their very
nature and purpose, be designed for, or necessary for
manufacturing, mining, logging, commercial, industrial, or
agricultural purposes.
xxx xxx xxx
Article 415, paragraph (5) of the Civil Code considers as
immovables or real properties "[m]achinery, 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." The Civil Code, however, does not define
"machinery."
The properties under Article 415, paragraph (5) of the Civil
Code are immovables by destination, or "those which are essentially
movables, but by the purpose for which they have been placed in an
immovable, partake of the nature of the latter because of the added
utility derived therefrom." These properties, including machinery,
become immobilized if the following requisites concur: (a) they are
placed in the tenement by the owner of such tenement; (b) they
are destined for use in the industry or work in the tenement; and
(c) they tend to directly meet the needs of said industry or works.
The first two requisites are not found anywhere in the Local
Government Code. 92 (Emphasis supplied, citations omitted)
Section 199 (o) of the Local Government prevails over Article 415 (5) of
the Civil Code.In Manila Electric Company: TAacHE
As between the Civil Code, a general law governing property
and property relations, and the Local Government Code, a special
law granting local government units the power to impose real
property tax, then the latter shall prevail. As the Court pronounced
in  Disomangcop v. The Secretary of the Department of Public Works
and Highways Simeon A. Datumanong:
It is a finely-imbedded principle in statutory
construction that a special provision or law prevails over
a general one. Lex specialis derogant generali. As this
Court expressed in the case of  Leveriza v. Intermediate
Appellate Court, "another basic principle of statutory
construction mandates that general legislation must give
way to special legislation on the same subject, and
generally be so interpreted as to embrace only cases in
which the special provisions are not applicable, that
specific statute prevails over a general statute and that
where two statutes are of equal theoretical application to
a particular case, the one designed therefor specially
should prevail."
The Court also very clearly explicated in  Vinzons-Chato v.
Fortune Tobacco Corporation that:
A general law and a special law on the same
subject are statutes in pari materia and should,
accordingly, be  read together and harmonized, if
possible, with a view to giving effect to both. The rule is
that where there are two acts, one of which is special
and particular and the other general which, if standing
alone, would include the same matter and thus conflict
 with the special act, the special law must prevail since it
evinces the legislative intent more clearly than that of a
general statute and must not be taken as intended to
affect the more particular and specific provisions of the
earlier act, unless it is absolutely necessary so to
construe it in order to give its words any meaning at all.
The circumstance that the special law is passed
before or after the general act does not change the
principle. Where the special law is later, it will be
regarded as an exception to, or a qualification of, the
prior general act; and where the general act is later, the
special statute will be construed as remaining an
exception to its terms, unless repealed expressly or by
necessary implication.
Furthermore, in Caltex (Philippines), Inc. v. Central Board of
Assessment Appeals, the Court acknowledged that "[i]t is a familiar
phenomenon to see things classed as real property for purposes of
taxation which on general principle might be considered personal
property[.]"
Therefore, for determining whether machinery is real property
subject to real property tax, the definition and requirements
under the Local Government Code are controlling. 93 (Emphasis
supplied, citations omitted)
Respondent is engaged in palm oil plantation. 94 Thus, it harvests fruits
from palm trees for oil conversion through its milling plant. 95 By the nature of
respondent's business, transportation is indispensable for its operations.
Under the definition provided in Section 199 (o) of the Local Government
Code, the road equipment and the mini haulers are classified as machinery,
thus:
SECTION 199.Definition of Terms. — When used in this Title, the
term:
xxx xxx xxx
(o) "Machinery" . . . includes the  physical facilities for
production, the installations and appurtenant service
facilities,  those which are mobile, self-powered or self-
propelled, and those not permanently attached to the real
property which are actually, directly, and exclusively
used to meet the needs of the particular industry,
business or activity and which by their very nature and
purpose are designed for, or necessary to its
manufacturing, mining, logging, commercial, industrial or
agricultural purposes[.] (Emphasis supplied)
Petitioner is correct in claiming that the phrase pertaining to physical
facilities for production is comprehensive enough to include the road
equipment and mini haulers as actually, directly, and exclusively used by
respondent to meet the needs of its operations in palm oil
production. 96 Moreover, "mini-haulers are farm tractors pulling attached
trailers used in the hauling of seedlings during planting season and in
transferring fresh palm fruits from the farm [or] field to the processing plant
within the plantation area." 97 The indispensability of the road equipment and
mini haulers in transportation makes it actually, directly, and exclusively used
in the operation of respondent's business. HDICSa
 In its Comment, respondent claims that the equipment is no longer vital
to its operation because it is currently employing equipment outside the
company to do the task. 98 However, respondent never raised this contention
before the lower courts. Hence, this is a factual issue of which this Court
cannot take cognizance. This Court is not a trier of facts. 99 Only questions of
law are entertained in a petition for review assailing a Court of Appeals
decision. 100
WHEREFORE, the Petition is PARTLY GRANTED. The Decision of the
Court of Appeals dated September 26, 2007 and the Resolution dated May 26,
2008 in CA-G.R. SP No. 74060 are AFFIRMED with MODIFICATION, in that
the road equipment and the mini haulers should be assessed with real property
taxes.
SO ORDERED. HcDSaT
|||  (Provincial Assessor of Agusan Del Sur v. Filipinas Palm Oil Plantation,
Inc., G.R. No. 183416, [October 5, 2016], 796 PHIL 547-573)

G.R. No. L-11139             April 23, 1958

SANTOS EVANGELISTA, petitioner, 
vs.
ALTO SURETY & INSURANCE CO., INC., respondent.

Gonzalo D. David for petitioner.

Raul A. Aristorenas and Benjamin Relova for respondent.

CONCEPCION, J.:
This is an appeal by certiorari from a decision of the Court of Appeals.

Briefly, the facts are: On June 4, 1949, petitioner herein, Santos Evangelista,
instituted Civil Case No. 8235 of the Court of First, Instance of Manila entitled "
Santos Evangelista vs.  Ricardo Rivera," for a sum of money. On the same date,
he obtained a writ of attachment, which levied upon a house, built by Rivera on a
land situated in Manila and leased to him, by filing copy of said writ and the
corresponding notice of attachment with the Office of the Register of Deeds of
Manila, on June 8, 1949. In due course, judgment was rendered in favor of
Evangelista, who, on October 8, 1951, bought the house at public auction held in
compliance with the writ of execution issued in said case. The corresponding
definite deed of sale was issued to him on October 22, 1952, upon expiration of
the period of redemption. When Evangelista sought to take possession of the
house, Rivera refused to surrender it, upon the ground that he had leased the
property from the Alto Surety & Insurance Co., Inc. — respondent herein — and
that the latter is now the true owner of said property. It appears that on May 10,
1952, a definite deed of sale of the same house had been issued to respondent,
as the highest bidder at an auction sale held, on September 29, 1950, in
compliance with a writ of execution issued in Civil Case No. 6268 of the same
court, entitled "Alto Surety & Insurance Co., Inc. vs. Maximo Quiambao, Rosario
Guevara and Ricardo Rivera," in which judgment, for the sum of money, had been
rendered in favor respondent herein, as plaintiff therein. Hence, on June 13,
1953, Evangelista instituted the present action against respondent and Ricardo
Rivera, for the purpose of establishing his (Evangelista) title over said house,
securing possession thereof, apart from recovering damages.

In its answer, respondent alleged, in substance, that it has a better right to the
house, because the sale made, and the definite deed of sale executed, in its
favor, on September 29, 1950 and May 10, 1952, respectively, precede the sale
to Evangelista (October 8, 1951) and the definite deed of sale in his favor
(October 22, 1952). It, also, made some special defenses which are discussed
hereafter. Rivera, in effect, joined forces with respondent. After due trial, the
Court of First Instance of Manila rendered judgment for Evangelista, sentencing
Rivera and respondent to deliver the house in question to petitioner herein and to
pay him, jointly and severally, forty pesos (P40.00) a month from October, 1952,
until said delivery, plus costs.

On appeal taken by respondent, this decision was reversed by the Court of

Appeals, which absolved said respondent from the complaint, upon the ground
that, although the writ of attachment in favor of Evangelista had been filed with
the Register of Deeds of Manila prior to the sale in favor of respondent,
Evangelista did not acquire thereby a preferential lien, the attachment having
been levied as if the house in question were immovable property, although in the
opinion of the Court of Appeals, it is "ostensibly a personal property." As such,
the Court of Appeals held, "the order of attachment . . . should have been served
in the manner provided in subsection (e) of section 7 of Rule 59," of the Rules of
Court, reading:

The property of the defendant shall be attached by the officer executing the
order in the following manner:

(e) Debts and credits, and other personal property not capable of manual
delivery, by leaving with the person owing such debts, or having in his
possession or under his control, such credits or other personal property, or
with, his agent, a copy of the order, and a notice that the debts owing by
him to the defendant, and the credits and other personal property in his
 possession, or under his control, belonging to the defendant, are attached in
pursuance of such order. (Emphasis ours.)

However, the Court of Appeals seems to have been of the opinion, also, that the
house of Rivera should have been attached in accordance with subsection (c) of
said section 7, as "personal property capable of manual delivery, by taking and
safely keeping in his custody", for it declared that "Evangelists could not have . . .
validly purchased Ricardo Rivera's house from the sheriff as the latter was not in
possession thereof at the time he sold it at a public auction."

Evangelista now seeks a review, by certiorari, of this decision of the Court of

Appeals. In this connection, it is not disputed that although the sale to the
respondent preceded that made to Evangelists, the latter would have a better
right if the writ of attachment, issued in his favor before  the sale to the
respondent, had been properly executed or enforced. This question, in turn,
depends upon whether the house of Ricardo Rivera is real property or not. In the
affirmative case, the applicable provision would be subsection (a) of section 7,
Rule 59 of the Rules of Court, pursuant to which the attachment should be made
"by filing with the registrar of deeds a copy of the order, together with a
description of the property attached, and a notice that it is attached, and by
leaving a copy of such order, description, and notice with the occupant of the
property, if any there be."

Respondent maintains, however, and the Court of Appeals held, that Rivera's
house is personal property, the levy upon which must be made in conformity with
subsections (c) and (e) of said section 7 of Rule 59. Hence, the main issue before
us is whether a house, constructed the lessee of the land on which it is built,
should be dealt with, for purpose, of attachment, as immovable property, or as
personal property.

It is, our considered opinion that said house is not personal property, much less a
debt, credit or other personal property not capable of manual delivery, but
immovable property. As explicitly held, in Laddera vs. Hodges (48 Off. Gaz.,
5374), "a true building (not merely superimposed on the soil) is immovable or
real property, whether it is erected by the owner of the land or by usufructuary
or lessee. This is the doctrine of our Supreme Court in Leung Yee vs. Strong
Machinery Company, 37 Phil., 644. And it is amply supported by the rulings of the
French Court. . . ."

It is true that the parties to a deed of chattel mortgage may agree to consider a
house as personal property for purposes of said contract
(Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard Oil Co. of New
York vs. Jaramillo, 44 Phil., 630; De Jesus vs. Juan Dee Co., Inc., 72 Phil., 464).
However, this view is good only insofar as the contracting parties  are concerned.
It is based, partly, upon the principle of estoppel. Neither this principle, nor said
view, is applicable to strangers to said contract. Much less is it in point where
there has been no contract  whatsoever, with respect to the status of the house
involved, as in the case at bar. Apart from this, in Manarang vs. Ofilada (99 Phil.,
108; 52 Off. Gaz., 3954), we held:

The question now before us, however, is: Does the fact that the parties
entering into a contract regarding a house gave said property the
consideration of personal property in their contract, bind the sheriff in
advertising the property's sale at public auction as personal property? It is
to be remembered that in the case at bar the action was to collect a loan
secured by a chattel mortgage on the house. It is also to be remembered
that in practice it is the judgment creditor who points out to the sheriff the
 properties that the sheriff is to levy upon in execution, and the judgment
creditor in the case at bar is the party in whose favor the owner of the
house had conveyed it by way of chattel mortgage and, therefore, knew its
consideration as personal property.

These considerations notwithstanding, we hold that the rules on execution

do not  allow, and, we should not interpret them in such a way as to allow,
the special consideration that parties to a contract may have desired to
impart to real estate, for example, as personal property, when they are, not
ordinarily so. Sales on execution affect the public and third persons. The
regulation governing sales on execution are for public officials to follow. The
form of proceedings prescribed for each kind of property is suited to its
character, not to the character, which the parties have given to it or desire
to give it. When the rules speak of personal property, property which is
ordinarily so considered is meant; and when real property is spoken of, it
means property which is generally known as real property. The regulations
were never intended to suit the consideration that parties may have
privately given to the property levied upon. Enforcement of regulations
would be difficult were the convenience or agreement of private parties to
determine or govern the nature of the proceedings. We therefore hold
that the mere fact that a house was the subject of the chattel mortgage and
was considered as personal property by the parties does not make said
house personal property for purposes of the notice to be given for its sale of
public auction. This ruling is demanded by the need for a definite, orderly
and well defined regulation for official and public guidance and would
prevent confusion and misunderstanding.

We, therefore, declare that the house of mixed materials levied upon on

execution, although subject of a contract of chattel mortgage between the
owner and a third person, is real property within the purview of Rule 39,
section 16, of the Rules of Court as it has become a permanent fixture of
the land, which, is real property. (42 Am. Jur. 199-200; Leung
Yee vs. Strong Machinery Co., 37 Phil., 644; Republic vs. Ceniza, et al., 90
Phil., 544; Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz. 5374.)"
(Emphasis ours.)

The foregoing considerations apply, with equal force, to the conditions for the
levy of attachment, for it similarly affects the public and third persons.

It is argued, however, that, even if the house in question were immovable

property, its attachment by Evangelista was void or ineffective, because, in the
language of the Court of Appeals, "after presenting a Copy of the order of
attachment in the Office of the Register of Deeds, the person who might then be
in possession of the house, the sheriff took no pains to serve Ricardo Rivera, or
other copies thereof." This finding of the Court of Appeals is neither conclusive
upon us, nor accurate.

The Record on Appeal, annexed to the petition for Certiorari, shows that
petitioner alleged, in paragraph 3 of the complaint, that he acquired the house in
question "as a consequence of the levy of an attachment and execution of the
judgment in Civil Case No. 8235" of the Court of First Instance of Manila. In his
answer (paragraph 2), Ricardo Rivera admitted  said attachment execution of
judgment. He alleged, however, by way a of special defense, that the title of
respondent "is superior to that of plaintiff because it is based on a public
instrument," whereas Evangelista relied upon a "promissory note" which "is only
a private instrument"; that said Public instrument in favor of respondent
"is superior also to the judgment in Civil Case No. 8235"; and that plaintiff's claim
against Rivera amounted only to P866, "which is much below the real value" of
said house, for which reason it would be "grossly unjust to acquire the property
for such an inadequate consideration." Thus, Rivera impliedly admitted that his
house had been attached, that the house had been sold to Evangelista
in accordance with the requisite formalities, and that said attachment was valid,
although allegedly inferior to the rights of respondent, and the consideration for
the sale to Evangelista was claimed to be inadequate.

Respondent, in turn, denied the allegation in said paragraph 3 of the complaint,

but only " for the reasons stated in its special defenses" namely: (1) that by
virtue of the sale at public auction, and the final deed executed by the sheriff in
favor of respondent, the same became the "legitimate owner of the house" in
question; (2) that respondent "is a buyer in good faith and for value"; (3) that
respondent "took possession and control of said house"; (4) that "there was no
valid attachment by the plaintiff and/or the Sheriff of Manila of the property in
question as neither took actual or constructive possession or control of the
property at any time"; and (5) "that the alleged registration of plaintiff's
attachment, certificate of sale and final deed in the Office of Register of Deeds,
Manila, if there was any, is likewise, not valid as there is no registry of
transactions covering houses erected on land belonging to or leased from
another." In this manner, respondent claimed a better right, merely under the
theory that, in case of double sale of immovable property, the purchaser who first
obtains possession in good faith, acquires title, if the sale has not been
"recorded . . . in the Registry of Property" (Art. 1544, Civil Code of the
Philippines), and that the writ of attachment and the notice of attachment in favor
of Evangelista should be considered unregistered, "as there is no registry  of
transactions covering houses erected on land belonging to or leased from
another." In fact, said article 1544 of the Civil Code of the Philippines, governing
double sales, was quoted on page 15 of the brief for respondent in the Court of
Appeals, in support of its fourth assignment of error therein, to the effect that it
"has preference or priority over the sale of the same property" to Evangelista.

In other words, there was no issue on whether copy of the writ and notice of
attachment had been served on Rivera. No evidence whatsoever, to the effect
that Rivera had not been served with copies of said writ and notice, was
introduced in the Court of First Instance. In its brief in the Court of
Appeals, respondent did not aver, or even, intimate, that no such copies were
served by the sheriff upon Rivera. Service thereof on Rivera had been impliedly
admitted by the defendants, in their respective answers, and by their behaviour
throughout the proceedings in the Court of First Instance, and, as regards
respondent, in the Court of Appeals. In fact, petitioner asserts in his brief herein
(p. 26) that copies of said writ and notice were delivered to Rivera,
simultaneously with copies of the complaint, upon service of summons, prior to
the filing of copies of said writ and notice with the register deeds, and the truth of
this assertion has not been directly and positively challenged or denied in the
brief filed before us by respondent herein. The latter did not dare therein to go
beyond making a statement — for the first time in the course of these
proceedings, begun almost five (5) years ago (June 18, 1953) — reproducing
substantially the aforementioned finding of the Court of Appeals and then quoting
the same.

Considering, therefore, that neither the pleadings, nor the briefs in the Court of
Appeals, raised an issue on whether or not copies of the writ of attachment and
notice of attachment had been served upon Rivera; that the defendants had
impliedly admitted-in said pleadings and briefs, as well as by their conduct during
the entire proceedings, prior to the rendition of the decision of the Court of
Appeals — that Rivera had received copies of said documents; and that, for this
reason, evidently, no proof was introduced thereon, we, are of the opinion, and
so hold that the finding of the Court of Appeals to the effect that said copies had
not been served upon Rivera is based upon a misapprehension of the specific
issues involved therein and goes beyond  the range of such issues, apart from
being contrary  to the aforementioned admission by the parties, and that,
accordingly, a grave abuse of discretion was committed in making said finding,
which is, furthermore, inaccurate.

Wherefore, the decision of the Court of Appeals is hereby reversed, and another
one shall be entered affirming that of the Court of First Instance of Manila, with
the costs of this instance against respondent, the Alto Surety and Insurance Co.,
Inc. It is so ordered.

G.R. No. L-55729 March 28, 1983

ANTONIO PUNSALAN, JR., petitioner, 
vs.
REMEDIOS VDA. DE LACSAMANA and THE HONORABLE JUDGE RODOLFO
A. ORTIZ, respondents.

Benjamin S. Benito & Associates for petitioner.

Expedito Yummul for private respondent.

MELENCIO-HERRERA, J.:

The sole issue presented by petitioner for resolution is whether or not respondent
Court erred in denying the Motion to Set Case for Pre-trial with respect to
respondent Remedios Vda. de Lacsamana as the case had been dismissed on the
ground of improper venue upon motion of co-respondent Philippine National Bank
(PNB).

It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner
of a parcel of land consisting of 340 square meters situated in Bamban, Tarlac. In
1963, petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the
amount of P10,000.00, but for failure to pay said amount, the property was
foreclosed on December 16, 1970. Respondent PNB (Tarlac Branch) was the
highest bidder in said foreclosure proceedings. However, the bank secured title
thereto only on December 14, 1977.

In the meantime, in 1974, while the properly was still in the alleged possession of
petitioner and with the alleged acquiescence of respondent PNB (Tarlac Branch),
and upon securing a permit from the Municipal Mayor, petitioner constructed a
warehouse on said property. Petitioner declared said warehouse for tax purposes
for which he was issued Tax Declaration No. 5619. Petitioner then leased the
warehouse to one Hermogenes Sibal for a period of 10 years starting January
1975.

On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac
Branch) and respondent Lacsamana over the property. This contract was
amended on July 31, 1978, particularly to include in the sale, the building and
improvement thereon. By virtue of said instruments, respondent - Lacsamana
secured title over the property in her name (TCT No. 173744) as well as separate
tax declarations for the land and building. 1

On November 22, 1979, petitioner commenced suit for "Annulment of Deed of

Sale with Damages" against herein respondents PNB and Lacsamana before
respondent Court of First Instance of Rizal, Branch XXXI, Quezon City, essentially
impugning the validity of the sale of the building as embodied in the Amended
Deed of Sale. In this connection, petitioner alleged:

xxx xxx xxx

22. That defendant, Philippine National Bank, through its Branch

Manager ... by virtue of the request of defendant ... executed a
document dated July 31, 1978, entitled Amendment to Deed of
Absolute Sale ... wherein said defendant bank as Vendor sold to
defendant Lacsamana the building owned by the plaintiff under Tax
Declaration No. 5619, notwithstanding the fact that said building is not
owned by the bank either by virtue of the public auction sale
conducted by the Sheriff and sold to the Philippine National Bank or by
 virtue of the Deed of Sale executed by the bank itself in its favor on
September 21, 1977 ...;

23. That said defendant bank fraudulently mentioned ... that the sale
in its favor should likewise have included the building, notwithstanding
no legal basis for the same and despite full knowledge that the
Certificate of Sale executed by the sheriff in its favor ... only limited
the sale to the land, hence, by selling the building which never became
the property of defendant, they have violated the principle against
'pactum commisorium'.

Petitioner prayed that the Deed of Sale of the building in favor of respondent
Lacsamana be declared null and void and that damages in the total sum of
P230,000.00, more or less, be awarded to him.2

In her Answer filed on March 4, 1980,-respondent Lacsamana averred the

affirmative defense of lack of cause of action in that she was a purchaser for
value and invoked the principle in Civil Law that the "accessory follows the
principal".3

On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that
venue was improperly laid considering that the building was real property under
article 415 (1) of the New Civil Code and therefore section 2(a) of Rule 4 should
apply. 4

Opposing said Motion to Dismiss, petitioner contended that the action for
annulment of deed of sale with damages is in the nature of a personal action,
which seeks to recover not the title nor possession of the property but to compel
payment of damages, which is not an action affecting title to real property.

On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss
as follows:

Acting upon the 'Motion to Dismiss' of the defendant Philippine

National Bank dated March 13, 1980, considered against the plaintiff's
opposition thereto dated April 1, 1980, including the reply therewith of
said defendant, this Court resolves to DISMISS the plaintiff's complaint
for improper venue considering that the plaintiff's complaint which
seeks for the declaration as null and void, the amendment to Deed of
Absolute Sale executed by the defendant Philippine National Bank in
favor of the defendant Remedios T. Vda. de Lacsamana, on July 31,
1978, involves a warehouse allegedly owned and constructed by the
plaintiff on the land of the defendant Philippine National Bank situated
in the Municipality of Bamban, Province of Tarlac, which warehouse is
an immovable property pursuant to Article 415, No. 1 of the New Civil
Code; and, as such the action of the plaintiff is a real action affecting
title to real property which, under Section 2, Rule 4 of the New Rules
of Court, must be tried in the province where the property or any part
thereof lies.5

In his Motion for Reconsideration of the aforestated Order, petitioner reiterated

the argument that the action to annul does not involve ownership or title to
property but is limited to the validity of the deed of sale and emphasized that the
case should proceed with or without respondent PNB as respondent Lacsamana
had already filed her Answer to the Complaint and no issue on venue had been
raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration for lack of
merit.

Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent
Lacsamana was concerned, as the issues had already been joined with the filing
of respondent Lacsamana's Answer.

In the Order of November 10, 1980 respondent Court denied said Motion to Set
Case for Pre-trial as the case was already dismissed in the previous Orders of
April 25, 1980 and September 1, 1980.

Hence, this Petition for Certiorari, to which we gave due course.

We affirm respondent Court's Order denying the setting for pre-trial.

The warehouse claimed to be owned by petitioner is an immovable or real

property as provided in article 415(l) of the Civil Code. 6 Buildings are always
immovable under the Code. 7 A building treated separately from the land on
which it stood is immovable property and the mere fact that the parties to a
contract seem to have dealt with it separate and apart from the land on which it
stood in no wise changed its character as immovable property. 8

While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his
claim for damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property, the recovery of
which is petitioner's primary objective. The prevalent doctrine is that an action for
the annulment or rescission of a sale of real property does not operate to efface
the fundamental and prime objective and nature of the case, which is to recover
said real property. It is a real action. 9

Respondent Court, therefore, did not err in dismissing the case on the ground of
improper venue (Section 2, Rule 4) 10, which was timely raised (Section 1, Rule
16) 11.

Petitioner's other contention that the case should proceed in so far as respondent
Lacsamana is concerned as she had already filed an Answer, which did not allege
improper venue and, therefore, issues had already been joined, is likewise
untenable. Respondent PNB is an indispensable party as the validity of the
Amended Contract of Sale between the former and respondent Lacsamana is in
issue. It would, indeed, be futile to proceed with the case against respondent
Lacsamana alone.

WHEREFORE, the petition is hereby denied without prejudice to the refiling of the
case by petitioner Antonio Punsalan, Jr. in the proper forum. Costs against
petitioner. SO ORDERED.
 [G.R. No. 26278. August 4, 1927.]

LEON SIBAL 1.º,  plaintiff-appellant, vs. EMILIANO J. VALDEZ ET

AL., defendants. EMILIANO J. VALDEZ,  appellee.

J. E. Blanco  for appellant.

Felix B. Bautista and Santos & Benitez for appellee.

SYLLABUS

1. ATTACHMENT GROWING CROPS, REAL OR PERSONAL PROPERTY.

— Held: Under the facts of the record, notwithstanding the provisions of
paragraph 2 of article 334 of the Civil Code, that growing sugar cane is
considered personal property and not real property and is subject to
attachment and sale. Act No. 1508, the Chattel Mortgage Law, provides that all
personal property shall be subject to mortgage. At common law all annual
crops which are raised by yearly manurance and labor and essentially owe
their existence to cultivation may be levied on as personal property. Paragraph
2 of article 334 of the Civil Code has been modified by section 450 of the Code
of Civil Procedure and by Act No. 1508 in the sense that, for the purpose of
attachment and execution and for the purposes of the Chattel Mortgage Law,
"ungathered products" have the nature of personal property.

DECISION

JOHNSON,  J p:

This action was commenced in the Court of First Instance of the Province
of Tarlac on the 14th day of December, 1924. The facts are about as
conflicting as it is possible for facts to be, in the trial of causes.
As a first cause of action the plaintiff alleged that the defendant Vitaliano
Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of
execution issued by the Court of First Instance of Pampanga, attached and sold
to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and
his tenants on seven parcels of land described in the complaint, in the third
paragraph of the first cause of action; that within one year from the date of
the attachment and sale the plaintiff offered to redeem said sugar cane and
tendered to the defendant Valdez the amount sufficient to cover the price paid
by the latter, the interest thereon and any assessments or taxes which he may
have paid thereon after the purchase, and the interest corresponding thereto
and that Valdez refused to accept the money and to return the sugar cane to
the plaintiff.
As a second cause of action, the plaintiff alleged that the defendant
Emiliano J. Valdez was attempting to harvest the palay planted in four of the
seven parcels mentioned in the first cause of action; that he had harvested and
taken possession of the palay in one of said seven parcels and in another
parcel described in the second cause of action, amounting to 300 cavans; and
that all of said palay belonged to the plaintiff.
 Plaintiff prayed that a writ of preliminary injunction be issued against the
defendant Emiliano J. Valdez, his attorneys and agents, restraining them (1)
from disturbing him in the possession of the parcels of land described in the
complaint; (2) from taking possession of, or harvesting the sugar cane in
question; and (3) from taking possession, or harvesting the palay in said
parcels of land. Plaintiff also prayed that a judgment be rendered in his favor
and against the defendants, ordering them to consent to the redemption of the
sugar cane in question, and that the defendant Valdez be condemned to pay to
the plaintiff the sum of P1,056, the value of palay harvested by him in the two
parcels above-mentioned, with interest and costs.
On December 27, 1924, the court, after hearing both parties and upon
approval of the bond for P6,000 filed by the plaintiff, issued the writ of
preliminary injunction prayed for in the complaint.
The defendant Emiliano J. Valdez, in his amended answer, denied
generally and specifically each and every allegation of the complaint and set up
the following defenses:
(a) That the sugar cane in question had the nature of personal property
and was not, therefore, subject to redemption;
(b) That he was the owner of parcels 1, 2 and 7 described in the first
cause of action of the complaint;
(c) That he was the owner of the palay in parcels 1, 2 and 7; and
(d) That he never attempted to harvest the palay in parcels 4 and 5.
The defendant Emiliano J. Valdez, by way of counterclaim, alleged that by
reason of the preliminary injunction he was unable to gather the sugar cane,
sugar-cane shoots (puntas de caña dulce) and palay in said parcels of land,
representing a loss to him of P8,375.20 and that, in addition thereto, he
suffered damages amounting to P3,458.56. He prayed for a judgment (1)
absolving him from all liability under the complaint; (2) declaring him to be the
absolute owner of the sugar cane in question and of the palay in parcels 1, 2
and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76,
representing the value of the sugar cane and palay in question, including
damages.
Upon the issue thus presented by the pleadings the cause was brought on
for trial. After hearing the evidence, and on April 28, 1926, the Honorable
Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor
of the defendant —
(1) Holding that the sugar cane in question was personal property and, as
such, was not subject to redemption;
(2) Absolving the defendants from all liability under the complaint; and
(3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan
Sangalang and Marcos Sibal to jointly and severally pay to the defendant
Emiliano J. Valdez the sum of P9,439.08 as follows:
(a) P6,757.40,  the value of the sugar cane;
(b) 1,435.68,  the value of the sugar-cane shoots;
(c) 646.00,  the value of palay harvested by
     plaintiff;
(d) 600.00,  the value of 150 cavans of palay
     which the defendant was not able
     to raise by reason of the injunction,
     at P4 cavan.
  ________   
  P9,439.08   
   ========   
From that judgment the plaintiff appealed and in his assignments of error
contends that the lower court erred:
(1) In holding that the sugar cane in question was personal property and,
therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the complaint belonged to Valdez,
as well as parcels 7 and 8, and that the palay therein was planted by Valdez;
(3) In holding that Valdez, by reason of the preliminary injunction failed
to realize P6,757.40 from the sugar cane and P435.68 from sugarcane shoots
(puntas de caña dulce);
(4) In holding that, for failure of plaintiff to gather the sugar cane on
time, the defendant was unable to raise palay on the land, which would have
netted him the sum of P600; and
(5) In condemning the plaintiff and his sureties to pay to the defendant
the sum of P9.439.08.
It appears from the record :
(1) That on May 11, 1923, the deputy-sheriff of the Province of Tarlac, by
virtue of a writ of execution in civil case No. 20203 of the Court of First
Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal), levied an attach-
ment on eight parcels of land belonging to said Leon Sibal, situated in the
Province of Tarlac, designated in the record of attachment as parcels 1, 2, 3, 4,
5, 6, 7 and 8 (Exhibit B, Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co., Inc., bought said eight
parcels of land, at the auction held by the sheriff of the Province of Tarlac, for
the sum of P4,273.93, having paid for the said parcels separately as follows
(Exhibits C and 2-A):
Parcel 1 P1.00
  2 2,000.00
  3 120.93
  4 1,000.00
  5 1.00
  6 1.00
  7 with the house thereon
  8 1,000.00
    _______
    4,273.93
    =======
(3) That within one year from the sale of said parcels of land, and on the
24th day of September, 1923, the judgment debtor, Leon Sibal, paid P2,000,
to Macondray & Co., Inc., for the account of the redemption price of said
parcels of land, without specifying the particular parcels to which said amount
was to be applied. The redemption price of said eight parcels was reduced, by
virtue of said transaction, to P2,579.97, including interest (Exhibits C and 2).
The record further shows:
(1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy
sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case
No. 1301 of the Province of Pampanga (Emiliano J. Valdezvs. Leon Sibal 1.º —
the same parties in the present case), attached the personal property of said
Leon Sibal located in Tarlac, among which was included the sugar cane now in
question in the seven parcels of land described in the complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction
said personal properties of Leon Sibal, including the sugar cane in question, to
Emiliano J. Valdez, who paid therefor the sum of P1,550, of which P600 was for
the sugar cane (Exhibit A).
(3) That on April 29, 1924, said deputy sheriff, by virtue of said writ of
execution, also attached the real property of said Leon Sibal in Tarlac,
including all of his rights, interest and participation therein, which real property
consisted of eleven parcels of land and a house and camarin situated in one of
said parcels (Exhibit A).
(4) That on June 25, 1924, eight of said eleven parcels, including the
house and the camarin, were bought by Emiliano J. Valdez at the auction held
by the sheriff for the sum of P12,200. Said eight parcels were designated in
the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and
camarin were situated on parcel 7 (Exhibit A).
(5) That the remaining three parcels, indicated in the certificate of the
sheriff as parcels 2, 12 and 13, were released from the attachment by virtue of
claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924, Macondray & Co. sold and
conveyed to Emiliano J. Valdez for P2,579.97 all of its rights and interest in the
eight parcels of land acquired by it at public auction held by the deputy sheriff
of Tarlac in connection with civil case No. 20203 of the Court of First Instance
of Manila, as stated above. Said amount represented the unpaid balance of the
redemption price of said eight parcels, after payment by Leon Sibal of P2,000
on September 24, 1923, for the account of the redemption price, as stated
above. (Exhibits C and 2.)
The foregoing statement of facts shows:
(1) That Emiliano J. Valdez bought the sugar cane question, located in
the seven parcels of land described in the first cause of action of the complaint
at public auction on May 9 and 10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co. became the owner of eight
parcels of land situated in the Province of Tarlac belonging to Leon Sibal and
that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 for
the account of the redemption price of said parcels.
(3) That on June 25, 1924, Emiliano J. Valdez acquired from Macondray &
Co. all of its rights and interest in the said eight parcels of land.
(4) That on the same date (June 25, 1924) Emiliano J. Valdez also
acquired all of the rights and interest which Leon Sibal had or might have had
on said eight parcels by virtue of the P2,000 paid by the latter to Macondray.
(5) That Emiliano J. Valdez became the absolute owner of said eight
parcels of land.
The first question raised by the appeal is, whether the sugar cane in
question is personal or real property. It is contended that sugar cane comes
under the classification of real property as "ungathered products" in paragraph
2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates
as real property the following: "Trees, plants, and ungathered products, while
they are annexed to the land or form an integral part of any immovable
property." That article, however, has received in recent years an interpretation
by the Tribunal Supremo de España, which holds that, under certain
conditions, growing crops may be considered as personal property. (Decision of
March 18, 1904, vol. 97, Civil Jurisprudence of Spain.)
Manresa, the eminent commentator of the Spanish Civil Code, in
discussing section 334 of the Civil Code, in view of the recent decisions of the
Supreme Court of Spain, admits that growing crops are sometimes considered
and treated as personal property. He says:
 "No creemos, sin embargo, que esto excluya la excepcion ue
muchos autores hacen tocante a la venta de toda cosecha o de parte
de ella cuando aun no esta cogida (cosa frecuente con la uva y la
naranja), y a la de leñas, considerando ambas como muebles. El
Tribunal Supremo, en,sentencia de 18 de marzo de 1904, al entender
sobre un contrato de arrendamiento de un predio rustico, resuelve
que su terminacion por desahucio no extingue los derechos del
arrendatario, para recolectar o percibir los frutos correspondientes al
ano agricola, dentro del que nacieron aquellos derechos, cuando el
arrendador ha percibido a su vez el importe de la renta integra
correspondiente, aun cuando lo haya sido por precepto legal durante
el curso del juicio, fundandose para ello, no solo en que de otra
suerte se daria al desahucio un alcance que no tiene, sino en que, y
esto es lo interesante a nuestro proposito, la consideracion de
inmuebles que el articulo 334 del Codigo Civil atribuye a los frutos
pendientes, no les priva del caracter de productos pertenecientes,
como tales, a quienes a ellos tenga derecho, llegado el momento de
su recoleccion.
xxx xxx xxx
"Mas actualmente y por virtud de la nueva edicion de la Ley
Hipotecaria, publicada en 16 de diciembre de 1909, con las reformas
introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto
expreso que disponga lo contrario, y cualquiera que sea la naturaleza
y forma de la obligacion que garantice, no comprende los
frutos cualquiera que sea la situacion en que se encuentre." (3
Manresa, 5.a edicion, pags. 22, 23.)
From the foregoing it appears (1) that, under Spanish authorities,
pending fruits and ungathered products may be sold and transferred as
personal property; (2) that the Supreme Court of Spain, in a case of ejectment
of a lessee of an agricultural land, held that the lessee was entitled to gather
the Products corresponding to the agricultural year because said fruits did not
go with the land but belonged separately to the lessee; and (3) that under the
Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land
does not include the fruits and products existing thereon, unless the contract
expressly provides otherwise.
An examination of the decisions of the Supreme Court of Louisiana may
give us some light on the question which we are discussing. Article 465 of the
Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our
Civil Code, provides: "Standing crops and the fruits of trees not gathered, and
trees before they are cut down, are likewise immovable, and are considered as
part of the land to which they are attached."
The Supreme Court of Louisiana having occasion to interpret that
provision, held that in some cases "standing crops" may be considered and
dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the
Civil Code it is provided that 'standing crops and the fruits of trees not
gathered and trees before they are cut down . . . are considered as part of the
land to which they are attached,' but the immovability provided for is only
one in abstracto and without reference to rights on or to the crop acquired by
others than the owners of the property to which the crop is attached. . . . The
existence of a right on the growing crop is a mobilization by anticipation, a
gathering as it were in advance, rendering the crop movable quoad the right
acquired therein. Our jurisprudence recognizes the possible mobilization of the
growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin,
28 La. Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39
La. Ann., 267.)
"It is true," as the Supreme Court of Louisiana said in the case
of Porche vs. Bodin (28 La. An., 761) that "article 465 of the Revised
Code says that standing crops are considered as immovable and as
part of the land to which they are attached, and article 466 declares
that the fruits of an immovable gathered or produced while it is
under seizure are considered as making part thereof, and inure to the
benefit of the person making the seizure. But the evident meaning of
these articles is, where the crops belong to the owner of the
plantation, they form part of the immovable, and where it is seized,
the fruits gathered or produced inure to the benefit of the seizing
creditor.
"A crop raised on leased premises in no sense forms part of the
immovable. It belongs to the lessee, and may be sold by him,
whether it be gathered or not, and it may be sold by his judgment
creditors. If it necessarily forms part of the leased premises the
result would be that it could not be sold under execution separate
and apart from the land. If a lessee obtain supplies to make his crop,
the factor's lien would not attach to the crop as a separate thing
belonging to his debtor, but the land belonging to the lessor would be
affected with the recorded privilege. The law cannot be construed so
as to result in such absurd consequences.
In the case of Citizens' Bank vs. Wiltz (31 La. Ann., 244) the court said:
"If the crop quoad the pledge thereof under the act of 1874 was
an immovable, it would be destructive of the very objects of the act,
it would render the pledge of the crop impossible, for if the crop was
an inseparable part of the realty possession of the latter would be
necessary to that of the former; but such is not the case. True, by
article 465 C. C. it is provided that 'standing crops and the fruits of
trees not gathered and trees before they are cut down are likewise
immovable and are considered as part of the land to which they are
attached ;' but the immovability provided for is only one in
abstracto and without reference to rights on or to the crop acquired
by other than the owners of the property to which the crop was
attached. The immovability of a growing crop is in the order of things
temporary, for the crop passes from the state of a growing to that of
a gathered one, from an immovable to a movable. The existence of a
right on the growing crop is a mobilization by anticipation, a
gathering as it were in advance, rendering the crop
movable quoadthe right acquired thereon. The provision of our Code
is identical with the Napoleon Code, 520, and we may therefore
obtain light by an examination of the jurisprudence of France."
The rule above announced, not only by the Tribunal Supremo de
España but by the Supreme Court of Louisiana, is followed in practically every
state of the Union.
From an examination of the reports and codes of the State of California
and other states we find that the settled doctrine followed in said states in
connection with the attachment of property and execution of judgment is, that
growing crops raised by yearly labor and cultivation are considered personal
property. (6 Corpus Juris, p. 197; 17 Corpus Juris, p. 379; 23 Corpus Juris, p.
329; Raventas vs. Green, 67 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161;
Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126;
McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644;
Gillitt vs. Truax, 27 Minn., 528; Prestonvs. Ryan, 45 Mich., 174; Freeman on
Execution, vol. 1, p. 438; Drake on Attachment, sec. 249; Mechem on Sales,
secs. 200 and 763.)
Mr. Mechem says that a valid sale may be made of a thing, which though
not yet actually in existence, is reasonably certain to come into existence as
the natural increment or usual incident of something already in existence, and
then belonging to the vendor, and the title will vest in the buyer the moment
the thing comes into existence. (Emerson vs. European Railway Co., 67 Me.,
387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature
are said to have a potential existence. A man may sell property of which he is
potentially and not actually possessed. He, may make a valid sale of the wine
that a vineyard is expected to produce; or the grain a field may grow in a
given time; or the milk a cow may yield during the coming year; or the wool
that shall thereafter grow upon sheep; or what may be taken at the next cast
of a fisherman's net; or fruits to grow; or young animals not yet in existence;
or the good will of a trade and the like. The thing sold, however, must be
specific and identified. They must be also owned at the time by the vendor.
(Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that paragraph 2 of article 334
of the Civil Code has been modified by section 450 of the Code of Civil
Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section
450 enumerates the property of a judgment debtor which may be subjected to
execution. The pertinent portion of said section reads as follows: "All goods,
chattels, moneys, and other property, both real and personal, . . . shall be
liable to execution." Said section 450 and most of the other sections of
the Code of Civil Procedure relating to the execution of judgments were taken
from the Code of Civil Procedure of California. The Supreme Court of California,
under section 688 of the Code of Civil Procedure of that state (Pomeroy, p.
424) has held, without variation, that growing crops were personal property
and subject to execution.
Act No. 1508, the Chattel Mortgage Law, fully recognizes that growing
crops are personal property. Section 2 of said Act provides: "All personal
property shall be subject to mortgage, agreeably to the provisions of this Act,
and a mortgage executed in pursuance thereof shall be termed a chattel
mortgage." Section 7 in part provides: "If growing crops be mortgaged the
mortgage may contain an agreement stipulating that the mortgagor binds
himself properly to tend. care for and protect the crop while growing . . .."
It is clear from the foregoing provisions that Act No. 1508 was enacted
on the assumption that "growing crops" are personal property. This
consideration tends to support the conclusion hereinbefore stated, that
paragraph 2 of article 334 of the Civil Code has been modified by section 450
of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as
mentioned in said article of the Civil Code have the nature of personal
property. In other words, the phrase "personal property" should be understood
to include "ungathered products."
"At common law, and generally in the United States, all annual
crops which are raised by yearly manurance and labor, and
essentially owe their annual existence to cultivation by man, . . . may
be levied on as personal property." (23 C. J., p. 329.) On this
question Freeman, in his treatise on the Law of Executions, says:
"Crops, whether growing or standing in the field ready to be
harvested, are, when produced by annual cultivation, no part of the
realty. They are, therefore, liable to voluntary transfer as chattels. It
 is equally well settled that they may be seized and sold under
execution." (Freeman on Executions, vol. 1, p. 438.)
We may, therefore, conclude that paragraph 2 of article 334 of the Civil
Code has been modified by section 450 of the Code of Civil Procedure and
by Act No. 1508, in the sense that, for the purposes of attachment and
execution, and for the purposes of the Chattel Mortgage Law, "ungathered
products" have the nature of personal property. The lower court, therefore,
committed no error in holding that the sugar cane in question was personal
property and, as such, was not subject to redemption.
All the other assignments of error made by the appellant, as above
stated, relate to questions of fact only. Before entering upon a discussion of
said assignments of error, we deem it opportune to take special notice of the
failure of the plaintiff to appear at the trial during the presentation of evidence
by the defendant. His absence from the trial and his failure to cross-examine
the defendant have lent considerable weight to the evidence then presented
for the defense.
Coming now to the ownership of parcels 1 and 2 described in the first
cause of action of the complaint, the plaintiff made a futile attempt to show
that said two parcels belonged to Agustin Cuyugan and were the identical
parcel 2 which was excluded from the attachment and sale of real property
of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the
description of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and
the description of parcels 1 and 2 of the complaint will readily show that they
are not the same.
The description of the parcels in the complaint is as follows:
"1. La caña dulce sembrada por los inquilinos del ejecutado
Leon Sibal 1.º en una parcela de terreno de la pertenencia del citado
ejecutado, situada en Libutad, Culubasa, Bamban, Tarlac, de unas
dos hectareas poco mas o menos de superficie.
"2. La caña dulce sembrada por el inquilino del ejecutado
Leon Sibal 1.º, llamado Alejandro Policarpio, en una parcela de
terreno de la pertenencia del ejecutado, situada en Dalayap,
Culubasa, Bamban, Tarlac de unas dos hectareas de superficie poco
mas o menos."
The description of parcel 2 given in the certificate of sale (Exhibit A) is as
follows:
"2.ª Terreno palayero situado en Culubasa, Bamban, Tarlac, de
177,090 metros cuadrados de superficie, linda al N. con Canuto Sibal,
Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon,
Felipe Manu and others; al S. con Alejandro Dayrit, Isidoro Santos
and Melecio Manu; y al O. con Alejandro Dayrit and Paulino Vergara.
Tax No. 2854, valor amillarado P4,200 pesos."
On the other hand the evidence for the defendant purported to show that
parcels 1 and 2 of the complaint were included among the parcels bought
by Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in
the deed of sale (Exhibits B and 2), and were also included among the parcels
bought by Valdez at the auction of the real property of Leon Sibal on June 25,
1924, and corresponded to parcel 3 in the certificate of sale made by the
sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit
A) is as follows:
"Parcela No. 4. — Terreno palayero, ubicado en el barrio de
Culubasa, Bamban, Tarlac, I. F. de 145,000 metros cuadrados de
superficie, lindante al Norte con Road of the barrio of Culubasa that
 goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mano y
Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado
asciende a la suma de P2,990. Tax No. 2856."
As will be noticed, there is hardly any relation between parcels 1 and 2 of
the complaint and parcel 4 (Exhibits 2 and B) and parcel 3 (Exhibit A). But,
inasmuch as the plaintiff did not care to appear at the trial when the defendant
offered his evidence, we are inclined to give more weight to the evidence
adduced by him than to the evidence adduced by the plaintiff, with respect to
the ownership of parcels 1 and 2 of the complaint. We, therefore, conclude
that parcels 1 and 2 of the complaint belong to the defendant, having acquired
the same from Macondray & Co. on June 25, 1924, and from the plaintiff
Leon Sibal on the same date.
It appears, however, that the plaintiff planted the palay in said parcels
and harvested therefrom 190 cavans. There being no evidence of bad faith on
his part, he is therefore entitled to one-half of the crop, or 95 cavans. He
should therefore be condemned to pay to the defendant for 95 cavans only, at
P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held
by the lower court.
As to the ownership of parcel 7 of the complaint, the evidence shows that
said parcel corresponds to parcel 1 of the deed of sale of Macondray & Co.
to Valdez (Exhibits B and 2), and to parcel 4 in the certificate of sale
to Valdez of real property belonging to Sibal, executed by the sheriff as above
stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having
acquired the interest of both Macondray and Sibal in said parcel.
With reference to the parcel of land in Pacalcal, Tarlac, described in
paragraph 3 of the second cause of action, it appears from the testimony of
the plaintiff himself that said parcel corresponds to parcel 8 of the deed of sale
of Macondray to Valdez (Exhibits B and 2) and to parcel 10 in the deed of sale
executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the
absolute owner of said parcel, having acquired the interest of both Macondray
and Sibal therein.
In this connection the following facts are worthy of mention:
Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of
land were attached under said execution. Said parcels of land were sold to
Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On
September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the
redemption of said parcels of land. (See Exhibits B and C.)
Attachment, April 29, 1924, in favor of Valdez. Personal property
of Sibal was attached, including the sugar cane in question. (Exhibit A.) The
said personal property so attached, sold at public auction May 9 and 10, 1924.
April 29, 1924, the real property of Sibal was attached under the execution in
favor of Valdez (Exhibit A).
June 25, 1924, said real property was sold and purchased
by Valdez (Exhibit A). June 25, 1924, Macondray & Co. sold all of the land
which they had purchased at public auction on the 30th day of July, 1923,
toValdez.
As to the loss of the defendant in sugar cane by reason of the injunction,
the evidence shows that the sugar cane in question covered an area of 22
hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have
yielded an average crop of 1039 picos and 60 cates; that one-half of that
quantity, or 519 picos and 80 cates would have corresponded to the
defendant, as owner; that during the season the sugar was selling at P13 a
pico (Exhibits 5 and 5-A). Therefore, the defendant, as owner, would have
netted P6,757.40 from the sugar cane in question. The evidence also shows
that the defendant could have taken from the sugar cane 1,017,000 sugar-
cane shoots (puntas de caña) and not 1,170,000 as computed by the lower
court. During the season the shoots were selling at P1.20 a thousand (Exhibits
6 and 7). The defendant therefore would have netted P1,220.40 from sugar-
cane shoots and not P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in parcels 1 and 2 of the
complaint, amounting to 190 cavans, one-half of said quantity should belong
to the plaintiff, as stated above, and the other half to the defendant. The court
erred in awarding the whole crop to the defendant. The plaintiff should
therefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323
instead of P646 as allowed by the lower court.
The evidence also shows that the defendant was prevented by the acts of
the plaintiff from cultivating about 10 hectares of the land involved in the
litigation. He expected to have raised about 600 cavans of palay, 300 cavans
of which would have corresponded to him as owner. The lower court has wisely
reduced his share to 150 cavans only. At P4 a cavan, the palay would have
netted him P600.
In view of the foregoing, the judgment appealed from is hereby modified.
The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and
Marcos Sibal are hereby ordered to pay to the defendant jointly and severally
the sum of P8,900.80, instead of P9,439.08 allowed by the lower court, as
follows:
P6,757.40  for the sugar cane; 
1,220.40  for the sugar cane shoots; 
323.00  for the palay harvested by plaintiff in
   parcels 1 and 2;
600.00  for the palay which defendant could have raised.
________   
8.900.80   
=======
   
=
In all other respects, the judgment appealed from is hereby affirmed,
with costs. So ordered.
|||  (Sibal v. Valdez, G.R. No. 26278, [August 4, 1927], 50 PHIL 512-
529)
 [G.R. No. 92013. July 25, 1990.]

SALVADOR H. LAUREL, petitioner, vs. RAMON GARCIA, as head of

the Asset Privatization Trust, RAUL MANGLAPUS, as Secretary of
Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary,  respondents.

[G.R. No. 92047. July 25, 1990.]

DIONISIO S. OJEDA, petitioner, vs. EXECUTIVE SECRETARY

MACARAIG, JR., ASSETS PRIVATIZATION TRUST CHAIRMAN
RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION OF PHILIPPINE GOVERNMENT
PROPERTIES IN JAPAN, respondents.

Arturo M. Tolentino for petitioner in 92013.

DECISION

GUTIERREZ, JR., J  p:

These are two petitions for prohibition seeking to enjoin respondents,

their representatives and agents from proceeding with the bidding for the sale
of the 3,179 square meters of land at 306 Ropponggi, 5-Chome Minato-ku,
Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a
temporary restraining order effective February 20, 1990. One of the petitioners
(in G.R. No. 92047) likewise prayer for a writ of mandamus to compel the
respondents to fully disclose to the public the basis of their decision to push
through with the sale of the Roppongi property inspite of strong public
opposition and to explain the proceedings which effectively prevent the
participation of Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard
by the Court on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary
Macaraig, et al. was filed, the respondents were required to file a comment by
the Court's resolution dated February 22, 1990. The two petitions were
consolidated on March 27, 1990 when the memoranda of the parties in
the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the
respondents filed a motion for an extension of thirty (30) days to file comment
in G.R. No. 92047, followed by a second motion for an extension of another
thirty (30) days which we granted on May 8, 1990, a third motion for
extension of time granted on May 24, 1990 and a fourth motion for extension
of time which we granted on June 5, 1990 but calling the attention of the
respondents to the length of time the petitions have been pending. After the
comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days
to file a reply. We noted his motion and resolved to decide the two (2)
cases. LexLib

The subject property in this case is one of the four (4) properties in Japan
acquired by the Philippine government under the Reparations Agreement
entered into with Japan on May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku,
Tokyo which has an area of approximately 2,489.96 square
meters, and is at present the site of the Philippine Embassy
Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an
area of around 764.72 square meters and categorized as a
commercial lot now being used as a warehouse and parking lot
for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyamacho,
Shinohara, Nada-ku, Kobe, a residential lot which is now
vacant.
The properties and the capital goods and services procured from the
Japanese government for national development projects are part of the
indemnification to the Filipino people for their losses in life and property and
their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550
million would be payable in twenty (20) years in accordance with annual
schedules of procurements to be fixed by the Philippine and Japanese
governments (Article 2, Reparations Agreement). Rep. Act No. 1789,
the Reparations Law, prescribes the national policy on procurement and
utilization of reparations and development loans. The procurements are divided
into those for use by the government sector and those for private parties in
projects as the then National Economic Council shall determine. Those
intended for the private sector shall be made available by sale to Filipino
citizens or to one hundred (100%) percent Filipino-owned entities in national
development projects.
The Roppongi property was acquired from the Japanese government
under the Second Year Schedule and listed under the heading "Government
Sector", through Reparations Contract No. 300 dated June 27, 1958. The
Roponggi property consists of the land and building "for the Chancery of the
Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As
intended, it became the site of the Philippine Embassy until the latter was
transferred to Nampeidai on July 22, 1976 when the Roppongi building needed
major repairs. Due to the failure of our government to provide necessary
funds, the Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former
Philippine Ambassador to Japan, Carlos J. Valdez, to make the property the
subject of a lease agreement with a Japanese firm — Kajima
Corporation — which shall construct two (2) buildings in Roppongi and one (1)
building in Nampeidai and renovate the present Philippine Chancery in
Nampeidai. The consideration of the construction would be the lease to the
foreign corporation of one (1) of the buildings to be constructed in Roppongi
and the two (2) buildings in Nampeidai. The other building in Roppongi shall
then be used as the Philippine Embassy Chancery. At the end of the lease
period, all the three leased buildings shall be occupied and used by the
Philippine government. No change of ownership or title shall occur. (See Annex
"B" to Reply to Comment) The Philippine government retains the title all
throughout the lease period and thereafter. However, the government has not
acted favorably on this proposal which is pending approval and ratification
between the parties. Indeed, on August 11, 1986, President Aquino created a
committee to study the disposition/utilization of Philippine government
properties in Tokyo and Kobe, Japan through Administrative Order No. 3,
followed by Administrative Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling
non-Filipino citizens or entities to avail of reparations' capital goods and
services in the event of sale, lease or disposition. The four properties in Japan
including the Roppongi were specifically mentioned in the first "Whereas"
clause.
Amidst opposition by various sectors, the Executive branch of the
government has been pushing, with great vigor, its decision to sell the
reparations properties starting with the Roppongi lot. The property has twice
been set for bidding at a minimum floor price at $225 million. The first bidding
was a failure since only one bidder qualified. The second one, after
postponements, has not yet materialized. The last scheduled bidding on
February 21, 1990 was restrained by his Court. Later, the rules on bidding
were changed such that the $225 million floor price became merely a
suggested floor price. cdrep
The Court finds that each of the herein petitions raises distinct issues.
The petitioner in G.R. No. 92013 objects to the alienation of the Roppongi
property to anyone while the petitioner in G.R. No. 92047 adds as a principal
objection the alleged unjustified bias of the Philippine government in favor of
selling the property to non-Filipino citizens and entities. These petitions have
been consolidated and are resolved at the same time for the objective is the
same — to stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by
the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the
authority and jurisdiction, to sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the
authority of the government to alienate the Roppongi property assails the
constitutionality of Executive Order No. 296 in making the property available
for the sale to non-Filipino citizens and entities. He also questions the bidding
procedures of the Committee on the Utilization or Disposition of Philippine
Government Properties in Japan for being discriminatory against Filipino
citizens and Filipino-owned entities by denying them the right to be informed
about the bidding requirements.

II

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property

and the related lots were acquired as part of the reparations from the Japanese
government for diplomatic and consular use by the Philippine government.
Vice-President Laurel states that the Roppongi property is classified as one of
public dominion, and not of private ownership under Article 420 of the Civil
Code (See infra).
The petitioner submits that the Roppongi property comes under "property
intended for public service" in paragraph 2 of the above provision. He states
that being one of public dominion, no ownership by any one can attach to it,
not even by the State. The Roppongi and related properties were acquired for
"sites for chancery, diplomatic, and consular quarters, buildings and other
improvements" (Second Year Reparations Schedule). The petitioner states that
they continue to be intended for a necessary service. They are held by the
State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
cannot be appropriated, is outside the commerce of man, or to put it in more
simple terms, it cannot be alienated nor be the subject matter of contracts
(Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use
of the Roppongi property at the moment, the petitioner avers that the same
remains property of public dominion so long as the government has not used it
for other purposes nor adopted any measure constituting a removal of its
original purpose or use.
The respondents, for their part, refute the petitioner's contention by
saying that the subject property is not governed by our Civil Code but by the
laws of Japan where the property is located. They rely upon the rule of lex
situs which is used in determining the applicable law regarding the acquisition,
transfer and devolution of the title to a property. They also invoke Opinion No.
21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which
used the lex situs in explaining the inapplicability of Philippine law regarding a
property situated in Japan.
The respondents add that even assuming for the sake of argument that
the Civil Code is applicable, the Roppongi property has ceased to become
property of public dominion. It has become patrimonial property because it has
not been used for public service or for diplomatic purposes for over thirteen
(13) years now (Citing Article 422, Civil Code) and because the intention by
the Executive Department and the Congress to convert it to private use has
been manifested by overt acts, such as, among others; (1) the transfer of the
Philippine Embassy to Nampeidai; (2) the issuance of administrative orders for
the possibility of alienating the four government properties in Japan; (3) the
issuance of Executive Order No. 296; (4) the enactment by the Congress
of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on June 10,
1988 which contains a provision stating that funds may be taken from the sale
of Philippine properties in foreign countries; (5) the holding of the public
bidding of the Roppongi property but which failed; (6) the deferment by the
Senate in Resolution No. 55 of the bidding to a future date; thus an
acknowledgment by the Senate of the government's intention to remove the
Roppongi property from the public service purpose; and (7) the resolution of
this Court dismissing the petition in Ojeda v. Bidding Committee, et
al., G.R. No. 87478 which sought to enjoin the second bidding of the Roppongi
property scheduled on March 30, 1989.

III

In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on

the constitutionality of Executive Order No. 296. He had earlier filed a petition
in G.R. No. 87478 which the Court dismissed on August 1, 1989. He now avers
that the executive order contravenes the constitutional mandate to conserve
and develop the national patrimony stated in the Preamble of the 1987
Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable
lands of the public domain to Filipino citizens. (Sections 2 and
3, Article XII, Constitution; Section 22 and 23
of Commonwealth Act 141).
(2) The preference for Filipino citizens in the grant of rights,
privileges and concessions covering the national economy and
patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair
competition and trade practices;
(4) The guarantee of the right of the people to information on all
matters of public concern (Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities
not wholly owned by Filipino citizens of capital goods received
by the Philippines under the Reparations Act (Sections 2 and 12
ofRep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all
transactions involving public interest (Sections 28, Article
II, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an
unconstitutional executive order is a misapplication of public funds. He states
that since the details of the bidding for the Roppongi property were never
publicly disclosed until February 15, 1990 (or a few days before the scheduled
bidding), the bidding guidelines are available only in Tokyo, and the
accomplishment of requirements and the selection of qualified bidders should
be done in Tokyo, interested Filipino citizens or entities owned by them did not
have the chance to comply with Purchase Offer Requirements on the Roppongi.
Worse, the Roppongi shall be sold for a minimum price of $225 million from
which price capital gains tax under Japanese law of about 50 to 70% of the
floor price would still be deducted. cdll

IV

The petitioners and respondents in both cases do not dispute the fact
that the Roppongi site and the three related properties were acquired through
reparations agreements, that these were assigned to the government sector
and that the Roppongi property itself was specifically designated under the
Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly
spelled out. It is dictated by the terms of the Reparations Agreement and the
corresponding contract of procurement which bind both the Philippine
government and the Japanese government.
There can be no doubt that it is of public dominion unless it is
convincingly shown that the property has become patrimonial. This, the
respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce
of man. It cannot be alienated. Its ownership is a special collective ownership
for general use and enjoyment, an application to the satisfaction of collective
needs, and resides in the social group. The purpose is not to serve the State as
a juridical person, but the citizens; it is intended for the common and public
welfare and cannot be the object of appropriation. (Taken from 3 Manresa, 66-
69; cited in Tolentino, Commentaries on the Civil Code of the Philippines, 1963
Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
"ART. 419. Property is either of public dominion or of private
ownership.
"ART. 420. The following things are property of public dominion:
"(1) Those intended for public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public
use, and are intended for some public service or for the development
of the national wealth.
"ART. 421. All other property of the State, which is not of the
character stated in the preceding article, is patrimonial property."
The Roppongi property is correctly classified under paragraph 2 of Article
420 of the Civil Code as property belonging to the State and intended for some
public service.
Has the intention of the government regarding the use of the property
been changed because the lot has been idle for some years? Has it become
patrimonial?
The fact that the Roppongi site has not been used for a long time for
actual Embassy service does not automatically convert it to patrimonial
property. Any such conversion happens only if the property is withdrawn from
public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]).
A property continues to be part of the public domain, not available for private
appropriation or ownership "until there is a formal declaration on the part of
the government to withdraw it from being such (Ignacio v. Director of Lands,
108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public
officials insinuating a change of intention. We emphasize, however, that an
abandonment of the intention to use the Roppongi property for public service
and to make it patrimonial property under Article 422 of the Civil Code must
be definite. Abandonment cannot be inferred from the non-use alone specially
if the non-use was attributable not to the government's own deliberate and
indubitable will but to a lack of financial support to repair and improve the
property (See Heirs of Felino Santiago v. Lazaro, n 166 SCRA 368 [1988]).
Abandonment must be a certain and positive act based on correct legal
premises. LexLib
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not
relinquishment of the Roppongi property's original purpose. Even the failure by
the government to repair the building in Roppongi is not abandonment since as
earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of
government properties in Japan were merely directives for investigation but
did not in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell",
does not have a provision in this text expressly authorizing the sale of the four
properties procured from Japan for the government sector. The executive order
does not declare that the properties lost their public character. It merely
intends to make the properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It merely eliminates the
restriction under Rep. Act. 1789 that reparations goods may be sold only to
Filipino citizens and one hundred (100%) percent Filipino-owned entities. The
text of Executive Order No. 296 provides:
"Section 1. The provisions of Republic Act No. 1789, as
amended, and of other laws to the contrary notwithstanding, the
abovementioned properties can be made available for sale, lease or
any other manner of disposition to non-Filipino citizens or to entities
owned by non-Filipino citizens."
Executive Order No. 296 is based on the wrong premise or assumption
that the Roppongi and the three other properties were earlier converted into
alienable real properties. As earlier stated, Rep. Act No. 1789 differentiates the
procurements for the government sector and the private sector (Sections 2
and 12, Rep. Act No. 1789). Only the private sector properties can be sold to
end-users who must be Filipinos or entities owned by Filipinos. It is this
nationality provision which was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as
one of the sources of funds for its implementation, the proceeds of the
disposition of the properties of the Government in foreign countries, did not
withdraw the Roppongi property from being classified as one of public
dominion when it mentions Philippine properties abroad. Section 63 (c) refers
to properties which are alienable and not to those reserved for public use or
service. Rep. Act No. 6657, therefore, does not authorize the Executive
Department to sell the Roppongi property. It merely enumerates possible
sources of future funding to augment (as and when needed) the Agrarian
Reform Fund created under Executive Order No. 229. n Obviously any property
outside of the commerce of man cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the
Roppongi property by insisting that Japanese law and not our Civil Code should
apply.
It is exceedingly strange why our top government officials, of all people,
should be the ones to insist that in the sale of extremely valuable government
property, Japanese law and not Philippine law should prevail. The Japanese law
— its coverage and effects, when enacted, and exceptions to its provisions — is
not presented to the Court. It is simply asserted that the lex loci rei sitae or
Japanese law should apply without stating what that law provides. It is
assumed on faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict
of law situation exists. A conflict of law situation arises only when: (1) There is
a dispute over the title or ownership of an immovable, such that the capacity
to take and transfer immovables, the formalities of conveyance, the essential
validity and effect of the transfer, or the interpretation and effect of a
conveyance, are to be determined (See Salonga, Private International
Law, 1981 ed., pp. 377-383); and (2) A foreign law on land ownership and its
conveyance is asserted to conflict with a domestic law on the same matters.
Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There
is no question that the property belongs to the Philippines. The issue is the
authority of the respondent officials to validly dispose of property belonging to
the State. And the validity of the procedures adopted to effect its sale. This is
governed by Philippine Law. The rule of lex situs does not apply.
 The assertion that the opinion of the Secretary of Justice sheds light on
the relevance of the lex situs rule is misplaced. The opinion does not tackle
the alienability of the real properties procured through reparations nor the
existence in what body of the authority to sell them. In discussing who are
capable of acquiring the lots, the Secretary merely explains that it is the
foreign law which should determine who can acquire the properties so that the
constitutional limitation on acquisition of lands of the public domain to Filipino
citizens and entities wholly owned by Filipinos is inapplicable. We see no point
in belaboring whether or not this opinion is correct. Why should we discuss
who can acquire the Roppongi lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the
recommendation by the investigating committee to sell the Roppongi property
was premature or, at the very least, conditioned on a valid change in the
public character of the Roppongi property. Moreover, the approval does not
have the force and effect of law since the President already lost her legislative
powers. The Congress had already convened for more than a year.
Assuming for the sale of argument, however, that the Roppongi property
is no longer of public dominion, there is another obstacle to its sale by the
respondents.
There is  no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides:
"Section 79 (f). Conveyances and contracts to which the
Government is a party. — In cases in which the Government of the
Republic of the Philippines is a party to any deed or other instrument
conveying the title to real estate or to any other property the value of
which is in excess of one hundred thousand pesos, the respective
Department Secretary shall prepare the necessary papers which,
together with the proper recommendations, shall be submitted to the
Congress of the Philippines for approval by the same. Such deed,
instrument, or contract shall be executed and signed by the President
of the Philippines on behalf of the Government of the Philippines
unless the Government of the Philippines unless the authority
therefor be expressly vested by law in another officer." (Emphasis
supplied)
The requirement has been retained in Section 48, Book I of
the Administrative Code of 1987 (Executive Order No. 292).
"SEC. 48. Official Authorized to Convey Real Property. —
Whenever real property of the Government is authorized by law to be
conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
"(1) For property belonging to and titled in the name of the
Republic of the Philippines, by the President, unless the authority
therefor is expressly vested by law in another officer.
"(2) For property belonging to the Republic of the Philippines
but titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or
instrumentality." (Emphasis supplied).
It is not for the President to convey valuable real property of the
government on his or her own sole will. Any such conveyance must be
authorized and approved by a law enacted by the Congress. It requires
executive and legislative concurrence.
 Resolution No. 55 of the Senate dated June 8, 1989, asking for the
deferment of the sale of the Roppongi property does not withdraw the property
from public domain much less authorize its sale. It is a mere resolution; it is
not a formal declaration abandoning the public character of the Roppongi
property. In fact, the Senate Committee on Foreign Relations is conducting
hearings on Senate Resolution No. 734 which raises serious policy
considerations and calls for a fact-finding investigation of the circumstances
behind the decision to sell the Philippine government properties in
Japan. LexLib
The resolution of this Court in Ojeda v. Bidding Committee, et al.,
supra, did not pass upon the constitutionality of Executive Order No. 296.
Contrary to respondents' assertion, we did not uphold the authority of the
President to sell the Roppongi property. The Court stated that the
constitutionality of the executive order was not the real issue and that
resolving the constitutional question was "neither necessary nor finally
determinative of the case." The Court noted that "[W]hat petitioner ultimately
questions is the use of the proceeds of the disposition of the Roppongi
property." In emphasizing that "the decision of the Executive to dispose of the
Roppongi property to finance the CARP . . . cannot be questioned" in view of
Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact
that the property became alienable nor did it indicate that the President was
authorized to dispose of the Roppongi property. The resolution should be read
to mean that in case the Roppongi property is re-classified to be patrimonial
and alienable by authority of law, the proceeds of a sale may be used for
national economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us
question the proposed 1990 sale of the Roppongi property. We are resolving
the issues raised in these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to withdraw the
Roppongi property from public domain to make it alienable and a need for
legislative authority to allow the sale of the property, we see no compelling
reason to tackle the constitutional issue raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless
these questions are properly raised in appropriate cases and their resolution is
necessary for the determination of the case (People v. Vera, 65 Phil.
56 [1937]). The Court will not pass upon a constitutional question although
property presented by the record if the case can be disposed of on some other
ground such as the application of a statute or general law (Siler v. Louisville
and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v. Pullman
Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property
should not be sold:
The Roppongi property is not just like any piece of property. It
was given to the Filipino people in reparation for the lives and blood
of Filipinos who died and suffered during the Japanese military
occupation, for the suffering of widows and orphans who lost their
loved ones and kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the Filipino people in the
face of an invader; like the monuments of Rizal, Quezon, and other
Filipino heroes, we do not expect economic or financial benefits from
them. But who would think of selling these monuments? Filipino
honor and national dignity dictate that we keep our properties in
Japan as memorials to the countless Filipinos who died and suffered.
 Even if we should become paupers we should not think of selling
them. For it would be as if we sold the lives and blood and tears of
our countrymen." (Rollo-G.R. No. 92013, p. 147).
The petitioner in G.R. No. 92047 also states:
"Roppongi is no ordinary property. It is one ceded by the
Japanese government in atonement for its past belligerence, for the
valiant sacrifice of life and limb and for deaths, physical dislocation
and economic devastation the whole Filipino people endured in World
War II.
"It is for what it stands for, and for what it could never bring
back to life, that its significance today remains undimmed, inspite of
the lapse of 45 years since the war ended, inspite of the passage of
32 years since the property passed on to the Philippine government.
"Roppongi is a reminder that cannot — should not — be
dissipated. . . ." (Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much
because of the inflated prices fetched by real property in Tokyo but more so
because of its symbolic value to all Filipinos — veterans and civilians alike.
Whether or not the Roppongi and related properties will eventually be sold is a
policy determination where both the President and congress must concur.
Considering the properties' importance and value, the laws on conversion and
disposition of property of public dominion must be faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED.
A writ of prohibition is issued enjoining the respondents from proceeding with
the sale of the Roppongi property in Tokyo, Japan. The February 20, 1990
Temporary Restraining Order is made PERMANENT.
SO ORDERED.
|||  (Laurel v. Garcia, G.R. Nos. 92013 & 92047, [July 25, 1990], 265
PHIL 827-864)
 [G.R. No. L-40474. August 29, 1975.]

CEBU OXYGEN & ACETYLENE CO., INC.,  petitioner, vs. HON.

PASCUAL A. BERCILLES, Presiding Judge, Branch XV, 14th
Judicial District, and JOSE L. ESPELETA, Assistant Provincial
Fiscal, Province of Cebu, representing the Solicitor General's
Office and the Bureau of Lands, respondents.

Jose Antonio B. Conde  for petitioner.

Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General
Octavio R. Ramirez  and  Trial Attorney David R. Hilario for respondents.

SYNOPSIS

Petitioner applied for registration of title over a portion of M. Gorces

Street in Cebu City. Said portion was declared an abandoned road by the City
Council of Cebu the same not being included in the CebuDevelopment Plan,
and later, by authority of the City Council, was sold by the Acting Mayor to
petitioner who was the highest bidder at a public bidding.
The trial court dismissed petitioner's application on motion of the
Assistant Provincial Fiscal on the ground that the property sought to be
registered being a public road intended of public use is considered part of the
public domain and therefore outside the commerce of men.
On petition for review, the Supreme Court set aside the trial court's order
the directed the latter to proceed with the hearing of petition's application for
registration of title.

SYLLABUS
 1. MUNICIPAL CORPORATIONS; STREETS; POWER OF MUNICIPAL
COUNCIL TO WITHDRAW PORTION OF STREET FROM PUBLIC USE. — Where a
portion of the city street is withdrawn from public use by the city council,
which under the city charter is empowered to close any city road, street or
alley, boulevard, avenue, park or square, the property thus withdraw from
public servitude become patrimonial property and be used or conveyed for any
purpose for which any real property belonging to the city may be lawfully used
or conveyed.
2. PROPERTY; PROPERTY OF PUBLIC DOMAIN MAY BE CONVERTED INTO
PATRIMONIAL PROPERTY. — Under Article 422 of the Civil Code, "property of
public dominion, when no longer intended for public service, shall form part of
the patrimonial property of the State.

DECISION

CONCEPCION, JR., J  p:

This is a petition for the review of the order of the Court of First Instance
of Cebu dismissing petitioner's application for registration of title over a parcel
of land situated in the City of Cebu.
The parcel of land sought to be registered was originally a portion of M.
Borces Street, Mabolo, Cebu City. On September 23, 1968, the City Council
of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared
the terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned
road, the same not being included in the City Development
Plan. 1 Subsequently, on December 19, 1968, the City Council of Cebu passed
Resolution No. 2755, authorizing the Acting City Mayor to sell the land through
a public bidding. 2 Pursuant thereto, the lot was awarded to the herein
petitioner being the highest bidder and on March 3, 1969, the City of Cebu,
through the Acting City Mayor, executed a deed of absolute sale to the herein
petitioner for a total consideration of P10,800.00. 3 By virtue of the aforesaid
deed of absolute sale, the petitioner filed an application with the Court of First
Instance of Cebu to have its title to the land registered. 4
On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to
dismiss the application on the ground that the property sought to be registered
being a public road intended for public use is considered part of the public
domain and therefore outside the commerce of man, Consequently, it cannot
be subject to registration by any private individual. 5
After hearing the parties, on October 11, 1914 the trial court issued an
order dismissing the petitioner's application for registration of title. 6 Hence,
the instant petition for review.
For the resolution of this case, the petitioner poses the following
questions:
(1) Does the City Charter of Cebu City (Republic Act No. 3857)
under Section 31, paragraph 34, give the City of Cebu the valid right
to declare a road as abandoned? and
(2) Does the declaration of the road, as abandoned, make it the
patrimonial property of the City of Cebu which may be the object of a
common contract?
(1) The pertinent portions of the Revised Charter of Cebu City provides:
 "Section 31. Legislative Powers. Any provision of law and
executive order to the contrary notwithstanding, the City Council
shall have the following legislative powers:
xxx xxx xxx
(34) . . . ; to close any city road, street or alley, boulevard,
avenue, park or square. Property thus withdrawn from public
servitude may be used or conveyed for any purpose for which other
real property belonging to the City may be lawfully used or
conveyed."
From the foregoing, it is undoubtedly clear that the City of Cebu is
empowered to close a city road or street. In the case of Favis vs. City of
Baguio, 7 where the power of the city Council of Baguio City to close city
streets and to vacate or withdraw the same from public use was similarly
assailed, this court said:
"5. So it is, that appellant may not challenge the city council's
act of withdrawing a strip of Lapu-Lapu Street at its dead end from
public use and converting the remainder thereof into an alley. These
are acts well within the ambit of the power to close a city street. The
city council, it would seem to us, is the authority competent to
determine whether or not a certain property is still necessary for
public use.
"Such power to vacate a street or alley is discretionary, And the
discretion will not ordinarily be controlled or interfered with by the
courts, absent a plain case of abuse or fraud or collusion. Faithfulness
to the public trust will be presumed. So the fact that some private
interests may be served incidentally will not invalidate the vacation
ordinance."
(2) Since that portion of the city street subject of petitioner's application
for registration of title was withdrawn from public use, it follows that such
withdrawn portion becomes patrimonial property which can be the object of an
ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public
dominion, when no longer intended for public use or for public service, shall
form part of the patrimonial property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in
very clear and unequivocal terms, states that: "Property thus withdrawn from
public servitude may be used or conveyed for any purpose for which other real
property belonging to the City may be lawfully used or conveyed."
Accordingly, withdrawal of the property in question from public use and
its subsequent sale to the petitioner is valid. Hence, the petitioner has a
registerable title over the lot in question.
WHEREFORE, the order dated October 11, 1974, rendered by the
respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is
hereby set aside, and the respondent court is hereby ordered to proceed with
the hearing of the petitioner's application for registration of title.
SO ORDERED.
|||  (Cebu Oxygen & Acetylene Co., Inc. v. Bercilles, G.R. No. L-40474,
[August 29, 1975], 160 PHIL 1155-1159)
 [G.R. No. L-12958. May 30, 1960.]

FAUSTINO IGNACIO,  applicant and

appellant, vs. THE DIRECTOR OF LANDS and LAUREANO
VALERIANO,  oppositors and appellees.

David S.  Ignacio  for appellant.

Acting Assistant Solicitor General Pacifico P. de Castro and Solicitor
Crispin V. Bautista  for appellee Director of Lands.
Benjamin H. Aquino  for appellee Laureano Veleriano.

SYLLABUS

1. PROPERTY; LAND FORMED BY ACTION OF THE SEA. — Land formed by

the action of the sea is property of the state; Francisco vs. Government of the
P.I., 28 Phil., 505, involving a land claimed by a private person and subject to
the ebb and flow of the tides of the Manila Bay.
2. ID.; ID.; WHEN NO LONGER NEEDED FOR PUBLIC USE; DECLARATION
NECESSARY. — Until a formal declaration on the part of the Government,
through the executive department or the legislature, to the effect that land is
no longer needed for coast guard service, for public use or for special
industries, they continue to be part of the public domain; not available for
private appropriation or ownership.

DECISION
MONTEMAYOR, J  p:

Faustino Ignacio is appealing the decision of the Court of First

Instance of Rizal, dismissing his application for the registration of a
parcel of land.
On January 25, 1950, Ignacio filed an application for the registration of a
parcel of land (mangrove), situated in barrio Gasac, Navotas, Rizal, with an
area of 37,877 square meters. Later, he amended his application by alleging
among others that he owned the parcel applied for by right of accretion. To the
application, the Director of Lands, Laureano Valeriano and Domingo Gutierrez
filed oppositions. Gutierrez later withdrew his opposition.
The Director of Lands claimed the parcel applied for as a portion of the public
domain, for the reason that neither the applicant nor his predecessor- in-
interest possessed sufficient title thereto, not having acquired it either by
composition title from the Spanish government or by possessory information
title under the Royal Decree of February 13, 1894, and that he had not
possessed the same openly, continuously and adversely under a bona
fide claim of ownership since July 26, 1894. In his turn, Valeriano alleged that
he was holding the land by virtue of a permit granted him by the
Bureau ofFisheries, issued on January 13, 1947, and approved by the
President.
It is not disputed that the land applied for adjoins a parcel owned by the
applicant which he had acquired from the Government by virtue of a free
patent title in 1936. It has also been established that the parcel in question
was formed by accretion and alluvial deposits caused by the action of the
Manila Bay which borders it on the southwest. Applicant Ignacio claims that he
had occupied the land since 1935, planting it with api-api trees, and that his
possession thereof had been continuous, adverse and public for a
period of twenty years until said possession was disturbed by oppositor
Valeriano.
On the other hand, the Director of Lands sought to prove that the parcel
is foreshore land, covered by the ebb and flow of the tide and, therefore,
formed part of the public domain.
After hearing, the trial court dismissed the application, holding that the
parcel formed part of the public domain. In his appeal, Ignacio assigns the
following errors:
"I. The lower court erred in holding that the land in question,
altho an accretion to the land of the applicant-appellant, does not
belong to him but forms part of the public domain.
"II. Granting that the land in question forms part of the public
domain, the lower court nevertheless erred in not declaring the same
to be the property of the applicant-appellant, the said land not being
necessary for any public use or purpose and in not ordering at the
same time its registration in the name of applicant-appellant in the
present registration proceedings.
"III. The lower court erred in not holding that the land in
question now belongs to the applicant-appellant by
virtue of acquisitive prescription, the said land having ceased to
be of the public domain and became the private or patrimonial
property of the State.
"IV. The lower court erred in not holding that the
oppositor Director of Lands is now in estoppel from claiming the land
in question as a land of the public domain."
Appellant contends that the parcel belongs to him by the law of accretion,
having been formed by gradual deposit by action of the Manila Bay, and he
cites Article 457 of the New Civil Code (Article 366, Old Civil Code), which
provides that:
"To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the
current of the waters."
The article cited is clearly inapplicable because it refers to accretion or deposits
on the banks of rivers, while the accretion in the present case was caused by
action of the Manila Bay.
Appellant next contends that Articles 1, 4 and 5 of the Law of Waters are
not applicable because they refer to accretions formed by the sea, and that
Manila Bay cannot be considered as a sea. We find said contention untenable.
A bay is a part of the sea, being a mere indentation of the same:
"Bay. — An opening into the land where the water is shut in on
all sides except at the entrance; an inlet of the sea; an arm of the
sea, distinct from a river, a bending or curbing of the shore of the sea
or of a lake." 7 C.J. 1013-1014 (Cited in Francisco, Philippine
Law of Waters and Water Rights p. 6)
Moreover, this Tribunal has in some cases applied the Law of Waters
on Lands bordering Manila Bay. (See the cases of Ker & Co. vs. Cauden, 6
Phil., 732, involving a parcel of land bounded on the sides by Manila Bay,
where it was held that such land formed by the action of the sea is
property of the State; Francisco vs. Government of P.I., 28 Phil., 505,
involving a land claimed by a private person and subject to the ebb and
flow of the tides of the Manila Bay).
Then the applicant argues that granting that the land in question formed
part of the public domain, having been gained from the sea, the trial court
should have declared the same no longer necessary for any public use or
purpose, and therefore, became disposable and available for private
ownership. Article 4 of the Law of Waters of 1866 reads thus:
"ART. 4. Lands added to the shores by accretions and alluvial
deposits caused by the action of the sea, form part of the public
domain. When they are no longer washed by the waters of the sea
and are not necessary for purposes of public utility, or for the
establishment of special industries, or for the coastguard service, the
Government shall declare them to be the property of the
owners of the estates adjacent thereto and as increment thereof."
Interpreting Article 4 of the Law of Waters of 1866, in the
case of Natividad vs. Director of Lands, (CA) 37 Off. Gaz., 2905, it was there
held that:
"Article 4 of the Law of Waters of 1866 provides that when a
portion of the shore is no longer washed by the waters of the sea and
is not necessary for purposes of public utility, or for the
establishment of special industries, or for coastguard service, the
government shall declare it to be the property of the owners of the
estates adjacent thereto and as an increment thereof. We believe
that only the executive and possibly the legislative departments have
the authority and the power to make the declaration that any land so
gained by the sea, is not necessary for purposes of public utility, or
for the establishment of special industries, or for coast-guard service.
If no such declaration has been made by said departments, the lot in
 question forms part of the public domain."
(Natividad vs. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the
case of Vicente Joven y Monteverde vs. Director of Lands, 93 Phil., 134, (cited
in Velayo's Digest, Vol. I, p. 52).
". . . is undoubtedly that the courts are neither primarily called
upon, nor indeed in a position to determine whether any public land
are to be used for the purposes specified in Article 4 of the
Law of Waters."
Consequently, until a formal declaration on the part of the Government,
through the executive department or the Legislature, to the effect that the
land in question is no longer needed for coast guard service, for public use or
for special industries, they continue to be part of the public domain, not
available for private appropriation or ownership.
Appellant next contends that he had acquired the parcel in question
through acquisitive prescription, having possessed the same for over ten
years. In answer, suffice it to say that land of the public domain is not subject
to ordinary prescription. In the case of Insular Government vs. Aldecoa & Co.,
19 Phil., 505, this Court said:
"The occupation or material possession of any land formed upon
the shore by accretion, without previous permission from the proper
authorities, although the occupant may have held the same as owner
for seventeen years and constructed a wharf on the land, is illegal
and is a mere detainer, inasmuch as such land is outside of the
sphere of commerce; it pertains to the national domain; it is intended
for public uses and for the benefit of those who live nearby."
We deem it unnecessary to discuss the other points raised in the appeal.
In view of the foregoing, the appealed decision is hereby affirmed, with
costs. ||| (Ignacio v. Director of Lands, G.R. No. L-12958, [May 30, 1960],
108 PHIL 335-340)
[G.R. No. 24950. March 25, 1926.]

VIUDA DE TAN TOCO,  plaintiff-appellant, vs.
THE MUNICIPAL  COUNCIL OF  ILOILO,  defendant-appellee.

Arroyo & Evangelista  for appellant.

Provincial Fiscal Borromeo Veloso for appellee.

SYLLABUS

1. MUNICIPAL CORPORATIONS; EXEMPTION FROM EXECUTION. — The

property of a municipality, whether real or personal, necessary for
governmental purposes cannot be attached and sold at public auction to satisfy
a judgment against the municipality.
2. ID.; ID.; PROPERTY EXEMPT. — Auto trucks used by a municipality in
sprinkling its streets, its police patrol automobile, police stations, and public
markets, together with the land on which they stand, are exempt from
execution.
3. ID.; ID.; MANDAMUS. — Where after judgment is entered again
municipality, the latter has no property subject to execution the creditor's
remedy for collecting his judgment is mandamus.
 DECISION

VILLAMOR, J  p:

It appears from the record that the widow of Tan Toco had sued

the municipal council of Iloilo for the amount of P42,966.40, being the
purchase price of two strips of land, one on Calle J. M. Basa consistingof 592
square meters, and the other on Calle Aldiguer consisting of 59 square meters,
which the municipality of Iloilo had appropriated for widening said street. The
Court of First Instance of Iloilo sentenced the said municipality to pay the
plaintiff the amount so claimed, plus the interest, and the said judgment was
on appeal affirmed by this court.

On account of lack of funds the municipality of Iloilo was unable to pay

the said judgment, wherefore plaintiff had a writ of execution issue against the
property of the said municipality, by virtue of which the sheriff attached two
auto trucks used for street sprinkling, one police patrol automobile, the police
stations on Mabini street, and in Molo and Mandurriao and the concrete
structures, with the corresponding lots, used as markets by Iloilo, Molo, and
Mandurriao.
After notice of the sale of said property had been made, and a few days
before the sale, the provincial fiscal of Iloilo filed a motion with the
Court of First Instance praying that the attachment on the said property be
dissolved, that the said attachment be declared null and void as being illegal
and violative of the rights of the defendant municipality.
Plaintiff's counsel objected to the fiscal's motion but the court, by
order of August 12, 1925, declared the attachment levied upon the
aforementioned property of the defendant municipality null and void, thereby
dissolving the said attachment.
From this order the plaintiff has appealed by bill of exceptions. The
fundamental question raised by appellant in her four assignments of error is
whether or not the property levied upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides
that:
"Municipalities are political bodies corporate, and as such are
endowed with the faculties of municipal corporations, to be exercised
by and through their respective municipal government in conformity
with law.
"It shall be competent for them, in their proper corporate name,
to sue and be sued, to contract and be contracted with, to acquire
and hold real and personal property for municipal purposes, and
generally to exercise the powers hereinafter specified or otherwise
conferred upon them by law."
For the purposes of the matter here in question, the Administrative Code
does not specify the kind of property that a municipality may acquire.
However, article 343 of the Civil Code divides the property ofprovinces and
(municipalities) into property for public use and patrimonial property.
According to article 344 of the Code, provincial roads and foot-path, squares,
streets, fountains, and public waters, drives and public
improvements of general benefit built at the expense of the said towns or
provinces, are property for public use.
 All other property possessed by the said towns and provinces is
patrimonial and shall be subject to the provision of the Civil Code except as
provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with
administrative legislation" (Spanish) we must distinguish, as to the patrimonial
property of the towns, "between that of common benefit and that which is
private property of the town. The first differs from property for public use in
that generally its enjoyment is less, as it is limited to neighbors or to a group
or class thereof; and furthermore, such use, more or less general, is not
intrinsic with this kind of property, for by its very nature it may be enjoyed as
though it were private property. The third group, that is, private property, is
used in the name of the town or province by the entities representing it and,
like any private property, giving a source of revenue."
Such distinction, however, is of little practical importance in this
jurisdiction in view of the different principles underlying the functions of a
municipality under the American rule. Notwithstanding this, we believe that the
principle governing property of the public domain of the State is applicable to
property for public use of the municipalities as said municipal property is
similar in character. The principle is that the property for public use of the
State is not within the commerce of man and, consequently, is unalienable and
not subject to prescription. Likewise, property for public use of the municipality
is not within the commerce of man so long as it is used by the public and,
consequently, said property is also inalienable.
The American Law is more explicit about this matter as expounded by
McQuillin in Municipal Corporations, volume 3, paragraph 1160, where he says
that:
"State statutes often provide that court houses, jails other
buildings owned by municipalities and the lots on which they stand
shall be exempt from attachment and execution. But
independent of express statutory exemption, as a general
proposition, property, real and personal, held
by municipal corporations, in trust for the benefit of their inhabitants,
and used for public purposes, is exempt.
"For example, public buildings, school houses, streets, squares,
parks, wharves, engines and engine houses, and the like, are not
subject to execution. So city waterworks, and a stock of liquors
carried in a town dispensary, are exempt. The reason for the
exemption is obvious. Municipal corporations are created for public
purposes and for the good of the citizens in their aggregate or public
capacity. That they may properly discharge such public functions
corporate property and revenues are essential, and to deny them
these means the very purpose of their creation would be materially
impeded, and in some instances practically destroy it. Respecting this
subject the Supreme Court of Louisiana remarked: 'On the first
view of this question there is something very repugnant to the moral
sense in the idea that a municipal corporation should contract debts,
and that having no resources but the taxes which are due to it these
should not be subjected by legal process to the satisfaction of its
creditors. This consideration, deduced from the principles of moral
equity has only given way to the more enlarged contemplation of the
great and paramount interests of public order and the
principles of government.'
"It is generally held that property owned by a municipality,
where not used for a public purpose but for quasi private purposes, is
 subject to execution on a judgment against the municipality, and
may be sold. This rule applies to shares of stock owned by
a municipal corporation and the like. But the mere fact that corporate
property held for public uses is being temporarily used for private
purposes does not make it subject to execution.
"If municipal property exempt from execution is destroyed, the
insurance money stands in lieu thereof and is also exempt.
"The members or inhabitants of a municipal corporation proper
are not personally liable for the debts of the municipality, except that
in the New England States the individual liability of the inhabitant is
generally maintained."
In Corpus Juris, vol. 23, page 355, the following is found:
"Where property of a municipal or other public corporation is
sought to be subjected to execution to satisfy judgments recovered
against such corporation, the question as to whether such property is
leviable or not is to be determined by the usage and purposes for
which it is held. The rule is that property held for public uses, such as
public buildings, streets, squares, parks, promenades, wharves
landing places, fire engines, hose and hose carriages. engine houses,
public markets, hospitals, cemeteries, and generally everything held
for governmental purposes, is not subject to levy and sale under
execution against such corporation. The rule also applies to funds in
the hands of a public officer. Likewise it has been held that taxes due
to a municipal corporation or county cannot be seized under
execution by a creditor of such corporation. But where
amunicipal corporation or county owns in its proprietary, as
distinguished from its public or governmental capacity, property not
useful or used for a public purpose but for quasi private purposes,
the general rule is that such property may be seized and sold under
execution against the corporation, precisely as similar
property of individuals is seized and sold. But property held for public
purposes is not subject to execution merely because it is temporarily
used for private purposes, although if the public use is wholly
abandoned it becomes subject to execution. Whether or not property
held as public property is necessary for the public use is a political,
rather than a judicial question."
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd.
(140 U. S., 654; 35 Law. ed., 556), it was held that a wharf for unloading
sugar and molasses, open to the public, was property for the public use of the
City of New Orleans and was not subject to attachment for the payment  of  the
debts of the said city.
In that case it was proven that the said wharf was a parcel of land
adjacent to the Mississippi River where all shipments of sugar and molasses
taken to New Orleans were unloaded.
That city leased the said wharf to the Louisiana Construction Company,
Ltd., in order that it might erect warehouses so that the merchandise upon
discharge might not be spoiled by the elements. The said company was given
the privilege of charging certain fees for storing merchandise in the said
warehouses and the public in general had the right to unload sugar and
molasses there by paying the required fees, 10 per cent of which was turned
over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was
public property, that it never ceased to be such in order to become private
property of the City; wherefore the company could not levy execution upon the
wharf in order to collect the amount of the judgment rendered in favor thereof.
In the case of Klein vs. City  of  New Orleans (98 U S., 149; 25 Law. ed.,
430), the Supreme Court of the United States held that a public wharf on the
banks of the Mississippi River was public property and not subject to execution
for the payment of a debt  of  the City  of  New Orleans where said wharf was
located.
In this case a parcel of land adjacent to the Mississippi River, which
formerly was the shore of the river and which later enlarged itself by
accession, was converted into wharf by the city for public use, who charged a
certain fee for its use.
It was held that land was public property as necessary as a public street
and was not subject to execution on account of the debts of the city. It was
further held that the fees collected were also exempt from execution because
they were a part of the income of the city.
In the case of Tufexis vs. Olaguera and  Municipal Council of Guinobatan
(32 Phil., 654), the question raised was whether for the payment of a debt to
a third person by the concessionaire of a public market, the said public market
could be attached and sold at public auction. The Supreme Court held that:
"Even though a creditor is unquestionably entitled to recover
out of his debtor's property, yet when among such property there is
included the special right granted by the Government of usufruct in a
building intended for a public service, and when this privilege is
closely related to a service of a public character, such right of the
creditor to the collection of a debt owed him by the debtor who
enjoys the said special privilegeof usufruct in a public market is not
absolute and may be exercised only through the action of a
court of justice with respect to the profits or revenue obtained under
the special right of usufruct enjoyed by debtor.
"The special concession of the right to usufruct in a public
market cannot be attached like any ordinary right, because that
would be to permit a person who has contracted with the state or
with the administrative officials thereof to conduct and manage a
service of a public character, to be substituted, without the
knowledge and consent of the administrative authorities, by one who
took no part in the contract, thus giving rise to the possibility of the
regular course of a public service being disturbed by the more or less
legal action of a grantee, to the prejudice of the state and the public
interests.
"The privilege or franchise granted to a private person to enjoy
the usufruct of a public market cannot lawfully be attached and sold,
and a creditor of such person can recover his debt only out of the
income or revenue obtained by the debtor from the enjoyment or
usufruct of the said privilege, in the same manner that the
rights of the creditors of a railroad company can be exercised and
their creditors collected only out ofthe gross receipts remaining after
deduction has been made therefrom of the operating expenses of the
road. (Law of November 12, 1869, extended to the overseas
provinces by the royal order of August 3, 1886.)"
For the reasons contained in the authorities above quoted we believe that
this court would have reached the same conclusion if the debtor had been the
municipality of Guinobatan and the public market had been levied upon by
virtue of the execution.
 It is evident that the movable and immovable property of a municipality,
necessary for governmental purposes, may not be attached and sold for the
payment of a judgment against the municipality. The supreme reason for this
rule is the character of the public use to which such kind of property is
devoted. The necessity for government service justifies that the
property of public use of the municipality be exempt from execution just as it
is necessary to exempt certain property of private individuals in accordance
with section 452 of the Code of Civil Procedure.
Even the municipal income, according to the above quoted authorities, is
exempt from levy and execution. In volume 1, page
467, Municipal Corporations by Dillon we find that:
"Municipal corporations are instituted by the supreme
authority of a state for the public good. They exercise, by delegation
from the legislature, a portion of the sovereign power. The main
object of their creation is to act as administrative agencies for the
state, and to provide for the police and local government of certain
designated civil divisions of its territory. To this end they are invested
with certain governmental powers and charged with civil, political,
and municipal duties. To enable them beneficially to exercise these
powers and discharge these duties, they are clothed with the
authority to raise revenues, chiefly by taxation, and subordinately by
other modes, as by licenses, fines, and penalties. The revenue of the
public corporation is the essential means by which it is enabled to
perform its appointed work. Deprived of its regular and adequated
supply of revenue, such a corporation is practically destroyed, and
the ends of its erection thwarted. Based upon considerations of this
character, it is the settled doctrine of the law that not only the public-
property but also the taxes and public revenues of such corporations
cannot be seized under execution against them, either in the treasury
or when in transit to it. Judgments rendered for taxes, and the
proceeds ofsuch judgments in the hands of officers of the law, are
not subject to execution unless so declared by statute. The
doctrine of the inviolability of the public revenues by the creditor is
maintained, although the corporation is in debt, and has no
means of payment but the taxes which it is authorized to collect."
Another error assigned by counsel for appellant is the
holding of the court a quo that the proper remedy for collecting the judgment
in favor of the plaintiff was by way of mandamus.
While this question is not necessarily included in the one which is the
subject of this appeal, yet we believe that the holding of the trial court,
assigned as error by appellant's counsel, is true when, after a judgment is
rendered against a municipality, it has no property subject to execution. This
doctrine is maintained by Dillon (Municipal Corporations vol. 4, par. 1507, 5th
ed.) based upon the decisions of several States of the Union upholding the
same principle and which are cited on page 2679 of the aforesaid work. In this
sense this assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and
is hereby affirmed with costs against the appellant. So ordered.
|||  (Vda. de Tan Toco v. Municipal Council of Iloilo, G.R. No. 24950,
[March 25, 1926], 49 PHIL 52-61)
 [G.R. No. L-24440. March 28, 1968.]

THE PROVINCE OF ZAMBOANGA DEL NORTE, plaintiff-appellee, v
s.  CITY OF ZAMBOANGA, SECRETARY OF FINANCE AND
COMMISSIONER OF INTERNAL REVENUE, defendants-appellants.

Fortugaleza, Lood, Sarmiento, M .T . Yap & Associates  for plaintiff-

appellee.
Solicitor General  for defendant-appellant.

SYLLABUS

1. SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF; CONVERSION INTO

AN ORDINARY ACTION. — Assuming that the law had already been violated
and that plaintiff sought to give it coercive effect, sec. 6of Rule 64 of the
Rules of Court authorizes the conversion of a petition for declaratory relief into
an ordinary action.
2. MUNICIPAL CORPORATIONS; EXTENT OF CONGRESSIONAL CONTROL
OVER MUNICIPAL PROPERTY. — The principle is this: If the property is owned
by the municipal corporation or municipality in its public and governmental
capacity, the property is public and Congress has absolute control over it; if
the property is owned in its private or proprietary capacity, then it is
patrimonial and Congress has no absolute control, in which case, the
municipality cannot be deprived of it without due process and payment of just
compensation.
3. ID.; ID.; SUBJECT TO TWO NORMS PROVIDED BY THE CIVIL CODE
AND THE LAW OF MUNICIPAL CORPORATIONS. — The capacity in which the
property is held is dependent on the use to which it is intended and devoted.
There are two norms, i.e., of the Civil Code and of the law of Municipal
Corporations in classifying whether municipal properties are patrimonial or
public.
4. ID.; ID.; UNDER CIVIL CODE, ALL MUNICIPAL PROPERTIES EXCEPT
THOSE ENUMERATED IN ART. 424 ARE PATRIMONIAL. — The Civil Code
classification is found in articles 423 and 424 of the same Code. Under Art.
424, property for public, use, consists of provincial roads, city streets,
municipal streets, the squares, fountains, public waters, promenades and
public works for public service paid for by said municipal corporations. All other
property possessed by any of them is patrimonial and is governed by the Code
without prejudice to provisions of special laws. Under this classification, all the
properties in question save two lots used as High School playgrounds are
patrimonial properties of Zamboanga Province; this includes the capitol site,
the hospital and leprosarium sites, and the school sites which are patrimonial
as they are not for public use. They fall outside the phrase "public works for
public service" because under the ejusdem generis rule, such public works
must be for free and for the indiscriminate use by anyone.
5. ID.; ID.; CLASSIFICATION OF MUNICIPAL PROPERTIES UNDER
MUNICIPAL CORPORATION LAW. — Under the norm provided for by the
law of Municipal Corporations, all those properties which are devoted to public
service are deemed public; the rest remain patrimonial. Under this norm, to be
considered public, it is enough that the property be held and devoted for
governmental purposes like local administration, public education, public
health, etc.
6. ID.; ID.; BUILDINGS EXISTING ON LOTS PARTAKE OF NATURE OF THE
LATTER. — Although the records do not show whether the buildings on the lots
in question were constructed at the expense of the municipal corporation, since
said buildings were constructed even before the enactment of Commonwealth
Act 39 in 1936 and the provinces then had no power to authorize
construction of buildings at their own expense, it is presumed that the
buildings were erected by national funds, In this case, Congress could
dispose of said buildings in the same manner as it did with the lots in question.
And even assuming that provincial funds were used in their construction, the
buildings are mere accessories to the lands which are public, and so they
follow the nature of the lands, i.e., public. Moreover, although located in
the city, the buildings are not for the exclusive use and benefit of city residents
but also for provincial residents, wherefore the province is not really
deprived of its benefits.
7. ID.; ID.; MUNICIPAL PROPERTY HELD AND DEVOTED TO PUBLIC
SERVICE IS NOT IN THE SAME CATEGORY AS ORDINARY PRIVATE PROPERTY.
— The controversy is more along the domains of the law ofMunicipal
Corporations — State vs. Province — than along that of Civil Law. The Court is
not inclined to hold that municipal property held and devoted to public service
is in the same category as ordinary private property. Else, the consequences
are dire. As ordinary private properties, they can be levied upon and attached,
 they can be acquired thru adverse possession - to the detriment of the local
community.
8. ID.; ID.; REGISTRATION CANNOT CONVERT PUBLIC PROPERTY INTO
PRIVATE PROPERTY. — The fact that the lots used for government purposes
are registered is of no significance since registration cannot convert public
property to private.
9. ID.; ID.; CLASSIFICATION OF PROPERTIES UNDER CIVIL CODE,
WITHOUT PREJUDICE TO PROVISIONS OF LAW ON MUNICIPAL
CORPORATIONS. — The classification of properties other than those for public
use in the municipalities as patrimonial under art. 424 of the Civil Code is
without prejudice to provisions of special laws. For purposes of this article, the
law of Municipal Corporations is considered as "special laws." Hence, the
classification of municipal property devoted for distinctly governmental
purposes as public should prevail over the Civil Code classification in this
particular case.
10. ID.; NO LACHES UNDER FACTS OF THE CASE. —
Under Commonwealth Act No. 39, sec. 50, the cause of action in favor of the
defunct province of Zamboanga arose only in 1948 when the Auditor General
fixed the value of the properties in issue. In 1951, when the Cabinet
transferred the properties for free to Zamboanga City, a reconsideration
thereof was sought on time. In 1952, the old province was dissolved and as
successor-in-interest to over half of the
properties, Zamboanga del Norte obtained a reconsideration of the cabinet
resolution of 1959 and in fact partial payments were later made. It was only
after the enactment of Republic Act 3039 in 1961 that the present controversy
arose and since plaintiff brought suit in 1962 all these facts negative laches.

DECISION

BENGZON, J.P., J p:

Prior to its incorporation as a chartered city, the

Municipality of Zamboanga used to be the provincial capital of the
then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was
approved converting the Municipality of Zamboanga into Zamboanga City. Sec.
50 of the Act also provided that —
"Buildings and properties which the province shall abandon
upon the transfer of the capital to another place will be acquired and
paid for by the City of Zamboanga at a price to be fixed by the
Auditor General."
The properties and buildings referred to consisted of 50 lots and some
buildings constructed thereon, located in the City of Zamboanga and covered
individually by Torrens certificates of title in the name ofZamboanga Province.
As far as can be gleaned from the records 1 said properties were being utilized
as follows —
No. of Lots Use
   
1 Capitol Site
3 School Site
3 Hospital Site
 3 Leprosarium
1 Curuan School
1 Trade School
2 Burleigh School
2 High School Playground
9 Burleighs
1 Hydro-Electric Site (Magay)
1 San Roque
23 vacant

It appears that in 1945, the capital of Zamboanga Province was

transferred to Dipolog 2 Subsequently, or on June 16, 1948, Republic Act
286 was approved creating the municipality of Molave and making it the
capital of Zamboanga Province.

On May 26, 1949, the Appraisal Committee formed by the Auditor

General, pursuant to Commonwealth Act 39, fixed the value of the properties
and buildings in question left by Zamboanga Province inZamboanga City at
P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing
the province of Zamboanga into two
(2): Zamboanga del Norte and Zamboanga del Sur. As to how the assets and
obligations of the old provincewere to be divided between the two new ones,
Sec. 6 of the law provided:
"Upon the approval of this Act, the funds, assets and other
properties and the obligations of the province of Zamboanga shall be
divided equitably between the Province of Zamboanga del Norte and
the Provinceof Zamboanga del Sur by the President of the Philippines,
upon the recommendation of the Auditor General."

Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the
assets and obligations of the defunct Province of Zamboanga as follows:
54.39% for Zamboanga del Norte and 45.61%
for Zamboangadel Sur, Zamboanga del Norte therefore became entitled to
54,39% of P1,294,244.00, the total value of the lots and buildings in question,
or P704,220.05 payable by Zamboanga City.

On March 17, 1959, the Executive Secretary, by order of the President,

issued a ruling 4 holding that Zamboanga del Norte had a vested right as
owner (should be co-owner pro-indiviso) of the properties mentioned in Sec.
50 of Commonwealth Act 39, and is entitled to the price thereof, payable
by Zamboanga City. This ruling revoked the previous Cabinet Resolution of July
13, 1951 conveying all the said 50 lots and buildings thereon
to Zamboanga City for P1.00, effective as of 1945, when the provincial
capital of the then Zamboanga Province was transferred to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal
Revenue to deduct an amount equal to 25% of the regular internal revenue
allotment for the City of Zamboanga for the quarter ending March 31, 1960,
then for the quarter ending June 30, 1960, and again for the first
quarter of the fiscal year 1960-1961. The deductions, all aggregating
P57,373.46 was credited to the province ofZamboanga del Norte, in partial
payment of the P704,220,05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending
Sec. 50 of Commonwealth Act 39 by providing that —
"All buildings, properties and assets belonging to the
former province of Zamboanga and located within
the City of Zamboanga are hereby transferred, free  of  charge, in
favor of the said City of Zamboanga." (Stressed for emphasis)

Consequently, the Secretary of Finance, on July 12, 1961, ordered the

Commissioner of Internal Revenue to stop from effecting further payments
to Zamboanga del Norte and to return to Zamboanga City the
sumof P57,373.46 taken from it out of the internal revenue
allotment of Zamboanga del Norte. Zamboanga City admits that since the
enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has already
been returned to it.

This constrained plaintiff-appellee Zamboanga del Norte to file on March

5, 1962, a complaint entitled "Declaratory Relief with Preliminary Mandatory
Injunction" in the Court of First Instance of Zamboangadel Norte against
defendants-appellants Zamboanga City, the Secretary of Finance and the
Commissioner of Internal Revenue. It was prayed that: (a) Republic Act
3039 be declared unconstitutional for depriving plaintiff province of property
without due process and just compensation; (b) Plaintiff's nights and
obligations under said law be declared; (c) The Secretary of Finance and the
Internal Revenue Commissioner be enjoined from reimbursing the
sum of 57,373.46 to defendant City; and (d) The latter be ordered to continue
paying the balance of P704,220.05 in quarterly installments of 25% of its
internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary
injunction as prayed for. After defendants filed their respective answers, trial
was held. On August 12, 1963, judgment was rendered, the dispositive
portion of which reads:
"WHEREFORE, judgment is hereby rendered declaring Republic
Act No. 3039 unconstitutional in so far as it deprives
plaintiff Zamboanga del Norte of its private properties,
consisting of 50 parcels of land and the improvements thereon under
certificates of titles (Exhibits 'A' to 'A-49') in the name of the
defunct province of Zamboanga; ordering
defendant City of Zamboanga to pay to the plaintiff the
sum of P704,220.05, payment thereof to be deducted from its
regular quarterly internal revenue allotment equivalent to 25%
thereof every quarter until said amount shall have been fully paid;
ordering defendant Secretary of Finance to direct defendant
Commissioner of Internal Revenue to deduct 25% from the regular
quarterly internal revenue allotment for
defendant City of Zamboanga and to remit the same to
plaintiff Zamboanga del Norte until said sum of P704,220.00 shall
have been fully paid; ordering plaintiff Zamboanga del Norte to
execute through its proper officials the corresponding public
instrument deeding to defendant City of Zamboanga the 50
parcelsof land and the improvements thereon under the
certificates of tide (Exhibits 'A' to 'A-49') upon payment by the
latter of the aforesaid sum of P704,220.00 in full; dismissing the
 counterclaim of defendant City ofZamboanga; and declaring
permanent the preliminary mandatory injunction issued on June 8,
1967, pursuant to the order of the Court dated June 47 1962. No
costs are assessed against the defendant.
"It is SO ORDERED."
Subsequently, but prior to the perfection of defendants' appeal,
plaintiff province fled a motion to reconsider praying that Zamboanga City be
ordered instead to pay the P704,220.05 in lump sum with 6% interest per
annum. Over defendants' opposition, the lower court granted
plaintiff province motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the
propriety of declaratory relief filed in the lower court on the assertion that the
law had already been violated and that plaintiff sought to give it coercive
effect, since assuming the same to be true, the Rules anyway authorize the
conversion of the proceedings to an ordinary action, 5 We proceed to the more
important and principal question of the validity ofRepublic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots
and buildings thereon in question. For, the matter involved here is the
extent of legislative control over the properties of a municipal
corporation, of which a province is one. The principle itself is simple: If the
property is owned by the municipality (meaning municipal corporation) in its
public and governmental capacity, the property is public and Congress has
absolute control over it. But if the property is owned in its private or
proprietary capacity, then it is patrimonial and Congress has no absolute
control. The municipality cannot be deprived of it without due process and
payment of just compensation. 6
The capacity in which the property is held is, however, dependent on the
use to which it is intended and devoted. Now, which of two norms, i.e.,
that of the Civil Code or that obtaining under the law ofMunicipal Corporations,
must be used in classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which
provide.
"ART. 423. The property of provinces, cities and municipalities,
is divided into property for public use and patrimonial properly."
"ART. 424. Property for public use, in the provinces, cities, and
municipalities, consists of the provincial roads, city streets, municipal
streets, the squares, fountains, public waters, promenades, and
public works for public service paid for by said provinces, cities, or
municipalities.
"All other property possessed by any  of  them is patrimonial  and
shall be governed by this Code, without prejudice to the
provisions of special laws." (Stressed for emphasis)
Applying the above cited norm, all the properties in question, except the
two (2) lots used as High School playgrounds, could be considered as
patrimonial properties of the former Zamboanga province. Even the capitol
site, the hospital and leprosarium sites, and the school sites will be considered
patrimonial for they are not for public use. They would not fall under the
phrase "public works for public service" for it has been held that under
the ejusdem generis rule, such public works must be for free and
indiscriminate use by anyone, just like the preceding enumerated properties in
the first paragraph of Art. 424. 7 The playgrounds, however, would fit into this
category. This was the norm applied by the lower court. And it cannot be said
that its actuation was without jurisprudential precedent for in
Municipality of Catbalogan v. Director of Lands, 8 and in
Municipality of Tacloban v. Director of Lands, 9 it was held that the capitol site
and the school sites in municipalities constitute their patrimonial properties.
This result is understandable because, unlike in the classification regarding
State properties, properties for public service in the municipalities are not
classified as public. Assuming then the Civil Code classification to be the
chosen norm, the lower court must be affirmed except with regard to the two
(2) lots used as playgrounds.
On the other hand, applying the norm obtaining under the principles
constituting the law of Municipal Corporations, all those of the 50 properties in
question which are devoted to public service are deemed public; the rest
remain patrimonial. Under this norm, to be considered public, it is enough that
the property be held and devoted for governmental purposes like local
administration, public education, public health, etc. 10
Supporting jurisprudence are found in the following cases: (1)
Hinunangan v. Director of Lands, 11 where it was stated that ". . . where the
municipality has occupied lands distinctly for public purposes, such as for the
municipal court house, the public school, the public market, or other necessary
municipal building, we will, in the absence of proof to the contrary, presume a
grant from the State in favor of the municipality; but, as indicated by the
wording, that rule may be invoked only as to property which is used distinctly
for public purposes . . ." (2) Viuda de Tantoco v. Municipal
Council of Iloilo 12 held that municipal properties necessary for governmental
purposes are public in nature. Thus, the auto trucks used by the municipality
for street sprinkling, the police patrol automobile, police stations and concrete
structures with the corresponding lots used as markets were declared exempt
from execution and attachment since they were not patrimonial properties. (3)
Municipality of Batangas v. Cantos, 13 held squarely that a municipal lot which
had always been devoted to school purposes is one dedicated to public use and
is not patrimonial property of a municipality.
Following this classification, Republic Act 3039 is valid insofar as it affects
the lots used as capitol site, school sites and its grounds, hospital and
leprosarium sites and the high school playground sites — a total of 24 lots —
since these were held by the former Zamboanga province in its governmental
capacity and therefore are subject to the absolute control of Congress. Said
lots considered as public property are the following:
TCT Number Lot Number Use
     
2220 4-B Capitol Site
2816 149 School Site
3281 1224 Hospital Site
3282 1226 Hospital Site
3283 1225 Hospital Site
3748 434-A-1 School Site
5406 171 School Site
5564 168 High School
     Playground
5567 157 & 158 Trade School
15583 167 High School
    Playground
6181 (O.C.T.) Curuan School
11942 926 Leprosarium
11943 927 Leprosarium
11944 925 Leprosarium
5557 170 Burleigh School
5562 180 Burleigh School
5565 172-B Burleigh
5570 171-A Burleigh
5571 172-C Burleigh
5572 174 Burleigh
5573 178 Burleigh
5585 171-B Burleigh
5586 173 Burleigh
5587 172-A Burleigh

We noticed that the eight Burleigh lots above described are adjoining each
other and in turn are between the two lots wherein the Burleigh schools arc
built as per records appearing herein and in the Bureau ofLands. Hence. there
is sufficient basis for holding that said eight lots constitute-the the appurtenant
grounds of the Burleigh schools and partake of the nature of the same.

Regarding the several buildings existing on the lots above- mentioned,

the records do not disclose whether they were constructed at the
expense of the former Province of Zamboanga, Considering however the fact
that said buildings must have been erected even before 1936
when Commonwealth Act 39 was enacted and the further fact that provinces
then had no power to authorize construction of buildings such as those in the
case at bar at their own expense, 14 it can be assumed that said buildings
were erected by the National Government, using national funds. Hence,
Congress could very well dispose of said buildings in the same manner that it
did with the lots in question.
But even assuming that provincial funds were used, still the buildings
constitute mere accessories to the lands, which are public in nature, and so,
they follow the nature of said lands, i.e., public Moreover, said buildings, those
located in the city, will not be for the exclusive use and benefit of city residents
for they could be availed of also by the provincial residents. The province then
— and its successors-in-interest — are not really deprived of the benefits
thereof.
But Republic Act 3039 cannot be applied to
deprive Zamboanga del Norte of its share in the value of the rest of the 26
remaining lots which are patrimonial properties since they are not being
utilized for distinctly governmental purposes. Said lots are:
 TCT Number Lot Number Use
     
5577 177 Mydro, Magay
13198 127-D San Roque
5569 169 Burleigh 15
5558 175 Vacant
5559 188 "
5560 183 "
5561 186 "
5563 191 "
5566 176 "
5568 179 "
5574 196 "
5575 181-A "
5576 181-B "
5578 182 "
5579 197 "
5580 195 "
5581 159-B "
5582 194 "
5584 190 "
5588 184 "
5589 187 "
5590 189 "
5591 192 "
5592 193 "
5593 185 "
7379 4147 "

Moreover, the fact that these 26 lots are registered strengthens the proposition

that they are truly private in nature. On the other hand, that the 24 lots used
for governmental purposes are also registered is of no significance since
registration cannot convert public property to private. 16

We are more inclined to uphold this latter view. The controversy here is
more along the domains of the Law of Municipal Corporations —
State v. Province — than along that of Civil Law. Moreover, this Court is not
inclined to hold that municipal property held and devoted to public service is in
the same category as ordinary private property. The consequences are dire. As
ordinary private properties, they can be levied upon and attached. They can
even be acquired thru adverse possession — all these to the detriment of the
local community. Lastly, the classification of properties other than those for
public use in the municipalities as patrimonial under Art. 424 of the Civil Code
is ". . . without prejudice to the provisions of special laws." For purposes of this
article, the principles obtaining under the Law of Municipal Corporations can be
considered as "special laws". Hence, the classification of municipal property
devoted for governmental purposes as public should prevail over the Civil Code
classification in this particular case.
Defendants' claim that plaintiff and its predecessor-in-interest are
guilty of laches is without merit. Under Commonwealth Act 39, Sec. 50, the
cause of action in favor of the defunct Zamboanga Provincearose only in 1949
after the Auditor General fixed the value of the properties in question. While in
1951, the Cabinet resolved to transfer said properties practically for free
to Zamboanga City, a reconsideration thereof was seasonably sought. In 1952,
the old province was dissolved. As successor-in-interest to more than
half of the properties involved, Zamboanga del Norte was able to get a
reconsideration of the Cabinet Resolution in 1959. In fact, partial payments
were effected subsequently and it was only after the passage of Republic Act
3039 in 1961 that the present controversy arose. Plaintiff brought suit in 1962.
All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to collect from
the City of Zamboanga the former's 54.39% share in the 26 properties which
are patrimonial in nature, said share to be computed on the basis of the
valuation of said 26 properties as contained in Resolution No. 7, dated March
26, 1949, of the Appraisal Committee formed by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the
P43,030.11 already returned to defendant City. The return of said amount to
defendant was without legal basis. Republic Act 3039took effect only on June
17, 1961 after a partial payment of P57,373.46 had already been made. Since
the law did not provide for retroactivity, it could not have validly affected a
completed act. Hence, the amountof P43,030.11 should be immediately
returned by defendant City to plaintiff province. The remaining balance, if any,
in the amount of plaintiff's 54.39% share in the 26 lots should then be paid by
defendant City in the same manner originally adopted by the
Secretary of Finance and the Commissioner of Internal Revenue, and not in
lump sum. Plaintiff's prayer, particularly pars. 5 and 6, read together with
pars. 10 and 11 ofthe first cause of action recited in the complaint 17 clearly
shows that the relief sought was merely the continuance of the quarterly
payments from the internal revenue allotments of defendant City. Art.
1169 ofthe Civil Code on reciprocal obligations invoked by plaintiff to justify
lump sum payment is inapplicable since there has been so far in legal
contemplation no complete delivery of the lots in question. The titles to the
registered lots are not yet in the name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another
judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to
plaintiff Zamboanga del Norte in lump sum the amount of P43,030,11 which
the former took back from the latter out of the sum ofP57,373.46 previously
paid to the latter, and
(2) Defendants are hereby ordered to effect payments in
favor of plaintiff of whatever balance remains of plaintiff's 54.39% share in the
26 patrimonial properties, after deducting therefrom the sum ofP57,373.46, on
the basis of Resolution No. 7 dated March 26, 1949 of the Appraisal Committee
formed by the Auditor General, by way of quarterly payments from the
allotments of defendant City, in the manner originally adopted by the
Secretary of Finance and the Commissioner of Internal Revenue. No costs. So
ordered.
|||  (Province of Zamboanga del Norte v. City of Zamboanga, G.R. No. L-
24440, [March 28, 1968], 131 PHIL 446-461)

[G.R. No. L-41001. September 30, 1976.]

MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE

ORDER OF THE ELKS, INC.,  petitioner, vs. THE
HONORABLE COURT OF APPEALS, CITY OF MANILA, and
TARLAC DEVELOPMENT CORPORATION,  respondents.

[G.R. No. L-41012. September 30, 1976.]

TARLAC DEVELOPMENT
CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS
, CITY OF MANILA, LODGE NO. 761, BENEVOLENT AND
PROTECTIVE ORDER OF ELKS, INC.,  respondents.
 Quasha, Asperilla, Zafra, Tayag & Ancheta, for Manila Lodge No. 761,
Benevolent and Protective Order of the ELKS, Inc.
Jose P. Bengzon, Villegas, Zarraga, Narciso & Cudala and Emmanuel G.
Cochico, for Tarlac Development Corporation.
S.M. Artiaga Jr. and Restituto R. Villanueva, Office  of  the City Legal
Officer for City of Manila.

DECISION

CASTRO, J  p:

STATEMENT OF THE CASE AND STATEMENT

OF THE FACTS

These two cases are petitions on certiorari to review the decision dated
June 30, 1975 of the Court of Appeals in CA-G.R. No. 51590-R entitled "Tarlac
Development Corporation vs. City of Manila, and ManilaLodge No. 761,
Benevolent and Protective Order of Elks, Inc.," affirming the trial court's
finding in Civil Case No. 83009 that the property subject of the decision a
quo is a "public park or plaza." LibLex
On June 26, 1905 the Philippine Commission enacted Act No. 1.360 which
authorized the City of Manila to reclaim a portion of Manila Bay. The reclaimed
area was to form part of the Luneta extension. TheAct provided that the
reclaimed area "shall be the property of the City of Manila" and that "the
City of Manila is hereby authorized to set aside a tract of the reclaimed land
formed by the Luneta extension . . . at the north end not to exceed five
hundred feet by six hundred feet in size, for a hotel site, and to lease the
same, with the approval of the Governor General, to a responsible person or
corporation for a term not to exceed ninety-ninety years."
Subsequently, the Philippine Commission passed on May 18,
1907 Act No. 1657, amending Act No. 1360, so as to authorize the
City of Manila either to lease or to sell the portion set aside as a hotel site.
The total area reclaimed was a little over 25 hectares. The
City of Manila applied for the registration of the reclaimed area, and on
January 20, 1911, O.C.T. No. 1909 was issued in the name of the
City ofManila. The title described the registered land as "un terreno conocido
con el nombre de Luneta Extension, situado en el distrito de la Ermita . . .."
The registration was "subject, however, to such of the incumbrances
mentioned in Article 39 or said law (Land Registration Act) as may be
subsisting" and "sujeto a las disposiciones y condiciones impuestas en la
Ley No. 1360; y sujeto tambien a los contratos de venta. celebrados y
otorgados por la Ciudad de Manila a favor del Army and Navy Club y
la Manila Lodge No. 761, Benevolent and Protective Order of Elks, fechados
respectivamente, en 29 de Diciembre de 1908 y 16 de Enero de 1909." 1
On July 13, 1911 the City of Manila, affirming a prior sale dated January
16, 1909, conveyed 5,543.07 square meters of the reclaimed area to
the Manila Lodge No. 761, Benevolent and Protective Order ofElks of the U.S.A.
(BPOE, for short) on the basis of which TCT No. 2195 2 was issued to the latter
over the "parcela de terreno que es parte de la Luneta Extension, Situada en el
Distrito de la Ermita . . .." At the backof this title was annotated document
4608/T-1635, which in part reads as follows: "que la citada Ciudad
de Manila tendra derecho a su opcion, de recomprar la expresada propiedad
para fines publicos solamente, en cualquier tiempo despues de cincuenta anos
desde el 13 de Julio de 1911, previo pago a la entidad compradora, o a sus
sucesores del precio de la venta de la misma propiedad, mas el valor que
entonces tengan las mejoras."
For the remainder of the Luneta Extension, that is, after segregating
therefrom the portion sold to the Manila Lodge No. 761, BPOE, a new
Certificate of Title No. 2196 3 was issued on July 17, 1911 to the Cityof Manila.
Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07 square
meters to the Elks Club, Inc., to which was issued TCT No. 67488. 4 The
registered owner, "The Elks Club, Inc.," was later changed bycourt order to
"Manila Lodge No. 761, Benevolent and Protective Order of Elks, Inc."
In January 1963 the BPOE petitioned the Court of First
Instance of Manila, Branch IV, for the cancellation of the right of the
City of Manila to repurchase the property. This petition was granted on
February 15, 1963.
On November 19, 1963 the BPOE sold for the sum of P4,700,000 the land
together with all the improvements thereon to the Tarlac Development
Corporation (TDC, for short) which paid P1,700,000 as down payment and
mortgaged to the vendor the same realty to secure the payment of the balance
to be paid in quarterly installments. 5 At the time of the sale, there
was no annotation of any subsisting lien on the title to the property. On
December 12, 1963 TCT No. 73444 as issued to TDC over the subject land still
described as "UNA PARCELA DE TERRENO, que es parte de la Luneta
Extension, situada en el Distrito de Ermita . . .."
In June 1964 the City of Manila filed with the Court of First
Instance of Manila a petition for the reannotation of its right to repurchase;
the court, after hearing, issued an order, dated November 19, 1964, directing
the Register of Deeds of the City of Manila to reannotate in toto the entry
regarding the right of the City of Manila to repurchase the property after fifty
years. From this order TDC and BPOE appealed to this Court which on July 31,
1968 affirmed in G.R. Nos. L-24557 and L-24469 the trial court's
order of reannotation, but reserved to TDC the right to bring another action for
the clarification of its rights. LLphil
As a consequence of such reservation, TDC filed on April 28, 1971 against
the City of Manila and the Manila Lodge No. 761, BPOE, a complaint, docketed
as Civil Case No. 83009 of the Court of First Instanceof Manila, containing
three causes of action and praying —
"a) On the first cause of action, that the plaintiff TDC be
declared to have purchased the parcel of land now in question with
the buildings and improvements thereon from the defendant BPOE
for value and in good faith, and accordingly ordering the
cancellation of Entry No. 4608/T-1635 on Transfer
Certificate of Title No. 73444 in the name of the Plaintiff.
"b) On the second cause of action, ordering the
defendant of Manila to pay the plaintiff TDC damages in the
sum of not less than one hundred thousand pesos (P100,000.00);
"c) on the third cause of action, reserving to the plaintiff TDC
the right to recover from the defendant BPOE the amounts mentioned
in par. XVI of the complaint in accordance with Art. 1555 of the Civil
Code, in the remote event that the final judgment in this case should
be that the parcel of land now in question is a public park; and
 "d) For costs, and for such other and further relief as
the Court may deem just and equitable." 6
Therein defendant City of Manila, in its answer dated May 19, 1971,
admitted all the facts alleged in the first cause of action except the allegation
that TDC purchased said property "for value and in good faith," but denied for
lack of knowledge or information the allegations in the second and third
causes of action. As special and affirmative defense, the City of Manila claimed
that TDC was not a purchaser in good faith for it had actual notice of the City's
right to repurchase which was annotated at the back of the title prior to its
cancellation, and that, assuming arguendo that TDC had no notice of the right
to repurchase, it was, nevertheless, under obligation to investigate inasmuch
as its title recites that the property is a part of the Luneta extension. 7
The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971,
admitted having sold the land together with the improvements thereon for
value to therein plaintiff which was in good faith, but denied for
lack of knowledge as to their veracity the allegations under the second
cause of action. It furthermore admitted that TDC had paid the quarterly
installments until October 15, 1964 but claimed that the latter failed without
justifiable cause to pay the subsequent installments. It also asserted that it
was a seller for value in good faith without having misrepresented or concealed
facts relative to the title on the property. As
counterclaim, Manila Lodge No. 761 (BPOE) sought to recover the
balance of the purchase price plus interest and costs. 8
On June 15, 1971 TDC answered the aforesaid counterclaim, alleging that
its refusal to make further payments was fully justified. 9
After due trial the court a quo rendered on July 14, 1972 its decision
finding the subject land to be part of the "public park or plaza" and, therefore,
part of the public domain. The court consequently declared that the sale of the
subject land by the City of Manila to Manila Lodge No. 761, BPOE, was null and
void; that plaintiff TDC was a purchaser thereof in good faith and for value
from BPOE and can enforce its rights against the latter; and that BPOE is
entitled to recover from the City of Manila whatever consideration it had paid
the latter. The dispositive part of the decision reads:
"WHEREFORE, the Court hereby declares that the parcel of land
formerly covered by Transfer Certificate of Title Nos. 2195 and 67488
in the name of BPOE and now by Transfer Certificate of Title No.
73444 in the name of Tarlac Development Corporation is a public
park or plaza, and, consequently, instant complaint is dismissed,
without pronouncement as to costs.
"In view of the reservation made by plaintiff Tarlac
Development Corporation to recover from defendant BPOE the
amounts mentioned in paragraph XVI of the complaint in accordance
with Article 1555 of the Civil Code,
the Court makes no pronouncement on this point." 10
From said decision the therein plaintiff TDC as well as the
defendant Manila Lodge No. 761, BPOE, appealed to the Court of Appeals.
In its appeal docketed as CA-G.R. No. 51590-R,
the Manila Lodge No. 761, BPOE, avers that the trial court committed the
following errors, namely:
1. In holding that the property subject of the action is not patrimonial
property of the City of Manila; and
 2. In holding that the Tarlac Development Corporation may recover and
enforce its right against the defendant BPOE. 11
The Tarlac Development Corporation, on the other hand, asserts that the
trial court erred:
(1) In finding that the property in question is or was a public park and in
consequently nullifying the sale thereof by the City of Manila to BPOE;
(2) In applying the cases of Municipality  of  Cavite vs. Rojas, 30 Phil.
602, and Government  vs. Cabangis, 53 Phil. 112, to the case at bar; and
(3) In not holding that the plaintiff-appellant is entitled to recover
damages from the defendant City of Manila. 12
Furthermore, TDC, as appellee regarding the second assignment of error
raised by BPOE, maintained that it can recover and enforce its right against
BPOE in the event that the land in question is declared a public park or part
thereof. 13
In its decision promulgated on June 30, 1975,
the Court of Appeals concurred in the findings and conclusions of the
lower court upon the ground that they are supported by the evidence and are
in accordance with law, and accordingly affirmed the lower court's judgment.
Hence, the present petitions for review on certiorari.

G.R.  No. L-41001

The Manila Lodge No. 761, BPOE, contends, in its petition for review on

certiorari docketed as G.R. No. L-41001, that the Court of Appeals erred in (1)
disregarding the very enabling acts and/or statutes according to which the
subject property was, and still is, patrimonial property of the City of Manila and
could therefore be sold and/or disposed of like any other private property; and
(2) in departing from the accepted and usual course of judicial proceedings
when it simply made a general affirmance of the court a quo's findings and
conclusions without bothering to discuss or resolve several vital points stressed
by the BPOE in its assigned errors. 14

G.R.  No. L-41012

The Tarlac Development Corporation, in its petition for review on

certiorari docketed as G.R. No. L-41012, relies on the following grounds for the
allowance of its petition:
1. that the Court of Appeals did not correctly interpret Act No.
1360, as amended by Act No. 1657, of the Philippine Commission;
and
2. that the Court of Appeals has departed from the accepted
and usual course of judicial proceedings in that it did not make its
own findings but simply recited those of the lower court. 15

ISSUES AND ARGUMENTS

FIRST ISSUE
 Upon the first issue, both petitioners claim that the property
subject of the action, pursuant to the provisions of Act No. 1360, as amended
by Act No. 1657, was patrimonial property of the City of Manila and not a park
or plaza.

Arguments of Petitioners

In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that "there

appears to be some logic in the conclusion" of the Court of Appeals that
"neither Act No. 1360 nor Act No. 1657 could have meant to supply the
City of Manila the authority to sell the subject property which is located at the
south end — not the north — of the reclaimed area." 16 It argues, however,
that when Act No. 1360, as amended, authorized the City of Manila to
undertake the construction of the Luneta extension by reclaiming land from
the Manila Bay, and declared that the reclaimed land shall be the
"property of the City of Manila," the State expressly granted the ownership
thereof to the City of Manila which. consequently, could enter into transactions
involving it; that upon the issuance of O.C.T. No. 1909, there could
be no doubt that the reclaimed area owned by the City was its patrimonial
property; 17 that the south end of the reclaimed area could not be for public
use for. as argued by TDC, a street, park or promenade can be property for
public use pursuant to Article 344 of the Spanish Civil Code only when it has
already been so constructed or laid out, and the subject land, at the time it
was sold to the Elk's Club, was neither actually constructed as a street, park or
promenade nor laid out as a street, park or promenade; 18 that even
assuming that the subject property was at the beginning property of public
dominion, it was subsequently converted into patrimonial property pursuant to
Art. 422 of the Civil Code, inasmuch as it had never been used, regarded, or
utilized since it was reclaimed in 1905 for purposes other than that of an
ordinary real estate for sale or lease; that the subject property had never been
intended for public use, is further shown by the fact that it was neither
included as a part of the Luneta Park under Plan No. 30 of the National
Planning Commission nor considered a part of the Luneta National Park (now
Rizal Park) by Proclamation No. 234 dated December 19, 1955 of President
Ramon Magsaysay or by Proclamation Order No. 274 dated October 4,
1967 of President Ferdinand E. Marcos; 19 that, such being the case, there
is no reason why the subject property should not be considered as having been
converted into patrimonial property, pursuant to the ruling in Municipality  vs.
Roa, 7 Phil. 20, inasmuch as the City of Manila has considered it as its
patrimonial property not only bringing it under the operation of the Land
Registration Act but also by disposing of it; 20 and that to consider now the
subject property as a public plaza or park would not only impair the
obligations of the parties to the contract of sale dated July 13, 1911, but also
authorize deprivation of property without due process of law. 21

G.R.  No. L-41012

In L-41012, the petitioner TDC stresses that the principal issue is the
interpretation of Act No. 1360, as amended by Act No. 1657 of the Philippine
Commission, 22 and avers that inasmuch as Section 6 of ActNo. 1360, as
amended by Act 1657, provided that the reclamation of the Luneta extension
was to be paid for out of the funds of the City of Manila which was authorized
to borrow P350,000 "to be expended in the construction of Luneta Extension,"
the reclaimed area became "public land" belonging to the City of Manila that
spent for the reclamation, conformably to the holding in Cabangis, 23 and
consequently, said land was subject to sale and other disposition; that the
Insular Government itself considered the reclaimed Luneta extension as
patrimonial property subject to disposition as evidenced by the fact that Sec.
3 of Act1360 declared that "the land hereby reclaimed shall be the
property of the City of Manila;" that this property cannot be property for public
use for, according to Article 344 of the Civil Code, the character ofproperty for
public use can only attach to roads and squares that have already been
constructed or at least laid out as such, which conditions did not obtain
regarding the subject land; that Sec. 5 of Act 1360 authorized the
City of Manila to lease the northern part of the reclaimed area for hotel
purposes; that Act No. 1657 furthermore authorized the City of Manila to sell
the same; 24 that the express statutory authority to lease or sell the northern
part of the reclaimed area cannot be interpreted to mean that the remaining
area could not be sold inasmuch as the purpose of the statute was not merely
to confer authority to sell the northern portion but rather to limit the city's
power of disposition thereof, to wit: to prevent disposition of the northern
portion for any purpose other than for a hotel site; 25 that the northern and
southern ends of the reclaimed area cannot be considered as extension of the
Luneta for they lie beyond the-sides of the original Luneta when extended in
the direction of the sea, and that is the reason why the law authorized the
sale of the northern portion for hotel purposes, and, for the same reason, it is
implied that the southern portion could likewise be disposed of. 26
TDC argues likewise that there are several items of uncontradicted
circumstantial evidence which may serve as aids in construing the legislative
intent and which demonstrate that the subject property is patrimonial in
nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of the National
Planning Commission showing the Luneta and its vicinity, do not include the
subject property as part of the Luneta Park; (2) Exhibit "K", which is the
plan of the subject property covered by TCT No. 67488 of BPOE, prepared on
November 11, 1963, indicates that said property is not a public park; (3)
Exhibit "T", which is a certified copy ofProclamation No. 234 issued on
December 15, 1955 by President Magsaysay, and Exhibit "U" which is
Proclamation Order No. 273 issued on October 4, 1967 by President Marcos, do
not include the subject property in the Luneta Park; (4) Exhibit "W", which is
the location plan of the Luneta National Park under Proclamations Nos. 234
and 273, further confirms that the subject property is not a public park; and
(5) Exhibit "y", which is a copy of O.C.T. No. 7333 in the name of the United
States of America covering the land now occupied by the American Embassy,
the boundaries of which were delineated by the Philippine Legislature, states
that the said land is bounded on the northwest by properties of the Army and
Navy Club (Block No. 321) and the Elks Club (Block No. 321), and this
circumstance shows that even the Philippine Legislature recognized the subject
property as private property of the Elks Club. 27
TDC furthermore contends that the City of Manila is estopped from
questioning the validity of the sale of the subject property that it executed on
July 13, 1911 to the Manila Lodge No. 761, BPOE, for several reasons, namely:
(1) the City's petition for the reannotation of Entry No. 4608/T-1635 was
predicated on the validity of said sale; (2) when the property was bought by
the petitioner TDC it was not a public plaza or park as testified to by both
Pedro Cojuangco, treasurer of TDC, and the surveyor, Manuel Añonuevo; (4)
the property was never used as a public park, for, since the
issuance of T.C.T. No. 2165 on July 17, 1911 in the
name of the Manila Lodge NO. 761, the latter used it as private property, and
as early as January 16, 1909 the City of Manila had already executed a
deed of sale over the property in favor of the Manila LodgeNo. 761; and (5)
the City of Manila has not presented any evidence to show that the subject
property has ever been proclaimed or used as a public park. 28
 
TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot apply
to the subject land, for Com. Act No. 141 took effect on December 1, 1936 and
at that time the subject land was no longer part of the public domain. 29
TDC also stresses that its rights as a purchaser in good faith cannot be
disregarded, for the mere mention in the certificate of title that the lot it
purchased was "part of the Luneta extension" was not a sufficient warning that
the title of the City of Manila was invalid; and that although the trial court, in
its decision affirmed by the Court of Appeals, found the TDC to have been an
innocent purchaser for value, thecourt disregarded the petitioner's rights as
such purchaser that relied on a Torrens certificate of title. 30
The Court, continues the petitioner TDC, erred in not holding that the
latter is entitled to recover from the City of Manila damages in the
amount of P100,000 caused by the City's petition for reannotation ofits right to
repurchase.

DISCUSSION AND RESOLUTION OF FIRST ISSUE

It is a cardinal rule of statutory construction that courts must give effect

to the general legislative intent that can be discovered from or is unraveled by
the four corners of the statute, 31 and in order to discover said intent, the
whole statute, and not only a particular provision thereof, should be
considered. 32 It is, therefore, necessary to analyze all the
provisions of Act No. 1360, as amended, in order to unravel the legislative
intent.
Act No. 1360 which was enacted by the Philippine Commission on June
26, 1905, as amended by Act No. 1657 enacted on May 18, 1907, authorized
the "construction of such rock and timber bulkheads or sea walls as may be
necessary for the making of an extension to the Luneta" (Sec. 1[a]), and the
placing of the material dredged from the harbor of Manila "inside the
bulkheads constructed to inclose the Luneta extension above referred to" (Sec.
1[c]). It likewise provided that the plan of Architect D. H. Burnham as "a
general outline for the extension and improvement of the Luneta in the
City of Manila" be adopted; that "the reclamation from the Bay of Manila of the
land included in said projected Luneta extension . . . is hereby authorized
and the land thereby reclaimed shall be the property of the City of Manila"
(Sec. 3); that "the City  of  Manila  is hereby authorized to set aside a
tract of the reclaimed land formed by the Luneta extension authorized by
this Act at the north end of said tract, not to exceed five hundred feet by six
hundred feet in size, for a hotel site, and to lease the same with the
approval of the Governor General, . . . for a term not exceeding ninety-nine
years;" that "should the Municipal Board . . . deem it advisable it ishereby
authorized to advertise for sale to sell said tract  of  land . . .;" "that said tract
shall be used for hotel purposes as herein prescribed, and shall not be devoted
to any other purpose or object whatever;" "that should the grantee . . . fail to
maintain on said tract a first-class hotel . . . then the title to said tract of land
sold, conveyed, and transferred to the grantee shall revert to the
City of Manila, and said City of Manilashall thereupon become entitled to the
immediate possession of said tract of land" (Sec. 3); that the
construction of the rock and timber bulkheads or sea wall "shall be paid for
out of the funds of the City ofManila, but the area to be reclaimed by said
proposed Luneta extension shall be filled, without cost to the City of Manila,
with material dredged from Manila Bay at the expense of the Insular
Government" (Sec. 6); and that "the City of Manila is hereby authorized to
borrow from the Insular Government . . . the sum of three hundred thousand
pesos, to be expended in the construction of the Luneta extension provided for
by paragraph (a) of section one hereof" (Sec. 7).
The grant made by Act No. 1360 of the reclaimed land to the
City of Manila is a grant of a "public" nature, the same having been made to a
local political subdivision. Such grants have always been strictlyconstrued
against the grantee. 33 One compelling reason given for the strict
interpretation of a public grant is that there is in such grant a gratuitous
donation of, public money or resources which results in an unfair advantage to
the grantee and for that reason, the grant should be narrowly restricted in
favor of the public. 34 This reason for strict interpretation obtains relative to
the aforesaid grant for although the Cityof Manila was to pay for the
construction of such work and timber bulkheads or sea walls as may be
necessary for the making of the Luneta extension, the area to be reclaimed
would be filled at the expense ofthe Insular Government and without cost to
the City of Manila, with material dredged from Manila Bay. Hence, the
letter of the statute should be narrowed to exclude matters which if included
would defeat the policy of the legislation. cdll
The reclaimed area, an extension to the Luneta, is declared to be
property of the City of Manila. Property, however, is either of public ownership
or of private ownership. 35 What kind of property of the City is the reclaimed
land? Is it of public ownership (dominion) or of private ownership?
We hold that it is of public dominion, intended for public use.
Firstly, if the reclaimed area was granted to the City of Manila as its
patrimonial property, the City could, by virtue of its ownership, dispose of the
whole reclaimed area without need of authorization to do so from the
lawmaking body. Thus Article 348 of the Civil Code of Spain provides that
"ownership is the right to enjoy and dispose of a thing without further
limitations than those established by law." 36 The right to dispose ( jus
disponendi) of one's property is an attribute of ownership. Act No. 1360, as
amended, however, provides by necessary implication, that the
City of Manila could not dispose of the reclaimed area without
being authorized by the lawmaking body. Thus the statute provides that "the
City of Manila is hereby authorized to set aside a tract . . . at the north end, for
a hotel site, and to lease the same . . . should the municipal board . . . deem it
advisable, it is hereby authorized . . . to sell said tract of land . . ." (Sec. 5). If
the reclaimed area were patrimonial property of the City, the latter could
dispose of it without need ofthe authorization provided by the statute, and the
authorization to set aside . . . lease . . . or sell . . . given by the statute would
indeed be superfluous. To so construe the statute as to render the term
"authorize," which is repeatedly used by the statute, superfluous would violate
the elementary rule of legal hermeneutics that effect must be given to every
word, clause, and sentence of the statute and that a statute should be so
interpreted that no part thereof becomes inoperative or superflous. 37 To
authorize means to empower, to give a right to act. 38 Act No.
1360 furthermore qualifies the verb "authorize" with the adverb "hereby,"
which means "by means of this statue or section." Hence without the
authorization expressly given by Act No. 1360, the City of Manila could not
lease or sell even the northern portion; much less could it dispose of the whole
reclaimed area. Consequently, the reclaimed area was granted to the
City of Manila, not as its patrimonial property. At most, only the northern
portion reserved as a hotel site could be said to be patrimonial property, for,
by express statutory provision it could be disposed of, and the title thereto
would revert to the City should the grantee fail to comply with the terms
provided by the statute. LLpr
TDC, however, contends that the purpose of the authorization provided
in Act No. 1360 to lease or sell was really to limit the City's
power of disposition. To sustain such contention is to beg the question. If the
purpose of the law was to limit the City's power of disposition, then it is
necessarily assumed that the City had already the power to dispose, for if such
power did not exist, how could it be limited? It was precisely Act 1360 that
gave the City the power to dispose — for it was "hereby authorized" — by
lease or sale. Hence, the City of Manila had no power to dispose of the
reclaimed land had such power not been granted by Act No. 1360, and the
purpose of the authorization was to empower the city to sell or lease the
northern part and not, as TDC claims, to limit only the power to dispose.
Moreover, it is presumed that when the lawmaking body enacted the statute, it
had full knowledge of prior and existing laws and legislation on the
subject of the statute and acted in accordance or with respect thereto. 39 If by
another previous law, the City of Manila could already dispose of the reclaimed
area, which it could do if such area were given to it as its patrimonial property,
would it then not be a superfluity for Act No. 1360 to authorize the City to
dispose of the reclaimed land? Neither has petitioner TDC pointed to any other
law that authorized the City to do so, nor have we come across any. What we
do know is that if the reclaimed land were patrimonial property, there would
be no need of giving special authorization to the City to dispose of it. Said
authorization was given because the reclaimed land was not intended to be
patrimonial property ofthe City of Manila, and without the express
authorization to dispose of the northern portion, the City could not
dispose of even that part. LibLex
Secondly, the reclaimed area is an "extension to the Luneta in the
City of Manila." 40 If the reclaimed area is an extension of the Luneta, then it
is of the same nature or character as the old Luneta. Anent this matter, it has
been said that a power to extend (or continue an act or business) cannot
authorize a transaction that is totally distinct. 41 It is not disputed that the old
Luneta is a public park or plaza and it is so considered by Section 859 of the
Revised Ordinances of the City of Manila. 42 Hence the "extension to the
Luneta" must be also a public park or plaza and for public use.
TDC, however, contends that the subject property cannot be considered
an extension of the old Luneta because it is outside of the limits of the old
Luneta when extended to the sea. This is a strained interpretation of the term
"extension," for an "extension," it has been held, "signifies enlargement in any
direction — in length, breadth, or circumstance." 43
Thirdly, the reclaimed area was formerly a part of the Manila Bay. A by is
nothing more than an inlet of the sea. Pursuant to Article 1 of the
Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores are
parts of the national domain open to public use. These are also
property of public ownership devoted to public use, according to Article
339 of the Civil Code of Spain.
When the shore or part of the bay is reclaimed, it does not lose its
character of being property for public use, according to Government  of  the
Philippine Islands  vs. Cabangis. 44 The predecessor of the claimants in this
case was the owner of a big tract of land including the lots is question. From
1896 said land began to wear away due to the action of the
water of Manila Bay. In 1901 the lots in question became completely
submerged in water in ordinary tides. It remained in such a state until 1912
when the Government undertook the dredging of the Vitas estuary and
dumped the sand and silt from estuary on the low lands completely submerged
in water, thereby gradually forming the lots in question. Tomas Cabangis took
possession thereof as soon as they were reclaimed; hence, the claimants, his
successors in interest, claimed that the lots belonged to them. The
trial court found for the claimants and the Government appealed.
This Court held that when the lots became a part of the shore. As they
remained in that condition until reclaimed by the filling done by the
Government, they belonged to the public domain for public use. 45 Hence, a
part of the shore, and for that purpose, a part of the bay, did not lose its
character of being for public use after it was reclaimed.
Fourthly, Act 1360, as amended, authorized the lease or sale of the
northern portion of the reclaimed area as a hotel site. The subject property is
not that northern portion authorized to be leased or sold; the subject property
is the southern portion. Hence, applying the rule of expresio unius est exlusio
alterius, the City of Manila was not authorized to sell the subject property. The
application of this principle ofstatutory construction becomes the more
imperative in the case at bar inasmuch as not only must the public grant of the
reclaimed area to the City of Manila be, as above stated, strictly construed
against the Cityof Manila, but also because a grant of power to a municipal
corporation, as happens in this case where the city is authorized to lease or
sell the northern portion of the Luneta extension, is strictly limited to such as
are expressly or impliedly authorized or necessarily incidental to the
objectives of the corporation.
Fifthly, Article 344 of the Civil Code of Spain provides that
"property of public use, in provinces and in towns, comprises the provincial and
town roads, the squares, streets, fountains, and public waters, the
promenades, and public works of general service paid for by such towns or
provinces." A park or plaza, such as the extension to the Luneta, is
undoubtedly comprised in said article.
The petitioners, however, argue that, according to said Article 344, in
order that the character of property for public use may be so attached to a
plaza, the latter must be actually constructed or at least laid out as such, and
since the subject property was not yet constructed as a plaza or at least laid
out as a plaza when it was sold by the City, it could not be property for public
use. It should be noted, however, that properties of provinces and towns for
public use are governed by the same principles as properties of the same
character belonging to the public domain. 46 In order to be property of public
domain an intention to devote it to public use is sufficient. 47 The petitioners'
contention is refuted by Manresa himself who said, in his comments 48 on
Article 344, that:
"Las plazas, calles y paseos publicos corresponden, sin duda
alguna, aldominio publico municipal, porque se hallan establecidos
sobre suelo municipal y estan destinadas al uso de todos. Laurent
presenta, tratando de las Plazas, una cuestion relativa a si deben
conceptuarse como de dominio publico los lugares vacios, libres, que
se encuentran en los Municipios rurales. . . . Laurent opina contra
Proudhon, que toda vez que estan al servicio de todos esos lugares,
deben considerarse publicos y de dominio publico. Realmente, para
decidir el punto, bastara siempre fijarse en el destino real y efectivo
de los citados lugares, y si este destino entraña un uso comun de
todos, no hay duda que son de dominio municipal
si no patrimoniales."
 It is not necessary, therefore, that a plaza be already construed or laid
out as a plaza in order that it be considered property for public use. It is
sufficient that it be intended to be such. In the case at bar, it has been shown
that the intention of the lawmaking body in giving to the City of Manila the
extension to the Luneta was not a grant to it of patrimonial property but a
grant for public use as a plaza.
We have demonstrated ad satietatem that the Luneta extension was
intended to be property of the City of Manila for public use. But, could not said
property later on be converted, as the petitioners contend, to patrimonial
property? It could be. But this Court has already said, in Ignacio vs. The
Director of Lands, 49 that it is only the executive and possibly the legislative
department that has the authority and the power to make the declaration that
said property is no longer required for public use, and until such declaration is
made the property must continue to form part of the public domain. In the
case at bar, there has been no such explicit or unequivocal declaration. It
should be noted, furthermore, anent this matter, that courts are undoubtedly
not primarily called upon, and are not in a position, to determine whether any
public land is still needed for the purposes specified in Article 4 of the
Law of Waters. 50
Having disposed of the petitioners' principal arguments relative to the
main issue, we now pass to the items of circumstantial evidence which TDC
claims may serve as aids in construing the legislative intent in the
enactment of Act No. 1360, as amended. It is noteworthy that all these
items of alleged circumstantial evidence are acts far removed in time from the
date of the enactment of Act No. 1360 such that they cannot be considered
contemporaneous with its enactment. Moreover, it is not far-fetched that this
mass of circumstantial evidence might have been influenced by the antecedent
series of invalid acts, to wit: the City's having obtained over the reclaimed area
OCT No. 1909 on January 20, 1911; the sale made by the City of the subject
property to Manila Lodge No. 761; and the issuance to the latter of T.C.T. No.
2195. It cannot be gainsaid that if the subsequent acts constituting the
circumstantial evidence have been based on, or at least influenced, by those
antecedent invalid acts and Torrens titles, they can hardly be indicativeof the
intent of the lawmaking body in enacting Act No. 1360 and its
amendatory act. LexLib
TDC claims that Exhs. "J," "J-1," "K," "T," "U," "W" and "Y" show that the
subject property is not a park.
Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed
development" dated May 14, 1949, were prepared by the National Urban
Planning Commission of the Office of the President. It cannot be reasonably
expected that this plan for development of the Luneta should show that the
subject property occupied by the Elks Club is a public park, for it was made 38
years after the sale to the Elks, and after T.C.T. No. 2195 had been issued to
Elks. It is to be assumed that the Office of the President was cognizant of the
Torrens title of BPOE. That the subject property was not included as a
part of the Luneta only indicates that the National Urban Planning Commission
that made the plan knew that the subject property was occupied by Elks and
that Elks had a Torrens title thereto. But this in no way proves that the subject
property was originally intended to be patrimonial property of the
City of Manila or that the sale to Elks or that the Torrens title of the latter is
valid.
Exhibit "K" is the "Plan of land covered by T.C.T. No. ____, as prepared
for Tarlac Development Company." It was made on November 11, 1963 by
Felipe F. Cruz, private land surveyor. This surveyor is admittedly a surveyor for
TDC. 51 This plan cannot be expected to show that the subject property is a
part of the Luneta Park, for the plan was made to show the lot that "was to be
sold to petitioner " This plan must have also assumed the existence of a valid
title to the land in favor of Elks.
Exhibits "T" and "U" are copies of Presidential Proclamations No. 234
issued on November 15, 1955 and No. 273 issued on October 4, 1967,
respectively. The purpose of the said Proclamations was to reserve certain
parcels of land situated in the District of Ermita, City of Manila, for park site
purposes. Assuming that the subject property is not within the
boundaries of the reservation, this cannot be interpreted to mean that the
subject property was not originally intended to be for public use or that it has
ceased to be such. Conversely had the subject property been included in the
reservation, it would not mean, if it really were private property, that the
rights of the owners thereof would be extinguished, for the reservations was
"subject to private rights, if any there be." That the subject property was not
included in the reservation only indicates that the President knew of the
existence of the Torrens titles mentioned above. The failure of the
Proclamations to include the subject property in the reservation for park site
could not change the character of the subject property as originally for public
use and to form part of the Luneta Park. What has been said here applies to
Exhibits "V", "V-1" to "V-3," and "W" which also refer to the area and
location of the reservation for the Luneta Park. LLjur
Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935,
covering the lot where now stands the American Embassy [Chancery]. It states
that the property is "bounded . . . on the Northwest by properties of Army and
Navy Club (Block No. 321) and Elks Club (Block No. 321)." Inasmuch as the
said boundaries were delineated by the Philippine Legislature in Act No. 4269,
the petitioners contend that the Legislature "recognized and conceded the
existence of the Elks Club property as a private property (the property is
question) and not as a public park or plaza. This argument is non sequitur,
plain and simple. Said Original Certificate of Title cannot be considered as an
inconvertible declaration that the Elks Club was in truth and in fact the
owner of such boundary lot. Such mention as boundary owner is not a
means ofacquiring title nor can it validate a title that is null and void.
TDC finally claims that the City of Manila is estopped from questioning
the validity of the sale it executed on July 13, 1911 conveying the subject
property to the Manila Lodge No. 761, BPOE. This contention cannot be
seriously defended in the light of the doctrine repeatedly enunciated by
this Court that the Government is never estopped by mistakes or errors on the
part. of its agents, and estoppel does not apply to a municipal corporation to
validate a contract that is prohibited by law or its against public policy, and the
sale of July 13, 1911 executed by the city of Manila to Manila Lodge was
certainly a contract prohibited by law. Moreover, estoppel cannot be urged
even if the City of Manila accepted the benefits of such contract of sale and
the Manila Lodge No. 761 had performed its part of the agreement, for to
apply the doctrineof estoppel against the City of Manila in this case would be
tantamount to enabling it to do indirectly what it could not do directly. 52
The sale of the subject property executed by the City of Manila to
the Manila Lodge No. 761, BPOE, was void and inexistent for lack of subject
matter. 53 It suffered from an incurable defect that could not be ratified either
by lapse of time or by express ratification. The Manila Lodge No. 761 therefore
acquired no right by virtue of the said sale. Hence to consider now the contract
inexistent as it always has been, cannot be, as claimed by
the Manila Lodge No. 761, an impairment of the obligations of contracts, for
there was in contemplation of law, no contract at all. Cdpr
The inexistence of said sale can be set up against anyone who asserts a
right arising from it, not only against the first vendee,
the Manila Lodge No. 761, BPOE, but also against all its successors, including,
the TDC, which are not protected by law. 54 The doctrine of bona
fide  purchaser without notice, being claimed by the TDC, does not apply where
there is a total absence of title in the vendor, and the good faith ofthe
purchaser TDC cannot create title where none exists. 55
The so-called sale of the subject property having been executed, the
restoration or restitution of what has been given is in order. 56

SECOND ISSUE

The second ground alleged in support of the instant petitions for review

on certiorari is that the Court of Appeals has departed from the accepted and
usual course of judicial proceedings as to call for an exercise of the
power of supervision TDC, in L-41012, argues that the respondent Court did
not make its own findings but simply recited those of the lower court and made
a general affirmance, contrary to the requirements of the Constitution; that
the respondent Court made glaring and patent mistakes in recounting even the
copied findings, palpably showing lack of deliberate consideration of the
matters involved, as, for example, when said court said that Act No.
1657 authorized the City of Manila to set aside a portion of the reclaimed land
"formed by the Luneta Extension or to lease or sell the same for park
purposes;" and that respondent Court, furthermore, did not resolve or
dispose of any of the assigned errors contrary to the mandate of the
Judiciary Act. 57
The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the
reasons warranting review, that the Court of Appeals departed from the
accepted and usual course of judicial proceedings by simply making a general
affirmance of the court a quo's findings without bothering to resolve several
vital points mentioned by the BPOE in its assigned errors. 58

COMMENTS ON SECOND ISSUE

We have shown in our discussion of the first issue that the decision of the

trial court is fully in accordance with law. It follows that when such decision
was affirmed by the Court of Appeals, the affirmance was likewise in
accordance with law. Hence, no useful purpose will be served in further
discussing the second issue.

CONCLUSION

ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012 are

denied for lack of merit, and the decision of the Court of Appeals of June 30,
1975, is hereby affirmed, at petitioners' cost.
|||  (Manila Lodge No. 761 v. Court of Appeals, G.R. No. L-41001, L-
41012, [September 30, 1976], 165 PHIL 161-190)
 [G.R. No. 168557. February 16, 2007.]

FELS ENERGY, INC., petitioner, vs.
THE PROVINCE OF  BATANGAS and THE OFFICE  OF THE
PROVINCIAL ASSESSOR OF  BATANGAS, respondents.

[G.R. No. 170628. February 16, 2007.]

NATIONAL POWER CORPORATION,  petitioner, vs. LOCAL

BOARD  OF ASSESSMENT APPEALS  OF BATANGAS, LAURO C.
ANDAYA, in his capacity as the
Assessor of  the Province  of Batangas, and
the  PROVINCE  OF BATANGAS  represented by its Provincial
Assessor,  respondents.

DECISION

CALLEJO,  SR.,  J p:

Before us are two consolidated cases docketed as G.R. No. 168557 and G.R.
No. 170628, which were filed by petitioners FELS Energy, Inc. (FELS) and
National Power Corporation (NPC), respectively. The first is a petition for review
on certiorari assailing the August 25, 2004 Decision 1 of the Court of Appeals
(CA) in CA-G.R. SP No. 67490 and its Resolution 2 dated June 20, 2005; the
second, also a petition for review oncertiorari, challenges the February 9, 2005
Decision 3 and November 23, 2005 Resolution 4 of the CA in CA-G.R. SP No.
67491. Both petitions were dismissed on the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with
Polar Energy, Inc. over 3x30 MW diesel engine power barges moored at Balayan
Bay in Calaca, Batangas. The contract, denominated as an EnergyConversion
Agreement 5 (Agreement), was for a period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for
the payment of (a) all taxes, import duties, fees, charges and other
levies imposed by the National Government of the Republic of the
Philippines or any agency or instrumentality thereof to
which POLAR may be or become subject to or in relation to the
performance of their obligations under this agreement (other than (i)
taxes imposed or calculated on the basis ofthe 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) and (b) all real estate taxes and
assessments, rates and other charges in respect of the Power
Barges. 6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement
to FELS. The NPC initially opposed the assignment of rights, citing paragraph
17.2 of Article 17 of the Agreement. HATICc
On August 7, 1995, FELS received an assessment of real property taxes on
the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. The
assessed tax, which likewise covered those due for 1994, amounted to
P56,184,088.40 per annum. 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.
In a letter 7 dated September 7, 1995, NPC sought reconsideration of the
Provincial Assessor's decision to assess real property taxes on the power barges.
However, the motion was denied on September 22, 1995, and the Provincial
Assessor advised NPC to pay the assessment. 8 This prompted NPC to file a
petition with the Local Board of Assessment Appeals (LBAA) for the setting
aside of the assessment and the declaration of the barges as non-taxable items;
it also prayed that should LBAA find the barges to be taxable, the Provincial
Assessor be directed to make the necessary corrections. 9
In its Answer to the petition, the Provincial Assessor averred that the barges
were real property for purposes of taxation under Section 199 (c) of Republic Act
(R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation,
informing the LBAA that the Department of Finance (DOF) had rendered an
opinion 10 dated May 20, 1996, where it is clearly stated that power barges are
not real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution 11 denying the
petition. The  fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to
pay the real estate tax in the amount of P56,184,088.40, for the year
1994.
SO ORDERED. 12
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.
Aggrieved, FELS appealed the LBAA's ruling to the Central
Board of Assessment Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a
Notice of Levy and Warrant by Distraint 13 over the power barges, seeking to
collect real property taxes amounting to P232,602,125.91 asof July 31, 1996. The
notice and warrant was officially served to FELS on November 8, 1996. It then
filed a Motion to Lift Levy dated November 14, 1996, praying that the Provincial
Assessor be further restrained by the CBAA from enforcing the disputed
assessment during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order 14 lifting the levy and
distraint on the properties of FELS in order not to preempt and render ineffectual,
nugatory and illusory any resolution or judgment which the Board would issue.
Meantime, the NPC filed a Motion for Intervention 15 dated August 7, 1998
in the proceedings before the CBAA. This was approved by the CBAA in an
Order 16 dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions
to admit bond to guarantee the payment of real property taxes assessed by the
Provincial Assessor (in the event that the judgment be unfavorable to them). The
bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision 17 finding the power
barges exempt from real property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment
Appeals of the Province of Batangas is hereby reversed. Respondent-
appellee Provincial Assessor of the Province of Batangas is hereby
ordered to drop subject property under ARP/Tax Declaration No. 018-
00958 from the List of Taxable Properties in the Assessment Roll. The
Provincial Treasurer of Batangas is hereby directed to act
accordingly.
SO ORDERED. 18
Ruling in favor of FELS and NPC, the CBAA reasoned 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. 19 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. The Provincial Assessor filed a motion for
reconsideration, which was opposed by FELS and NPC. AHDacC
In a complete volte face, the CBAA issued a Resolution 20 on July 31, 2001
reversing its earlier decision. The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is
dismissed.
(c) The resolution of the Local Board of Assessment
Appeals of Batangas is hereby affirmed,
(d) The real property tax assessment on FELS by the Provincial
Assessor of Batangas is likewise hereby affirmed.
 SO ORDERED. 21
FELS and NPC filed separate motions for reconsideration, which were timely
opposed by the Provincial Assessor. The CBAA denied the said motions in a
Resolution 22 dated October 19, 2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-
G.R. SP No. 67490. Meanwhile, NPC filed a separate petition, docketed as CA-
G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in
CA-G.R. SP No. 67490 praying for the consolidation of its petition with CA-G.R. SP
No. 67491. In a Resolution 23 dated February 12, 2002, the appellate court
directed NPC to re-file its motion for consolidation with CA-G.R. SP No. 67491,
since it is the ponente of the latter petition who should resolve the request for
reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the
Twelfth Division of the appellate court rendered judgment in CA-G.R. SP No.
67490 denying the petition on the ground ofprescription. The decretal
portion of the decision reads:
WHEREFORE, the petition for review is DENIED for
lack of merit and the assailed Resolutions dated July 31, 2001 and
October 19, 2001 of the Central Board of Assessment Appeals
are  AFFIRMED.
SO ORDERED. 24
On September 20, 2004, FELS timely filed a motion for reconsideration
seeking the reversal of the appellate court's decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before
this Court, docketed as G.R. No. 165113, assailing the appellate court's decision
in CA-G.R. SP No. 67490. The petition was, however, denied in this Court's
Resolution 25 of November 8, 2004, for NPC's failure to sufficiently show that the
CA committed any reversible error in the challenged decision. NPC filed a motion
for reconsideration, which the Court denied with finality in a Resolution 26 dated
January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No.
67491. It held that the right to question the assessment of the Provincial
Assessor had already prescribed upon the failure of FELS to appeal the disputed
assessment to the LBAA within the period prescribed by law. Since FELS had lost
the right to question the assessment, the right of the Provincial Government to
collect the tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking
reconsideration of the February 5, 2005 ruling of the CA in CA-G.R. SP No.
67491. The motion was denied in a Resolution 27 dated November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had
been earlier denied for lack of merit in a Resolution 28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557
before this Court, raising the following issues:
A.
Whether power barges, which are floating and movable, are personal
properties and therefore, not subject to real property tax.
B.
 Assuming that the subject power barges are real properties, whether
they are exempt from real estate tax under Section 234 of the Local
Government Code ("LGC").
C.
Assuming arguendo that the subject power barges are subject to real
estate tax, whether or not it should be NPC which should be made to
pay the same under the law.
D.
Assuming arguendo that the subject power barges are real
properties, whether or not the same is subject to depreciation just
like any other personal properties.
E.
Whether the right of the petitioner to question the patently null and
void real property tax assessment on the petitioner's personal
properties is imprescriptible. 29
On January 13, 2006, NPC filed its own petition for review before this Court
(G.R. No. 170628), indicating the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE
APPEAL TO THE LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT
THE POWER BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT
THE ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN
ACCORDANCE WITH LAW. 30
Considering that the factual antecedents of both cases are similar, the Court
ordered the consolidation of the two cases in a Resolution 31 dated March 8,
2006.
In an earlier Resolution dated February 1, 2006, the Court had required the
parties to submit their respective Memoranda within 30 days from notice. Almost
a year passed but the parties had not submitted their respective memoranda.
Considering that taxes — the lifeblood of our economy — are involved in the
present controversy, the Court was prompted to dispense with the said pleadings,
with the end view ofadvancing the interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA
was not time-barred. FELS argues that when NPC moved to have the assessment
reconsidered on September 7, 1995, the running ofthe period to file an appeal
with the LBAA was tolled. For its part, NPC posits that the 60-day period for
appealing to the LBAA should be reckoned from its receipt of the denial of its
motion for reconsideration.
Petitioners' contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government
Code of 1991, provides:
SECTION 226. Local Board  of Assessment Appeals. — Any
owner or person having legal interest in the property who is not
 satisfied with the action of the provincial, city or municipal assessor
in the assessment of his property may, within sixty (60) days from
the date of receipt of the written notice of assessment, appeal to the
Board of Assessment Appeals of the province or city by filing a
petition under oath in the form prescribed for the purpose, together
with copies of the tax declarations and such affidavits or documents
submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent
to FELS on August 7, 1995, contained the following statement:
If you are not satisfied with this assessment, you may, within
sixty (60) days from the date of receipt hereof, appeal to the
Board of Assessment Appeals  of the province by filing a petition
under oath on the form prescribed for the purpose, together with
copies of ARP/Tax Declaration and such affidavits or documents
submitted in support of the appeal. 32
Instead of appealing to the Board of Assessment Appeals (as stated in the
notice), NPC opted to file a motion for reconsideration of the Provincial Assessor's
decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or
action of the provincial, city or municipal assessor in the assessment of the
property. It follows then that the determination made by the respondent
Provincial Assessor with regard to the taxability of the subject real properties falls
within its power to assess properties for taxation purposes subject to appeal
before the LBAA. 33
We fully agree with the rationalization of the CA in both CA-G.R. SP No.
67490 and CA-G.R. SP No. 67491. The two divisions of the appellate court cited
the case of Callanta v. Office  of  the Ombudsman, 34 where we ruled that under
Section 226 of R.A. No. 7160, 35 the last action of the local assessor on a
particular assessment shall be the notice of assessment; it is this last
action which gives the owner of the property the right to appeal to the LBAA. The
procedure likewise does not permit the property owner the remedy of filing a
motion for reconsideration before the local assessor. The pertinent holding of the
Court in Callanta is as follows:
. . . [T]he same Code is equally clear that the aggrieved owners
should have brought their appeals before the LBAA. Unfortunately,
despite the advice to this effect contained in their respective
notices ofassessment, the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not
sanctioned by the law. To allow this procedure would indeed invite
corruption in the system ofappraisal and assessment. It conveniently
courts a graft-prone situation where values of real property may be
initially set unreasonably high, and then subsequently reduced upon
the request of a property owner. In the latter instance, allusions of a
possible covert, illicit trade-off cannot be avoided, and in fact can
conveniently take place. Such occasion for mischief must be
prevented and excised from our system. 36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
. . . . The Court announces:  Henceforth, whenever the local
assessor sends a notice to the owner or lawful possessor  of  real
property of its revised assessed value, the former shall no longer
have any jurisdiction to entertain any request for a review or
readjustment. The appropriate forum where the aggrieved party may
 bring his appeal is the LBAA as provided by law. It follows ineluctably
that the 60-day period for making the appeal to the LBAA runs
without interruption. This is what We held in SP 67490 and reaffirm
today in SP 67491. 37
To reiterate, if the taxpayer fails to appeal in due course, the right of the
local government to collect the taxes due with respect to the taxpayer's property
becomes absolute upon the expiration of the period to appeal. 38 It also bears
stressing that the taxpayer's failure to question the assessment in the LBAA
renders the assessment of the local assessor final, executory and demandable,
thus, precluding the taxpayer from questioning the correctness of the
assessment, or from invoking any defense that would reopen the question of its
liability on the merits. 39
In fine, the LBAA acted correctly when it dismissed the petitioners' appeal
for having been filed out of time; the CBAA and the appellate court were likewise
correct in affirming the dismissal. Elementary is the rule that the perfection of an
appeal within the period therefor is both mandatory and jurisdictional, and failure
in this regard renders the decision final and executory. 40
In the Comment filed by the Provincial Assessor, it is asserted that the
instant petition is barred by res judicata; that the final and executory judgment in
G.R. No. 165113 (where there was a final determination on the
issue of prescription), effectively precludes the claims herein; and that the
filing of the instant petition after an adverse judgment in G.R. No. 165113
constitutes forum shopping.
FELS maintains that the argument of the Provincial Assessor is completely
misplaced since it was not a party to the erroneous petition which the NPC filed in
G.R. No. 165113. It avers that it did not participate in the aforesaid proceeding,
and the Supreme Court never acquired jurisdiction over it. As to the
issue of forum shopping, petitioner claims that no forum shopping could have
been committed since the elements oflitis pendentia or res judicata are not
present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is
founded upon two grounds embodied in various maxims of common law, namely:
(1) public policy and necessity, which makes it to the interest of the State that
there should be an end to litigation — republicae ut sit litium; and (2) the
hardship on the individual of being vexed twice for the same cause — nemo debet
bis vexari et eadem causa. A conflicting doctrine would subject the public peace
and quiet to the will and dereliction of individuals and prefer the
regalement of the litigious disposition on the part of suitors to the
preservation of the public tranquility and happiness. 41 As we ruled
in  Heirs  of  Trinidad De Leon Vda. de Roxas  v. Court  of  Appeals: 42
. . . An existing final judgment or decree — rendered upon
the merits, without fraud or collusion, by a court of competent
jurisdiction acting upon a matter within its authority — is
conclusive on the rights ofthe parties and their privies. This
ruling holds in all other actions or suits, in the same or any
other judicial tribunal of concurrent jurisdiction, touching on the
points or matters in issue in the first suit.

xxx xxx xxx

Courts will simply refuse to reopen what has been decided.

They will not allow the same parties or their privies to litigate anew a
 question once it has been considered and decided with finality.
Litigations must end and terminate sometime and somewhere. The
effective and efficient administration of justice requires that once a
judgment has become final, the prevailing party should not be
deprived of the fruits of the verdict by subsequent suits on the same
issues filed by the same parties.
This is in accordance with the doctrine of res judicata which has
the following elements: (1) the former judgment must be final; (2)
the court which rendered it had jurisdiction over the subject matter
and the parties; (3) the judgment must be on the merits; and (4)
there must be between the first and the second actions,
identity of parties, subject matter and causes of action. The
application of the doctrine of res judicatadoes not require
absolute identity of parties but merely substantial
identity of parties. There is substantial identity of parties
when there is community of interest or privity of interest
between a party in the first and a party in the second case
even if the first case did not implead the latter. 43
To recall, FELS gave NPC the full power and authority to represent it in any
proceeding regarding real property assessment. Therefore, when petitioner NPC
filed its petition for review docketed as G.R. No. 165113, it did so not only on its
behalf but also on behalf of FELS. Moreover, the assailed decision in the earlier
petition for review filed in this Court was the decision of the appellate court in CA-
G.R. SP No. 67490, in which FELS was the petitioner. Thus, the decision in G.R.
No. 165116 is binding on petitioner FELS under the principle of privity of interest.
In fine, FELS and NPC are substantially "identical parties" as to warrant the
application of res judicata. FELS's argument that it is not bound by the erroneous
petition filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum
shopping exists when, as a result of an adverse judgment in one forum, a party
seeks another and possibly favorable judgment in another forum other than by
appeal or special civil action or certiorari. There is also forum shopping when a
party institutes two or more actions or proceedings grounded on the same cause,
on the gamble that one or the other court would make a favorable disposition. 44
Petitioner FELS alleges that there is no forum shopping since the
elements of res judicata are not present in the cases at bar; however, as already
discussed, res judicata may be properly applied herein. Petitioners engaged in
forum shopping when they filed G.R. Nos. 168557 and 170628 after the petition
for review in G.R. No. 165116. Indeed, petitioners went from one court to
another trying to get a favorable decision from one of the tribunals which allowed
them to pursue their cases.
It must be stressed that an important factor in determining the
existence of forum shopping is the vexation caused to the courts and the parties-
litigants by the filing of similar cases to claim substantially the same
reliefs. 45 The rationale against forum shopping is that a party should not be
allowed to pursue simultaneous remedies in two different  fora. Filing multiple
petitions or complaints constitutes abuse of court processes, which tends to
degrade the administration of justice, wreaks havoc upon orderly judicial
procedure, and adds to the congestion of the heavily burdened dockets of the
courts. 46
Thus, there is forum shopping when there exist: (a) identity of parties, or at
least such parties as represent the same interests in both actions, (b)
identity of rights asserted and relief prayed for, the relief being founded on the
same facts, and (c) the identity of the two preceding particulars is such that any
judgment rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other. 47
Having found that the elements of res judicata and forum shopping are
present in the consolidated cases, a discussion of the other issues is no longer
necessary. Nevertheless, for the peace and contentmentof petitioners, we shall
shed light on the merits of the case.
As found by the appellate court, 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. 48 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 judgmentof men especially trained in appraising property. Where
the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed. 49 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.,  50 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 "[d]ocks 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. 51
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. 52
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, which reads:
SECTION 234. Exemptions from Real Property Tax. — The
following are exempted from payment of the real property tax:
 xxx xxx xxx
(c) All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned
or controlled corporations engaged in the supply and
distribution of water and/or generation and
transmission of electric power; . . .
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. 53
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. 54
Time and again, the Supreme Court has stated that taxation is the rule and
exemption is the exception. 55 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. 56 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. HTCISE
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. 57The 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 58and 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. 59
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. 60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and
Resolutions AFFIRMED.
 SO ORDERED.
|||  (FELS Energy, Inc. v. Province of Batangas, G.R. Nos. 168557 &
170628, [February 16, 2007], 545 PHIL 92-115)

[G.R. No. 179408. March 5, 2014.]

PHILIPPINE LONG DISTANCE TELEPHONE

COMPANY, petitioner, vs. ABIGAIL R. RAZON  ALVAREZ  and
VERNON R. RAZON, respondents.

DECISION

BRION,  J p:

Before the Court is a petition for review on certiorari 1 assailing the

decision 2 dated August 11, 2006 and the resolution 3 dated August 22, 2007
of the Court of Appeals (CA) in CA-G.R. SP No. 89213 on the validity of the
four search warrants issued by the Regional Trial Court (RTC) of Pasay City,
Branch 115.
The CA rulings (i) quashed the first two search warrants, similarly
docketed as Search Warrant No. 03-063, issued for violation of Article 308, in
relation to Article 309, of the Revised Penal Code (RPC), and (ii) declared void
paragraphs 7, 8 and 9 of the other two search warrants, also similarly
docketed as Search Warrant No. 03-064, issued for violation of Presidential
Decree (PD) No. 401. 4

FACTUAL ANTECEDENTS
 Philippine Long Distance Telephone Company (PLDT) is the grantee of a
legislative franchise 5 which authorizes it to carry on the business of providing
basic and enhanced telecommunications services in and between areas in the
Philippines and between the Philippines and other countries and
territories, 6 and, accordingly, to establish, operate, manage, lease, maintain
and purchase telecommunications system for both domestic and international
calls. 7 Pursuant to its franchise, PLDT offers to the public wide range of
services duly authorized by the National Telecommunications
Commission (NTC).
PLDT's network is principally composed of the Public Switch Telephone
Network, telephone handsets and/or telecommunications equipment used by
its subscribers, the wires and cables linking these handsets and/or equipment,
antennae, transmission facilities, the international gateway facility (IGF) and
other telecommunications equipment providing interconnections. 8 To
safeguard the integrity of its network, PLDT regularly conducts investigations
on various prepaid cards marketed and sold abroad to determine alternative
calling patterns (ACP) and network fraud that are being perpetrated against
it. aHTCIc
To prevent or stop network fraud, PLDT's ACP Detection
Division (ACPDD) regularly visits foreign countries to conduct market research
on various prepaid phone cards offered abroad that allow their users to make
overseas calls to PLDT subscribers in the Philippines at a cheaper rate.
The ACPDD bought The Number One prepaid card — a card principally
marketed to Filipinos residing in the United Kingdom for calls to the Philippines
— to make test calls using two telephone lines: the dialing phone — an IDD-
capable 9 telephone line which makes the call and through which the access
number and the PIN number printed at the back of the card are entered;
and the receiving phone — a caller identification (caller id) unit-equipped
telephone line which would receive the call and reflect the incoming caller's
telephone number.
During a test call placed at the PLDT-ACPDD office, the receiving phone
reflected a PLDT telephone number (2-8243285) as the calling number
used, as if the call was originating from a local telephone in Metro Manila.
Upon verification with the PLDT's Integrated Customer Management (billing)
System, the ACPDD learned that the subscriber of the reflected telephone
number is Abigail R. Razon Alvarez, with address at 17 Dominic Savio St.,
Savio Compound, Barangay Don Bosco, Parañaque City. It further learned that
several lines are installed at this address with Abigail and Vernon R.
Razon (respondents), among others, as subscribers. 10
To validate its findings, the ACPDD conducted the same test calls on
November 5, 2003 at the premises of the NTC in Quezon City (and in the
presence of an NTC representative) 11 using the same prepaid
card. (validation test). The receiving phone at the NTC premises reflected the
telephone numbers registered in the name of Abigail as the calling
number from the United Kingdom. 12
Similar test calls subsequently conducted using the prepaid cards Unity
Card and IDT Supercalling Card revealed the same results. The caller-id-
equipped receiving phone reflected telephone numbers 13 that are in the
names of Experto Enterprises and Experto Phils. as subscribers, with a
common address at No. 38 Indonesia St., Better Living Subdivision, Barangay
Don Bosco, Parañaque City. It turned out that the actual occupant of these
premises is also Abigail. Subsequently, a validation test was also conducted,
yielding several telephone numbers registered in the name of Experto
Phils./Experto Enterprises as the calling numbers supposedly from the United
Kingdom. 14
According to PLDT, had an ordinary and legitimate call been made, the
screen of the caller-id-equipped receiving phone would not reflect a local
number or any number at all. In the cards they tested, however, once the
caller enters the access and pin numbers, the respondents would route the
call via the internet to a local telephone number (in this case,
a PLDT telephone number) which would connect the call to the receiving
phone. Since calls through the internet never pass the toll center of the PLDT's
IGF, users of these prepaid cards can place a call to any point in the Philippines
(provided the local line is NDD-capable) without the call appearing as coming
from abroad. 15
On November 6, 2003 and November 19, 2003, Mr. Lawrence Narciso of
the PLDT's Quality Control Division, together with the operatives of the
Philippine National Police (PNP), conducted an ocular inspection at 17 Dominic
Savio St., Savio Compound and at No. 38 Indonesia St., Better Living
Subdivision — both in Barangay Don Bosco, Parañaque City — and discovered
that PLDT telephone lines were connected to several pieces of
equipment. 16 Mr. Narciso narrated the results of the inspection, thus —
10. During [the] ocular inspection [at 17 Dominic Savio St., Savio
Compound], Ms. Abigail Razon Alvarez allowed us to gain entry and
check the telephone installations within their premises. First, we
checked the location of the telephone protectors that are commonly
installed at a concrete wall boundary inside the compound. Some of
these protectors are covered with a fabricated wooden cabinet.
Other protectors are installed beside the said wooden cabinet. . . . .
The inside wiring installations from telephone protectors to
connecting block were routed to the said adjacent room passing
through the house ceiling.
11. . . . . Upon entering the so-called adjacent room, we
immediately noticed that the PLDT telephone lines were connected
to the equipment situated at multi-layered rack. The equipment
room contains the following: aAHISE
a. 6 Quintum router;
b. 13 Com router;
c. 1 Cisco 800 router;
d. 1 Nokia Modem for PLDT DSL;
e. 1 Meridian Subscriber's Unit[;]
f. 5 Personal Computers[;]
g. 1 Computer Printer[; and]
h. 1 Flat-bed Scanner[.]
12. We also noticed that these rooters are connected to the
Meridian's subscriber unit ("SU") that has an outdoor antenna
installed on the top of the roof. Meridian's SU and outdoor antenna
are service components used to connect with wireless broadband
Internet access service of Meridian Telekoms.
xxx xxx xxx
18. During the site inspection [at No. 38 Indonesia St., Better Living
Subdivision], we noticed that the protector of each telephone
 line/number . . . were enclosed in a fabricated wooden cabinet with
safety padlock. Said wooden cabinet was situated on the concrete
wall inside the compound near the garage entrance gate. The
telephone inside the wiring installations from the protector to the
connecting blocks were placed in a plastic electrical conduit routed
to the adjacent room at the second floor. 17
On December 3, 2003, Police Superintendent Gilbert C. Cruz filed a
consolidated application for a search warrant 18 before Judge Francisco G.
Mendiola of the RTC, for the crimes of theft and violation of PD No. 401.
According to PLDT, the respondents are engaged in a form of network fraud
known as International Simple Resale (ISR) which amounts to theft under
the RPC.
ISR is a method of routing and completing international long distance
calls using lines, cables, antennae and/or wave frequencies which are
connected directly to the domestic exchange facilities of the country where the
call is destined (terminating country); and, in the process, bypassing the IGF
at the terminating country. 19
Judge Mendiola found probable cause for the issuance of the search
warrants applied for. Accordingly, four search warrants 20 were issued for
violations of Article 308, in relation to Article 309, of the RPC(SW A-1 and SW
A-2) and of PD No. 401, as amended (SW B-1 and SW B-2) for the ISR
activities being conducted at 17 Dominic Savio St., Savio Compound and at
No. 38 Indonesia St., Better Living Subdivision, both in Barangay Don Bosco,
Parañaque City. The four search warrants enumerated the objects to be
searched and seized as follows:
1. MERIDIAN SUBSCRIBERS UNIT AND PLDT DSL LINES and/or
CABLES AND ANTENNAS and/or similar equipment or device capable
of transmitting air waves or frequency, such as a Meridian
Subscriber's Unit, Broadband DSL and telephone lines;
2. PERSONAL COMPUTERS or any similar equipment or device
capable of accepting information applying the prescribed process of
the information and supplying the result of this process;
3. NOKIA MODEM or any similar equipment or device that
enables data terminal equipment such as computers to communicate
with other data terminal equipment via a telephone line; ATaDHC
4. QUINTUM Equipment or any similar equipment capable of
receiving digital signals from the internet and converting those
signals to voice;
5. QUINTUM, 3COM AND CISCO Routers or any similar
equipment capable of switching packets of data to their assigned
destination or addresses;
6. LINKS DSL SWITCH or any similar equipment capable of
switching data;
7. COMPUTER PRINTERS AND SCANNERS or any similar
equipment or device used for copying and/or printing data and/or
information;
8. SOFTWARE, DISKETTES, TAPES or any similar equipment or
device used for recording or storing information; and
9. Manuals, phone cards, access codes, billing statements,
receipts, contracts, checks, orders, communications and documents,
lease and/or subscription agreements or contracts, communications
 and documents relating to securing and using telephone lines and/or
equipment[.] 21
On the same date, the PNP searched the premises indicated in the
warrants. On December 10, 2003, a return was made with a complete
inventory of the items seized. 22 On January 14, 2004, the PLDT and the PNP
filed with the Department of Justice a joint complaint-affidavit for theft and for
violation of PD No. 401 against the respondents. 23
On February 18, 2004, the respondents filed with the RTC a motion to
quash 24 the search warrants essentially on the following grounds: first, the
RTC had no authority to issue search warrants which were enforced in
Parañaque City; second, the enumeration of the items to be searched and
seized lacked particularity; and third, there was no probable cause for the
crime of theft. ACETID
On March 12, 2004, PLDT opposed the respondents' motion. 25
In a July 6, 2004 order, 26 the RTC denied the respondents' motion to
quash. Having been rebuffed 27 in their motion for reconsideration, 28 the
respondents tiled a petition for certiorari with the CA. 29

RULING OF THE CA

On August 11, 2006, the CA rendered the assailed decision and

resolution, granting the respondents' petition for certiorari. The CA quashed
SW A-1 and SW A-2 (for theft) on the ground that they were issued for "non-
existent crimes." 30 According to the CA, inherent in the determination of
probable cause for the issuance of search warrant is the accompanying
determination that an offense has been committed. Relying on this Court's
decision in Laurel  v. Judge Abrogar, 31 the CA ruled that the respondents
could not have possibly committed the crime of theft because PLDT's business
of providing telecommunication services and these services themselves are not
personal properties contemplated under Article 308 of the RPC.
With respect to SW B-1 and SW B-2 (for violation of PD No. 401), the
CA upheld paragraphs one to six of the enumeration of items subject of the
search. The CA held that the stock phrase "or similar equipment or device"
found in paragraphs one to six of the search warrants did not make it suffer
from generality since each paragraph's enumeration of items was sufficiently
qualified by the citation of the specific objects to be seized and by its functions
which are inherently connected with the crime allegedly committed.
The CA, however, nullified the ensuing paragraphs 7, 8 and 9, for lack of
particularity and ordered the return of the items seized under these provisions.
While the same stock phrase appears in paragraphs 7 and 8, the properties
described therein — i.e., printer and scanner, software, diskette and tapes —
include even those for the respondents' personal use, making the description
of the things to be seized too general in nature.
With the denial of its motion for reconsideration, 32 PLDT went to this
Court via this Rule 45 petition.

THE PETITIONER'S ARGUMENTS

PLDT faults the CA for relying on Laurel on three

grounds: first, Laurel cannot be cited yet as an authority under the principle
of stare decisis because Laurel is not yet final and executory; in fact, it is the
subject of a pending motion for reconsideration filed by PLDT itself; second,
even assuming that Laurel is already final, the facts in Laurel vary from the
present case. Laurel involves the quashal of an informationon the ground that
the information does not charge any offense; hence, the determination of the
existence of the elements of the crime of theft is indispensable in resolving the
motion to quash. In contrast, the present case involves the quashal of a search
warrant. Third, accordingly, in resolving the motion, the issuing court only has
to be convinced that there is probable cause to hold that: (i) the items to be
seized are connected to a criminal activity; and (ii) these items are found in
the place to be searched. Since the matter of quashing a search warrant may
be rooted on matters "extrinsic of the search warrant," 33 the issuing court
does not need to look into the elements of the crime allegedly committed in
the same manner that the CA did in Laurel.
PLDT adds that a finding of grave abuse of discretion in the issuance of
search warrant may be justified only when there is "disregard of the
requirements for the issuance of a search warrant[.]" 34 In the present case,
the CA did not find (and could not have found) any grave abuse of discretion
on the part of the RTC because at the time the RTC issued the search warrants
in 2003, Laurel had not yet been promulgated.
In defending the validity of the nullified provisions of SW B-1 and SW B-
2, PLDT argues that PD No. 401 also punishes unauthorized installation of
telephone connections. Since the enumerated items are connected to the
computers that are illegally connected to PLDT telephone lines, then these
items bear a direct relation to the offense of violation of PD No. 401, justifying
their seizure. DEaCSA
The enumeration in paragraph 8 is likewise a proper subject of seizure
because they are the fruits of the offense as they contain information
on PLDT's business profit and other information relating to the commission of
violation of PD No. 401. Similarly, paragraph 9 specifies the fruits and evidence
of violation of PD No. 401 since it supports PLDT's claim that the respondents
have made a business out of their illegal connections to PLDT lines.

THE RESPONDENTS' ARGUMENTS

The respondents counter that while Laurel may not yet be final, at least it

has a persuasive effect as the current jurisprudence on the matter. Even
without Laurel, the CA's nullification of SW A-1 and SW A-2 can withstand
scrutiny because of the novelty of the issue presented before it. The
nullification of paragraphs 7, 8 and 9 of SW B-1 and SW B-2 must be upheld
not only on the ground of broadness but for lack of any relation whatsoever
with PD No. 401 which punishes the theft of electricity.

OUR RULING

We partially grant the petition.

Laurel and its reversal by the Court En Banc

Before proceeding with the case, a review of Laurel is in order as it

involves substantially similar facts as in the present case.
Baynet Co., Ltd. (Baynet) sells prepaid cards, "Bay Super Orient Card,"
that allow their users to place a call to the Philippines from
Japan. PLDT asserted that Baynet is engaged in ISR activities by using an
international private leased line (IPL) to course Baynet's incoming international
long distance calls. The IPL is linked to a switching equipment, which is then
connected to PLDT telephone lines/numbers and equipment, with Baynet as
subscriber.
 To establish its case, PLDT obtained a search warrant. On the strength of
the items seized during the search of Baynet's premises, the prosecutor found
probable cause for theft against Luis Marcos Laurel(Laurel) and other Baynet
officials. Accordingly, an information was filed, alleging that the Baynet officials
"take, steal and use the international long distance calls belonging to PLDT by
[ISR activities] . . . effectively stealing this business from PLDT while using its
facilities in the estimated amount of P20,370,651.92 to the damage and
prejudice of PLDT[.]"35
Laurel moved to quash the information on the bold assertion that ISR
activities do not constitute a crime under Philippine law. Laurel argued that an
ISR activity cannot entail taking of personal property because the international
long distance telephone calls using PLDT telephone lines belong to the caller
himself; the amount stated in the information, if at all, represents the rentals
due PLDT for the caller's usage of its facilities. Laurel argued that the business
of providing international long distance calls, i.e., PLDT's service, and the
revenue derived therefrom are not personal property that can be appropriated.
Laurel went to the Court after failing to secure the desired relief from the
trial and appellate courts, 36 raising the core issue of whether PLDT's business
of providing telecommunication services for international long distance calls is
a proper subject of theft under Article 308 of the RPC. The Court's First
Division granted Laurel's petition and ordered the quashal of the information.
Taking off from the basic rule that penal laws are construed strictly
against the State, the Court ruled that international long distance calls and the
business of providing telecommunication or telephone services by PLDT are not
personal properties that can be the subject of theft. aIcCTA
One is apt to conclude that "personal property" standing alone,
covers both tangible and intangible properties and are subject of
theft under the Revised Penal Code. But the words "Personal
property" under theRevised Penal Code must be considered in
tandem with the word "take" in the law. The statutory definition of
"taking" and movable property indicates that, clearly, not all personal
properties may be the proper subjects of theft. The general rule is
that, only movable properties which have physical or material
existence and susceptible of occupation by another are proper
objects of theft. . . . .
xxx xxx xxx
. . . . Business, like services in business, although are
properties, are not proper subjects of theft under the Revised Penal
Code because the same cannot be "taken" or "occupied." If it were
otherwise, . . . there would be no juridical difference between the
taking of the business of a person or the services provided by him for
gain, vis-à-vis, the taking of goods, wares or merchandise, or
equipment comprising his business. If it was its intention to include
"business" as personal property under Article 308 of the Revised
Penal Code, the Philippine Legislature should have spoken in
language that is clear and definite: that business is personal property
under Article 308 of the Revised Penal Code.
xxx xxx xxx
The petitioner is not charged, under the Amended Information,
for theft of telecommunication or telephone services offered by PLDT.
Even if he is, the term "personal property" under Article 308 of
the Revised Penal Code cannot be interpreted beyond its seams so as
to include "telecommunication or telephone services" or computer
 services for that matter. . . . . Even at common law, neither time nor
services may be taken and occupied or appropriated. A service is
generally not considered property and a theft of service would not,
therefore, constitute theft since there can be no caption or
asportation. Neither is the unauthorized use of the equipment and
facilities of PLDT by [Laurel] theft under [Article 308].
If it was the intent of the Philippine Legislature, in 1930, to
include services to be the subject of theft, it should have
incorporated the same in Article 308 of the Revised Penal Code. The
Legislature did not. In fact, the Revised Penal Code does not even
contain a definition of services. 37
PLDT 38 moved for reconsideration and referral of the case to the
Court En Banc. The Court's First Division granted the referral.
On January 13, 2009 (or while the present petition was pending in
court), the Court En Banc unanimously granted PLDT's motion for
reconsideration. 39 The Court ruled that even prior to the passage of theRPC,
jurisprudence is settled that "any personal property, tangible or intangible,
corporeal or incorporeal, capable of appropriation can be the object of
theft." 40 This jurisprudence, in turn, applied the prevailing legal meaning of
the term "personal property" under the old Civil Code as "anything susceptible
of appropriation and not included in the foregoing chapter (not real
property)." 41 PLDT's telephone service or its business of providing this was
appropriable personal property and was, in fact, the subject of appropriation in
an ISR operation, facilitated by means of the unlawful use of PLDT's facilities.
In this regard, the Amended Information inaccurately describes the
offense by making it appear that what [Laurel] took were the
international long distance telephone calls, rather than
respondent PLDT's business.
xxx xxx xxx
Indeed, while it may be conceded that "international long
distance calls," the matter alleged to be stolen . . ., take the form of
electrical energy, it cannot be said that such international long
distance calls were personal properties belonging to PLDT since the
latter could not have acquired ownership over such
calls. PLDT merely encodes, augments, enhances, decodes and
transmits said calls using its complex communications infrastructure
and facilities. PLDT not being the owner of said telephone calls, then
it could not validly claim that such telephone calls were taken without
its consent. It is the use of these communications facilities without
the consent of PLDT that constitutes the crime of theft, which is the
unlawful taking of the telephone services and business.
Therefore, the business of providing telecommunication and the
telephone service are personal property under Article 308 of
the Revised Penal Code, and the act of engaging in ISR is an act of
"subtraction" penalized under said article. 42
The Court En Banc's reversal of its Laurel Division ruling during the
pendency of this petition significantly impacts on how the Court should resolve
the present case for two reasons: DECcAS
First, the Laurel  En Banc ruling categorically equated an ISR activity to
theft under the RPC. In so doing, whatever alleged factual variance there may
be between Laurel and the present case cannot renderLaurel inapplicable.
 Second, and more importantly, in a Rule 45 petition, the Court basically
determines whether the CA was legally correct in determining whether the RTC
committed grave abuse of discretion. Under this premise, the CA ordinarily
gauges the grave abuse of discretion at the time the RTC rendered its assailed
resolution. In quashing SW A-1 and SW A-2, note that the CA relied on
the Laurel Division ruling at the time when it was still subject of a pending
motion for reconsideration. The CA, in fact, did not expressly impute grave
abuse of discretion on the RTC when the RTC issued the search warrants and
later refused to quash these. Understandably, the CA could not have really
found the presence of grave abuse of discretion for there was no Laurel ruling
to speak of at the time the RTC issued the search warrants.
These peculiar facts require us to more carefully analyze our prism of
review under Rule 45.

Requisites for the issuance of search

warrant; probable cause requires the
probable existence of an offense

Section 2, Article III of the 1987 Constitution guarantees the right of

persons to be free from unreasonable searches and seizures.
Section 2. The right of the people to be secure in their persons,
houses, papers, and effects against unreasonable searches and
seizures of whatever nature and for any purpose shall be inviolable,
and no search warrant or warrant of arrest shall issue except
upon probable cause to be determined personally by the judge
after examination under oath or affirmation of the complainant and
the witnesses he may produce, and particularly describing the place
to be searched and the persons or things to be seized.
The purposes of the constitutional provision against unlawful searches
and seizures are to: (i) prevent the officers of the law from violating private
security in person and property and illegal]y invading the sanctity of the home;
and (ii) give remedy against such usurpations when attempted or
committed. 43
The constitutional requirement for the issuance of a search warrant is
reiterated under Sections 4 and 5, Rule 126 of the Revised Rules of Criminal
Procedure. These sections lay down the following requirements for the
issuance of a search warrant: (1) the existence of probable cause; (2) the
probable cause must be determined personally by the judge; (3) the judge
must examine, in writing and under oath or affirmation, the complainant and
the witnesses he or she may produce; (4) the applicant and the witnesses
testify on the facts personally known to them; and (5) the warrant specifically
describes the place to be searched and the things to be seized. 44 Should any
of these requisites be absent, the party aggrieved by the issuance and
enforcement of the search warrant may file a motion to quash the search
warrant with the issuing court or with the court where the action is
subsequently instituted. 45
A search warrant proceeding is a special criminal and judicial process akin
to a writ of discovery. It is designed by the Rules of Criminal Procedure to
respond only to an incident in the main case, if one has already been
instituted, or in anticipation thereof. Since it is at most incidental to the main
criminal case, an order granting or denying a motion to quash a search
warrant may be questioned only via a petition forcertiorari under Rule 65. 46
When confronted with this petition, the higher court must necessarily
determine the validity of the lower court's action from the prism of whether it
was tainted with grave abuse of discretion. By grave abuse of discretion,
jurisprudence refers to the capricious and whimsical exercise of judgment
equivalent to lack of jurisdiction, or to the exercise of power in an arbitrary or
despotic manner by reason of passion or personal hostility or in a manner so
patent and gross as to amount to an invasion of positive duty or to the virtual
refusal to perform the duty enjoined or to act at all in contemplation of the
law. 47
In a certiorari proceeding, the determination translates to an inquiry on
whether the requirements and limitations provided under the Constitution and
the Rules of Court were properly complied with, from the issuance of the
warrant up to its implementation. In view of the constitutional objective of
preventing stealthy encroachment upon or the gradual depreciation of the
rights secured by the Constitution, strict compliance with the constitutional and
procedural requirements is required. A judge who issues a search warrant
without complying with these requirements commits grave abuse of
discretion. 48
One of the constitutional requirements for the validity of a search warrant
is that it must be issued based on probable cause which, under the Rules, must
be in connection with one specific offense. In search warrant proceedings,
probable cause is defined as such facts and circumstances that would lead a
reasonably discreet and prudent man to believe that an offense has been
committed and that the objects sought in connection with the offense are in
the place sought to be searched. 49
In the determination of probable cause, the court must necessarily
determine whether an offense exists to justify the issuance or quashal of the
search warrant 50 because the personal properties that may be subject of the
search warrant are very much intertwined with the "one specific offense"
requirement of probable cause. 51 Contrary to PLDT's claim, the only way to
determine whether a warrant should issue in connection with one specific
offense is to juxtapose the facts and circumstances presented by the applicant
with the elements of the offense that are alleged to support the search
warrant.

Reviewing the RTC's denial of the

motion to quash SW A-1 and SW A-
2

a.  From the prism of Rule 65

The facts of the present case easily call to mind the case of Columbia
Pictures, Inc.  v. CA 52 involving copyright infringement. In that case, the CA
likewise voided the search warrant issued by the trial court by applying a
doctrine that added a new requirement (i.e., the production of the master tape
for comparison with the allegedly pirate copies) in determining the existence of
probable cause for the issuance of search warrant in copyright infringement
cases. The doctrine referred to was laid down in 20th Century Fox Film
Corporation  v. Court of Appeals. 20th Century Fox, however, was promulgated
more than eight monthsafter the search warrants were issued by the RTC. In
reversing the CA, the Court ruled:
Mindful as we are of the ramifications of the doctrine of stare
decisis and the rudiments of fair play, it is our considered view that
the 20th Century Fox ruling cannot be retroactively applied to the
instant case to justify the quashal of Search Warrant No. 87-053.
[The] petitioners' consistent position that the order of the lower
court[,] . . . [which denied the respondents'] motion to lift the order
 of search warrant[,] was properly issued, [because there was]
satisfactory compliance with the then prevailing standards under the
law for determination of probable cause, is indeed well taken. The
lower court could not possibly leave have expected more evidence
from petitioners in their application for a search warrant other than
what the law and jurisprudence, then existing and judicially accepted,
required with respect to the finding of probable cause. 53 EScHDA
Columbia could easily be cited in favor of PLDT to sustain the RTC's
refusal to quash the search warrant. Indeed, in quashing SW A-1 and SW A-2,
the CA never intimated that the RTC disregarded any of the requisites for the
issuance of a search warrant as these requirements were interpreted and
observed under the then prevailing jurisprudence. The CA could not have
done so because precisely the issue of whether telephone services or the
business of providing these services could be the subject of theft under
the RPC had not yet reached the Court when the search warrants were applied
for and issued.
However, what distinguishes Columbia from the present case is the focus
of Columbia's legal rationale. Columbia's focus was not on whether the facts
and circumstances would reasonably lead to the conclusion that an offense has
been or is being committed and that the objects sought in connection with the
offense were in the place to be searched — the primary points of focus of the
present case.Columbia's focus was on whether the evidence presented at
the time the search warrant was applied for was sufficient to establish
the facts and circumstances required for establishing probable cause to issue a
search warrant.
Nonetheless, Columbia serves as a neat guide for the CA to decide the
respondents' certiorari petition. In Columbia, the Court applied the principle of
non-retroactivity of its ruling in 20th Century Fox,whose finality was not an
issue, in reversing a CA ruling. The Court's attitude in that case should have
been adopted by the CA in the present case a fortiori since the ruling that the
CA relied upon was not yet final at the time the CA resolved to quash the
search warrants.
b.  Supervening events justifying a
broader review under Rule 65
Ordinarily, the CA's determination under Rule 65 is limited to whether the
RTC gravely abused its discretion in granting or denying the motion to
quash based on facts then existing. Nonetheless, the Court recognizes that
supervening facts may transpire after the issuance and implementation of the
search warrant that may provide justification for the quashal of the search
warrant via a petition for certiorari.
For one, if the offense for which the warrant is issued is subsequently
decriminalized during the pendency of the petition for certiorari, then the
warrant may be quashed. 54 For another, a subsequent ruling from the Court
that a similar set of facts and circumstances does not constitute an offense, as
alleged in the search warrant application, may be used, as a ground to quash a
warrant. 55 In both instances, the underlying reason for quashing the search
warrant is the absence of probable cause which can only possibly exist when
the combination of facts and circumstances points to the possible commission
of an offense that may be evidenced by the personal properties sought to be
seized. To the CA, the second instance mentioned justified the quashal of the
search warrants.
We would have readily agreed with the CA if the Laurel Division ruling
had not been subsequently reversed. As things turned out, however, the Court
granted PLDT's motion for reconsideration of the Court First Division's ruling
in Laurel and ruled that "the act of engaging in ISR is . . . penalized under . . .
article [308 of the RPC]." 56 As the RTC itself found, PLDT successfully
established in its application for a search warrant a probable cause for theft by
evidence that Laurel's ISR activities deprived PLDT of its telephone services
and of its business of providing these services without its consent.
b1. the stare decisis aspect
With the Court En Banc's reversal of the earlier Laurel ruling, then the
CA's quashal of these warrants would have no leg to stand on. This is the dire
consequence of failing to appreciate the full import of the doctrine of stare
decisis that the CA ignored.
Under Article 8 of the Civil Code, the decisions of this Court form part of
the country's legal system. While these decisions are not laws pursuant to the
doctrine of separation of powers, they evidence the laws' meaning, breadth,
and scope and, therefore, have the same binding force as the laws
themselves. 57 Hence, the Court's interpretation of a statute forms part of the
law as of the date it was originally passed because the Court's construction
merely establishes the contemporaneous legislative intent that the interpreted
law carries into effect. 58
Article 8 of the Civil Code embodies the basic principle of stare decisis et
non quieta movere (to adhere to precedents and not to unsettle established
matters) that enjoins adherence to judicial precedents embodied in the
decision of the Supreme Court. That decision becomes a judicial precedent to
be followed in subsequent cases by all courts in the land. The doctrine of stare
decisis, in turn, is based on the principle that once a question of law has been
examined and decided, it should be deemed settled and closed to further
argument. 59 The doctrine of (horizontal) stare decisis is one of policy,
grounded on the necessity of securing certainty and stability of judicial
decisions. 60
In the field of adjudication, a case cannot yet acquire the status of a
"decided" case that is "deemed settled and closed to further argument" if the
Court's decision is still the subject of a motion for reconsideration seasonably
filed by the moving party. Under the Rules of Court, a party is expressly
allowed to file a motion for reconsideration of the Court's decision within 15
days from notice. 61 Since the doctrine of stare decisis is founded on the
necessity of securing certainty and stability in law, then these attributes will
spring only once the Court's ruling has lapsed to finality in accordance with
law. In Ting  v. Velez-Ting, 62 we ruled that: HAaDTI
The principle of stare decisis enjoins adherence by lower courts
to doctrinal rules established by this Court in its final decisions. It is
based on the principle that once a question of law has been examined
and decided, it should be deemed settled and closed to further
argument.
In applying Laurel despite PLDT's statement that the case is still subject
of a pending motion for reconsideration, 63 the CA legally erred in refusing to
reconsider its ruling that largely relied on a non-final ruling of the Court. While
the CA's dutiful desire to apply the latest pronouncement of the Court
in Laurel is expected, it should have acted with caution, instead of excitement,
on being informed by PLDT of its pending motion for reconsideration; it should
have then followed the principle of stare decisis. The appellate court's
application of an exceptional circumstance when it may order the quashal of
the search warrant on grounds not existing at the time the warrant was issued
or implemented must still rest on prudential grounds if only to maintain the
limitation of the scope of the remedy of certiorari as a writ to correct errors of
jurisdiction and not mere errors of judgment.
Still, the respondents attempt to justify the CA's action by arguing that
the CA would still rule in the way it did 64 even without Laurel.
As PLDT correctly pointed out, there is simply nothing in the CA's decision that
would support its quashal of the search warrant independently of Laurel. We
must bear in mind that the CA's quashal of SW A-1 and SW A-2 operated
under the strictures of a certiorari petition, where the presence of grave abuse
of discretion is necessary for the corrective writ to issue since the appellate
court exercises its supervisory jurisdiction in this case. We simply cannot
second-guess what the CA's action could have been.
Lastly, the CA's reliance on Savage  v. Judge Taypin 65 can neither
sustain the quashal of SW A-1 and SW A-2. In Savage, the Court granted
the certiorari petition and quashed the search warrant because the alleged
crime (unfair competition involving design patents) that supported the search
warrant had already been repealed, and the act complained of, if at all, gave
rise only to civil liability (for patent infringement). Having been decriminalized,
probable cause for the crime alleged could not possibly exist.
In the present case, the issue is whether the commission of an ISR
activity, in the manner that PLDT's evidence shows, sufficiently establishes
probable cause for the issuance of search warrants for the crime of theft.
Unlike in Savage, the Court in Laurel was not confronted with the issue of
decriminalization (which is a legislative prerogative) but whether the
commission of an ISR activity meets the elements of the offense of theft for
purposes of quashing an information. Since the Court, in Laurel, ultimately
ruled then an ISR activity justifies the elements of theft that must necessarily
be alleged in the information a fortiori, the RTC's determination should be
sustained on certiorari.

The requirement of particularity in

SW B-1 and SW B-2

On the issue of particularity in SW B-1 and, SW B-2, we note that the

respondents have not appealed to us the CA ruling that sustained paragraphs 1
to 6 of the search warrants. Hence, we shall limit our discussion to the
question of whether the CA correctly ruled that the RTC gravely abused its
discretion insofar as it refused to quash paragraphs 7 to 9 of SW B-1 and SW
B-2.
Aside from the requirement of probable cause, the Constitution also
requires that the search warrant must particularly describe the place to be
searched and the things to be seized. This requirement of particularity in the
description, especially of the things to be seized, is meant to enable the law
enforcers to readily identify the properties to be seized and, thus, prevent the
seizure of the wrong items. It seeks to leave the law enforcers with no
discretion at all regarding these articles and to give life to the constitutional
provision against unreasonable searches and seizures. 66 In other words, the
requisite sufficient particularity is aimed at preventing the law enforcer from
exercising unlimited discretion as to what things are to be taken under the
warrant and ensure that only those connected with the offense for which the
warrant was issued shall be seized. 67
The requirement of specificity, however, does not require technical
accuracy in the description of the property to be seized. Specificity is satisfied
if the personal properties' description is as far as the circumstances will
ordinarily allow it to be so described. The nature of the description should vary
according to whether the identity of the property or its character is a matter of
concern. 68 One of the tests to determine the particularity in the description of
objects to be seized under a search warrant is when the things described are
limited to those which bear direct relation to the offense for which the warrant
is being issued. 69 IDTSEH
Additionally, the Rules require that a search warrant should be issued "in
connection with one specific offense" to prevent the issuance of a scatter-shot
warrant. 70 The one-specific-offense requirement reinforces the constitutional
requirement that a search warrant should issue only on the basis of probable
cause. 71 Since the primary objective of applying for a search warrant is to
obtain evidence to be used in a subsequent prosecution for an offense for
which the search warrant was applied, a judge issuing a particular warrant
must satisfy himself that the evidence presented by the applicant establishes
the facts and circumstances relating to this specific offense for which the
warrant is sought and issued. 72 Accordingly, in a subsequent challenge
against the validity of the warrant, the applicant cannot be allowed to maintain
its validity based on facts and circumstances that may be related to other
search warrants but are extrinsic to the warrant in question.
Under the Rules, the following personal property may be subject of
search warrant: (i) the subject of the offense; (ii) fruits of the offense; or (iii)
those used or intended to be used as the means of committing an offense. In
the present case, we sustain the CA's ruling nullifying paragraphs 7, 8 and 9 of
SW B-1 and SW B-2 for failing the test of particularity. More specifically, these
provisions do not show how the enumerated items could have possibly been
connected with the crime for which the warrant was issued, i.e., P.D. No. 401.
For clarity, PD No. 401 punishes:
Section 1. Any person who installs any water,
electrical, telephone, or piped gas connection without previous
authority from . . . the Philippine Long Distance Telephone
Company, . . ., tampers and/or uses tampered water, electrical or
gas meters, jumpers or other devices whereby water, electricity or
piped gas is stolen; steals or pilfers water, electric or piped gas
meters, or water, electric and/or telephone wires, or piped gas pipes
or conduits; knowingly possesses stolen or pilfered water, electrical
or gas meters as well as stolen or pilfered water, electrical and/or
telephone wires, or piped gas pipes and conduits, shall, upon
conviction, be punished with prision correccional in its minimum
period or a fine ranging from two thousand to six thousand pesos, or
both. 73
Paragraphs 7 to 8 of SW B-1 and SW B-2 read as follows:
7. COMPUTER PRINTERS AND SCANNERS or any similar
equipment or device used for copying and/or printing data and/or
information;
8. SOFTWARE, DISKETTES, TAPES or any similar equipment or
device used for recording or storing information; and
9. Manuals, phone cards, access codes, billing statements,
receipts, contracts, checks, orders, communications and documents,
lease and/or subscription agreements or contracts, communications
and documents relating to securing and using telephone lines and/or
equipment[.]74
According to PLDT, the items in paragraph 7 have a direct relation to
violation of PD No. 401 because the items are connected to computers that, in
turn, are linked to the unauthorized connections to PLDTtelephone lines. With
regard to the software, diskette and tapes in paragraph 8, and the items in
paragraph 9, PLDT argues that these items are "fruits of the offense" and that
the information it contains "constitutes the business profit" of PLDT. According
to PLDT, it corroborates the fact that the respondents have made a business
out of their illegal connections to its telephone lines.
We disagree with PLDT. The fact that the printers and scanners are or
may be connected to the other illegal connections to the PLDT telephone lines
does not make them the subject of the offense or fruits of the offense, much
less could they become a means of committing an offense.
It is clear from PLDT's submission that it confuses the crime for
which SW B-1 and SW B-2 were issued with the crime for which SW A-1 and
SW A-2 were issued: SW B-1 and SW B-2 were issued for violation of PD No.
401, to be enforced in two different places as identified in the warrants. The
crime for which these search warrants were issued does not pertain to the
crime of theft — where matters of personal property and the taking thereof
with intent to gain become significant — but to PD No. 401.
These items could not be the subject of a violation of PD No.
401 since PLDT itself does not claim that these items themselves comprise the
unauthorized installations. For emphasis, what PD No. 401punishes is the
unauthorized installation of telephone connection without the previous consent
of PLDT. In the present case, PLDT has not shown that connecting printers,
scanners, diskettes or tapes to a computer, even if connected to
a PLDT telephone line, would or should require its prior authorization.
Neither could these items be a means of committing a violation of PD No.
401 since these copying, printing and storage devices in no way aided the
respondents in making the unauthorized connections. While these items may
be accessory to the computers and other equipment linked to telephone
lines, PD No. 401 does not cover this kind of items within the scope of the
prohibition. To allow the seizure of items under the PLDT's interpretation
would, as the CA correctly observed, allow the seizure under the warrant of
properties for personal use of the respondents.
If PLDT seeks the seizure of these items to prove that these installations
contain the respondents' financial gain and the corresponding business loss
to PLDT, then that purpose is served by SW A-1 and SW A-2 since this is
what PLDT essentially complained of in charging the respondents with theft.
However, the same reasoning does not justify its seizure under a warrant for
violation of PD No. 401 since these items are not directly connected to
the PLDT telephone lines and PLDT has not even claimed that the installation of
these items requires prior authorization from it.
WHEREFORE, premises considered, the petition is PARTIALLY
GRANTED. The decision and the resolution of the Court of Appeals in CA-G.R.
SP No. 89213 are hereby MODIFIED in that SW A-1 and SW A-2 are hereby
declared valid and constitutional.
SO ORDERED. ATICcS
|||  (Phil. Long Distance Telephone Co. v. Razon Alvarez, G.R. No.
179408, [March 5, 2014])

[G.R. No. 136438. November 11, 2004.]

 TEOFILO C. VILLARICO,  petitioner, vs. VIVENCIO  SARMIENTO,
SPOUSES BESSIE  SARMIENTO-DEL MUNDO & BETH DEL
MUNDO, ANDOK'S LITSON CORPORATION and MARITES'
CARINDERIA,respondents.

DECISION

SANDOVAL-GUTIERREZ,  J p:

Before us is a petition for review on certiorari of the Decision 1 of the Court

of Appeals dated December 7, 1998 in CA-G.R. CV No. 54883, affirming in
toto the Decision 2 of the Regional Trial Court (RTC) of Parañaque City, Branch
259, dated November 14, 1996, in Civil Case No. 95-044.
The facts of this case, as gleaned from the findings of the Court of Appeals,
are:
Teofilo C. Villarico, petitioner, is the owner of a lot in La Huerta, Parañaque
City, Metro Manila with an area of sixty-six (66) square meters and covered by
Transfer Certificate of Title (T.C.T.) No. 95453 issued by the Registry of Deeds,
same city.
Petitioner's lot is separated from the Ninoy Aquino Avenue (highway) by a
strip of land belonging to the government. As this highway was elevated by four
(4) meters and therefore higher than the adjoining areas, the Department of
Public Works and Highways (DPWH) constructed stairways at several portions of
this strip of public land to enable the people to have access to the
highway. aIcCTA
Sometime in 1991, Vivencio Sarmiento, his daughter Bessie Sarmiento and
her husband Beth Del Mundo, respondents herein, had a building constructed on
a portion of said government land. In November that same year, a part thereof
was occupied by Andok's Litson Corporation and Marites' Carinderia, also
impleaded as respondents.
In 1993, by means of a Deed of Exchange of Real Property, petitioner
acquired a 74.30 square meter portion of the same area owned by the
government. The property was registered in his name as T.C.T. No. 74430 in the
Registry of Deeds of Parañaque City.
In 1995, petitioner filed with the RTC, Branch 259, Parañaque City, a
complaint for accion publiciana against respondents, docketed as Civil Case No.
95-044. He alleged inter alia that respondents' structures on the government land
closed his "right of way" to the Ninoy Aquino Avenue; and encroached on a
portion of his lot covered by T.C.T. No. 74430.
Respondents, in their answer, specifically denied petitioner's allegations,
claiming that they have been issued licenses and permits by Parañaque City to
construct their buildings on the area; and that petitioner has no right over the
subject property as it belongs to the government.
After trial, the RTC rendered its Decision, the dispositive portion of which
reads:
"WHEREFORE, premises considered, judgment is hereby
rendered:
1. Declaring the defendants to have a better right of possession
over the subject land except the portion thereof covered
 by Transfer Certificate of Title No. 74430 of the Register of
Deeds of Parañaque;
2. Ordering the defendants to vacate the portion of the subject
premises described in Transfer Certificate of Title No.
74430 and gives its possession to plaintiff; and
3. Dismissing the claim for damages of the plaintiff against the
defendants, and likewise dismissing the claim for
attorney's fees of the latter against the former. CaEATI
Without pronouncement as to costs.
SO ORDERED." 3
The trial court found that petitioner has never been in possession of any
portion of the public land in question. On the contrary, the defendants are the
ones who have been in actual possession of the area. According to the trial court,
petitioner was not deprived of his "right of way" as he could use the Kapitan
Tinoy Street as passageway to the highway.
On appeal by petitioner, the Court of Appeals issued its Decision affirming
the trial court's Decision in toto, thus:
"WHEREFORE, the judgment hereby appealed from is hereby
AFFIRMED in toto, with costs against the plaintiff-appellant.
SO ORDERED." 4
In this petition, petitioner ascribes to the Court of Appeals the following
assignments of error:
"I
THE FINDINGS OF FACT OF THE HON. COURT OF APPEALS
CONTAINED A CONCLUSION WITHOUT CITATION OF SPECIFIC
EVIDENCE ON WHICH THE SAME WAS BASED.
II
THE HON. COURT OF APPEALS ERRED IN CONSIDERING THAT THE
ONLY ISSUE IN THIS CASE IS WHETHER OR NOT THE PLAINTIFF-
APPELLANT HAS ACQUIRED A RIGHT OF WAY OVER THE LAND OF
THE GOVERNMENT WHICH IS BETWEEN HIS PROPERTY AND THE
NINOY AQUINO AVENUE. AcIaST
III
THE HON. COURT OF APPEALS ERRED IN CONCLUDING
THAT ACCION PUBLICIANA IS NOT THE PROPER REMEDY IN THE
CASE AT BAR.
IV
THE HON. COURT OF APPEALS ERRED IN CONCLUDING THAT THE
EXISTENCE OF THE PLAINTIFF-APPELLANT'S RIGHT OF WAY DOES
NOT CARRY POSSESSION OVER THE SAME.
V
THE HON. COURT OF APPEALS ERRED IN NOT RESOLVING THE
ISSUE OF WHO HAS THE BETTER RIGHT OF POSSESSION OVER THE
SUBJECT LAND BETWEEN THE PLAINTIFF-APPELLANT AND THE
DEFENDANT-APPELLEES."5
 In their comment, respondents maintain that the Court of Appeals did not
err in ruling that petitioner's action for accion publiciana is not the proper remedy
in asserting his "right of way" on a lot owned by the government.
Here, petitioner claims that respondents, by constructing their buildings on
the lot in question, have deprived him of his "right of way" and his right of
possession over a considerable portion of the same lot, which portion is covered
by his T.C.T. No. 74430 he acquired by means of exchange of real property.
It is not disputed that the lot on which petitioner's alleged "right of way"
exists belongs to the state or property of public dominion. Property of public
dominion is defined by Article 420 of the Civil Code as follows:
"ART. 420. The following things are property of public dominion:
(1) Those intended for public use such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores,
roadsteads, and other of similar character.
(2) Those which belong to the State, without being for public
use, and are intended for some public service or for the development
of the national wealth."
Public use is "use that is not confined to privileged individuals, but is open
to the indefinite public." 6 Records show that the lot on which the stairways were
built is for the use of the people as passageway to the highway. Consequently, it
is a property of public dominion. DTAHEC
Property of public dominion is outside the commerce of man and hence it:
(1) cannot be alienated or leased or otherwise be the subject matter of contracts;
(2) cannot be acquired by prescription against the State; (3) is not subject to
attachment and execution; and (4) cannot be burdened by any voluntary
easement. 7
Considering that the lot on which the stairways were constructed is a
property of public dominion, it can not be burdened by a voluntary easement of
right of way in favor of herein petitioner. In fact, its use by the public is by mere
tolerance of the government through the DPWH. Petitioner cannot appropriate it
for himself. Verily, he can not claim any right of possession over it. This is clear
from Article 530 of the Civil Code which provides:
"ART. 530. Only things and rights which are susceptible of being
appropriated may be the object of possession."
Accordingly, both the trial court and the Court of Appeals erred in ruling that
respondents have better right of possession over the subject lot.
However, the trial court and the Court of Appeals found that defendants'
buildings were constructed on the portion of the same lot now covered by T.C.T.
No. 74430 in petitioner's name. Being its owner, he is entitled to its possession.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of
Appeals dated December 7, 1998 in CA-G.R. CV No. 54883 is AFFIRMED with
MODIFICATION in the sense that neither petitioner nor respondents have a right
of possession over the disputed lot where the stairways were built as it is a
property of public dominion. Costs against petitioner.
SO ORDERED.
|||  (Villarico v. Sarmiento, G.R. No. 136438, [November 11, 2004], 484
PHIL 724-729)
 [G.R. Nos. 175806 and 175810. October 20, 2010.]

MANUEL ALMAGRO joined by his spouse,

ELIZABETH ALMAGRO,  petitioners, vs. SALVACION C.  KWAN,
WILLIAM C.  KWAN, VICTORIA C. KWAN, assisted by her
husband, JOSE A. ARBAS, and CECILIA C.  KWAN, respondents.

[G.R. No. 175849. October 20, 2010.]

MARGARITA PACHORO, DRONICA ORLINA, PIO TUBAT, JR.,

ANDRES TUBAT, EDUVIGIS KISKIS, ELSA BIÑALBER, NOELA
TUBAT, ELSA TUBAT, and ROGELIO DURAN,  petitioners, vs.
WILLIAM C.KWAN, SALVACION C.  KWAN, VICTORIA C. KWAN,
assisted by her husband, JOSE A. ARBAS, and CECILIA
C.  KWAN, respondents.

DECISION

CARPIO,  J p:

This is a consolidation of two separate petitions for review, 1 assailing the

4 April 2006 Decision 2 and the 31 October 2006 Resolution 3 of the Court of
Appeals in CA-G.R. SP Nos. 71237 and 71437.
This case involves Lot No. 6278-M, a 17,181 square meter parcel of land
covered by TCT No. T-11397. Lot No. 6278-M is located at Maslog, Sibulan,
Negros Oriental and is registered in the name of spousesKwan Chin and
Zosima Sarana. Respondents are the legitimate children of spouses Kwan Chin
and Zosima Sarana, who both died intestate on 2 November 1986 and 23
January 1976, respectively, in Dumaguete City. Upon the death of their
parents, respondents inherited Lot No. 6278-M through hereditary succession.
On 18 September 1996, respondents filed with the Municipal Trial Court
(MTC) an action for recovery of possession and damages against spouses
Rogelio and Lourdes Duran, spouses Romulo Vinalver and Elsa
Vinalver, 4 spouses Marte 5 Bati-on and Liz E. Bati-on, spouses Pablo Deciar
and Marlyn Deciar, spouses Salvador Palongpalong and Bienvenida
Palongpalong, spouses Sabas Kiskis and Eduvigis Kiskis, spouses Pio Tubat, Jr.
and Encarnita Tubat, spouses Andres Tubat and Leonides Tubat, spouses
George Tubat and Noela Tubat, spouses Dodong Go and Alice Go, spouses
Delano Bangay and Maria Bangay, 6spouses Simeon Pachoro and Margarita
Pachoro, spouses Cepriano 7 Tubat and Elsa Tubat, spouses Jovito Remolano
and Editha Orlina Remolano, spouses Nelson Miravalles and Erlene Miravalles,
Dronica Orlina,8 Clarita Barot Lara, Conchita Orlina, Antonia Malahay and the
Philippine National Police (PNP), 9 Agan-an, Sibulan, Negros Oriental.
Subsequently, spouses Manuel Almagro and Elizabeth Almagro intervened as
successors-in-interest of spouses Delano Bangay and Maria Bangay. prcd
During pre-trial, the parties agreed to refer the case to the Chief of the
Land Management Services Division, PENRO-DENR, Dumaguete City, to
conduct a verification survey of Lot No. 6278-M. When the PENRO personnel
failed to conduct the verification survey, the court and the parties designated
Geodetic Engineer Jorge Suasin, Sr. (Engr. Suasin) as joint commissioner to do
the task. Engr. Suasin conducted the verification and relocation survey of Lot
No. 6278-M on 12-13 September 2000 in the presence of the parties, some of
their lawyers, and the MTC Clerk of Court. Thereafter, Engr. Suasin submitted
a written report with the following findings:
WRITTEN REPORT
Comes now, the undersigned Geodetic Engineer Jorge S.
Suasin, Sr., to this Honorable Court, most respectfully submit the
following written report of the verification and relocation survey of
the lot 6278-M located at Maslog, Sibulan, Negros Oriental with
T.C.T. No. T-11397 owned by Salvacion G. Kwan, et al.
A. That a big portion of the lot is submerged under the sea and
only a small portion remain as dry land.
B. That some of the defendants have constructed their buildings
or houses inside the dry land while others have constructed outside
or only a small portion of their buildings or houses are on the said
dry land.
The defendants and their buildings or houses are as follows:
1. Sps. Rogelio Duran inside
2. Sps. Romulo Vinalver inside
3. Sps. Marto Bati-on inside
4. Sps. Salvador inside
Palongpalong
5. Sps. Pablo Deciar inside
6. Sps. Sabas Kiskis inside
7. Sps. Pio Tubat, Jr. 2 houses, the first
    house a portion,
and
    the second one
    - inside
8. Sps. Andres Tubat inside
9. Sps. George Tubat portion
10. Sps. Dodong Go inside
11. Sps. Delano Bangay- portion
Almagro
12. Sps. Simeon Pachoro inside
13. Sps. Cipriano Tubat inside
14. Sps. Jovito Remolano inside
15. Sps. Nelson Miravalles cottage and
    house - outside
16. Monica Orlina cottage inside
    and house -
    portion
17. Clarita Barot outside
 18. Conchita Orlina outside
19. Antonia Malahay outside

The verification and relocation survey was executed last

September 12-13, 2000 with the presence of both parties and of the
Clerk of Court. The cost of the survey was FIFTEEN THOUSAND
PESOS (P15,000) shouldered by the plaintiffs and the defendants
equally. HAIDcE
Enclosed are a blue print of the sketch plan and a xerox copy of
the land title of the said lot.
Respectfully submitted by:
(Sgd.) JORGE SUASIN, SR.
Geodetic Engineer 10
After the court admitted Engr. Suasin's report and the pleadings of the
parties, respondents filed a motion for judgment on the pleadings, which the
MTC granted.
In its Judgment dated 11 May 2001, the MTC dismissed the complaint on
the ground that the remaining dry portion of Lot No. 6278-M has become
foreshore land and should be returned to the public domain. The MTC
explained:
The term "foreshore" refers to that part of the land adjacent to
the sea which is alternately covered and left dry by the ordinary flow
of the tides. "Foreshore lands" refers to the strip of land that lies
between the high and low water marks and that is alternately wet
and dry according to the flow of the tide. The term "foreshore land"
clearly does not include submerged lands.
From these definitions, it is safe to conclude that the remaining
dry portion of Lot No. 6278-M is now "foreshore land." A big portion
of the said lot is presently underwater or submerged under the sea.
When the sea moves towards the estate and the tide invades it, the
invaded property becomes foreshore land and passes to the realm of
public domain. The subject land, being foreshore land, should
therefore be returned to the public domain. Besides, Article 420 of
the Civil Code provides:
"Art. 420. The following thin[g]s are property of public
dominion:
(1) Those intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks,
shores, roadsteads, and others of similar character;
Plaintiff cannot use the doctrine of indefeasibility of their
Torrens title, as property in question is clearly foreshore land. At the
time of its registration, property was along the shores. In fact, it is
bounded by the Tañon Strait on the NW along lines 2-3-4. The
property was of public dominion and should not have been subject of
registration. The survey showed that the sea had advanced and the
waves permanently invaded a big portion of the property making the
land part of the shore or the beach. The remaining dry land is
foreshore and therefore should be returned to the public
domain. 11 ISDHcT
 Respondents appealed to the Regional Trial Court (RTC). The RTC
conducted ocular inspections of Lot No. 6278-M on two separate dates: on 5
October 2001 during low tide and on 15 October 2001 when the high tide
registered 1.5 meters. All the parties and their lawyers were notified before the
two ocular inspections were conducted. During the ocular inspections, in which
some parties and their lawyers were present, the RTC observed that the small
portion referred to by Engr. Suasin as dry land in his report actually remained
dry even during high tide. 12 Thus, the RTC concluded that the disputed
remaining portion of Lot No. 6278-M is not foreshore land. The RTC stated:
It is the Court's considered view that the small portion of
plaintiff's property which remains as dry land is not within the scope
of the well-settled definition of foreshore and foreshore land as
mentioned above. For one thing, the small dry portion is not adjacent
to the sea as the term adjacent as defined in Webster's Dictionary
means "contiguous or touching one another or lying next to."
Secondly, the small dry portion is not alternately wet and dry by the
ordinary flow of the tides as it is dry land. Granting, as posited by
defendants, that at certain times of the year, said dry portion is
reached by the waves, then that is not anymore caused by the
ordinary flow of the tide as contemplated in the above definition. The
Court then finds that the testimony of Engr. Suasin dovetails with the
import and meaning of foreshore and foreshore land as defined
above.
Anent the case of Republic  vs. Court of Appeals, 281 SCRA 639,
also cited in the appealed judgment, the same has a different factual
milieu. Said case involves a holder of a free patent on a parcel of
land situated at Pinagtalleran, Caluag, Quezon who mortgaged and
leased portions thereof within the prescribed five-year period from
the date of issuance of the patent. It was established in said case
that the land subject of the free patent is five (5) to six (6) feet deep
under water during high tide and two (2) feet deep at low tide. Such
is not the situation of the "remaining small dry portion" which
plaintiffs seek to recover in the case at bar. 13
On 8 January 2002, the RTC rendered its Decision, 14 the dispositive
portion of which reads:
WHEREFORE, all told and circumspectly considered, the
appealed judgment is hereby reversed and set aside insofar as it
states that plaintiffs are not entitled to recover possession of the
property in question. SHIcDT
Plaintiffs-appellants have the right to recover possession of the
remaining small dry portion of the subject property in question. It is
further ordered to remand this case to the court of origin for the
reception of further evidence to determine who among the
defendants-appellees are builders or possessors in good faith and
who are not and once determined, to apply accordingly the pertinent
laws and jurisprudence on the matter. 
SO ORDERED. 15
Petitioners moved for reconsideration, which the RTC denied in its
Order 16 dated 6 May 2002.
Petitioners filed separate petitions for review with the Court of Appeals,
alleging that the disputed portion of Lot No. 6278-M is no longer private land
but has become foreshore land and is now part of the public domain.
 The Ruling of the Court of Appeals

On 4 April 2006, the Court of Appeals promulgated its decision, affirming

with modification the RTC Decision. The dispositive portion of the Court of
Appeals Decision 17 reads:
WHEREFORE,  the instant petitions for review
are DENIED.  And the Decision dated January 8, 2002 of Branch 38
of the Regional Trial Court of Dumaguete City is hereby AFFIRMED
with MODIFICATION  as regards the dispositive portion only. Based
on the written report of Geodetic Engr. Suasin categorically
identifying who among herein petitioners are illegally occupying a
portion of Lot No. 6278-M, the following petitioners areordered to
vacate the premises and/or remove the houses and/or
cottages constructed on Lot No. 6278-M within thirty (30)
days from finality of judgment,  namely: 1) Sps. Rogelio Duran, 2)
Sps. Romulo Vinalver, 3) Sps. Marto Bati-on, 4) Sps. Salvador
Palongpalong, 5) Sps. Pablo Deciar, 6) Sps. Sabas Kiskis, 7) Sps. Pio
Tubat, Jr. (first house — portion, second house — inside), 8) Sps.
Andres Tubat, 9) George Tubat (portion), 10) Sps. Dodong Go, 11)
Sps. Delano Bangay-Almagro (portion), 12) Sps. Simeon Pachoro,
13) Sps. Cipriano Tubat, 14) Sps. Jovito Remolano and 15) Monica
Orlina (cottage-inside and house-portion).
Costs against petitioners.
SO ORDERED. 18
In modifying the RTC Decision, the Court of Appeals explained:
Lastly, the argument that the RTC decision was "vague and
indefinite" is utterly bereft of merit. We have found no reversible
error in the appreciation of the facts and in the application of the law
by the RTC which will warrant the reversal of the questioned decision.
However, litigation must end and terminate sometime and
somewhere, and it is essential to the administration of justice that
the issues or causes therein should be laid to rest. Hence, in keeping
with this principle, We modify the assailed decision insofar as the
dispositive portion is concerned. It is our considered view that there
is no longer a need to determine who among the petitioners are
builders in good faith or not considering that it has been established
in the MTC that they knew all along that the subject lot is a titled
property. As such, petitioners should vacate and/or demolish the
houses and/or cottages they constructed on Lot No. 6278-M as
stated in the written report of Geodetic Engineer Jorge S. Suasin, Sr.
Remanding this case to the court of origin would not only unduly
prolong the resolution of the issues of this case, but would also
subject the parties to unnecessary expenses. 19
Hence, these consolidated petitions.

The Issue

The primary issue in this case is whether the disputed portion of Lot No.
6278-M is still private land or has become foreshore land which forms part of the
public domain.
 The Ruling of the Court

We find the petitions without merit. EaHATD

Petitioners contend that the disputed portion of Lot No. 6278-M is already
foreshore land. In fact, most of them allegedly have foreshore lease permits
from the Department of Environment and Natural Resources (DENR) on the
said foreshore land.
However, petitioners failed to present evidence to prove their claim that
they are holders of foreshore lease permits from the DENR. Thus, the RTC
Order dated 6 May 2002 stated:
Defendants-appellees have been harping that they have been
granted foreshore leases by DENR. However, this is merely lip service
and not supported at all by concrete evidence. Not even an iota of
evidence was submitted to the lower court to show that defendants-
appellees herein have been granted foreshore leases. 20
Although the MTC concluded that the subject land is foreshore land, we
find such conclusion contrary to the evidence on record.
It is undisputed that the subject land is part of Lot No. 6278-M, which is
covered by TCT No. T-11397, registered in the name of respondents'
parents, Kwan Chin and Zosimo Sarana. In fact, as found by the Court of
Appeals, even the Provincial Environment and Natural Resources Officer
(PENRO) declared in May 1996 that Lot No. 6278-M is a private property
covered by a Torrens Title and that petitioners should vacate the disputed
property or make other arrangements with respondents. 21
Furthermore, from the report of Engr. Suasin, the geodetic engineer
designated by the court and the parties as joint commissioner to conduct the
survey, it can be clearly gleaned that the contested land is the small portion
of dry land of Lot No. 6278-M. Even in his testimony, Engr. Suasin was
adamant in stating that the remaining portion of Lot No. 6278-M is not
foreshore because "it is already dry land" and is "away from the
shoreline." 22 Because of this apparent contradiction between the evidence
and the conclusion of the MTC, the RTC conducted ocular inspection twice,
during low tide and high tide, and observed that the disputed portion of Lot
No. 6278-M actually remained dry land even during high tide. Thus, the RTC
concluded that the said land is not foreshore land. On appeal, the Court of
Appeals adopted the findings and conclusion of the RTC that the disputed land
is not foreshore land and that it remains as private land owned by
respondents.
We are in accord with the conclusion of the Court of Appeals and the RTC
that the disputed land is not foreshore land. To qualify as foreshore land, it
must be shown that the land lies between the high and low water marks and is
alternately wet and dry according to the flow of the tide. 23 The land's
proximity to the waters alone does not automatically make it a foreshore
land. 24
Thus, in Republic of the Philippines  v. Lensico, 25 the Court held that
although the two corners of the subject lot adjoins the sea, the lot cannot be
considered as foreshore land since it has not been proven that the lot was
covered by water during high tide. IHTASa
Similarly in this case, it was clearly proven that the disputed land
remained dry even during high tide. Indeed, all the evidence supports the
conclusion that the disputed portion of Lot No. 6278-M is not foreshore land
but remains private land owned by respondents.
 WHEREFORE, we DENY the petitions. We AFFIRM the 4 April 2006
Decision and the 31 October 2006 Resolution of the Court of Appeals in CA-
G.R. SP Nos. 71237 and 71437.
SO ORDERED.
|||  (Almagro v. Kwan, G.R. Nos. 175806 175810 & 175849, [October 20,
2010], 648 PHIL 468-478)
[G.R. No. 193657. September 4, 2018.]

REPUBLIC OF THE
PHILIPPINES, petitioner, vs. HEIRS OF IGNACIO DAQUER AND
THE REGISTER OF DEEDS,
PROVINCE OF PALAWAN, respondents.

DECISION

LEONEN, J  p:

Any application for a homestead settlement recognizes that the land

belongs to the public domain. 1 Prior to its disposition, the public land has to
be classified first as alienable and disposable 2 through a positive act of the
government. 3 This act must be direct and express, not merely inferred from
an instrument such as the homestead patent. The State has the right to
institute an action for the reversion of an inalienable land of the public domain
erroneously awarded by its officials and agents.
This resolves a Petition for Review on Certiorari 4 under Rule
45 of the 1997 Rules of Procedure assailing the January 14, 2010
Decision 5 and September 7, 2010 Resolution 6 of the Court of Appeals in CA-
G.R. CV No. 90488, which affirmed the September 28, 2007
Decision 7 of Branch 95, Regional Trial Court, Puerto Princesa City. The
Regional Trial Court denied the Republic of the Philippines' Complaint for
Cancellation of Free Patent, Original Certificate of Title and
Reversion of land 8 for lack of merit.
On October 22, 1933, Ignacio Daquer (Daquer), married to Fernanda
Abela, 9 applied for a homestead patent grant over Lot No. H-19731, situated
at Brgy. Corong-Corong, Centro, Bacuit, Palawan. 10
Daquer lodged Homestead Application No. 197317 11 before the
Bureau of Lands, now Land Management Bureau, seeking nine (9) hectares or
90,000 square meters of land for his "exclusive personal use and benefit." 12
On September 3, 1936, the Provincial Environment and Natural
Resources Officer, by the Director of the Bureau of Lands' authority,
approved 13 Daquer's application and issued him Homestead Patent No.V-
67820, covering an area of 65,273 square meters. 14
Thereafter, Homestead Patent No. V-67820 was transmitted to the
Registrar of Deeds of Palawan for registration. 15 After registration, Original
Certificate of Title (OCT) No. G-3287 was issued in Daquer's name. 16
On April 3, 1969, Daquer passed away. He was survived by his children,
who were his legal heirs, namely, Porcepina Daquer Aban (Porcepina), Alita
Daquer Quijano, and Neria Daquer Laguta (collectively,Heirs of Daquer). 17
Subsequently, the Department Secretary and the Undersecretary for
Legal Affairs of the Department of Agriculture and Natural Resources instructed
the Community Environment and Natural Resource Office (CENRO) "to submit
an inventory of suspected spurious titles cases which may fall within
timberland and classified public forest." 18
Pursuant to their directive, Mariano Lilang, Jr. (Lilang), Land Management
Officer III of CENRO, Taytay, Palawan, conducted an investigation to determine
whether lands covered by approved patent applications were indeed alienable
or disposable. 19
Upon investigation, Lilang discovered that the land covered by
Homestead Application No. 197317 and OCT No. G-3287 fell within the
zone of unclassified public forest. 20 Relative to this, Lilang and Senior Forest
Management Specialist Chief Leonardo Publico issued a Certification 21 dated
July 10, 2000, confirming that Lot No. H-19731 was "still within the
Unclassified Zone," thus:
This CERTIFIES that the area of Plan H. 197317 in CENTRO
Bacuit, El Nido, Palawan and with Homestead Patent No. V-67820
and Original Certificate of Title No. G-3287 in the name of Ignacio
Daquer is still within the Unclassified Zone, as per Land
Classification Map No. 1467 certified on September 16, 1941.
Issued in connection with the on-going
investigation of questionable land titles being made by this
Office. 22 (Emphasis supplied)
Consequently, the Republic of the Philippines (the Republic) filed a
Complaint for Cancellation of Free Patent, Original Certificate of Title and
Reversion 23 of land to public domain on April 1, 2003. 24 It argued that Lot
No. H-19731 could not have been validly registered because it fell within the
forest or timberland zone. It stated that the Director of the Lands and
Management Bureau 25 was bereft of any jurisdiction over public forests or
any lands incapable of registration. It claimed that until and unless these lands
were reclassified and considered disposable and alienable, occupying them in
the concept of an owner, no matter how long, could not ripen into
ownership. 26
In support of its complaint, the Republic presented Land Management
Officer Lilang as its witness. 27
Lilang testified that he conducted a records investigation on Daquer's
land. Based on his investigation, it was disclosed that Lot No. H-19731 fell
within the unclassified public forest. He explained that he based his conclusion
on Land Classification Map No. 1467. He averred that all lands not within the
tract of areas classified as alienable and disposable, as shown in the
classification map, were regarded as unclassified public forest. Thus, since Lot
No. H-19731 fell outside the alienable and disposable area, it should be
considered as part of the unclassified public forest. 28
The Heirs of Daquer, on the other hand, presented Porcepina as witness.
Porcepina testified that she was residing at Lot No. H-19731 and that she had
custody of OCT No. G-3287. She paid the taxes over the land after the
death of her brother, Francisco Daquer. She admitted that her late father also
owned other properties aside from Lot No. H-19731. 29
The Heirs of Daquer also presented as witness Eduardo Franciso, who
testified that he was familiar with the area covered by Lot No. H-19731
because his house was only 10 meters away from it. He admitted that the area
where his house and Lot No. H-19731 were located was timber land. 30
 In its September 28, 2007 Decision, the Regional Trial Court
denied 31 the Republic's petition for cancellation and reversion for
lack of merit.
In its ruling, the Regional Trial Court relied heavily on the
presumption of regularity of official functions when the Undersecretary of the
Department of Agriculture and Natural Resources, acting for the President,
granted the homestead patent. It ruled that the President, acting through his
alter ego, would not award a homestead patent over forest land but only over
public agricultural land. 32
The Regional Trial Court likewise noted that under the land classification
map, areas falling outside the alienable and disposable area were not
considered as unclassified public forest, but only unclassified
land. 33 Citing Krivenko v. Register  of  Deeds, 34 it ruled that unclassified
lands, such as Lot No. H-19731, are presumed to be agricultural lands. 35
Finally, the Regional Trial Court held that even assuming that Lot No. H-
19731 was previously considered as unclassified land, the
issuance of Homestead Patent No. V-67820 "could only mean that the land at
that point in time had already been expressly classified as alienable or
disposable land of public domain." 36
The Republic appealed before the Court of Appeals, 37 objecting to the
ruling that the land was presumed alienable and disposable agricultural
land. 38 It also contested the ruling of the Regional Trial Court that the
issuance of Homestead Patent No. V-67820 effectively classified the land from
public domain land to alienable and disposable land. 39
According to the Republic, public lands may only be classified by the
Executive Department through the Office of the
President. 40 Citing Heirs  of  Spouses Vda. De Palanca  v.  Republic,  41 it
argued that "[w]hen the property is still unclassified, whatever possession
applicants may have had, and however long, still cannot ripen into private
ownership." 42 Finally, it asserted that Homestead Patent No. V-67820
suffered from a jurisdictional flaw warranting the reversion of the land to the
State:
The Director of the Lands Management Bureau [then
Bureau of Lands] is devoid of jurisdiction over public forests or any
land not capable of registration. When he [or she] is misled into
issuing patents over such lands, the patents and the corresponding
certificates of title are immediately infected with jurisdictional flaw
which warrants the institution of suit to revert land to the
State[.] 43
In its January 14, 2010 Decision, the Court of Appeals dismissed the
appeal and affirmed the Regional Trial Court September 28, 2007 Decision.
The Republic's Motion for Reconsideration 44 was denied by the
Court of Appeals on September 7, 2010. 45
On October 28, 2010, 46 the Republic appealed the Court of Appeals
January 14, 2010 Decision and September 7, 2010 Resolution before this
Court.
Thus, for this Court's resolution are the following issues:
First, whether or not the mere issuance of a homestead patent could
classify an otherwise unclassified public land into an alienable and disposable
agricultural land of the public domain; and
 Second, whether or not the issuance of Homestead Patent No. V-67820
was jurisdictionally defective as Lot No. H-19731 was still part of the
inalienable public land when Homestead Application No. 197317 was granted.
The Petition is impressed with merit.

I.A

A homestead patent is a gratuitous grant from the government "designed

to distribute disposable agricultural lots of the State to land-destitute citizens
for their home and cultivation." 47 Being a gratuitous grant, a homestead
patent applicant must strictly comply with the requirements laid down by the
law.
When Daquer filed Homestead Application No. 197317 on October 22,
1933, the governing law was Act No. 2874 or the Public Land Act, which
outlined the procedure for the classification and disposition oflands of the
public domain, to wit:
CHAPTER II
Classification, Delimitation, and Survey of Lands of the Public Domain, for the
Concession Thereof
Section 6. The Governor-General, upon the recommendation of the
Secretary of Agriculture and Natural Resources, shall from time to
time classify the lands of the public domain into —
(a) Alienable or disposable
(b) Timber, and
(c) Mineral lands
and may at any time and in a like manner, transfer such lands from
one class to another, for the purposes  of  their government and
disposition.
Section 7. For the purpose of the government and
disposition of alienable or disposable public lands, the Governor-
General, upon recommendation by the Secretary of Agriculture and
Natural Resources, shall from time to time declare what lands are
open to disposition or concession under this Act.
Section 8. Only those lands shall be declared open to disposition or
concession which have been officially delimited and classified and,
when practicable, surveyed, and which have not been reserved for
public or quasi-public uses, nor appropriated by the Government,
nor in any manner become private property, nor those on which a
private right authorized and recognized by this Act or any other
valid law may be claimed, or which, having been reserved or
appropriated, have ceased to be so. However, the Governor-General
may, for reasons of public interest, declare lands of the public
domain open to disposition before the same have had their
boundaries established or been surveyed, or may, for the same
reasons, suspend their concession or disposition until they are again
declared open to concession or disposition by proclamation duly
published or by Act of the Legislature.
Section 9. For the purposes of their government and disposition, the
lands of the public domain alienable or open to disposition shall be
classified, according to the use or purposes to which such lands are
destined, as follows:
 (a) Agricultural.
(b) Commercial, industrial, or for similar productive
purposes.
(c) Educational, charitable, and other similar purposes.
(d) Reservations for town sites, and for public and quasi-
public uses.
The Governor-General, upon recommendation by the
Secretary of Agriculture and Natural Resources, shall from time to
time make the classifications provided for in this section, and may,
at any time and in a similar manner, transfer lands from one class
to another. (Emphasis supplied)
Under the Public Land Act, the Governor-General (now the President),
upon the recommendation of the Secretary of Agriculture and Natural
Resources (now Department of Environment and Natural Resources), shall
have the power to classify lands of the public domain into: (1) alienable or
disposable; (2) timber; and (3) mineral lands.
Lands of public domain which have been classified as alienable or
disposable may further be classified into: (1) agricultural; (2) commercial,
industrial, or for similar productive purposes; (3) educational, charitable and
other similar purposes; and (4) reservations for town sites, and for public and
quasi-public uses. 48
Once lands of public domain have been classified as public agricultural
lands, they may be disposed through any of the following means: (1)
homestead settlement; (2) sale; (3) lease; or (4) confirmation ofimperfect or
incomplete titles. Section 11 provides:
TITLE II
Agricultural Public Lands
CHAPTER III
Forms of Concession of Agricultural Lands
Section 11. Public lands suitable for agricultural purposes can be
disposed of only as follows, and not otherwise:
(1) For homestead settlement.
(2) By sale.
(3) By lease.
(4) By confirmation of imperfect or incomplete titles:
(a) By administrative legalization (free patent).
(b) By judicial legalization. (Emphasis supplied)
Chapter IV of the Public Land Act governs the disposition of public
agricultural lands through a homestead settlement. Section 12 provides:
CHAPTER IV
Homesteads
Section 12. Any citizen of the Philippine Islands or of the United
States, over the age of eighteen years, or the head of a family, who
does not own more than twenty-four hectares of land in said Islands
or has not had the benefit of any gratuitous allotment of more than
twenty-four hectares of land since the occupation of the Philippine
Islands by the United States, may enter a homestead of not
 exceeding twenty-four hectaresof agricultural land of the public
domain.
Thereafter, should the Director of Lands find the application compliant
with the requirements of the law, he or she would approve it. 49

I.B

Only lands of the public domain which have been classified as public

agricultural lands may be disposed of through homestead settlement. 50
The Public Land Act vested the exclusive prerogative to classify
lands of the public domain to the Executive Department, specifically with the
Governor-General, now the President. 51 Thus, until and unless lands of the
public domain have been classified as public agricultural lands, they are
inalienable and not capable of private appropriation.
In the case at bar, the Court of Appeals ruled that the President's
issuance of Homestead Patent No. V-67820 in favor of Daquer under the terms
stated in it was considered as an adequate recognition that Lot No. H-19731
was already classified as alienable and disposable when the patent was
issued. 52
Petitioner argues that contrary to the findings of the Court of Appeals,
the mere issuance of a homestead patent does not automatically remove the
land from inalienability and convert it into alienable agricultural
land. 53 Petitioner contends that before lands of the public domain may be the
subject of a homestead application, there must first be a positive act of the
government, declassifying a forest land and converting it into alienable or
disposable land for agricultural purpose. 54
This Court finds for petitioner.
At the outset, it must be emphasized that in classifying lands of the
public domain as alienable and disposable, there must be a positive act from
the government declaring them as open for alienation and disposition.
In Secretary  of  the Department of Environment and Natural Resources  v.
Yap: 55
A positive act declaring land as alienable and disposable is
required. In keeping with the presumption of State ownership, the
Court has time and again emphasized that there must be a positive
act of the government, such as an official proclamation,
declassifying inalienable public land into disposable land for
agricultural or other purposes. . . . (Emphasis in the original,
citations omitted)
A positive act is an act which clearly and positively manifests the
intention to declassify lands of the public domain into alienable and
disposable. 56
"Any person seeking relief under . . . the Public Land Act admits that the
property being applied for is public land." 57 "The burden of proof in
overcoming the presumption of State ownership of the lands ofthe public
domain is on the person applying for registration (or claiming ownership), who
must prove that the land subject of the application is alienable or
disposable." 58
As aptly argued by petitioner, an act of the government may only be
considered as "express or positive if [it] is exercised directly for the very
purpose of lifting land from public ownership." 59
 In this case, the records are bereft of any evidence showing that the land
has been classified as alienable and disposable. Respondents presented no
proof to show that a law or official proclamation had been issued declaring the
land covered by Homestead Patent No. V-67820 to be alienable and
disposable.
Having failed to overcome the burden of proving that the land covered by
Homestead Patent No. V-67820 is alienable and disposable, the presumption
that it is an inalienable land of the public domain remains.

II.A

Citing Chavez v. Public Estates

Authority, 60 respondents Heirs of Daquer argue that when Homestead Patent
No. V-67820 was issued, Lot No. H-19731 was already alienable and
disposable public land. They reason that the passage of "[t]he Public Land Act,
coupled with the issuance of Homestead Patent No. V-67820 over [Lot No. H-
19731] in the name of Daquer[,] is equivalent to an official proclamation
classifying [Lot No. H-19731] as alienable or disposable land of the public
domain." 61
Private respondents' reliance on Chavez is misplaced. Chavez is
inapplicable since it involves the sale of reclaimed foreshore and submerged
lands to a private corporation through a Joint Venture Agreement. The
facts of the case are as follows:
In 1973, the government, through the Commissioner of Public Highways,
entered into a contract with the Construction and Development
Corporation of the Philippines for the reclamation of certain foreshore and
offshore areas of Manila Bay. Their contract involved the
construction of Manila-Cavite Coastal Road Phases I and II. 62
Subsequently, then President Ferdinand E. Marcos, issued Presidential
Decree No. 1084, which created the Public Estates Authority (PEA) and tasked
PEA "to reclaim land, including foreshore and submerged areas," 63 and "to
develop, improve, acquire, . . . lease and sell any and all
kinds of lands." 64 Then President Marcos likewise issued Presidential Decree
No. 1085, transferring to PEA the "lands reclaimed in the foreshore and
offshore area of Manila Bay" under the Manila-Cavite Coastal Road and
Reclamation Project. 65
Thereafter, then President Corazon C. Aquino issued Special Patent No.
3517, granting and transferring to PEA the parcels of land reclaimed under the
Manila-Cavite Coastal Road and Reclamation Project. Consequently, Transfer
Certificates of Title Nos. 7309, 7311, and 7312, covering three (3) reclaimed
islands known as the "Freedom Islands," were issued in favor of PEA. 66
PEA and Amari, a private corporation, then entered into a Joint Venture
Agreement for the development of the Freedom Islands. 67 Under the Joint
Venture Agreement, Amari would acquire and own a maximum of 367.5
hectares of reclaimed land which would be titled in its name. 68
On November 29, 1996, then Senator Ernesto Maceda delivered a
privilege speech and called the Joint Venture Agreement between PEA and
Amari as the "grandmother of all scams." 69 The Senate Committee on
Government Corporations and Public Enterprises, and the Committee on
Accountability of Public Officers and Investigations held a joint investigation on
the matter. They reported that: (1) the reclaimed lands that PEA sought to
transfer to Amari under the Joint Venture Agreement "are lands of the public
domain which the government has not classified as alienable lands and
therefore PEA cannot alienate these lands; (2) the certificates of title covering
the Freedom Islands are thus void; and (3) the [Joint Venture Agreement]
itself is illegal." 70
Subsequently, petitioner Francisco Chavez filed a Petition
for Mandamus with Prayer for the Issuance of a Writ of Preliminary Injunction
and Temporary Restraining Order, assailing the sale of lands of public domain
to Amari. He argued that the sale was "a blatant violation of Section 3, Article
XII of the 1987 Constitution prohibiting the sale of alienable lands of the public
domain to private corporations." 71
On the issue of land classification, this Court held that foreshore and
submerged areas belong to the public domain. Mere reclamation by PEA "does
not convert these inalienable natural resources of the State into alienable or
disposable lands of the public domain. There must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or
disposable and open to disposition or concession." 72 Thus:
Under Section 2, Article XII of the 1987 Constitution, the
foreshore and submerged areas of Manila Bay are part of the
"lands of the public domain, waters . . . and other natural
resources" and consequently "owned by the State." As such,
foreshore and submerged areas "shall not be alienated," unless they
are classified as "agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or
disposable lands of the public domain. There must be a law or
presidential proclamation officially classifying these reclaimed lands
as alienable or disposable and open to disposition or concession.
Moreover, these reclaimed lands cannot be classified as alienable or
disposable if the law has reserved them for some public or quasi-
public use.
Section 8 of C[ommonwealth] A[ct] No. 141 provides that
"only those lands shall be declared open to disposition or concession
which have been officially delimited and classified." The President
has the authority to classify inalienable lands of the public domain
into alienable or disposable lands of the public domain, pursuant to
Section 6 of C[ommonwealth] A[ct] No. 141. 73 (Emphasis in the
original, citations omitted)
Nonetheless, this Court considered the issuance of a presidential decree
and a special patent proclaiming the land as alienable and disposable as a
positive act of the Executive Department that converted the reclaimed areas
into alienable and disposable agricultural lands:
P[residential] D[ecree] No. 1085, coupled with President
Aquino's actual issuance of a special patent covering the Freedom
Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public
domain. P[residential] D[ecree] No. 1085 and President Aquino's
issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service. The
Freedom Islands are thus alienable or disposable
lands  of the public domain, open to disposition or
concession to qualified parties. 74 (Emphasis in the original)
In other words, Presidential Decree No. 1085 75 provides for the express
and direct transfer of ownership of the reclaimed lands located in the foreshore
and offshore area of Manila Bay. On the other hand,Act No. 2874 merely
outlines the procedure for the administration and disposition of alienable
lands of the public domain.
Clearly, the lack of any qualifying words that explicitly declare the lands
as alienable and disposable, or convey ownership over them proves that Act
No. 2874 was enacted merely to serve as a guideline for the proper
administration and disposition of alienable lands.
Act No. 2874, Section 8 provides that only lands which have been
officially delimited and classified as alienable may be disposed of through
any of the authorized methods.
Therefore, the issuance of Homestead Patent No. V-67820 in
favor of Daquer, pursuant to the Public Land Act, did not, by itself, reclassify
Lot No. H-19731 into alienable and disposable public agricultural land.

II.B

In denying petitioner's complaint, the Regional Trial Court ruled that

since Lot No. H-19731 falls within the unclassified zone under the Land
Classification Map, it should be presumed that it was public agricultural
land. 76 In its ruling, the Regional Trial Court relied on Krivenko v.
Register of Deeds, 77 thus:
Being unclassified, does it mean that the land subject of this
case [is] considered as timberland? The Supreme Court in [the]
case of Krivenko v. Register  of  Manila, 79 Phil. 461 held that:
The scope of this constitutional provision, according
to its heading and its language, embraces all land of any
kind of the public domain, its purpose being to establish
a permanent and fundamental policy for the conservation
and utilization of all natural resources of the Nation.
When, therefore, this provision, with reference [to]
lands of the public domain, makes mention of only
agricultural, timber and mineral lands, it means that all
lands of the public domain are classified into said three
groups, namely, agricultural, timber and mineral. And
this classification finds corroboration in the circumstance
that at the time of the adoption of the Constitution, that
was the basic classification existing in the public laws
and judicial decisions in the Philippines, and the term
"public agricultural lands" under said classification had
then acquired a technical meaning that was well-known
to the members of the Constitutional Convention who
were mostly members of the legal profession.
As early as 1908, in the case of Mapa vs. Insular
Government (10 Phil. 175, 182), this Court said that the
phrase "agricultural public lands" as defined in the
Act of Congress of July 1, 1902, which phrase is also to
be found in several sections of the Public Land Act (No.
926), means "those public lands acquired from Spain
which are neither mineral nor timber lands.["] This
definition has been followed in a long
line of decisions of this Court. . . . And with respect to
residential lands, it has been held that since they are
neither mineral nor timber lands, of necessity they must
be classified as agricultural.
 . . . But whatever the test might be, the fact
remains that at the time the Constitutional (sic) was
adopted, lands of the public domain were classified in our
laws and jurisprudence into agricultural, mineral, and
timber, and that the term "public agricultural lands"
[was] construed as referring to those lands that were not
timber or mineral, and as including residential lands[.] It
may safely [be] presumed, therefore, that what the
members of the Constitutional Convention had in mind
when they drafted the Constitutional (sic) was this well-
known classification and its technical meaning then
prevailing.
Being not classified as mineral or timberland, it could be
presumed that the land subject of this case is agricultural applying
the afore-quoted jurisprudence. 78
The Regional Trial Court's reliance on Krivenko is erroneous. The pivotal
issue in Krivenko is whether or not an alien could acquire a residential lot in
the Philippines. Here, the issue is whether the mere issuance of a homestead
patent could classify an otherwise unclassified public land into an alienable and
disposable agricultural land of the public domain.
Even if the property falls within the unclassified zone, this Court,
in Heirs of the late Spouses Palanca v. Republic, 79 ruled that unclassified
lands, until released and rendered open to disposition, shall be considered as
inalienable lands of the public domain, thus:
While it is true that the land classification map does not
categorically state that the islands are public forests, the fact that
they were unclassified lands leads to the same result. In the
absence of the classification as mineral or timber land, the land
remains unclassified land until released and rendered open to
disposition. When the property is still unclassified, whatever
possession applicants may have had, and however long, still cannot
ripen into private ownership. This is because, pursuant to
Constitutional precepts, all lands of the public domain belong to the
State, and the State is the source of any asserted right to
ownership in such lands and is charged with the
conservation of such patrimony. Thus, the Court has emphasized
the need to show in registration proceedings that the government,
through a positive act, has declassified inalienable public land into
disposable land for agricultural or other purposes. 80 (Citations
omitted)

II.C

As a rule, a certificate of title issued pursuant to a homestead patent

partakes the nature of a certificate of title issued through a judicial proceeding
and becomes incontrovertible upon the expiration of one (1) year. Thus,
in Wee  v. Mardo: 81
[O]nce a patent is registered and the corresponding
certificate of title is issued, the land ceases to be part of public
domain and becomes private property over which the
Director of Lands has neither control nor jurisdiction. A public land
patent, when registered in the corresponding Register of Deeds, is a
veritable Torrens title, and becomes as indefeasible upon the
 expiration of one (1) year from the date of issuance thereof. Said
title, like one issued pursuant to a judicial decree, is subject to
review within one (1) year from the date of the issuance of the
patent. This rule is embodied in Section 103 of PD 1529, which
provides that:
Section 103. Certificates of title pursuant to
patents. — Whenever public land is by the Government
alienated, granted or conveyed to any person, the same
shall be brought forthwith under the operation of this
Decree. . . . After due registration and
issuance of the certificate of title, such land shall
be deemed to be registered land to all intents and
purposes under this Decree. 82(Emphasis in the
original)
Nevertheless, the rule that "a certificate of title issued pursuant to a
homestead patent becomes indefeasible after one year, is subject to the
proviso that 'the land covered by said certificate is a disposable public land
within the contemplation of the Public Land Law.'" 83
When the property covered by a homestead patent is part of the
inalienable land of the public domain, the title issued pursuant to it is null and
void, and the rule on indefeasibility of title will not apply. 84 InAgne  v.
Director of Lands: 85
The rule on the incontrovertibility of a certificate of title upon
the expiration of one year, after the entry of the decree, pursuant
to the provisions of the Land Registration Act, does not apply where
an action for the cancellation of a patent and a certificate of title
issued pursuant thereto is instituted on the ground that they
are null and void because the Bureau of Lands had no jurisdiction to
issue them at all[.] 86 (Emphasis supplied)
In Republic v. Ramos, 87 this Court held that despite the
registration of the land and the issuance of a Torrens title, the State may still
file an action for reversion of a homestead land that was granted in
violation of the law. The action is not barred by the statute of limitations,
especially against the State:
Granting that because the homestead land in controversy has
been brought under the operation of the Land Registration Act and
the Torrens title issued therefor has become indefeasible, under the
prayer ofany other or further relief, which the court may deem just
and equitable to grant, a directive for reconveyance may be
granted, if after trial on the merits the court should find that the
appellee Ricardo Ramos is not entitled to hold and possess title in
fee simple to the homestead land erroneously granted to him . . .
The action for reconveyance is not yet barred by the
statute of limitations, even granting that the statute could,
which, of course, does not, run against the State. 88 (Emphasis
supplied)
Likewise, Spouses De Guzman  v. Agbagala 89 did not apply the
principle of indefeasibility where "the patent and the title based thereon are
null and void." 90 In Mendoza  v. Navarette: 91
[T]he Torrens system was not established as a means for the
acquisition of title to private land. It is intended merely to confirm
and register the title which one may already have on the land.
Where the applicant possesses no title or ownership over the
 parcel of land, he cannot acquire one under the Torrens
system of registration . . . The effect is that it is as if no registration
was made at all. 92 (Citations omitted)
Heirs  of  Spouses Vda. De Palanca  v.  Republic 93 also held that the State
may recover non-disposable public lands registered under the Land
Registration Act "at any time and the defense of res judicatawould not apply as
courts have no jurisdiction to dispose of such lands of the public domain." 94
As this Court ruled in that case, Lot No. H-19731, the land covered by
Homestead Patent No. V-67820, is still part of the inalienable lands of the
public domain there being no positive act declassifying it. Consequently, OCT
No. G-3287, issued pursuant to Homestead Patent No. V-67820, is null and
void. Thus, the State is not estopped from instituting an action for the
reversion of Lot No. H-19731 into the lands ofthe public domain.
Lands of the public domain can only be classified as alienable and
disposable through a positive act of the government. 95 The State cannot be
estopped by the omission, mistake, or error of its officials or agents. 96 It may
revert the land at any time, where the concession or disposition is void ab
initio.
WHEREFORE, the petition is GRANTED. The January 14, 2010 Decision
and September 7, 2010 Resolution of the Court of Appeals in CA-G.R. CV No.
90488 are REVERSED AND SET ASIDE. The ownership and possession of the
tract of land covered by Original Certificate of Title No. G-3287 in the
name of Ignacio Daquer falling within the unclassified zone is
hereby REVERTED to and REACQUIRED by the Republic of the Philippines.
The Register of Deeds of Palawan is directed to CANCEL Original
Certificate of Title No. G-3287 for being null and void. SO ORDERED.
|||  (Republic v. Heirs of Daquer, G.R. No. 193657, [September 4, 2018])
[G.R. No. L-34915. June 24, 1983.]

CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF Q
UEZON CITY,  petitioners, vs. HON. JUDGE VICENTE
G. ERICTA as Judge of the Court of First
Instance of Rizal, Quezon City, Branch XVIII; HIMLAYANG
PILIPINO, INC.,  respondents.

City Fiscal for petitioners.
Manuel Villaruel, Jr. and Feliciano Tumale for respondents.

SYLLABUS

1. ADMINISTRATIVE LAW; CITY ORDINANCE; REGULATING THE

ESTABLISHMENT, MAINTENANCE AND OPERATION OF PRIVATE MEMORIAL
TYPE CEMETERIES; NOT JUSTIFIABLE; CASE AT BAR. — We find the
stand of the private respondent as well as the decision of the
respondent Judge to be well-founded. We quote with approval the lower court's
ruling which declared null and void Section 9 of the questioned cityordinance:
"The issue is: Is Section 9 of the ordinance in question a valid exercise of the
police power? An examination of the Charter of Quezon City (Rep. Act No.
537), does not reveal any provision that would justify the ordinance in
question except the provision granting police power to the City. Section 9
cannot be justified under the power granted to Quezon City to tax, fix the
license fee, and regulate such other business, trades, and occupation as may
be established or practised in the City (Sub-sections 'C,' Sec. 12, R.A. 537).
The power to regulate does not include the power to prohibit (People vs.
Esguerra, 81 Phil. 33 Vega vs. Municipal Board of Iloilo, L-6765, May 12, 1954;
39 N.J. Law, 70, Mich. 396). A fortiori, the power to regulate does not include
the power to confiscate. The ordinance in question not only confiscates but
also prohibits the operation of a memorial park cemetery, because under
Section 13 of said ordinance, 'Violation of the provision thereof is punishable
with a fine and/or imprisonment and that upon conviction thereof the permit to
operate and maintain a private cemetery shall be revoked or cancelled.' The
confiscatory clause and the penal provision in effect deter one from
operating a memorial park cemetery. Neither can the ordinance in question be
justified under sub-section 't,' Section 12 of Republic Act 537. There is nothing
in the above provision which authorizes confiscation."
2. ID.; ID.; NOT A VALID EXERCISE OF POLICE POWER. — We now come
to the question whether or not Section 9 of the ordinance in question is a valid
exercise of police power. The police power ofQuezon City is defined in sub-
section 00, Sec. 12, Rep. Act 537. Police power is usually exercised in the
form of mere regulation or restriction in the use of liberty or property for the
promotion of the general welfare. It does not involve the taking or
confiscation of property with the exception of a few cases where there
is a necessity to confiscate private property in order to destroy it for the
purpose of protecting the peace and order and of promoting the general
welfare as for instance, the confiscation of an illegally possessed article, such
as opium and firearms. "It seems to the court that Section 9 of Ordinance No.
6118, Series of 1964 of Quezon City is not a mere police regulation but an
outright confiscation. It deprives a person of his private property without due
process of law, nay, even without compensation."
3. POLITICAL LAW; POLICE POWER; DEFINITION AND CONCEPT. —
Police power is defined by Freund as 'the power of promoting the public welfare
by restraining and regulating the use of liberty and property' (Quoted in
Political Law by Tañada and Carreon, V-II, p. 50). It is usually exerted in order
to merely regulate the use and enjoyment of property of the owner. If he is
deprived of his property outright, it is not taken for public use but rather to
destroy in order to promote the general welfare. In police power, the owner
does not recover from the government for injury sustained in consequence
thereof.
4. ADMINISTRATIVE LAW; CITY ORDINANCE; LACK OF REASONABLE
RELATION BETWEEN SETTING ASIDE OF 6% OF THE TOTAL AREA OF ALL
PRIVATE CEMETERIES AND THE GENERAL WELFARE. — There is no reasonable
relation between the setting aside of at least six (6) percent of the total
area of all private cemeteries for charity burial grounds of deceased paupers
and the promotion of health, morals. good order, safety, or the general
welfare of the people. The ordinance is actually a taking without
compensation of a certain area from a private cemetery to benefit paupers who
are charges of the municipal corporation. Instead of building or
maintaining a public cemetery for this purpose, the city passes the burden to
private cemeteries.
5. ID.; ID.; AUTHORITY OF CITY TO PROVIDE ITS OWN PUBLIC
CEMETERIES; LAW AND PRACTICE. — The expropriation without
compensation of a portion of private cemeteries is not covered by Section
12(t) of Republic Act 537, the Revised Charter of Quezon City which empowers
the city council to prohibit the burial of the dead within the
center of population of the city and to provide for their burial in a proper place
subject to the provisions of general law regulating burial grounds and
 cemeteries. When the Local Government Code, Batas Pambansa Blg.
337 provides in Section 177(g) that a sangguniang panlungsod may "provide
for the burial of the dead in such place and in such manner as prescribed by
law or ordinance" it simply authorizes the city to provide its own city owned
land or to buy or expropriate private properties to construct public cemeteries.
This has been the law and practice in the past. It continues to the present.
6. ID.; MUNICIPAL CORPORATION; GENERAL WELFARE CLAUSE; BROAD
AND LIBERAL INTERPRETATION; STRETCH INTERPRETATION NO LONGER
FEASIBLE IN THE CASE AT BAR. — As a matter of fact, the petitioners rely
solely on the general welfare clause or on implied powers of the municipal
corporation, not on any express provision of law as statutory basis of their
exercise of power. The clause has always received broad and liberal
interpretation but we cannot stretch it to cover this particular taking.
Moreover, the questioned ordinance was passed after Himlayang Pilipino, Inc.
had incorporated, received necessary licenses and permits, and commenced
operating. The sequestration of six percent of the cemetery cannot even be
considered as having been impliedly acknowledged by the private respondent
when it accepted the permits to commence operations.

DECISION

GUTIERREZ, JR., J  p:

This is a petition for review which seeks the reversal of the

decision of the Court of First Instance of Rizal, Branch XVIII declaring Section
9 of Ordinance No. 6118, S-64, of the Quezon City Council null and void.
Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE
REGULATING THE ESTABLISHMENT, MAINTENANCE AND
OPERATION OF PRIVATE MEMORIAL TYPE CEMETERY OR BURIAL GROUND
WITHIN THE JURISDICTION OF QUEZON CITY AND PROVIDING PENALTIES
FOR THE VIOLATION THEREOF" provides:
"Sec. 9. At least six (6) percent of the total area of the
memorial park cemetery shall be set aside for charity
burial of deceased persons who are paupers and have been
residents of Quezon City for at least 5 years prior to their death, to
be determined by competent City Authorities. The area so designated
shall immediately be developed and should be open for operation not
later than six months from the date of approvalof the application."
For several years, the aforequoted section of the Ordinance was not
enforced by city authorities but seven years after the enactment of the
ordinance, the Quezon City Council passed the following resolution: LexLib
"RESOLVED by the council of Quezon assembled, to request, as
it does hereby request the City Engineer, Quezon City, to stop any
further selling and/or transaction of memorial park lots
in Quezon City where the owners thereof have failed to donate the
required 6% space intended for paupers burial."

Pursuant to this petition, the Quezon City Engineer notified respondent

Himlayang Pilipino, Inc. in writing that Section 9 of Ordinance No. 6118, S-64
would be enforced.
 Respondent Himlayang Pilipino reacted by filing with the Court of First
Instance of Rizal, Branch XVIII at Quezon City, a petition for declaratory relief,
prohibition and mandamus with preliminary injunction (Sp. Proc. No. Q-16002)
seeking to annul Section 9 of the Ordinance in question. The respondent
alleged that the same is contrary to the Constitution, the Quezon City Charter,
the Local Autonomy Act, and the Revised Administrative Code.
There being no issue of fact and the questions raised being purely legal,
both petitioners and respondent agreed to the rendition of a judgment on the
pleadings. The respondent court, therefore, rendered the decision declaring
Section 9 of Ordinance No. 6118, S-64 null and void.
A motion for reconsideration having been denied,
the City Government and City Council filed the instant petition. cdlex
Petitioners argue that the taking of the respondent's property is a valid
and reasonable exercise of police power and that the land is taken for a public
use as it is intended for the burial ground of paupers. They further argue that
the Quezon City Council is authorized under its charter, in the exercise of local
police power, "to make such further ordinances and resolutions not repugnant
to law as may be necessary to carry into effect and discharge the powers and
duties conferred by this Act and such as it shall deem necessary and proper to
provide for the health and safety, promote the prosperity, improve the morals,
peace, good order, comfort and convenience of the city and the inhabitants
thereof, and for the protection of property therein."
On the other hand, respondent Himlayang Pilipino, Inc. contends that the
taking or confiscation of property is obvious because the questioned ordinance
permanently restricts the use of the property such that it cannot be used for
any reasonable purpose and deprives the owner of all beneficial use of his
property.
The respondent also stresses that the general welfare clause is not
available as a source of power for the taking of the property in this case
because it refers to "the power of promoting the public welfare by restraining
and regulating the use of liberty and property." The respondent points out that
if an owner is deprived of his property outright under the State's police power,
the property is generally not taken for public use but is urgently and
summarily destroyed in order to promote the general welfare. The respondent
cites the case of a nuisance  per se or the destruction of a house to prevent the
spread of aconflagration. LexLib
 
We find the stand of the private respondent as well as the decision of the
respondent Judge to be well-founded. We quote with approval the lower court's
ruling which declared null and void Section 9 of the questioned city ordinance:
"The issue is: Is Section 9 of the ordinance in question a valid
exercise of the police power?
"An examination of the Charter of Quezon City (Rep. Act No.
5371), does not reveal any provision that would justify the ordinance
in question except the provision granting police power to the City.
Section 9 cannot be justified under the power granted
to Quezon City to tax, fix the license fee, and regulate such other
business, trades, and occupation as may be established or practiced
in the City.' (Sub-sections 'C', Sec. 12,R.A. 537).
"The power to regulate does not include the power to prohibit
(People vs. Esguerra, 81 Phil. 33, Vega vs. Municipal Board of Iloilo,
L-6765, May 12, 1954; 39 N.J. Law, 70, Mich. 396). A fortiori, the
power to regulate does not include the power to confiscate. The
ordinance in question not only confiscates but also prohibits the
operation of a memorial park cemetery, because under Section
13 of said ordinance, 'Violation of the provision thereof is punishable
with a fine and/or imprisonment and that upon conviction thereof the
permit to operate and maintain a private cemetery shall be revoked
or cancelled.' The confiscatory clause and the penal provision in
effect deter one from operating a memorial park cemetery. Neither
can the ordinance in question be justified under sub-section 't',
Section 12 of Republic Act 537 which authorizes the City Council to —
"'prohibit the burial of the dead within the
center of population of the city and provide for their burial in
such proper place and in such manner as the council may
determine, subject to the provisions of the general law
regulating burial grounds and cemeteries and governing
funerals and disposal of the dead.'(Sub-sec. (t), Sec. 12, Rep.
Act No. 537).

There is nothing in the above provision which authorizes

confiscation or as euphemistically termed by the respondents,
'donation.'

We now come to the question whether or not Section 9 of the

ordinance in question is a valid exercise of police power. The police
power of Quezon City is defined in sub-section 00, Sec. 12, Rep. Act
537 which reads as follows:
"(00) To make such further ordinance and regulations not
repugnant to law as may be necessary to carry into effect and
discharge the powers and duties conferred by this act and such
as it shall deem necessary and proper to provide for the health
and safety, promote, the prosperity, improve the morals, peace,
good order, comfort and convenience of the city and the
inhabitants thereof, and for the protectionof property therein;
and enforce obedience thereto with such lawful fines or
penalties as the City Council may prescribe under the
provisions of subsection (jj) of this section.'
"We start the discussion with a restatement of certain basic
principles. Occupying the forefront in the bill of rights is the provision
which states that 'no person shall be deprived of life, liberty or
property without due process of law' (Art. III, Section 1
subparagraph 1, Constitution).
"On the other hand, there are three inherent
powers of government by which the state interferes with the property
rights, namely (1) police power, (2) eminent domain, (3) taxation.
These are said to exist independently of the Constitution as
necessary attributes of sovereignty.
"Police power is defined by Freund as 'the power of promoting
the public welfare by restraining and regulating the use of liberty and
property' (Quoted in Political Law by Tañada and Carreon, V-II, p.
50). It is usually exerted in order to merely regulate the use and
enjoyment of property of the owner. If he is deprived of his property
outright, it is not taken for public use but rather to destroy in order
to promote the general welfare. In police power, the owner does not
recover from the government for injury sustained in consequence
 thereof. (12 C.J. 623). It has been said that police power is the most
essential of government powers, at times the most insistent, and
always one of the least limitable of the
powers of government (Ruby vs. Provincial Board, 39 Phil. 660;
Ichong vs. Hernandez, L-7995, May 31, 1957). This power embraces
the whole systemof public regulation (U.S. vs. Linsuya Fan, 10 Phil.
104). The Supreme Court has said that police power is so far-
reaching in scope that it has almost become impossible to limit its
sweep. As it derives its existence from the very existence of the state
itself, it does not need to be expressed or defined in its scope. Being
coextensive with self-preservation and survival itself, it is the most
positive and active of all governmental processes, the most essential,
insistent and illimitable. Especially it is so under the modern
democratic framework where the demands of society and nations
have multiplied to almost unimaginable proportions. The field and
scope of police power have become almost boundless, just as the
fields of public interest and public welfare have become almost all
embracing and have transcended human foresight. Since the Courts
cannot foresee the needs and demands of public interest and welfare,
they cannot delimit beforehand the extent or scope of the police
power by which and through which the state seeks to attain or
achieve public interest and welfare. (Ichong vs. Hernandez, L-7995,
May 31, 1957).
"The police power being the most active
power of the government and the due process clause being the
broadest limitation on governmental power, the conflict between this
power of government and the due process clause of the Constitution
is oftentimes inevitable.
"It will be seen from the foregoing authorities that police power
is usually exercised in the form of mere regulation or restriction in
the use of liberty or property for the promotion of the general
welfare. It does not involve the taking or confiscation of property
with the exception of a few cases where there is a necessity to
confiscate private property in order to destroy it for the
purpose of protecting the peace and order and ofpromoting the
general welfare as for instance, the confiscation of an illegally
possessed article, such as opium and firearms.
"It seems to the court that Section 9 of Ordinance No. 6118,
Series of 1964 of Quezon City is not a mere police regulation but an
outright confiscation. It deprives a person of his private property
without due process of law, nay, even without compensation."
In sustaining the decision of the respondent court, we are not
unmindful of the heavy burden shouldered by whoever challenges the
validity of duly enacted legislation, whether national or local. As early as 1913,
this Court ruled in Case  v. Board  of  Health (24 Phil. 250) that the courts
resolve every presumption in favor of validity and, more 90, where the
municipal corporation asserts that the ordinance was enacted to promote the
common good and general welfare. LLpr
In the leading case of Ermita-Malate Hotel and Motel Operators
Association Inc.  v.  City  Mayor of Manila (20 SCRA 849) the Court speaking
through the then Associate Justice and now Chief Justice Enrique M. Fernando
stated:
 "Primarily what calls for a reversal of such a decision is the
absence of any evidence to offset the presumption of validity that
attaches to a challenged statute or ordinance. As was expressed
categorically by Justice Malcolm: 'The presumption is all in
favor of validity. . . . The action of the elected representatives of the
people cannot be lightly set aside. The councilors must, in the very
nature of things, be familiar with the necessities of their particular
municipality and with all the facts and circumstances which surround
the subject and necessitate action. The local legislative body, by
enacting the ordinance, has in effect given notice that the regulations
are essential to the well-being of the people. . . . The Judiciary should
not lightly set aside legislative action when there is not a clear
invasion of personal or property rights under the guise of police
regulation.' (U.S. v. Salaveria [1918], 39 Phil. 102, at p. 111. There
was an affirmation of the presumption of validity of municipal
ordinance as announced in the leading Salaveria decision in Eboña v.
Daet, [1950] 85 Phil. 369.).
We have likewise considered the principles earlier stated in Case v.
Board of Health supra:
". . . Under the provisions of municipal charters which are
known as the general welfare clauses, a city, by virtue of its police
power, may adopt ordinances to secure the peace, safety, health,
morals and the best and highest interests of the municipality. It
is a well-settled principle, growing out of the nature of well-ordered
and civilized society, that every holder of property, however absolute
and unqualified may be his title, holds it under the implied liability
that his use of it shall not be injurious to the equal
enjoyment of others having an equal right to the enjoyment of their
property, nor injurious to the rights of the community. All property in
the state is held subject to its general regulations, which are
necessary to the common good and general welfare.
Rights of property, like all other social and conventional rights, are
subject to such reasonable limitations in their enjoyment as shall
prevent them from being injurious, and to such reasonable restraints
and regulations, established by law, as the legislature, under the
governing and controlling power vested in them by the constitution,
may think necessary and expedient. The state, under the police
power, is possessed with plenary power to deal with all matters
relating to the general health, morals, and safety ofthe people, so
long as it does not contravene any positive inhibition of the organic
law and providing that such power is not exercised in such a manner
as to justify the interference of the courts to prevent positive wrong
and oppression."

but find them not applicable to the facts of this case.

There is no reasonable relation between the setting aside of at least six

(6) percent of the total area of all private cemeteries for charity burial
grounds of deceased paupers and the promotion of health, morals, good order,
safety, or the general welfare of the people. The ordinance is actually a taking
without compensation of a certain area from a private cemetery to benefit
paupers who are charges of the municipal corporation. Instead of building or
maintaining a public cemetery for this purpose, the city passes the burden to
private cemeteries. LLphil
 The expropriation without compensation of a portion of private
cemeteries is not covered by Section 12(t) of Republic Act 537, the Revised
Charter of Quezon City which empowers the city council to prohibit the
burial of the dead within the center of population of the city and to provide for
their burial in a proper place subject to the provisions of general law regulating
burial grounds and cemeteries. When the LocalGovernment Code, Batas
Pambansa Blg. 337 provides in Section 177 (q) that a Sangguniang panlungsod
may "provide for the burial of the dead in such place and in such manner as
prescribed by law or ordinance" it simply authorizes the city to provide its
own city owned land or to buy or expropriate private properties to construct
public cemeteries. This has been the law and practice in the past. It continues
to the present. Expropriation, however, requires payment of just
compensation. The questioned ordinance is different from laws and regulations
requiring owners of subdivisions to set aside certain areas for streets, parks,
playgrounds, and other public facilities from the land they sell to
buyers of subdivision lots. The necessities of public safety, health, and
convenience are very clear from said requirements which are intended to
insure the development of communities with salubrious and wholesome
environments. The beneficiaries of the regulation, in turn, are made to pay by
the subdivision developer when individual lots are sold to homeowners.
As a matter of fact, the petitioners rely solely on the general welfare
clause or on implied powers of the municipal corporation, not on any express
provision of law as statutory basis of their exercise ofpower. The clause has
always received broad and liberal interpretation but we cannot stretch it to
cover this particular taking. Moreover, the questioned ordinance was passed
after Himlayang Pilipino, Inc. had incorporated, received necessary licenses
and permits, and commenced operating. The sequestration of six
percent of the cemetery cannot even be considered as having been impliedly
acknowledged by the private respondent when it accepted the permits to
commence operations.
WHEREFORE, the petition for review is hereby DISMISSED. The
decision of the respondent court is affirmed.
SO ORDERED.
|||  (City Government of Quezon City v. Ericta, G.R. No. L-34915, [June
24, 1983], 207 PHIL 648-657)

[G.R. No. 116100. February 9, 1996.]

SPOUSES CRISTINO and
BRIGIDA CUSTODIO and SPOUSES LITO and MARIA CRISTINA
SANTOS, petitioners, vs. COURT OF  APPEALS,
HEIRS OF  PACIFICO C. MABASA and REGIONAL
TRIAL  COURTOF  PASIG, METRO MANILA, BRANCH
181,  respondents.

Maria T . M.  Leviste  for petitioners.

 Roberto B. Arca  for private respondents.

SYLLABUS

1. REMEDIAL LAW; ACTIONS; APPEALS; PARTY WHO DID NOT APPEAL

FROM THE DECISION OF THE COURT A QUO GRANTING PRIVATE RESPONDENT
THE RIGHT OF WAY, BARRED FROM RAISING THE SAME. — With respect to the
first issue, herein petitioners are already barred from raising the same.
Petitioners did not appeal from the decision of the court a quo granting private
respondents the right of way, hence they are presumed to be satisfied with the
adjudication therein. With the finality of the judgment of the trial court as to
petitioners, the issue of propriety of the grant of right of way has already been
laid to rest. For failure to appeal the decision of the trial court to
the Court of Appeals, petitioners cannot obtain any affirmative relief other than
those granted in the decision of the trial court. That decision of the court below
has become final as against them and can no longer be reviewed, much less
reversed, by this Court. The rule in this jurisdiction is that whenever an appeal is
taken in a civil case, an appellee who has not himself appealed may not obtain
from the appellate court any affirmative relief other than what was granted in the
decision of the lower court. The appellee can only advance an argument that he
may deem necessary to defeat the appellant's claim or to uphold the decision that
is being disputed, and he can assign errors in his brief if such is required to
strengthen the views expressed by the court a quo. These assigned errors, in
turn, may be considered by the appellate court solely to maintain the appealed
decision on other grounds, but not for the purpose of reversing or modifying the
judgment in the appellee's favor and giving him other affirmative reliefs.
2. CIVIL LAW DAMAGES; RECOVERY OF DAMAGES; REQUISITES. — The
mere fact that the plaintiff suffered losses does not give rise to a right to recover
damages. To warrant the recovery of damages, there must be both a
right of action for a legal wrong inflicted by the defendant, and damage resulting
to the plaintiff therefrom. Wrong without damage, or damage without wrong,
does not constitute a cause of action, since damages are merely part of the
remedy allowed for the injury caused by a breach or wrong. In order that a
plaintiff may maintain an action for the injuries of which he complains, he must
establish that such injuries resulted from a breach of duty which the defendant
owed to the plaintiff — a concurrence of injury to the plaintiff and legal
responsibility by the person causing it. The underlying basis for the award of tort
damages is the premise that an individual was injured in contemplation of law.
Thus, there must first be the breach of some duty and the imposition of liability
for that breach before damages may be awarded, it is not sufficient to state that
there should be tort liability merely because the plaintiff suffered some pain and
suffering. In other words, in order that the law will give redress for an act causing
damage, that act must be not only hurtful, but wrongful. There must be damnum
et injuria. If, as may happen in many cases, a person sustains actual damage,
that is, harm or loss to his person or property, without sustaining any legal injury,
that is, an act or omission which the law does not deem an injury, the damage is
regarded as damnum absque injuria.
3. ID.; ID.; DAMAGES DISTINGUISHED FROM INJURY. — There is a material
distinction between damages and injury. Injury is the illegal invasion of a legal
right; damage is the loss, hurt, or harm which results from the injury; and
damages are the recompense or compensation awarded for the damage suffered.
Thus, there can be damage without injury in those instances in which the loss or
harm was not the result of a violation of a legal duty. These situations are often
called damnum absque injuria.
 4. ID.; ID.; DAMAGE OR LOSS WHICH VIOLATE NO LEGAL DUTY TO OTHER
PERSON, BORNE BY THE INJURED PERSON. — Many accidents occur and many
injuries are inflicted by acts or omissions which cause damage or loss to another
but which violate no legal duty to such other person, and consequently create no
cause of action in his favor. In such cases, the consequences must be borne by
the injured person alone. The law affords no remedy for damages resulting from
an act which does not amount to a legal injury or wrong. cdll
5. ID.; PRINCIPLE OF ABUSE OF RIGHTS; REQUISITES. — Contrary to the
claim of private respondents, petitioners could not be said to have violated the
principle of abuse of right. In order that the principleof abuse of right provided in
Article 21 of the Civil Code can be applied, it is essential that the following
requisites concur: (1) The defendant should have acted in a manner that is
contrary to morals, good customs or public policy, (2) The acts should be willful;
and (3) There was damage or injury to the plaintiff.
6. ID.; ID.; RIGHT NOT VIOLATED WHERE OWNERS ENCLOSE AND FENCE
THEIR PROPERTY. — The act of petitioners in constructing a fence within their lot
is a valid exercise of their right as owners, hence not contrary to morals, good
customs or public policy. The law recognizes in the owner the right to enjoy and
dispose of a thing, without other limitations than those established by law. It is
within the right of petitioners, as owners, to enclose and fence their property.
Article 430 of the Civil Code provides that "(e)very owner may enclose or fence
his land or tenements by means of walls, ditches, live or dead hedges, or by any
other means without detriment to servitudes constituted thereon." cdll
7. REMEDIAL LAW; ACTIONS; NO CAUSE OF ACTION FOR LAWFUL ACTS
DONE BY PERSON ON HIS PROPERTY. — At the time of the construction of the
fence, the lot was not subject to any servitudes. It was only that decision which
gave private respondents the right to use the said passageway after
payment of the compensation and imposed a corresponding duty on petitioners
not to interfere in the exercise of said right. Hence, prior to said decision,
petitioners had an absolute right over their property and their act of fencing and
enclosing the same was an act which they may lawfully perform in the
employment and exerciseof said right. To repeat, whatever injury or damage may
have been sustained by private respondents by reason of the rightful use of the
said land by petitioners is damnum absque injuria. A person has a right to the
natural use and enjoyment of his own property, according to his pleasure, for all
the purposes to which such property is usually applied. As a general rule,
therefore, there is no cause of action for acts done by one person upon his own
property in a lawful and proper manner, although such acts incidentally cause
damage or an unavoidable loss to another, as such damage or loss is damnum
absque injuria. When the owner ofproperty makes use thereof in the general and
ordinary manner in which the property is used, such as fencing or enclosing the
same as in this case, nobody can complain of having been injured, because the
inconvenience arising from said use can be considered as a mere
consequence of community life. The proper exercise of a lawful right cannot
constitute a legal wrong for which an action will lie, although the actmay result in
damage to another, for no legal right has been invaded. One may use any lawful
means to accomplish a lawful purpose and though the means adopted may cause
damage to another, no cause ofaction arises in the latter's favor. Any injury or
damage occasioned thereby is damnum absque injuria. The courts can give no
redress for hardship to an individual resulting from action reasonably calculated
to achieve a lawful end by lawful means.

DECISION
REGALADO, J  p:

This petition for review on certiorari assails the

decision of respondent Court of Appeals in CA-G.R. CV No. 29115, promulgated
on November 10, 1993, which affirmed with modification the decision of the
trial court, as well as its resolution dated July 8, 1994 denying petitioner's
motion for reconsideration. 1

On August 26, 1982, Civil Case No. 47466 for the grant of an
easement of right of way was filed by Pacifico Mabasa against
Cristino Custodio, Brigida R. Custodio, Rosalina R. Morato, Lito Santos and
Maria Cristina C. Santos before the Regional Trial Court of Pasig and assigned
to Branch 22 thereof. 2

The generative facts of the case, as synthesized by the trial court and

adopted by the Court of Appeals, are as follows:
Perusing the record, this Court finds that the original plaintiff
Pacifico Mabasa died during the pendency of this case and was
substituted by Ofelia Mabasa, his surviving spouse [and children].
The plaintiff owns a parcel of land with a two-door apartment
erected thereon situated at Interior P. Burgos St., Palingon, Tipas,
Tagig, Metro Manila. The plaintiff was able to acquire said property
through a contract of sale with spouses Mamerto Rayos and Teodora
Quintero as vendors last September 1981. Said property may be
described to be surrounded by other immovables pertaining to
defendants herein. Taking P. Burgos Street as the point of reference,
on the left side, going to plaintiff's property, the row of houses will be
as follows: That of defendants Cristino and Brigida Custodio, then
that of Lito and Maria Cristina Santos and then that of Ofelia Mabasa.
On the right side (is) that of defendant Rosalina Morato and then a
Septic Tank (Exhibit "D"). As an access to P. Burgos Street from
plaintiff's property, there are two possible passageways. The first
passageway is approximately one meter wide and is about 20 meters
distan(t) from Mabasa's residence to P. Burgos Street. Such path is
passing in between the previously mentioned row of houses. The
second passageway is about 3 meters in width and length from
plaintiff Mabasa's residence to P. Burgos Street; it is about 26
meters. In passing thru said passageway, a less than a meter wide
path through the septic tank and with 5-6 meters in length has to be
traversed.
When said property was purchased by Mabasa, there were
tenants occupying the premises and who were acknowledged by
plaintiff Mabasa as tenants. However, sometime in February, 1982,
one of said tenants vacated the apartment and when plaintiff Mabasa
went to see the premises, he saw that there had been built an adobe
fence in the first passageway making it narrower in width. Said adobe
fence was first constructed by defendants Santoses along their
property which is also along the first passageway. Defendant Morato
constructed her adobe fence and even extended said fence in such a
way that the entire passageway was enclosed (Exhibit "I-Santoses
and Custodios, Exh. "D" for plaintiff, Exhs. "1-C", "1-D" and "1-
E") And it was then that the remaining tenants of said apartment
vacated the area. Defendant Ma. Cristina Santos testified that she
constructed said fence because there was an incident when her
daughter was dragged by a bicycle pedalled by a son of one of the
 tenants in said apartment along the first passageway. She also
mentioned some other inconveniences of having (at) the front of her
house a pathway such as when some of the tenants were drunk and
would bang their doors and windows. Some of their footwear were
even lost. . . . 3 (Italics in original text; corrections in parentheses
supplied)
On February 27, 1990, a decision was rendered by the trial court, with this
dispositive part:
Accordingly, judgment is hereby rendered as follows:
1) Ordering defendants Custodios and Santoses to give plaintiff
permanent access — ingress and egress, to the public street;
2) Ordering the plaintiff to pay defendants Custodios and
Santoses the sum of Eight Thousand Pesos (P8,000) as indemnity for
the permanent use of the passageway.
The parties to shoulder their respective litigation expenses. 4
Not satisfied therewith, therein plaintiff represented by his heirs, herein
private respondents, went to the Court of Appeals raising the sole
issue of whether or not the lower court erred in not awarding damages in their
favor. On November 10, 1993, as earlier stated, the Court of Appeals rendered its
decision affirming the judgment of the trial court with modification, the decretal
portion of which disposes as follows:

WHEREFORE, the appealed decision of the lower court is

hereby AFFIRMED WITH MODIFICATION only insofar as the herein
grant of damages to plaintiffs-appellants. The Court hereby orders
defendants-appellees to pay plaintiffs-appellants the sum of Sixty
Five Thousand (P65,000) Pesos as Actual Damages, Thirty Thousand
(P30,000) Pesos as Moral Damages, and Ten Thousand (P10,000)
Pesos as Exemplary Damages. The rest of the appealed decision is
affirmed to all respects. 5

On July 8, 1994, the Court of Appeals denied petitioner's motion for

reconsideration. 6 Petitioners then took the present recourse to us, raising two
issues, namely, whether or not the grant of right of way to herein private
respondents is proper, and whether or not the award of damages is in order. prLL
With respect to the first issue, herein petitioners are already barred from
raising the same. Petitioners did not appeal from the decision of the court a
quo granting private respondents the right of way, hence they are presumed to
be satisfied with the adjudication therein. With the finality of the judgment of the
trial court as to petitioners, the issue of propriety of the grant of right of way has
already been laid to rest.
For failure to appeal the decision of the trial court to the Court of Appeals,
petitioners cannot obtain any affirmative relief other than those granted in the
decision of the trial court. That decision of the courtbelow has become final as
against them and can no longer be reviewed, much less reversed, by this Court.
The rule in this jurisdiction is that whenever an appeal is taken in a civil case, an
appellee who has not himself appealed may not obtain from the
appellate court any affirmative relief other than what was granted in the
decision of the lower court. The appellee can only advance any argument that he
may deem necessary to defeat the appellant's claim or to uphold the decision that
is being disputed, and he can assign errors in his brief if such is required to
strengthen the views expressed by the court a quo. These assigned errors, in
turn, may be considered by the appellate court solely to maintain the appealed
decision on other grounds, but not for the purpose of reversing or modifying the
judgment in the appellee's favor and giving him other affirmative reliefs.7
However, with respect to the second issue, we agree with petitioners that
the Court of Appeals erred in awarding damages in favor of private respondents.
The award of damages has no substantial legal basis. A reading of the
decision of the Court of Appeals will show that the award of damages was based
solely on the fact that the original plaintiff, Pacifico Mabasa, incurred losses in the
form of unrealized rentals when the tenants vacated the leased premises by
reason of the closure of the passageway.
However, the mere fact that the plaintiff suffered losses does not give rise
to a right to recover damages. To warrant the recovery of damages, there must
be both a right of action for a legal wrong inflicted by the defendant, and damage
resulting to the plaintiff therefrom. Wrong without damage, or damage without
wrong, does not constitute a cause of action, since damages are merely
part of the remedy allowed for the injury caused by a breach or wrong. 8
There is a material distinction between damages and injury. Injury is the
illegal invasion of a legal right; damage is the loss, hurt, or harm which results
from the injury, and damages are the recompense or compensation awarded for
the damage suffered. Thus, there can be damage without injury in those
instances in which the loss or harm was not the result of a violation of a legal
duty. These situations are often called damnum absque injuria. 9
In order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty
which the defendant owed to the plaintiff — a concurrence of injury to the plaintiff
and legal responsibility by the person causing it. 10 The underlying basis for the
award of tort damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be the breach of some duty and the
imposition of liability for that breach before damages may be awarded; it is not
sufficient to state that there should be tort liability merely because the plaintiff
suffered some pain and suffering. 11
Many accidents occur and many injuries are inflicted by acts or omissions
which cause damage or loss to another but which violate no legal duty to such
other person, and consequently create no cause ofaction in his favor. In such
cases, the consequences must be borne by the injured person alone. The law
affords no remedy for damages resulting from an act which does not amount to a
legal injury or wrong. 12
In other words, in order that the law will give redress for an act causing
damage, that act must be not only hurtful, but wrongful. There must be damnum
et injuria. 13 If, as may happen in many cases, a person sustains actual damage,
that is, harm or loss to his person or property, without sustaining any legal injury,
that is, an act or omission which the law does not deem an injury, the damage is
regarded as damnum absque injuria. 14
In the case at bar, although there was damage, there was no legal injury.
Contrary to the claim of private respondents, petitioners could not be said to have
violated the principle of abuse of right. In order that the
principle of abuse of right provided in Article 21 of the Civil Code can be applied,
it is essential that the following requisites concur: (1) The defendant should have
acted in a manner that is contrary to morals, good customs or public policy; (2)
The acts should be willful; and (3) There was damage or injury to the plaintiff. 15
The act of petitioners in constructing a fence within their lot is a valid
exercise of their right as owners, hence not contrary to morals, good customs or
public policy. The law recognizes in the owner the right to enjoy and dispose of a
thing, without other limitations than those established by law. 16 It is within the
right of petitioners, as owners, to enclose and fence their property. Article
430 of the Civil Code provides that "(e)very owner may enclose or fence his land
or tenements by means of walls, ditches, live or dead hedges, or by any other
means without detriment to servitudes constituted thereon."
At the time of the construction of the fence, the lot was not subject to any
servitudes. There was no easement of way existing in favor of private
respondents, either by law or by contract. The fact that private respondents had
no existing right over the said passageway is confirmed by the very
decision of the trial court granting a compulsory right of way in their favor after
payment of just compensation. It was only that decision which gave private
respondents the right to use the said passageway after payment of the
compensation and imposed a corresponding duty on petitioners not to interfere in
the exercise of said right. LLcd
Hence, prior to said decision, petitioners had an absolute right over their
property and their act of fencing and enclosing the same was an act which they
may lawfully perform in the employment and exerciseof said right. To repeat,
whatever injury or damage may have been sustained by private respondents by
reason of the rightful use of the said land by petitioners is damnum absque
injuria. 17
A person has a right to the natural use and enjoyment of his own property,
according to his pleasure, for all the purposes to which such property is usually
applied. As a general rule, therefore, there is no causeof action for acts done by
one person upon his own property in a lawful and proper manner, although such
acts incidentally cause damage or an unavoidable loss to another, as such
damage or loss is damnum absque injuria. 18 When the owner of property makes
use thereof in the general and ordinary manner in which the property is used,
such as fencing or enclosing the same as in this case, nobody can
complain ofhaving been injured, because the inconvenience arising from said use
can be considered as a mere consequence of community life. 19
The proper exercise of a lawful right cannot constitute a legal wrong for
which an action will lie, 20 although the act may result in damage to another, for
no legal right has been invaded. 21 One may use any lawful means to accomplish
a lawful purpose and though the means adopted may cause damage to another,
no cause of action arises in the latter's favor. Any injury or damage occasioned
thereby is damnum absque injuria. The courts can give no redress for hardship to
an individual resulting from action reasonably calculated to achieve a lawful end
by lawful means. 22
WHEREFORE, under the compulsion of the foregoing premises, the appealed
decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE and
the judgment of the trial court is correspondingly REINSTATED.
SO ORDERED.
|||  (Spouses Custodio v. Court of Appeals, G.R. No. 116100, [February
9, 1996], 323 PHIL 575-589)

[G.R. No. 76216. September 14, 1989.]

 GERMAN MANAGEMENT & SERVICES,
INC., petitioner, vs. HON. COURT OF APPEALS and ORLANDO
GERNALE,  respondents.

[G.R. No. 76217. September 14, 1989.]

GERMAN MANAGEMENT & SERVICES,
INC., petitioner, vs. HON. COURT OF APPEALS and ERNESTO
VILLEZA,  respondents.

Alam, Verano & Associates for petitioner.

Francisco D. Lozano for private respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; NOT

DENIED WHERE A PARTY WAS AFFORDED OPPORTUNITY TO BE HEARD. —
The Court of Appeals need not require petitioner to file an answer for due
process to exist. The comment filed by petitioner on February 26, 1986 has
sufficiently addressed the issues presented in the petition for review filed by
private respondents before the Court ofAppeals. Having heard both parties, the
Appellate Court need not await or require any other additional pleading.
Moreover, the fact that petitioner was heard by the Court of Appeals on its
motion for reconsideration negates any violation of due process.
2. REMEDIAL LAW; SPECIAL CIVIL ACTION; FORCIBLE ENTRY; CAN BE
COMMENCED BY THE ACTUAL POSSESSORS OF THE LAND. — Notwithstanding
petitioner's claim that it was duly authorized by the owners to develop the
subject property, private respondents, as actual possessors, can commence a
forcible entry case against petitioner because ownership is not in issue.
Forcible entry is merely a quieting process and never determines the actual
title to an estate. Title is not involved.
3. ID.; ID.; ID.; A PARTY IN PRIOR POSSESSION CAN RECOVER
OCCUPATION OF THE PROPERTY EVEN AGAINST THE OWNER HIMSELF. — It
must be stated that regardless of the actual condition of the title to the
property, the party in peaceable quiet possession shall not be turned out by a
strong hand, violence or terror. Thus, a party who can prove prior possession
can recover such possession even against the owner himself. Whatever may be
the character of his prior possession, if he has in his favor priority in time, he
has the security that entitles him to remain on the property until he is lawfully
ejected by a person having a better right by accion publiciana or accion
reivindicatoria.
4. CIVIL LAW; OWNERSHIP; DOCTRINE OF SELF-HELP; AVAILABLE ONLY
AT THE TIME OF ACTUAL OR THREATENED DISPOSSESSION. — The
doctrine of self-help enunciated in Article 429 of the New Civil Code. Such
justification is unavailing because the doctrine of self-help can only be
exercised at the time of actual or threatened dispossession which is absent in
the case at bar. When possession has already been lost, the owner must resort
to judicial process for the recovery of property. This is clear from Article
536 of the Civil Code which states, "(I)n no case may possession be acquired
through force or intimidation as long as there is a possessor who objects
thereto. He who believes that he has an action or right to deprive
another of the holding of a thing, must invoke the aid of the competent court,
if the holder should refuse to deliver the thing."
 D E C I S I O N

FERNAN, C.J  p:

Spouses Cynthia Cuyegkeng Jose and Manuel Rene Jose,

residents of Pennsylvania, Philadelphia, USA are the owners of a parcel of land
situated in Sitio Inarawan, San Isidro, Antipolo, Rizal, with an area of232,942
square meters and covered by TCT No. 50023 of the Register of Deeds of the
province of Rizal issued on September 11, 1980 which canceled TCT No.
56762/ T-560. The land was originally registered on August 5, 1948 in the
Office of the Register of Deeds of Rizal as OCT No. 19, pursuant to a
Homestead Patent granted by the President of the Philippines on July 27, 1948,
under Act No. 141.
On February 26, 1982, the spouses Jose executed a special
power of attorney authorizing petitioner German Management Services to
develop their property covered by TCT No. 50023 into a residential subdivision.
Consequently, petitioner on February 9, 1983 obtained Development Permit
No. 00424 from the Human Settlements Regulatory Commission for said
development. Finding that part of the property was occupied by private
respondents and twenty other persons, petitioner advised the occupants to
vacate the premises but the latter refused. Nevertheless, petitioner proceeded
with the development of the subject property which included the portions
occupied and cultivated by private respondents. prcd
Private respondents filed an action for forcible entry against petitioner
before the Municipal Trial Court of Antipolo, Rizal, alleging that they are
mountainside farmers of Sitio Inarawan, San Isidro, Antipolo, Rizal and
members of the Concerned Citizens of Farmer's Association; that they have
occupied and tilled their farmholdings some twelve to fifteen years prior to the
promulgation of P. D. No. 27; that during the first week of August 1983,
petitioner, under a permit from the Office of the Provincial Governor of Rizal,
was allowed to improve the Barangay Road at Sitio Inarawan, San Isidro,
Antipolo, Rizal at its expense, subject to the condition that it shall secure the
needed right of way from the owners of the lot to be affected; that on August
15, 1983 and thereafter, petitioner deprived private respondents of their
property without due process of law by: (1) forcibly removing and destroying
the barbed wire fence enclosing their farmholdings without notice; (2)
bulldozing the rice, corn, fruit bearing trees and other crops of private
respondents by means of force, violence and intimidation, in violation of P.D.
1038 and (3) trespassing, coercing and threatening to harass, remove and
eject private respondents from their respective farmholdings in
violation of P.D. Nos. 316, 583, 815, and 1028. 1
On January 7, 1985, the Municipal Trial Court dismissed private
respondents' complaint for forcible entry. 2 On appeal, the Regional
Trial Court of Antipolo, Rizal, Branch LXXI sustained the dismissal by the
Municipal Trial Court. 3
Private respondents then filed a petition for review with
the Court of Appeals. On July 24, 1986, said court gave due course to their
petition and reversed the decisions of the Municipal Trial Court and the
Regional Trial Court. 4
The Appellate Court held that since private respondents were in actual
possession of the property at the time they were forcibly ejected by petitioner,
private respondents have a right to commence an action for forcible entry
regardless of the legality or illegality of possession. 5 Petitioner moved to
reconsider but the same was denied by the Appellate Court in its resolution
dated September 26, 1986. 6
Hence, this recourse.
The issue in this case is whether or not the Court of Appeals denied due
process to petitioner when it reversed the decision of the court a quo without
giving petitioner the opportunity to file its answer and whether or not private
respondents are entitled to file a forcible entry case against petitioner. 7
We affirm. The Court of Appeals need not require petitioner to file an
answer for due process to exist. The comment filed by petitioner on February
26, 1986 has sufficiently addressed the issues presented in the petition for
review filed by private respondents before the Court of Appeals. Having heard
both parties, the Appellate Court need not await or require any other additional
pleading. Moreover, the fact that petitioner was heard by
the Court of Appeals on its motion for reconsideration negates any
violation of due process.
Notwithstanding petitioner's claim that it was duly authorized by the
owners to develop the subject property, private respondents, as actual
possessors, can commence a forcible entry case against petitioner because
ownership is not in issue. Forcible entry is merely a quieting process and never
determines the actual title to an estate. Title is not involved. 8
In the case at bar, it is undisputed that at the time petitioner entered the
property, private respondents were already in possession thereof. There is no
evidence that the spouses Jose were ever in possession of the subject
property. On the contrary, private respondents' peaceable possession was
manifested by the fact that they even planted rice, corn and fruit bearing trees
twelve to fifteen years prior to petitioner's act of destroying their crops.
Although admittedly petitioner may validly claim ownership based on the
muniments of title it presented, such evidence does not responsively address
the issue of prior actual possession raised in a forcible entry case. It must be
stated that regardless of the actual condition of the title to the property, the
party in peaceable quiet possession shall not be turned out by a strong hand,
violence or terror. 9 Thus, a party who can prove prior possession can recover
such possession even against the owner himself. Whatever may be the
character of his prior possession, if he has in his favor priority in time, he has
the security that entitles him to remain on the property until he is lawfully
ejected by a person having a better right by accion publiciana or accion
reivindicatoria.  10
Both the Municipal Trial Court and the Regional Trial Court have
rationalized petitioner's drastic action of bulldozing and destroying the
crops of private respondents on the basis of the doctrine of self-help
enunciated in Article 429 of the New Civil Code. 11 Such justification is
unavailing because the doctrine of self-help can only be exercised at the
time of actual or threatened dispossession which is absent in the case at bar.
When possession has already been lost, the owner must resort to judicial
process for the recovery of property. This is clear from Article 536 of the Civil
Code which states, "(I)n no case may possession be acquired through force or
intimidation as long as there is a possessor who objects thereto. He who
believes that he has an action or right to deprive another of the holding of a
thing, must invoke the aid of the competent court, if the holder should refuse
to deliver the thing."
WHEREFORE, the Court resolved to DENY the instant petition. The
decision of the Court of Appeals dated July 24, 1986 is hereby AFFIRMED.
Costs against petitioner. SO ORDERED. ||| (German Management & Services,
Inc. v. Court of Appeals, G.R. No. 76216, 76217, [September 14, 1989], 258
PHIL 289-294)

[G.R. No. 134239. May 26, 2005.]

 REYNALDO VILLAFUERTE and PERLITA
T. VILLAFUERTE,  petitioners,vs.HON. COURT OF APPEALS,
EDILBERTO DE MESA and GONZALO DALEON, respondents.

D E C I S I O N

CHICO-NAZARIO, J  p:

This is a petition for review on certiorari of the

Decision 1 of the Court of Appeals in CA-G.R. CV No. 41871 which affirmed, with
modification, the decision 2 of the Regional Trial Court, Branch 55, Lucena City, in
Civil Case No. 90-11 entitled, "Reynaldo C.  Villafuerte  and Perlita
Tan Villafuerte v. Edilberto De Mesa and Gonzalo Daleon."
The facts, as established by the Court of Appeals, follow:
Appellees — the spouses Reynaldo C. Villafuerte and Perlita
Tan-Villafuerte — operated a gasoline station known as Peewee's
Petron Powerhouse Service Station and General Merchandise on the
premises ofthree (3) adjoining lots at the corner of Gomez Street and
Quezon Avenue in Lucena City. One of these lots, Lot No. 2948-A
with an area of 575 square meters, is owned by several persons,
one of whom is appellant Edilberto de Mesa, while the other lot, Lot
2948-B with an area of 290 square meters, is owned by appellant
Gonzalo Daleon and his brother Federico A. Daleon. The remaining lot
belongs to Mrs. Anicia Yap-Tan, motherof appellee Perlita Tan-
Villafuerte.
Appellants Edilberto de Mesa and Gonzalo Daleon acquired their
respective lots subject to the lease by Petrophil Corporation which
had built thereon the gasoline station being managed by
the Villafuerte couple. When the lease of Petrophil Corporation
expired on December 31, 1988, the Villafuertes obtained a new lease
on Lot No. 2948-A from appellant Edilberto de Mesa for a period
expiring on December 31, 1989.
"1 — This lease will be for a period of one (1) year only, from
January 1, 1989 and will terminate on the 31st of December 1989 at
a monthly rental  of  FOUR THOUSAND PESOS (P4,000.00)." (Exhibit
"1-A-1" De Mesa).
As regards Lot 2948-B of the Daleon brothers, the Villafuertes
were not as lucky. For, instead of obtaining a lease renewal, what
they received were demand letters from the brothers' counsel
ordering them to vacate the premises. Instead of complying
therewith, the Villafuertes simply ignored the demand and continued
operating the gas station (Exhibits "3-B","3-C" and "3-
F",Daleon). HEISca
On May 9, 1989, in the Office of the Barangay
Captain of Barangay Tres,Lucena City, a complaint for ejectment was
filed by Gonzalo Daleon against the Villafuertes (Exhibit
"6",Daleon).Evidently, no settlement was reached thereat, as shown
by a certification to file action issued by the lupon.
With their problem with the Daleon brothers far from over, the
Villafuertes were apt for another one; their lease contract with
Edilberto de Mesa was not renewed when it expired on December 31,
1989. Nonetheless, and duplicating what they had done in the
case of the property of the Daleon brothers, the spouses continued to
operate their gasoline station and other businesses on the lot of de
Mesa despite the latter's demand to vacate.
What transpired next lays at the core of the instant controversy.
It appears that in the early morning of February 1, 1990,
appellants Edilberto de Mesa and Gonzalo Daleon, with the
aid of several persons and without the knowledge of the Villafuertes,
caused the closure of the latter's gasoline station by constructing
fences around it.
The following day — February 2, 1990 — the Villafuertes
countered with a complaint for damages with preliminary mandatory
injunction against both Edilberto de Mesa and Gonzalo Daleon.
Docketed in thecourt below as Civil Case No. 90-11, the complaint
seeks vindication for the alleged malicious and unlawful
fencing of the plaintiffs' business premises (Records, pp. 1-6).
Invoking their status as owners of the withheld premises, the
defendants admitted in their respective answers having caused the
fencing of the plaintiffs' gasoline station thereat but reasoned out
that they did so on account of the plaintiffs' refusal to vacate the
same despite demands.
After hearing the parties in connection with the plaintiffs'
application for a writ of preliminary mandatory injunction, the
lower court, in its order of May 23, 1990, ruled that with the
expiration of the lease on the defendants' property, the plaintiffs
have no more right to stay thereon and, therefore, cannot pretend to
have a clear and unmistakable right to an injunctive writ and
accordingly denied their application therefore (Rec.,p. 186).In a
subsequent order of July 30, 1990, the same court denied the
Villafuertes' motion for reconsideration (Rec.,p. 237).
Later, with leave of court, the Villafuertes amended their
complaint to allege, among others, that the complained acts of the
defendants cost them the following items of actual damages: IASEca
a) Daily Sales (4000-5000 lts.) at .35¢lt.  
  mark-up, P1,750 x 270 days P472,500.00
     
b) Storage Fee of POL (Petroleum, Oil &  
  Lubricants) Recom 4 at 5% for 100,000 lts.  
  = 5000 lts. X 3 quarters x P6.00/lt. 90,000.00
     
c) Tires, Batteries, Accessories (TBA) Gen.  
  Merchandise Sales, P50,000/mo. 20% mark-  
  Up = P10,000 x 9 months 90,000.00
     
d) Hauling of Petroleum products for Peewee's  
  Petron Powerhouse, 2 trips weekly, P1,500  
  X 8 trips/mo. X 9 months 108,000.00
     
e) Hauling of Petroleum products for military  
  7 trips/qtr.,P1,500/trip x 21 (3 qtrs.) 31,500.00
     
f) Balloon Business (Sunshine Balloons)  
  P50,000.00 capital, P6,000/mo. Income  
  TOTAL LOSS 200,000.00
     
g) Uncollected Debts 619,030.61
     
h) Uncollected Checks 37,449.05
     
i) Merchandise Inventory as of July 25, 1990,  
  P141,036.50 value, 50% damaged 70,518.25
     
j) Damaged Office Equipments 30,000.00
     
k) Stampitas (Religious Articles) and other  
  Hermana Fausta Memorial Foundation, Inc.  
  printed matters entrusted in my care,  
  totally damaged by rain and termites 5,000.00
     
l) Products lost in 4 underground tanks 249,805.00
     
m) Interest payments to RCBC (Rizal Commercial  
  Banking Corporation) for additional loan availed  
  of to pay off products acquired on credit from  
  Petron Corp. but were held inside gas station 172,490.53
    –––––––––––––
  TOTAL P2,176,293.44
    ===========
(Rec.,pp. 290, 300)  
The amended complaint thus prayed for the following reliefs:
"WHEREFORE, it is respectfully prayed  of  this
Hon.  Court  that judgment be rendered in favor  of  the plaintiffs:
A Immediately ordering the issuance of a
writ  of  preliminary mandatory injunction against the
 defendants commanding them and any person acting in their
behalf to forthwith remove the fence they have constructed
around the premises in question, and after trial making the said
injunction permanent.
B Ordering the defendants to pay jointly and severally the
plaintiffs the following:
1) Moral damages equivalent to not less than
P200,000.00;
2) Exemplary damages in the amount of P50,000.00;
3) Attorney's fee in the amount  of  P60,000.00 plus
twenty-five percent (25%)  of  the amount of damages to
which plaintiffs are entitled; and
4) Litigation expenses in this instance in the
amount of P10,000.00
C Requiring the defendants to pay jointly and severally
actual damages representing unrealized income and profits as
well as losses referred to in paragraphs 10 and 12 hereof in
such amount as may be shown in evidence during the hearing.
D Granting the plaintiffs such other just and equitable
remedies to which they may be entitled under the law and
equity." (Orig. Rec.,pp. 292-293).
As later events disclosed, the defendants resumed
possession of the premises in question on January 25, 1991 (Rec.,p.
333).Four (4) days later, they obtained a judgment by compromise
from the Municipal TrialCourt in Cities, Lucena City in connection with
the suit for ejectment they earlier filed thereat against Petrophil
Corporation. In that judgment, Petrophil bound itself to remove the
materials and equipment related to the operation of the gasoline
station on the subject premises. (Rec.,pp. 355-356). cEDIAa
After the parties herein had presented their respective
evidence, the lower court came out with the decision now under
review. Dated November 13, 1990, the decision dispositively reads:
"WHEREFORE, judgment is hereby rendered in
favor  of  the plaintiffs and ordering the defendants Edliberto de
Mesa and Gonzalo Daleon to pay, jointly and severally, plaintiffs
the following:
1. Actual damages in the total amount of TWO MILLION ONE
HUNDRED SEVENTY SIX THOUSAND AND TWO HUNDRED
NINETY THREE PESOS AND FORTY FOUR CENTAVOS
(P2,176,293.44);
2. Moral damages in the amount of P200,000.00;
3. Exemplary damages in the amount  of  P50,000.00;
4. P50,000.00, as and for attorney's fees; and
5. Costs  of  suit.
SO ORDERED" (Rec.,pp. 408-414).3
The trial court ruled that with the continued occupation by petitioners of the
two lots belonging to private respondents, despite the expiration of the lease
contracts over the same, petitioners had become "undesirable
lessees." 4 However, it was improper for private respondents to resort to fencing
their properties in order to remove petitioners from the premises in the
light of the clear provision of the Civil Code on the matter, to wit:
Art. 536. In no case may possession be acquired through force
or intimidation as long as there is a possessor who objects thereto.
He who believes that he has an action or a right to deprive
another of the holding of a thing, must invoke the aid of the
competent court, if the holder should refuse to deliver the thing.
Having disregarded the plain requirement of the law, private respondents
were held accountable to petitioners for the various damages prayed for by
petitioners in their amended complaint.
In due time, private respondents filed their respective appeals before
the Court of Appeals which affirmed, with modification, the decision of the
trial court. The dispositive portion of the appellate court's decision reads:
WHEREFORE, the decision appealed from is MODIFIED by
holding the appellants jointly and severally liable to the appellees for
P50,000.00 as exemplary damages and for P27,000.00 as actual
damages, itemized as follows:
 
1. detention of the records: P7,000.00;
2. detention of the merchandise: P10,000.00;
3. value of the damaged merchandise and religious items:
P5,000; and
4. detention of offices equipment: P5,000.00,
and by holding the appellees jointly and severally liable for
rental to appellants Edilberto de Mesa and Gonzalo Daleon in the
amount of P5,500.00 and P39,000.00, respectively. cHAaEC
The deficiency in the payment of the docket fees, to be
computed by the clerk of court of the lower court, shall constitute a
lien on this judgment. 5
In adjudging private respondents liable for damages,
the Court of Appeals substantially ruled that:
1. Private respondents could not invoke the doctrine of self-help contained
in Article 429 of the Civil Code 6 reasoning that the doctrine finds no application
when occupation was effected through lawful means such as in this case where
petitioners' possession of the lots owned by private respondents was effected
through lease agreements;
2. Petitioners' continued unauthorized occupation of private respondents'
properties may have been illegal, however, it was incumbent upon private
respondents to abide by the express provision of Article 536 of the Civil
Code requiring recourse to the proper court prior to ousting petitioners from their
(private respondents') lots;
3. On the matter of insufficient docket fees paid by petitioners during the
institution of this action, the Court of Appeals declared that "whatever deficiency
there may be in the docket fees can be levied from the amount that may be
awarded the appellees (petitioners herein)" 7 and that private respondents were
already estopped from assailing the jurisdiction of the trial court;
 4. Private respondents could not invoke the principle of damnum absque
injuria as this doctrine only applies "when the loss or damage does not constitute
a violation of a legal right or amounts to a legal wrong" 8 and not to this case
where private respondents clearly violated the law by unilaterally displacing
petitioners from the subject premises;
5. On the issue of actual damages, the appellate court substantially reduced
the amount of actual damages awarded by the court a quo upon the ground that
petitioners failed to substantiate their claims thereto except for the
detention of petitioners' records of their receivables, various merchandise,
damaged goods, religious items, and office equipment;
6. As for the propriety of awarding moral damages to petitioners,
the Court of Appeals held that petitioners are not entitled to this form of damage
as this case does not fall within Article 2219 of the Civil Code;
7. Although Article 2219 of the Civil Code encompasses incidents which may
fall within the purview of Article 21 of the Civil Code, the latter, being a rule
based on equity, necessitates the claimant to come to court with clean hands
which cannot be said of petitioners who continued to occupy the lands belonging
to private respondents without the authority of a subsisting lease agreement;
8. Private respondents are nevertheless liable for exemplary damages for
having taken the law into their own hands by fencing the premises of the Petron
gasoline station operated by petitioners instead ofseeking redress from the
proper court as mandated by Article 536 of the Civil Code; and
9. Petitioners are liable to pay private respondents for the unpaid rentals
from the time the lease agreements over the subject properties expired until 01
February 1990 when private respondents constructed the fence.
Dissatisfied with the ruling of the Court of Appeals, petitioners are now
before us raising, in the main, the issue of whether the appellate court erred in
substantially reducing the amount of damages earlier awarded to them by the
trial court. DHIcET
Petitioners insist that the appellate court "resorted to assumptions,
inferences, surmises and conjectures in disallowing certain items of actual
damages like lost petroleum products valued at P249,805.00,
lossof value of merchandise detained for a quite a long time (sic) in the fenced
premises and uncollected debts as against the positive testimony of petitioner
Perlita Villafuerte which remained unrebutted and uncontested even on
appeal." 9 They also allege that the list of unrealized income, collectibles and
damages prepared by petitioner Perlita was based and ably supported by
documents.
Petitioners also maintain that the Court of Appeals erred in finding that they
came to court with "unclean hands," thus, depriving them of entitlement to moral
damages. According to petitioners, their continued occupation of private
respondents' properties was based on their belief that their lease contract with
private respondent De Mesa was modified and extended whereas private
respondent Daleon had verbally agreed to allow them to continue with their
possession of his lot for as long as the Petron Corporation's equipment remain in
the premises.
Finally, petitioners argue that the trial court was correct in awarding in their
favor attorney's fees in the amount of P50,000.00 as they were compelled to
engage the services of counsel in order to seek vindication from the arbitrary
action of private respondents.
 After a considered review of the records of this case, we resolve to affirm,
with modification, the decision of the Court of Appeals.
Both the trial court and the Court of Appeals concluded that the lease
contracts between petitioners and private respondents over the latter's respective
lots had already expired. There was also a congruenceof findings that it was
wrong for private respondents to fence their properties thereby putting to a halt
the operation of petitioners' gasoline station. To this, we agree.
Article 536 of the Civil Code previously quoted explicitly provides for the
proper recourse of one who claims to be entitled to the possession of a thing.
When private respondents personally took it upon themselves to evict petitioners
from their properties, which act was in clear contravention of the law, they
became liable "for all the necessary and natural consequences of [their] illegal
act." 10
As expected, petitioners instituted this action praying that private
respondents be held liable for actual damages, moral damages, exemplary
damages, attorney's fees, and costs of litigation. We shall resolve their right to
these damages in seriatim.
Actual or compensatory damages are those awarded in order to compensate
a party for an injury or loss he suffered. They arise out of a sense of natural
justice and are aimed at repairing the wrong done. 11Except as provided by law
or by stipulation, a party is entitled to an adequate compensation only for such
pecuniary loss as he has duly proven. 12 It is hornbook doctrine that to be able
to recover actual damages, the claimant bears the onus of presenting before
the court actual proof of the damages alleged to have been suffered, thus:
A party is entitled to an adequate compensation for such
pecuniary loss actually suffered by him as he has duly proved. Such
damages, to be recoverable, must not only be capable of proof, but
must actually be proved with a reasonable degree of certainty. We
have emphasized that these damages cannot be presumed and
courts, in making an award must point out specific facts which could
afford a basis for measuring whatever compensatory or actual
damages are borne. 13
We have exhaustively perused the records of this case and thus conclude
that petitioners have miserably failed to proffer evidence capable of sustaining
their plea for actual damages. We note that when petitioner Perlita was directly
examined with respect to her unrealized income 14 for the following matters,
namely: daily sales of various petroleum products; 15 storage fee of RECOM IV's
petroleum, oil, and lubricants; 16 sales of tires, batteries, accessories, and
general merchandise; 17 hauling of petroleum products for Peewee's Petron
Powerhouse by the gasoline tankers owned by
petitioners; 18 hauling of petroleum products for the military; 19 and petitioner
Perlita's balloon business which she conducted within the premises of the fenced
gasoline station, 20 she repeatedly testified that she arrived at these claimed
amounts based on the average of her sales for the month of January 1990, the
number of trips undertaken by their tankers, and average volume of the gasoline
deposit for RECOM IV. Her testimony on these matters went as follows: CETDHA
Atty. CAMALIGAN:
 May I ask that this List of Unrealized Income, Collectibles and
Damages from February 1, 1990 to October 30, 1990 be
marked as Exhibit AA.

xxx xxx xxx

Q: Will you explain to the court why this list you made is up to
October 30, 1990?
A: I prepared this list until October 10, 1990 in preparation for our
first hearing sometime in November, sir.
Q: I am calling your attention to No. 1 which is I quote, "Daily Sales
(4,000 to 5,000 liters) at P0.035 per liter mark up — P1,750.00
by 270 days amounting to P472,500.00" will you explain to
the court how you incurred this damage?
(A): After the closure of our gasoline station that was February 1,
1990 and then until September, 1990 is nine (9) months and
that is 270 days. I went thru my sales for January and the
average sales (is) 4,000 to 5,000 liters and so for our daily
sales of 4,000 to 5,000 liters sale at P0.35 centavos mark-up, I
got P1,750.00 daily so that is times 270 days until September
1990, the total is P472,500.00, sir.
COURT:
 That is gross?
A: Yes, your Honor.
COURT:
 What about the net income to be realized?
A: Your Honor, we will deduct from here the salaries and
wages of the gasoline boys and electric bill, maybe P0.25
centavos per liter.
COURT: Proceed.
Q: Is the mark-up of P0.35 centavos per liter thru
(sic),irrespective of amount of gasoline or value of gasoline per
liter?
A: We have different kinds of petroleum products, extra, regular and
diesel and the average mark-up is thirty-five (35) centavos.

xxx xxx xxx

Q: Calling your attention to No. 2 in the list which refers to storage

fee of petroleum, oil and lubricant from RECOM IV amounting to
a total of ninety thousand pesos (P90,000.00) will you kindly
explain how you arrived at this amount?
A: The military, PC/INP RECOM IV which is stationed at Camp Nakar
has entered into an agreement with us to deposit their
petroleum, oil and lubricant for every quarter, sir.
Q: Under what condition was that deposit made for?
A: That they will be able to withdraw the said products for a certain
storage fee, sir, and the storage fee is 5% which would cover
disposing the products and also certain
percent of evaporation. CADacT
COURT:
 Five percent of what?
A: Five percent of the number of liters deposited with us so that if
they deposited one hundred thousand (100,000) liters we are
paid in terms of gasoline also, five thousand (5,000) liters.
Q: What was the average volume of deposit made by the RECOM IV?
A: It is on a quarterly basis, that is one hundred thousand (100,000)
liters quarterly, sir.
Q: On item 3 referring to tires, batteries, accessories, general
merchandise is listed an amount of ninety thousand
(P90,000.00) pesos as your losses, will you please explain how
you incurred such losses?
A: Aside from petroleum products we also sell accessories for the
motoring public and they are in kinds like tires, batteries and
some additives, how do you realize income out of this? (sic)
A: We have 20% mark-up on the merchandise and last January 1990
I average fifty thousand (P50,000.00) pesos gross income on
the general merchandise so for 20% mark-up that is more or
less ten thousand (P10,000.00) pesos and for nine (9) months
that is ninety thousand (P90,000.00) pesos, sir.
Q: In item No. 4 appearing in your list you listed a total
amount of one hundred eight thousand (P108,000.00) pesos,
for hauling of petroleum products for Peewee's Petron
Powerhouse, will you explain to the courtthis hauling?
A: My husband and I run a fleet of gasoline tankers and they are
hauling petroleum products for our gasoline stations and for the
military accounts. We average two (2) deliveries every week so
this is already a netof one thousand five hundred (P1,500.00)
pesos per delivery. It is two thousand eight hundred
(P2,800.00) pesos per delivery and deducting the salaries of the
drivers, the fuel consumption and the depreciationof the
tankers, we incur a net of one thousand five hundred
(P1,500.00) pesos per trip. Every month we incur at least eight
(8) trips and that is one thousand five hundred (P1,500.00)
pesos times eight (8) trips times nine (9) months and I got one
hundred eight thousand (P108,000.00) pesos total.
Q: Do you own them?
A: Yes, sir.
Q: In item No. 6 you listed Balloon Business under Sunshine Balloon,
you have given a total amount of two hundred thousand
(P200,000.00) pesos as your losses here, will you please
explain to the Court how you incurred these losses?

xxx xxx xxx

A: Inside the gasoline station we also operate a balloon business and

we have invested fifty thousand capital on this balloon business.
This business has been thriving for several years and we usually
incur six (6) thousand monthly income from said business, sir.
Now that the gasoline station was closed with all the
equipments of the balloon business inside also, we have totally
lost the market for the balloon business and I feel that two
 hundred thousand (P200,000.00) pesos would have to be paid
for the total loss of the business. 21
Noticeably, petitioner Perlita's testimony was replete with claims that her
unrealized income, as far as these items were concerned, were based on the
"average." Except, however, for the record of daily petroleum sales for the
month of January 1990, 22 petitioners failed to present any evidence that would
sufficiently establish their mean income from these business undertakings. In the
absence of any corroborative proof, this Court is not bound to award in
petitioners' favor the actual damages for items a, b, c, d, e, and f of her alleged
unrealized income. Nor can we give premium on the summary of daily petroleum
sales for January 1990 prepared by petitioner Perlita as the same is not
supported by any competent evidence; at best, said exhibit is self-
serving. ETDSAc
Anent the actual damages claimed for the deterioration of the items which
remained inside petitioners' office, petitioner Perlita testified that when they were
able to retrieve the merchandise from the gasoline station, they noticed that
most of them were already defective and so they "valued" 23 the damages
thereto at seventy (70%) of their total value. As for the items entrusted to her by
the Hermana Fausta Memorial Foundation of which she was the executive vice
president at that time, petitioner Perlita alleged that the amount of five thousand
pesos represents the production cost of these materials which the foundation
purportedly paid to Imprenta Lucentina. As regards the amount of P30,000.00
sought as actual damages for the damaged office equipment, petitioner Perlita
stated before the trial court that she arrived at this figure after computing the
acquisition costs of these equipment which she "approximated" 24 to be
P35,000.00.
Evidently, in establishing the amount of actual damages for the merchandise
inventory, office equipment, and materials owned by the Hermana Fausta
Memorial Foundation, petitioners relied solely on their own assessment of the
prices of these items as well as the damage thereto purportedly occasioned by
the fencing of the gasoline station. This is clearly demonstrated by the
inconsistent stance of petitioner Pertlita with regard to the
percentage of damaged merchandise stored in the gasoline station, thus:
ATTY. CAMALIGAN:
Q: I noticed that the total appearing on page 3 of your merchandize
inventory is one hundred forty one thousand thirty six pesos
and fifty centavos (P141,036.50) only while in your list, it is
ninety eight thousand seven hundred twenty five pesos and fifty
five centavos (P98,725.55),will you please explain the same?
WITNESS:
A: This list with the total amount of one hundred forty one thousand
thirty six pesos and fifty centavos (P141,036.50) represent the
total value of all the merchandize but then the reason why we
have the ninety eight thousand seven hundred twenty five
pesos and fifty five centavos (P98,725.55) figure is, this
represents seventy percent (70%) of the total amount because
when we retrieved the merchandize, we noticed that
most of them are already defective, so we valued the damages
only seventy percent (70%) of the total value because
some of them could still be sold, sir.
ATTY. CAMALIGAN:
 Q: I noticed there is a correction in Item No. 9 from ninety percent
(90%) to seventy percent (70%).When did you make that
correction?
A: Only last December 30, 1990 after we have retrieved all the
merchandize. I prepared this list on October 31, 1990 not
realizing the extent of the real damages to the merchandize but
when we retrieved them last December 29 and upon inspection,
most of the motor oil have already leaked because of the
plastics that were exposed to sun and rain, so we changed the
estimate to seventy percent (70%),sir. 25

Such arbitrary estimations run afoul with our consistent pronouncement that
actual or compensatory damages cannot be presumed but must be proved with
reasonable degree of certainty. 26 A court cannot simply rely on speculation,
conjecture or guesswork as to the fact and amount of damages, but is required
to depend upon competent proof that the claimant had suffered and on
evidence of the actual amount thereof. 27 Failing in this regard, we resolve to
delete the award of actual damages rendered by the Court of Appeals with
respect to these items. cISDHE

Similarly, we rule that petitioners are not entitled to the total amount of the
17 checks issued in their favor by their customers and to the
amount of uncollected debts owed to them by their patrons. Petitioners maintain
that their customers were used to coming to their gasoline station in order to
settle their obligations but were prevented from doing after the 01 February 1990
incident. They therefore would like to hold private respondents accountable for
these receivables. This, we can not grant.
The records indicate that petitioners filed before the trial court a motion to
allow them to enter the gasoline station subject of this dispute in order to make
an inventory of their property that were locked inside and to remove those they
needed for their personal use. 28 Among the items removed from the gasoline
station were the receipts evidencing petitioners' receivables from their
customers 29 as well as the 17 uncollected checks. 30 Obviously, after the court-
approved ocular inspection conducted on 24 July 1990 and 25 July 1990,
petitioners were already in possession of the evidences of credit of their
customers. There was nothing, not even the closure of their gasoline station,
which stood in the way of petitioners' exerting earnest efforts in going after their
debtors.
Petitioners likewise seek to be compensated for the value of the petroleum
products allegedly lost from the four underground tanks between the period 01
February 1990 until 25 July 1990 when an ocular inspection was conducted within
the disputed property. According to petitioners, after they compared the
volume of the tanks' contents as of the evening of 31 January 1990 with the
dipstick reading on 25 July 1990, they discovered that they had lost
thousands of liters of petroleum products. On this point, we quote with approval
the conclusion of the Court of Appeals, to wit:
The appellees 31 failed to adduce convincing evidence that
appellants are the ones responsible for the loss of the petroleum
products in the four (4) underground tanks (item "1," paragraph
10 of Amended Complaint).Although the premises which were fenced
by the appellants 32 adjoin the lot of Perlita's mother and are even
secured by appellees' guard, the appellees did not present anyone to
testify on the fact of loss ofsaid gasoline products. Instead, they
chose to rely on Perlita's bare assertion that she lost P249,805.00 in
 terms of petroleum products that allegedly disappeared. The sheer
volume of the missing fuel makes it difficult for the pilferer to commit
the deed without attracting attention. An unsubstantiated
claim of loss, more so of such a dimension, cannot merit an award
therefor. 33
 
Finally, with respect to the interest payments to the Rizal Commercial
Banking Corporation (RCBC),petitioners maintain that because of the
fencing of their gasoline station on 01 February 1990, they were forced to obtain
a loan from RCBC in order to pay off their obligations to different suppliers. This
contention was effectively refuted by petitioner Perlita herself when, during her
re-direct examination, she admitted that the loan granted by the RCBC was
intended for all the businesses that she and her husband, petitioner Reynaldo,
were maintaining. 34 It would, therefore, be iniquitous to charge private
respondents for the interest payments for this loan the proceeds of which were
utilized to finance petitioners' various businesses and not solely the
settlement of petitioners' obligations to the suppliers of Peewee's Petron
Powerhouse. In the absence of actual proof as to how much of the RCBC loan was
really used to pay the creditors of the closed gasoline station, this Court can not
affirm petitioners' right to be compensated for the amount ofinterest payments
they have made to the RCBC. cADaIH
We find, however, that an award of temperate damages to petitioners is in
order. In lieu of actual damages, temperate damages, which are more than
nominal but less than compensatory damages, may be awarded where
the court finds that some pecuniary loss had been suffered by the claimant but its
amount cannot be proved with certainty. Undoubtedly, pecuniary loss had been
inflicted upon petitioners in this case, however, due to the
insufficiency of evidence before us, we cannot place its amount with certainty. In
this regard, we find the amount of P50,000.00 to be sufficient.
Petitioners also assail the removal by the Court of Appeals of the moral
damages previously ordered by the trial court. They argue that contrary to the
findings of the appellate court, they came to court with "clean hands" as they
believed that the lease contract with private respondent De Mesa was modified
and extended. At the same time, they contend that they had a verbal
understanding with private respondent Daleon wherein the latter permitted them
to remain in his lot for as long as Petron Corporation was not removing its
equipment. Further, petitioners contend that under Article 2219 of the Civil Code,
this Court had awarded moral damages in instances where the claimants were
victims of capricious, wanton, oppressive, malicious, and arbitrary acts such as
petitioners in this case. On this issue, we agree in the
findings of theCourt of Appeals that:
The Court must have to disallow the lower court's
award of moral damages. The concept of moral damages, as
announced in Article 2217 of the Civil Code, is designed to
compensate the complainant for his physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injury occasioned
by the defendant's wrongful act or omission. Article 2219 of the
same Code specifies the cases where moral damages may be
awarded, to wit:
Art. 2219. Moral damages may be recovered in the following
and analogous cases:
(1) A criminal offense resulting in physical injuries;
 (2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29,
30, 32, 34, and 35.
The parents of the female seduced, abducted, raped or
abused, referred to in No. 3 of this article, may also recover
moral damages.
The spouse, descendants, ascendants, and brothers and
sisters may bring the action mentioned in No. 9 of this article,
in the order named. AcDHCS
Noticeably, none of the foregoing instances has any relevant
bearing to the case at bench. While Article 2219 comprehends the
situation in Article 21 of the Code, whereunder "[A]ny person who
willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter
for the damages," the appellees cannot benefit from it. The right to
recover moral damages under Article 21 is based on equity, and
those who come to court to demand equity must come with clean
hands (Garciano  v.  Court  of  Appeals,212 SCRA 436 citing
Padilla,  CIVIL CODE ANNOTATED,Vol. 1, 1975 Ed.,p. 87).The
appellees knew that their lease had expired. Yet, despite such
awareness, they persisted in their unauthorized
occupancy of appellants' property. Being partly responsible for their
present predicament which is very much within their power to avoid,
appellees cannot receive compensation for whatever mental anguish
or suffering they went thru. 35
Similarly, we uphold the award of P50,000.00 as exemplary damages in
order to deter similarly minded individuals from pursuing the course of action
taken by private respondents. The law on this matter is clear: "(h)e who believes
himself entitled to deprive another of the possession of a thing, so long as the
possessor refuses delivery, must request the assistance of the proper
authority." 36 Petitioners' arbitrary conduct of fencing their properties under the
claim that they own the same brazenly violates the law and circumvents the
proper procedure which should be obtained before the court.
This Court likewise adopts the conclusion reached by
the Court of Appeals that petitioners do not deserve the award of attorney's fees
for it was precisely their unfounded insistence to stay on private respondents'
properties that precipitated this suit.
WHEREFORE, the Decision of the Court of Appeals dated 31 March 1998,
which modified the Decision dated 13 November 1992 of the Regional Trial Court,
Branch 55, Lucena City, and its Resolution of 17 June 1993 denying
reconsideration are hereby MODIFIED as follows:
 1. The award of Twenty-Seven Thousand Pesos (P27,000.00) as actual
damages in favor of petitioners Reynaldo and Perlita Villafuerte is deleted; and
2. Private respondents Edilberto De Mesa and Gonzalo Daleon are held
jointly and severally liable to pay petitioners the amount of Fifty Thousand Pesos
(P50,000.00) as temperate damages.
The remainder of the same Decision and
Resolution of the Court of Appeals are hereby AFFIRMED. No costs.
SO ORDERED.
|||  (Spouses Villafuerte v. Court of Appeals, G.R. No. 134239, [May 26,
2005], 498 PHIL 105-127)
 [G.R. No. 160384. April 29, 2005.]

CESAR T. HILARIO, for himself and as Attorney-in-Fact of

IBARRA, NESTOR, LINA and PRESCILLA, all
surnamed HILARIO,  petitioners, vs. ALLAN
T. SALVADOR, respondent.

HEIRS OF SALUSTIANO SALVADOR, namely, REGIDOR

M. SALVADOR and VIRGINIA SALVADOR-LIM, respondents-
intervenors.

D E C I S I O N

CALLEJO, SR.,  J p:

This is a petition for review on certiorari under Rule 45 of the Revised Rules

of Court of the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 63737
as well as its Resolution 2 denying the motion for the reconsideration of the said
decision.

The Antecedents

On September 3, 1996, petitioners Cesar, Ibarra, Nestor, Lina and Prescilla,

all surnamed Hilario, filed a complaint with the Regional Trial Court (RTC) of
Romblon, Romblon, Branch 71, against private respondent Allan T. Salvador.
They alleged therein, inter alia, as follows:
2. That, the plaintiffs are co-owners by inheritance from Concepcion
Mazo Salvador of a parcel of land designated as Cad. Lot No.
3113-part, located at Sawang, Romblon, Romblon, which
property was [adjudged] as the hereditary share of their father,
Brigido M. Hilario, Jr. when their father was still single, and
which adjudication was known by the plaintiffs['] father's co-
heirs;
3. That, sometime in 1989, defendant constructed his dwelling unit of
mixed materials on the property of the plaintiffs' father without
the knowledge of the herein plaintiffs or their predecessors-in-
interest;
4. That, demands have been made of the defendant to vacate the
premises but the latter manifested that he have (sic) asked the
prior consent of their grandmother, Concepcion Mazo Salvador;
5. That, to reach a possible amicable settlement, the plaintiffs
brought the matter to the Lupon of Barangay Sawang, to no
avail, evidenced by the CERTIFICATE TO FILE ACTION hereto
attached as ANNEX B;
6. That, the unjustified refusal of the defendant to vacate the
property has caused the plaintiffs to suffer shame, humiliation,
wounded feelings, anxiety and sleepless nights; CSDTac
 7. That, to protect their rights and interest, plaintiffs were
constrained to engage the services of a lawyer. 3
The petitioners prayed that, after due proceedings, judgment be rendered in
their favor, thus:
WHEREFORE, it is prayed of this Honorable Court that after due
process (sic), an order be issued for the defendant to vacate and
peacefully turn over to the plaintiffs the occupied property and that
defendant be made to pay plaintiffs:
a. actual damages, as follows:
a.1. transportation expenses in connection with the
projected settlement of the case amounting to
P1,500.00 and for the subsequent attendance to the
hearing of this case at P1,500.00 each schedule;
a.2. attorney's fees in the amount of P20,000.00 and
P500.00 for every court appearance;
b. moral and exemplary damages in such amount incumbent
upon the Honorable Court to determine; and
c. such other relief and remedies just and equitable under the
premises. 4
The private respondent filed a motion to dismiss the complaint on the
ground of lack of jurisdiction over the nature of the action, citing Section 33
of Batas Pambansa (B.P.) Blg. 129, as amended by Section 3(3) of Republic Act
(R.A.) No. 7691. 5 He averred that —
(1) the complaint failed to state the assessed value of the land
in dispute;
(2) the complaint does not sufficiently identify and/or describe
the parcel of land referred to as the subject-matter of this
action;
both of which are essential requisites for determining the
jurisdiction of the Court where the case is filed. In this case,
however, the assessed value of the land in question is totally absent
in the allegations of the complaint and there is nothing in the relief
prayed for which can be picked-up for determining the Court's
jurisdiction as provided by law.
In the face of this predicament, it can nevertheless be surmised
by reading between the lines, that the assessed value of the land in
question cannot exceed P20,000.00 and, as such, it falls within the
jurisdiction of the Municipal Trial Court of Romblon and should have
been filed before said Court rather than before the RTC. . . . 6
The petitioners opposed the motion. 7 They contended that the RTC had
jurisdiction over the action since the court can take judicial notice of the market
value of the property in question, which was P200.00 per square meter and
considering that the property was 14,797 square meters, more or less, the total
value thereof is P3,500,000.00. Besides, according to the petitioners, the motion
to dismiss was premature and "the proper time to interpose it is when the
[petitioners] introduced evidence that the land is of such value."
On November 7, 1996, the RTC issued an Order 8 denying the motion to
dismiss, holding that the action was incapable of pecuniary estimation, and
therefore, cognizable by the RTC as provided in Section 19(1) of B.P. Blg. 129, as
amended.
After the denial of the motion to dismiss, the private respondent filed his
answer with counterclaim. 9 Traversing the material allegations of the complaint,
he contended that the petitioners had no cause of action against him since the
property in dispute was the conjugal property of his grandparents, the spouses
Salustiano Salvador and Concepcion Mazo-Salvador. caIEAD
On April 8, 1997, Regidor and Virginia Salvador filed their Answer-in-
Intervention 10 making common cause with the private respondent. On her own
motion, however, Virginia Salvador was dropped as intervenor. 11
During trial, the petitioners adduced in evidence Tax Declaration No. 8590-A
showing that in 1991 the property had an assessed value of P5,950.00. 12
On June 3, 1999, the trial court rendered judgment finding in favor of the
petitioners. The dispositive portion of the decision reads:
WHEREFORE, as prayed for, judgment is rendered:
Ordering the defendant to vacate and peacefully turn over to
the plaintiffs the occupied property; and
Dismissing defendant's counterclaim.
SO ORDERED. 13
Aggrieved, the private respondent and respondent-intervenor
Regidor Salvador appealed the decision to the CA, which rendered judgment on
May 23, 2003 reversing the ruling of the RTC and dismissing the complaint for
want of jurisdiction. The  fallo of the decision is as follows:
IN VIEW OF THE FOREGOING, the appealed decision is
REVERSED, and the case DISMISSED, without prejudice to its refilling
in the proper court.
SO ORDERED. 14
The CA declared that the action of the petitioners was one for the recovery
of ownership and possession of real property. Absent any allegation in the
complaint of the assessed value of the property, the Municipal Trial Court (MTC)
had exclusive jurisdiction over the action, conformably to Section 33 15 of R.A.
No. 7691.
The petitioners filed a motion for reconsideration of the said decision, which
the appellate court denied. 16 Hence, they filed the instant petition, with the
following assignment of errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
REVERSIBLE ERROR IN HOLDING THAT THE INSTANT CASE, ACCION
REIVINDICATORIA, FALLS WITHIN THE EXCLUSIVE ORIGINAL
JURISDICTION OF THE MUNICIPAL TRIAL COURT OF ROMBLON, AND
NOT WITH THE REGIONAL TRIAL COURT OF ROMBLON.
II
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
REVERSIBLE ERROR IN ORDERING THE REFILING OF THE CASE IN
THE [PROPER] COURT, INSTEAD OF DECIDING THE CASE ON THE
MERITS BASED ON THE COMPLETE RECORDS ELEVATED BEFORE
SAID APPELLATE COURT AND IN NOT AFFIRMING IN TOTO THE
DECISION OF THE TRIAL COURT. 17
 The Ruling of the Court

The lone issue for our resolution is whether the RTC had jurisdiction over
the action of the petitioners, the plaintiffs in the RTC, against the private
respondent, who was the defendant therein. SCaIcA
The petitioners maintain that the RTC has jurisdiction since their action is
an accion reivindicatoria, an action incapable of pecuniary estimation; thus,
regardless of the assessed value of the subject property, exclusive jurisdiction
falls within the said court. Besides, according to the petitioners, in their
opposition to respondent's motion to dismiss, they made mention of the increase
in the assessed value of the land in question in the amount of P3.5 million.
Moreover, the petitioners maintain that their action is also one for damages
exceeding P20,000.00, over which the RTC has exclusive jurisdiction under R.A.
No. 7691.
The petition has no merit.
It bears stressing that the nature of the action and which court has original
and exclusive jurisdiction over the same is determined by the material allegations
of the complaint, the type of relief prayed for by the plaintiff and the law in effect
when the action is filed, irrespective of whether the plaintiffs are entitled to some
or all of the claims asserted therein. 18 The caption of the complaint is not
determinative of the nature of the action. Nor does the jurisdiction of the court
depend upon the answer of the defendant or agreement of the parties or to the
waiver or acquiescence of the parties.
We do not agree with the contention of the petitioners and the ruling of the
CA that the action of the petitioners in the RTC was an accion reivindicatoria. We
find and so rule that the action of the petitioners was an accion publiciana, or one
for the recovery of possession of the real property subject matter thereof.
An accion reivindicatoria is a suit which has for its object the recovery of
possession over the real property as owner. It involves recovery of ownership and
possession based on the said ownership. On the other hand, an accion
publiciana is one for the recovery of possession of the right to possess. It is also
referred to as an ejectment suit filed after the expiration of one year after the
occurrence of the cause of action or from the unlawful withholding of possession
of the realty. 19
 
The action of the petitioners filed on September 3, 1996 does not involve a
claim of ownership over the property. They allege that they are co-owners
thereof, and as such, entitled to its possession, and that the private respondent,
who was the defendant, constructed his house thereon in 1989 without their
knowledge and refused to vacate the property despite demands for him to do so.
They prayed that the private respondent vacate the property and restore
possession thereof to them.
When the petitioners filed their complaint on September 3, 1996, R.A. No.
7691 was already in effect. Section 33(3) of the law provides:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial
Courts and Municipal Circuit Trial Courts in Civil Cases. —
Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts shall exercise:
xxx xxx xxx
(3) Exclusive original jurisdiction in all civil actions which
involve title to, or possession of, real property, or any interest therein
 where the assessed value of the property or interest therein does not
exceed Twenty Thousand Pesos (P20,000.00) or, in civil actions in
Metro Manila, where such assessed value does not exceed Fifty
Thousand Pesos (P50,000.00) exclusive of interest, damages of
whatever kind, attorney's fees, litigation expenses and costs:
Provided, That in cases of land not declared for taxation purposes,
the value of such property shall be determined by the assessed value
of the adjacent lots.
Section 19(2) of the law, likewise, provides that:
Sec. 19. Jurisdiction in civil cases. — The Regional Trial Court
shall exercise exclusive original jurisdiction: cCAIES
xxx xxx xxx
(2) In all civil actions, which involve the title to, or possession
of, real property, or any interest therein, where the assessed value of
the property involved exceeds Twenty Thousand Pesos (P20,000.00)
or, for civil actions in Metro Manila, where such value exceeds Fifty
Thousand Pesos (P50,000.00) except actions for forcible entry into
and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial
Courts, and Municipal Circuit Trial Courts.
The jurisdiction of the court over an action involving title to or possession of
land is now determined by the assessed value of the said property and not the
market value thereof. The assessed value of real property is the fair market value
of the real property multiplied by the assessment level. It is synonymous to
taxable value. 20 The fair market value is the price at which a property may be
sold by a seller, who is not compelled to sell, and bought by a buyer, who is not
compelled to buy.
Even a cursory reading of the complaint will show that it does not contain an
allegation stating the assessed value of the property subject of the
complaint. 21 The court cannot take judicial notice of the assessed or market
value of lands. 22 Absent any allegation in the complaint of the assessed value of
the property, it cannot thus be determined whether the RTC or the MTC had
original and exclusive jurisdiction over the petitioners' action.
We note that during the trial, the petitioners adduced in evidence Tax
Declaration No. 8590-A, showing that the assessed value of the property in 1991
was P5,950.00. The petitioners, however, did not bother to adduce in evidence
the tax declaration containing the assessed value of the property when they filed
their complaint in 1996. Even assuming that the assessed value of the property in
1991 was the same in 1995 or 1996, the MTC, and not the RTC had jurisdiction
over the action of the petitioners since the case involved title to or possession of
real property with an assessed value of less than P20,000.00. 23
We quote with approval, in this connection, the CA's disquisition:
The determining jurisdictional element for the accion
reivindicatoria is, as RA 7691 discloses, the assessed value of the
property in question. For properties in the provinces, the RTC has
jurisdiction if the assessed value exceeds P20,000, and the MTC, if
the value is P20,000 or below. An assessed value can have reference
only to the tax rolls in the municipality where the property is located,
and is contained in the tax declaration. In the case at bench, the
most recent tax declaration secured and presented by the plaintiffs-
appellees is Exhibit B. The loose remark made by them that the
property was worth 3.5 million pesos, not to mention that there is
 absolutely no evidence for this, is irrelevant in the light of the fact
that there is an assessed value. It is the amount in the tax
declaration that should be consulted and no other kind of value, and
as appearing in Exhibit B, this is P5,950. The case, therefore, falls
within the exclusive original jurisdiction of the Municipal Trial Court of
Romblon which has jurisdiction over the territory where the property
is located, and not the courta quo. 24
It is elementary that the tax declaration indicating the assessed value of the
property enjoys the presumption of regularity as it has been issued by the proper
government agency. 25
Unavailing also is the petitioners' argumentation that since the complaint,
likewise, seeks the recovery of damages exceeding P20,000.00, then the RTC had
original jurisdiction over their actions. Section 33(3) of B.P. Blg. 129, as
amended, quoted earlier, explicitly excludes from the determination of the
jurisdictional amount the demand for "interest, damages of whatever kind,
attorney's fees, litigation expenses, and costs." This Court issued Administrative
Circular No. 09-94 setting the guidelines in the implementation of R.A. No. 7691,
and paragraph 2 thereof states that —
2. The exclusion of the term "damages of whatever kind" in
determining the jurisdictional amount under Section 19(8) and
Section 33(1) of B.P. Blg. 129, as amended by R.A. 7691, applies to
cases where the damages are merely incidental to or a consequence
of the main cause of action. However, in cases where the claim for
damages is the main cause of action, or one of the causes of action,
the amount of such claim shall be considered in determining the
jurisdiction of the court. acADIT
Neither may the petitioners find comfort and solace in Section 19(8) of B.P.
Blg. 129, as amended, which states:
SEC. 19. Jurisdiction in civil cases. — Regional Trial Courts shall
exercise exclusive original jurisdiction:
xxx xxx xxx
(8) In all other cases in which the demand, exclusive of
interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs or the value of the property in controversy
exceeds One Hundred Thousand Pesos (P100,000.00) or, in such
other cases in Metro Manila, where the demand, exclusive of the
above-mentioned items exceeds Two Hundred Thousand Pesos
(P200,000.00).
The said provision is applicable only to "all other cases" other than an action
involving title to, or possession of real property in which the assessed value is the
controlling factor in determining the court's jurisdiction. The said damages are
merely incidental to, or a consequence of, the main cause of action for recovery
of possession of real property. 26
Since the RTC had no jurisdiction over the action of the petitioners, all the
proceedings therein, including the decision of the RTC, are null and void. The
complaint should perforce be dismissed. 27
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution
of the Court of Appeals in CA-G.R. CV No. 63737 are AFFIRMED. Costs against
the petitioners.
SO ORDERED. ||| (Hilario v. Salvador, G.R. No. 160384, [April 29, 2005],
497 PHIL 327-339)
 [G.R. No. 192486. November 21, 2012.]

RUPERTA CANO VDA. DE VIRAY and JESUS CARLO

GERARD VIRAY, petitioners, vs. SPOUSES JOSE  USI and
AMELITA USI,  respondents.

DECISION

VELASCO, JR., J  p:

The Case

Petitioners have availed of Rule 45 to assail and nullify the Decision 1 dated

July 24, 2009, as effectively reiterated in a Resolution 2 of June 2, 2010, both
rendered by the Court of Appeals (CA) in CA-G.R. CV No. 90344, setting aside the
Decision 3 dated June 21, 2007 of the Regional Trial Court (RTC), Branch 55 in
Macabebe, Pampanga, in Civil Case No. 01-1118(M), an accion
publiciana/reivindicatoria, which respondents commenced with, but eventually
dismissed by, that court. HSEIAT

The Facts

At the core of the present controversy are several parcels of land which
form part of what was once Lot No. 733, Cad-305-D, Masantol Cadastre (Lot 733
hereinafter), registered in the name of Ellen P. Mendoza (Mendoza), married to
Moses Mendoza, under Transfer Certificate of Title No. (TCT) 141-RP of the
Registry of Deeds of Pampanga. With an area of 9,137 square meters, more or
less, Lot 733 is located in Brgy. Bebe Anac, Masantol, Pampanga.
On April 28, 1986, Geodetic Engineer Abdon G. Fajardo prepared a
subdivision plan 4 (Fajardo Plan, for short) for Lot 733, in which Lot 733 was
divided into six (6) smaller parcels of differing size dimensions, designated as:
Lot 733-A, Lot 733-B, Lot 733-C, Lot 733-D, Lot 733-E, and Lot 733-F consisting
of 336, 465, 3,445, 683, 677 and 3,501 square meters, respectively.
The following day, April 29, 1986, Mendoza executed two separate deeds of
absolute sale, the first, transferring Lot 733-F to Jesus Carlo
Gerard Viray (Jesus Viray), 5 and the second deed conveying Lot 733-A to
spouses Avelino Viray and Margarita Masangcay (Sps. Viray). 6 The names
McDwight Mendoza, Mendoza's son, and one Ernesto Bustos appear in both
notarized deeds as instrumental witnesses. As of that time, the Fajardo Plan has
not been officially approved by the Land Management Bureau (LMB), formerly the
Bureau of Lands. And at no time in the course of the controversy did the
spouses Viray and Jesus Viray, as purchasers of Lots 733-A and 733-F,
respectively, cause the annotations of the conveying deeds of sale on TCT 141-
RP.
 Herein petitioner, Ruperta Cano Vda. de Viray (Vda. de Viray), is the
surviving spouse of Jesus Viray, who died in April 1992.
As of April 29, 1986, the dispositions made on and/or the ownership profile
of the subdivided lots appearing under the Fajardo Plan are as follows:
Lot No. Area Conveyances by Mendoza
     
Lot 733-A 366 square meters Sold to Sps. Avelino and MargaritaViray
Lot 733-B 465 square meters Unsold
Lot 733-C 3,445 square metersUnsold
Lot 733-D 683 square meters Proposed Road
Lot 733-E 677 square meters Unsold
Lot 733-F 3,501 square metersSold to Jesus Viray
The aforementioned conveyances notwithstanding, Mendoza, Emerenciana
M. Vda. de Mallari (Vda. de Mallari) and respondent spouses Jose Usi and Amelita
T. Usi (Sps. Usi or the Usis), as purported co-owners of Lot 733, executed on
August 20, 1990 a Subdivision Agreement, 7 or the 1st subdivision agreement
(1st SA). Pursuant to this agreement which adopted, as base of reference, the
LMB-approved subdivision plan prepared by Geodetic Engineer Alfeo S. Galang
(Galang Plan), Lot 733 was subdivided into three lots, i.e., Lots A to C, with the
following area coverage: Lots 733-A, 465 square meters, 733-B, 494 square
meters, and 733-C, 6,838 square meters. In its pertinent parts, the 1st SA reads:
That the above-parties are the sole and exclusive owners of
a certain parcel of land situated in the Bo. of Bebe Anac, Masantol,
Pampanga, which is known as Lot No. 733 under TCT No. 141 R.P. of
the Registry of Deeds of Pampanga, under Psd-No. 03-10-025242;
That for the convenience of the parties hereto that the existing
community of the said Lot be terminated and their respective share
be determined by proper adjudication;
That the parties hereto agreed to subdivided (sic) the above-
mentioned property by Geodetic Engineer Alfeo S. Galang, as per
tracing cloth and blue print copy of plan Psd-03-025242 and technical
description duly approved by the Bureau of Lands, hereto Attached
and made internal part of this instrument in the followin[g]
manner: acHCSD
Lot 733-A To Emerencia M. Vda. Mallari;
Lot 733-B To Sps. Jose B. Usi and Amelita B. Usi;
Lot 733-C To Ellen P. Mendoza 8 (Emphasis
added.)
TCT 141-RP would eventually be canceled and, in lieu thereof, three
derivative titles were issued to the following, as indicated: TCT 1584-RP for Lot
733-A to Mallari; TCT 1585-RP 9 for Lot 733-B to Sps. Usi; and TCT 1586-RP for
Lot 733-C to Mendoza.
On April 5, 1991, Mendoza, McDwight P. Mendoza, Bismark P. Mendoza,
Beverly P. Mendoza, Georgenia P. Mendoza, Sps. Alejandro Lacap and Juanita U.
Lacap, Sps. Nestor Coronel and Herminia Balingit, Sps. Bacani and Martha
Balingit, Sps. Ruperto and Josefina Jordan, and Sps. Jose and
Amelita Usi executed another Subdivision Agreement 10 (2nd SA) covering and
 under which the 8,148-sq. m. Lot 733-C was further subdivided into 13 smaller
lots (Lot 733-C-1 to Lot 733-C-13 inclusive). The subdivision plan 11 for Lot 733-
C, as likewise prepared by Engr. Galang on October 13, 1990, was officially
approved by the LMB on March 1, 1991
The 2nd SA partly reads:
1. That we are the sole and exclusive undivided co-
owners of a parcel of land situated at Barrio Putat and Arabia, Bebe
Anac, Masantol, Pampanga, identified as Lot No. 733-C of Psd-No.
03-041669, containing an area of 8,148 sq. meters and covered by
T.C.T. No. 1586 R.P. of the Register of Deeds of Pampanga;
2. That it is for the benefit and best interest of the parties
herein that the [sic] their co-ownership relation over the above-
mentioned parcel of land be terminated and their respective share
over the co-ownership be allotted [sic] to them;
Wherefore, by virtue of the foregoing premises, we have
agreed, as we hereby agree to subdivide our said parcel of
land . . . . 12 (Emphasis added.)
Consequent to the subdivision of Lot 733-C in line with the Galang Plan and
its subsequent partition and distribution to the respective allotees pursuant to the
2nd SA, the following individuals appeared as owners of the subdivided units as
indicated in the table below:

Lot No.Land areaPartitioned to:

Lot No. Land area Partitioned to:

     
Lot 733-C-1 200 square meters Sps. Jose and Amelita Usi
Lot 733-C-2 1,000 square Sps. Alejandro & Juanita Lacap
meters
Lot 733-C-3 300 square meters Sps. Nestor & Herminia Coronel
Lot 733-C-4 500 square meters Sps. Nestor & Herminia Coronel and Sps.
Bacani & Martha Balingit
Lot 733-C-5 400 square meters Sps. Ruperto & Josefina Jordan
Lot 733-C-6 500 square meters Ellen, McDwight, Bismark, Beverly and
Georgenia Mendoza
Lot 733-C-7 220 square meters Ellen, McDwight, Bismark, Beverly and
Georgenia Mendoza
Lot 733-C-8 1,000 square Ellen, McDwight, Bismark, Beverly and
meters Georgenia Mendoza
Lot 733-C-9 500 square meters Ellen, McDwight, Bismark, Beverly and
Georgenia Mendoza
Lot 733-C-10 1,000 square Sps. Jose and Amelita Usi
meters
Lot 733-C-11 668 square meters Ellen, McDwight, Bismark, Beverly and
Georgenia Mendoza
Lot 733-C-12 550 square meters Ellen, McDwight, Bismark, Beverly and
 Georgenia Mendoza
[Lot 733-C-13] [1,310 square [Allotted for a proposed road]
meters]
In net effect, the two subdivision agreements paved the way for the
issuance, under the Sps. Usi's name, of TCT Nos. 1585-RP, 13 2092-RP, 14 and
2101-RP, 15 covering Lots 733-B, 733-C-1 and 733-C-10, respectively. SHTcDE
On the other hand, the subdivision of Lot 733, per the Galang Plan, and the
two subdivision agreements concluded based on that plan, virtually resulted in
the loss of the identity of what under the Fajardo Plan were Lot 733-A and Lot
733-F. The Sps. Viray and the late Jesus Viray, to recall, purchased Lot 733-A and
Lot 733-F, respectively, from Mendoza.
Then came the ocular inspection and survey 16 conducted on Lot 733, as an
undivided whole, by Geodetic Engr. Angelito Nicdao of the LMB. Some highlights
of his findings:
(a) Lot 733-A of the Fajardo Plan with an area of 336 square meters that
Sps. Viray bought is within Lot 733-B (Galang Plan) allotted under 1st SA to Sps.
Jose and Amelita Usi; and
(b) tabLot 733-F of the Fajardo Plan with an area of 3,501 square meters is
almost identical to the combined area of Lots 733-C-8 to 733-C-12 awarded to
Ellen Mendoza and her children — McDwight, Bismark, Beverly and Georgenia,
and a portion (1,000 square meters) of Lot 733-C-10 of the Galang Plan awarded
to Sps. Jose and Amelita Usi.
As to be expected, the foregoing overlapping transactions involving the
same property or portions thereof spawned several suits and counter-suits
featuring, in particular, herein petitioners and respondents,viz.:
(a) A suit for Annulment of Deed of Absolute Sale  filed before the RTC,
Branch 55 in Macabebe, Pampanga, docketed as Civil Case No. 88-0265-M, in
which the Usis and Mendoza, as plaintiffs, assailed the validity and sought the
annulment of the deed of absolute sale executed by Mendoza on April 29, 1986
conveying Lot 733-A (Fajardo Plan) to defendants Sps. Viray.
(b) A similar suit for Annulment of Deed of Absolute Sale  commenced by
Mendoza against Jesus Viray before RTC-Br. 55 in Macabebe, Pampanga,
docketed as Civil Case No. 88-0283-M, entitled Ellen P. Mendoza  v. Jesus Carlo
Gerard Viray, also seeking to nullify the April 29, 1986 Deed of Absolute Sale
conveying Lot 733-F (Fajardo Plan) to Jesus Viray and to declare the plaintiff as
entitled to its possession.
The adverted Civil Case Nos. 88-0265-M and 88-0283-M were jointly tried
by RTC-Br. 55, which, on August 1, 1989, rendered a Joint Decision 17 finding for
the Sps. Viray and Jesus Viray, as defendants, and accordingly dismissing the
separate complaints to annul the deeds of sale subject of the joint cases.
On appeal, the CA, in CA-G.R. CV Nos. 24981-82, and later this Court, in its
Decision of December 11, 1995, in G.R. No. 122287 in effect affirmed in
toto the RTC dismissal decision. 18 The Court, via its Resolution of April 17,
1998, would eventually deny with finality 19 Mendoza and the Usis' motion for
reconsideration of the aforesaid December 11, 1995 Decision.
(c) A forcible entry case filed on November 19, 1991 by the late
Jesus Viray against the Sps. Usi before the Municipal Circuit Trial Court (MCTC) in
Macabebe, Pampanga, docketed as Civil Case No. 91 (13), entitled Jesus Carlo
Gerard Viray  v. Spouses Jose  Usi  and Emelita Tolentino, to eject the Usis from
Lot 733-F (Fajardo Plan).
 On July 29, 1998, the MCTC rendered a Decision 20 in favor of Jesus Viray,
the dispositive portion of which pertinently reads:
WHEREFORE, premises considered, judgment is hereby
rendered for the plaintiff [the late petitioner Jesus Viray], and
accordingly, the defendants [Sps. Usi] and any other persons
claiming under them are hereby ordered to vacate the subject
premises, Lot 733-F embraced in T.C.T. No. 141-R.P., Register of
Deeds Pampanga, and Lot 733-A, both situated at Bebe Anac,
Masantol, Pampanga and to remove at their own expense, all
structures or improvements they built and introduced thereon.
Defendants are likewise sentenced to pay plaintiff the amount
of THREE HUNDRED (P300.00) PESOS per month from November 19,
1991, until they vacate the premises, as reasonable compensation for
the use and occupation thereof . . . .
xxx xxx xxx
SO ORDERED. 21
The Decision eventually became final and executory, the Usis having opted
not to appeal it. HIEASa
(d) A Petition for Annulment of the MCTC's [July 29, 1998] Decision filed by
the Sps. Usi before the RTC, docketed as Civil Case No. 99-0914M, entitled Sps.
Jose & Amelita Usi v. Hon. Pres. Judge MCTC, Macabebe, Pampanga, the Court
Sheriff, MCTC, Macabebe, Pampanga and Ruperta  Cano Vda. de Viray, which
decision placed Jesus Viray's widow, Ruperta, in possession of Lot 733-F of the
Fajardo Plan
As may be noted, the spouses Usi, instead of appealing from the July 29,
1998 MCTC Decision in Civil Case No. 91 (13), sought, after its finality, its
annulment before the RTC. By Decision 22 dated June 29, 2000, the RTC
dismissed the petition to annul. The Usis' appeal to the CA, docketed as CA-G.R.
CV No. 67945, merited the same dismissal action. 23 And finally, in G.R. No.
154538 (Spouses Jose and Amelita Usi v. RupertaCano Vda. de Viray), the
Court denied, on February 12, 2003, Sps. Usi's petition for review of the CA's
Decision. The denial became final on April 8, 2003 and an Entry of
Judgment 24 issued in due course.
(e) A Petition for Accion Publiciana/Reivindicatoria 25 instituted on
December 12, 2001 by Sps. Usi against the late Jesus Viray, as substituted
by Vda. de Viray, et al., before the RTC in Macabebe, Pampanga, docketed as
Civil Case No. 01-1118(M), involving Lots 733-B, 733-C-1 and 733-C-10 (Galang
Plan) covered by TCT Nos. 1585-RP, 2092-RP and 2101-RP.
The execution of the July 29, 1998 MCTC Decision in Civil Case No. 91 (13),
as the Sps. Usi asserted in their petition, would oust them from their own in fee
simple lots even though the dispositive portion of said forcible entry Decision
mentioned Lots 733-A and 733-F (Fajardo Plan) and not Lots 733-B, 733-C-1 and
733-C-10 (Galang Plan) which are registered in their names per TCT Nos. 1585-
RP, 2092-RP and 2101-RP.
In time, Vda. de Viray moved for the dismissal 26 of
these publiciana/reivindicatoria  actions on grounds, among others, of litis
pendentia and res judicata, on account of (1) the Sps. Usi's appeal, then pending
before the CA, from the dismissal by the RTC of Civil Case No. 99-0914M; 27 and
(2) the August 1, 1989 RTC Decision in Civil Case Nos. 88-0265-M and 88-0283-
M, as effectively affirmed by the CA, and finally by the Court in G.R. No.
122287. This motion to dismiss would, however, be denied by the RTC through
an Order 28 of March 8, 2002, compelling Vda. de Viray to file an
answer, 29 again invoking in defense the doctrine ofres judicata. Sps. Usi's Reply
to Answer 30 contained an averment that their titles over the subject lots are the
best evidence of their ownership.
(f) An action for Cancellation of Titles or Surrender of Original Titles with
Damages 31 commenced by Vda. de Viray, et al., against the Sps. Usi, Mendoza
and eight others before the RTC, Branch 54 in Macabebe, Pampanga, docketed as
Civil Case No. (02)-1164(M), seeking the cancellation of TCT Nos. 3614-R.P.,
2099-R.P., 2101-R.P., 7502-R.P. and 2103-R.P. covering Lots 733-C-8 to 733-C-
12 as subdivided under the 2nd SA of April 5, 1991 which taken together is
basically identical to Lot 733-F (Fajardo Plan) sold to Jesus Viray
To recap, the six (6) cases thus filed involving portions of Lot 733 and their
status are:
Civil The Parties Action/Suit for Subject Disposition
Case No. Lot(s)
         
88- Sps.  Usi  v. Sps. Viray Annulment of 733-A Decision in favor of
0265-M Deed of (Fajardo Sps. Viray.
Absolute Sale Plan) Decision is now
final.
         
88- Mendoza v. Jesus  Viray Annulment of 733- Decision in favor of
0283-M Deed of F(Fajardo Sps. Viray. Subject
Absolute Sale Plan) of CA-G.R. CV Nos.
24981-82 denied.
Subject of G.R.
No. 122287 —
petition denied
         
91(13) Jesus Viray  v. Sps. Usi Forcible Entry 733- Judgment in favor
F(Fajardo of Viray. No
Plan) appeal.
         
99- Sps.  Usi  v.Vda. de Vira Petition for 733- RTC dismissed
0914M y Annulment of F(Fajardo petition. CA-G.R.
MCTC Decision Plan) CV No. 67945 —
in CC No. appeal dismissed.
91(13) G.R. No. 154538
— petition denied.
         
(02)- Vda. de Virayv. Cancellation Lots 733- Pending before the
1164(M) Mendoza,et al. of Titles C-8 to RTC.
before RTC, 733-C-12
Br. 55, (Lot 733-
Pampanga F(Fajardo
Plan)
         
 01- Sps.  Usi  v.Vda. de Vira Petition for 733-B, Petition dismissed.
1118(M) y Accion 733-C- 1 CA-G.R. CV No.
Publiciana and 733- 90344 — reversed
and C- 10 RTC Decision.
Reivindicatoria (Galang Subject of instant
before RTC, Plan) case, G.R. No.
Br. 55, 192486
Pampanga
In sum, of the six (6) cases referred to above, the first four (4) have been
terminated and the main issue/s therein peremptorily resolved. To a precise
point, the matter of the validity of the April 29, 1986 deeds of absolute sale
conveying Lots 733-A and 733-F under the Fajardo Plan to
Sps. Viray and Vda. de Viray (vice Jesus Viray), respectively, is no longer a
contentious issue by force of the Court's Decision in G.R. No. 122287 effectively
upholding the dismissal of the twin complaints to nullify the deeds
aforementioned. Likewise, the issue of who has the better possessory right
independent of title over the disputed lots has been resolved in favor
of Vda. de Viray and the Sps. Viray and against the Usis and veritably put to rest
by virtue of the Court's final, affirmatory Decision in G.R. No. 154538. HAEIac
Only two cases of the original six revolving around Lot 733 remained
unresolved. The first refers to the petition for review of the decision of the CA in
CA-G.R. CV No. 90344 which, in turn, is an appeal from the decision of the RTC in
Civil Case No. 01-1118(M), a Petition for Accion Publiciana/Reivindicatoria and
Damages, and the second is Civil Case No. (02)-1164(M) for Cancellation of Titles
or Surrender of Original Titles with Damages. The first case is subject of the
present recourse, while the second is, per records, still pending before the RTC,
Branch 54 in Macabebe, Pampanga, its resolution doubtless on hold in light of the
instant petition.
In the meantime, the Sps. Usi have remained in possession of what in the
Galang Plan are designated as Lots 733-B, 733-C-1 and 733-C-10.

The Ruling of the RTC in Civil Case No. 01-1118(M)

As may be recalled, on June 21, 2007 in Civil Case No. 01-1118(M), the
Macabebe, Pampanga RTC rendered judgment dismissing the petition of the
Sps. Usi 32 for Accion Publiciana/Reivindicatoria. In its dismissal action, the RTC
held that the Sps. Usi failed to establish by preponderance of evidence to support
their claim of title, possession and ownership over the lots subject of their
petition.
Following the denial of their motion for reconsideration per the RTC's
Order 33 of September 25, 2007, the Sps. Usi interposed an appeal before the
CA, docketed as CA-G.R. CV No. 90344.

The Ruling of the CA

On July 24, 2009, the CA rendered the assailed decision, reversing and
setting aside the appealed June 21, 2007 RTC decision. The fallo of the CA
decision reads:
WHEREFORE, the instant appeal is GRANTED and the assailed
Decision of the Regional Trial Court, REVERSED and SET ASIDE.
Judgment is hereby rendered declaring as legal and valid, the right of
ownership of petitioner-appellant [respondents herein] spouses
Jose Usi and Amelita T. Usi over Lot Nos. 733-B, 733-C-1 and 733-C-
10 covered by TCT Nos. 1585-R.P., 2092-R.P, and 2101-R.P.,
 respectively. Consequently, respondents-appellees [herein
petitioners] are hereby ordered to cease and desist from further
committing acts of dispossession or from disturbing possession and
ownership of petitioners-appellants of the said property as herein
described and specified. Claims for damages, however, are hereby
denied . . . .
SO ORDERED.
The CA predicated its ruling on the interplay of the following premises and
findings: (a) the validity of the two (2) duly notarized subdivision agreements, or
the 1st SA and 2nd SA, which the LMB later approved; (b) the subdivisions of Lot
733 on the basis of the Galang Plan actually partook the nature of the partition of
the shares of its co-owners; (c) what Mendoza conveyed through the April 29,
1986 deeds of absolute sale is only her ideal, abstract or pro-indiviso share of Lot
733 of which she had full ownership, the conveyance or sale subject to the
eventual delineation and partition of her share; (d) Vda. de Viray has not shown
that fraud surrounded the execution of the partition of Lot 733 through the
subdivision agreements of August 20, 1990 and April 5, 1991; (e) the certificates
of title of the Sps. Usi constitute indefeasible proof of their ownership of Lots 733-
B, 733-C-1 and 733-C-10; (f) said certificate entitled the Sps. Usi to take
possession thereof, the right to possess being merely an attribute of ownership;
(g) Vda. de Viray can only go after the partitioned shares of Mendoza in Lot 733;
and (h) the issue of possessory right has been mooted by the judgment of
ownership in favor of the Sps. Usi over Lots 733-B, 733-C-1 and 733-C-10
Vda. de Viray sought but was denied reconsideration per the assailed June
2, 2010 CA Resolution.
Hence, We have this petition.

The Issue

WHETHER OR NOT THE COURT A QUO GRAVELY AND SERIOUSLY

ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE
[RTC] DISMISSING RESPONDENTS' PETITION. 34

The Court's Ruling

In the main, the issue tendered in this proceeding boils down to the
question of whether the two (2) subdivision agreements dated August 20, 1990
and April 5, 1991, respectively, partake of a bona fide and legally binding
partition contracts or arrangements among co-owners that validly effectuated the
transfer of the subject lots to respondent spouses Usi. Intertwined with the main
issue is the correlative question bearing on the validity of the deeds of absolute
sale upon which the petitioners hinged their claim of ownership and right of
possession over said lots.
The Court rules in favor of petitioners.
Petitioners contend first off that the CA erred in its holding that the
partitions of Lot 733 and later of the divided unit Lot 733-C following the Galang
Plan were actually the partitions of the pro-indiviso shares of its co-owners
effectively conveying to them their respective specific shares in the
property. CcTHaD
We agree with petitioners.
First, the CA's holding aforestated is neither supported by, nor deducible
from, the evidentiary facts on record. He who alleges must prove it. Respondents
have the burden to substantiate the factum probandum  of their complaint or the
ultimate fact which is their claimed ownership over the lots in question. They
were, however, unsuccessful in adducing the factum probans or the evidentiary
facts by which thefactum probandum  or ultimate fact can be established. As shall
be discussed shortly, facts and circumstances obtain arguing against the claimed
co-ownership over Lot 733.
Second, the earlier sale of Lot 733-A and Lot 733-F (Fajardo Plan) on April
29, 1986 was valid and effective conveyances of said portions of Lot 733. The
subsequent transfers to the Sps. Usi of substantially the same portions of Lot 733
accomplished through the subdivision agreements constitute in effect double
sales of those portions. This aberration was brought to light by the results of the
adverted survey conducted sometime in June 22, 1999 of Engr. Nicdao of the
LMB.
Third, even granting arguendo that the subject subdivision agreements
were in fact but partitions of the pro-indiviso shares of co-owners, said
agreements would still be infirm, for the Sps. Viray and Vda. deViray (vice
Jesus Viray) were excluded from the transaction. Like Vda. de Mallari,
Sps. Viray and Jesus Viray had validly acquired and, hence, owned portions of Lot
733 and are themselves co-owners of Lot 733.
And last, over and above the foregoing considerations, the instant petition
must be resolved in favor of petitioners, the underlying reinvindicatory and
possessory actions in Civil Case No. 01-1118 (M) being barred by the application
of the res judicata principle. What is more, the issue of superior possessory rights
of petitioner Vda. de Viray over Lot 733-F (Fajardo Plan) has been laid to rest
with finality in Civil Case No. 91 (13). Besides, Sps. Usi's action to assail the final
and executory July 29, 1998 MCTC Decision in Civil Case No. 91 (13) has been
denied with finality in G.R. No. 154538.

The subdivision agreements not partition of co-owners

Partition, in general, is the separation, division, and assignment of a thing

held in common by those to whom it may belong. 35
Contrary to the finding of the CA, the subdivision agreements forged
by Mendoza and her alleged co-owners were not for the partition of pro-
indiviso shares of co-owners of Lot 733 but were actually conveyances,
disguised as partitions, of portions of Lot 733 specifically Lots 733-A and
733-B, and portions of the subsequent subdivision of Lot 733-C.
Notably, after a full-blown trial in Civil Case No. 01-1118 (M) wherein the
spouses Usi merged an accion publiciana with an accion reinvindicatoria in one
petition, the RTC held that Sps. Usi failed to prove their case. However, in CA
G.R. CV No. 90344, an appeal from said RTC decision, the CA, while
acknowledging the existence of the April 29, 1986 deeds of absolute sale,
nonetheless accorded validity to the August 20, 1990 and April 5, 1991
subdivision agreements. This is incorrect. The CA held that the two (2)
subdivision agreements, as notarized, enjoy the presumption of regularity and
effectuated the property transfers covered thereby, obviously glossing over
the mala fides attendant the execution of the two subdivision agreements. It
cannot be overemphasized enough that the two (2) deeds of absolute sale over
portions of substantially the same parcel of land antedated the subdivision
agreements in question and their execution acknowledged too before a notary
public.
The appellate court found and so declared the subdivision agreements valid
without so much as explaining, let alone substantiating, its determination. The CA
never elucidated how the Sps. Usi became, in the first place co-owners, with
Mendoza over Lot 733. On its face, TCT 141-RP covering Lot 733 was in the name
of spouses Ellen and Moses Mendoza only. Then too, the CA did not explain how
under the 2nd SA the Sps.Usi, the Sps. Lacap, the Sps. Balingit and the Sps.
Jordan became co-owners with Mendoza over Lot 733-C, when Mendoza, under
the 1st SA, virtually represented herself as the sole owner of Lot 733-C. HIEAcC
A scrutiny of the records with a fine-tooth comb likewise fails to
substantially show a partition of Lot 733 by its co-owners. While the 1st and 2nd
SAs purport to be deeds of partition by and among co-owners of the lot/s covered
thereby, partition as a fact is belied by the evidence extant on record. Consider:
It is undisputed that TCT 141 RP covering Lot 733 was originally in the
name of Ellen P. Mendoza and husband, Moses. 36 The joint decision of the RTC
in Civil Case Nos. 88-0265 and 88-0283-M narrated how the couple came to own
Lot 733, thus: "Lot 733 was acquired by Spouses Moses Mendoza and Ellen
Mendoza and Spouses Pacifico Bustos and Maria Roman from Donato Lacap for
P5,000.00 (Exh. "1") in 1977. After two years, Spouses Pacifico Bustos and Maria
Roman sold one-half pro-indiviso portion of Lot 733 to spouses Moses Mendoza
and Ellen Mendoza for P6,000.00 (Exh. "2") and the acquisition cost of the whole
lot is only P8,500.00 and . . . ." 37
Mendoza and the Sps. Usi, in their separate complaints for annulment of
deeds of sale, docketed as Civil Case Nos. 88-0265 and 88-0283-M of the
Macabebe, Pampanga RTC, alleged that Moses Mendoza authorized Atty.
Venancio Viray to sell the subject lot for at least PhP200 per square meter, and
that after his (Moses') death on April 5, 1986, Lot 733 was included in the
proceedings for the settlement of his estate docketed as Sp. Proc. Case No. 86-
0040-M of the RTC, Branch 55 in Macabebe, Pampanga, The events thus alleged
by Mendoza and the Usis can be gleaned from the final and executory joint
decision in Civil Case Nos. 88-0265-M and 88-0283-M which
petitioner Vda. de Viray attached as Annex "5" in her Answer with
Counterclaim 38 to the Usis' petition for accion publicana/reivindicatoria. Said
Joint Decision amply shows, in gist, the allegations 39 of both the Sps. Usi and
Mendoza in Civil Case Nos. 88-0265-M and 88-0283-M asserting said facts. And
these assertions, made in their complaints, are judicial admissions under Sec.
4, 40 Rule 129 of the Rules of Court.
Unlike Vda. de Mallari who, per Vda. de Viray's own admission, purchased
the 416-square meter portion of Lot 733 on February 14, 1984, thus constituting
her (Vda. de Mallari) as co-owner of Mendoza to the extent of said area
purchased, 41 the Sps. Usi have not been shown to be co-owners with
Mendoza. There is simply nothing in the records to demonstrate how the
Sps. Usi became co-owners of Lot 733 before or after the death of Moses
Mendoza. Elsewise put, no evidence had been adduced to show how the alleged
interest of the Sps. Usi, as co-owner, came about, except for the bare assertions
in the 1st and 2nd SAs that they co-owned Lot 733 and Lot 733-C (Galang Plan).
It is fairly clear that Lot 733, even from the fact alone of its being registered
under the name of the late Moses Mendoza and Ellen Mendoza, formed part of the
couple's conjugal property at the time Moses' demise on April 5, 1986. Equally
clear, too, is that Vda. de Mallari became a co-owner of Lot 733 by virtue of the
purchase of its 416-square meter portion on February 14, 1984, during the
lifetime of Moses. Be that as it may and given that the Sps. Usi have not been
shown to be co-owners of Mendoza and Vda. de Mallari prior to the sale by
Mendoza on April 29, 1986 of Lots 733-A and 733-F (Fajardo Plan) to the
Sps. Viray and Jesus Viray, respectively, then the execution of the 1st SA on
August 20, 1990 could not have been a partition by co-owners of Lot 733. The
same could be said of the 2nd SA of April 5, 1991 vis-á-vis Lot 733-C, for the
records are similarly completely bereft of any evidence to show on how the
purported participating co-owners, namely Sps. Usi, the Sps. Lacap, the Sps.
Balingit and the Sps. Jordan became co-owners with Mendoza and her
children, i.e., McDwight, Bismark, Beverly and Georgenia.

The April 29, 1986 Deeds of Absolute Sale

of Lot 733-A and Lot 733-F are Valid

It must be noted that the RTC, in its decision in Civil Case Nos. 88-0265-M
and 88-0283-M, upheld the validity of the separate April 29, 1986 deeds of
absolute sale of Lots 733-A and 733-F (Fajardo Plan). The combined area of Lot
733-A (366 sq. m.) and Lot 733-F (3,501) is less than one half of the total area
coverage of Lot 733 (9,137). The sale of one-half portion of the conjugal property
is valid as a sale. It cannot be gainsaid then that the deeds, executed as they
were by the property owner, were sufficient to transfer title and ownership over
the portions covered thereby. And the aforesaid RTC decision had become final
and executory as far back as December 11, 1995 when the Court, in G.R. No.
122287, in effect, affirmed the RTC decision. Likewise, the MCTC's decision in
Civil Case No. 91 (13) for forcible entry, declaring Vda. de Viray, as successor-in-
interest of Jesus Viray, as entitled to the physical possession, or
possession de  facto, of Lot 733-F (Fajardo Plan), and the RTC's decision in Civil
Case No. 99-0914M, disposing of the belated appeal of the MCTC decision in the
forcible entry case, have become final and executory on February 12, 2003
under G.R. No. 154538. HTCIcE
In light of the convergence of the foregoing disposed-of cases, there can be
no question as to the ownership of the Sps. Viray and Vda. de Viray (vice
Jesus Viray) over the specified and delineated portions of Lot 733 which they
purchased for value from Mendoza. And Mendoza, as vendor, was bound to
transfer the ownership of and deliver, as well as warrant, the thing which is the
object of the sale. 42
In the instant case, the April 29, 1986 deeds of absolute sale indeed
included the technical description of that part of Lot 733 subject of the
transactions, thus clearly identifying the portions (Lots 733-A and 733-F under
the Fajardo Plan) sold by Mendoza to the Sps. Viray and Vda. de Viray (vice
Jesus Viray). Hence, there can be no mistaking as to the identity of said lots.
The deeds in question were, to reiterate, not only valid but constitute prior
conveyances of the disputed portions of Lot 733. Accordingly, the subsequent
conveyances in 1990 and 1991 to the Sps. Usi through transfer contracts, styled
as subdivision agreements, resulted, in effect, in a double sale situation involving
substantially the same portions of Lot 733.
The survey report of LMB surveyor, Engr. Nicdao, would support a finding of
double sale. His report, as earlier indicated, contained the following key findings:
(1) Lot 733-A (Fajardo Plan) with an area of 336 square meters thus sold to the
Sps. Viray is within Lot 733-B (Galang Plan), the part assigned to Sps. Usi under
the division; and (2) Lot 733-F (Fajardo Plan) with an area of 3,501 square
meters is almost identical to the combined area of Lots 733-C-8 to 733-C-12
awarded to Ellen Mendoza and her children, McDwight, Bismark, Beverly and
Georgenia, and a portion (1,000 square meters) of Lot 733-C-10 (Galang Plan)
adjudicated to Sps. Usi.
A double sale situation, which would call, if necessary, the application of Art.
1544 of the Civil Code, arises when, as jurisprudence teaches, the following
requisites concur:
(a) The two (or more) sales transactions must constitute valid sales;
 (b) The two (or more) sales transactions must pertain to exactly the
same subject matter;
(c) The two (or more) buyers at odds over the rightful ownership of
the subject matter must each represent conflicting interests;
and
(d) The two (or more) buyers at odds over the rightful ownership of
the subject matter must each have bought from the very same
seller. 43
From the facts, there is no valid sale from Mendoza to respondents Usi. The
parties did not execute a valid deed of sale conveying and transferring the lots in
question to respondents. What they rely on are two subdivision agreements which
do not explicitly chronicle the transfer of said lots to them. Under the 1st SA, all
that can be read is the declaration that respondents, together with others, are the
"sole and exclusive owners" of the lots subject of said agreement. Per the 2nd
SA, it simply replicates the statement in the 1st SA that respondents are "sole
and exclusive undivided co-owners" with the other parties. While respondents
may claim that the SAs of 1990 and 1991 are convenient conveying vehicles
Mendoza resorted to in disposing portions of Lot 733 under the Galang Plan, the
Court finds that said SAs are not valid legal conveyances of the subject lots due
to non-existent prestations pursuant to Article 1305 which prescribes "a meeting
of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service." The third element of cause
of the obligation which is established under Art. 1318 of the Civil Code is likewise
visibly absent from the two SAs. The transfer of title to respondents based on
said SAs is flawed, irregular, null and void. Thus the two SAs are not "sales
transactions" nor "valid sales" under Art. 1544 of the Civil Code and, hence, the
first essential element under said legal provision was not satisfied.
Given the above perspective, the Sps. Viray and Vda. de Viray (vice
Jesus Viray) have, as against the Sps. Usi, superior rights over Lot 733-A and Lot
733-F (Fajardo Plan) or portions thereof.

Res Judicata Applies

Notably, the Sps. Viray and Vda. de Viray, after peremptorily prevailing in

their cases supportive of their claim of ownership and possession of Lots 733-A
and 733-F (Fajardo Plan), cannot now be deprived of their rights by the
expediency of the Sps. Usi maintaining, as here, an accion
publiciana and/or accion reivindicatoria, two of the three kinds of actions to
recover possession of real property. The third, accion interdictal, comprises two
distinct causes of action, namely forcible entry and unlawful detainer, 44 the
issue in both cases being limited to the right to physical possession or
possession de  facto, independently of any claim of ownership that either party
may set forth in his or her pleadings, 45 albeit the court has the competence to
delve into and resolve the issue of ownership but only to address the issue of
priority of possession. 46 Both actions must be brought within one year from the
date of actual entry on the land, in case of forcible entry, and from the date of
last demand to vacate following the expiration of the right to possess, in case of
unlawful detainer. 47
When the dispossession or unlawful deprivation has lasted more than one
year, one may avail himself of accion publiciana  to determine the better right of
possession, or possession de jure,  of realty independently of title. On the other
hand, accion reivindicatoria is an action to recover ownership which necessarily
includes recovery of possession. 48
 Now then, it is a hornbook rule that once a judgment becomes final and
executory, it may no longer be modified in any respect, even if the modification is
meant to correct an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it or by
the highest court of the land, as what remains to be done is the purely ministerial
enforcement or execution of the judgment. 49 Any attempt to reopen a close
case would offend the principle of res judicata.
Res judicata embraces two concepts or principles, the first is designated as
"bar by prior judgment" and the other, "conclusiveness of judgment." Tiongson  v.
Court of Appeals 50 describes the effects of res judicata, as a bar by prior
judgment, in the following manner:
There is no question that where as between the first case where
the judgment is rendered and the second where such judgment is
invoked, there is identity of parties, subject matter and cause of
action, the judgment on the merits in the first case constitutes an
absolute bar to the subsequent action not only as to every matter
which was offered and received to sustain or defeat the claim or
demand, but also as to any other admissible matter which might
have been offered for that purpose and to all matters that could have
been adjudged in that case. . . .
Res judicata operates as bar by prior judgment if the following requisites
concur: (1) the former judgment or order must be final; (2) the judgment or
order must be on the merits; (3) the decision must have been rendered by a
court having jurisdiction over the subject matter and the parties; and (4) there
must be, between the first and second action, identity of parties, of subject
matter and of causes of action. 51 All the requisites are present in the instant
case.
The better right to possess and the right of ownership of Vda. de Viray (vice
Jose Viray) and the Sps. Viray over the disputed parcels of land cannot, by force
of the res judicata doctrine, be re-litigated thru actions to recover possession and
vindicate ownership filed by the Sps. Usi. The Court, in G.R. No. 122287 (Ellen
P. Mendoza and Jose and Amelita  Usi  v. Spouses Avelino  Viray and Margarita
Masangcay and Jesus Carlo Gerard Viray), has in effect determined that the
conveyances and necessarily the transfers of ownership made to the
Sps. Viray and Vda. de Viray (vice Jose Viray) on April 29, 1986 were valid. This
determination operates as a bar to the Usis reivindicatory action to assail the
April 29, 1986 conveyances and precludes the relitigation between the same
parties of the settled issue of ownership and possession arising from ownership.
It may be that the spouses Usi did not directly seek the recovery of title or
possession of the property in question in their action for annulment of the deed
sale of sale. But it cannot be gainsaid that said action is closely intertwined with
the issue of ownership, and affects the title, of the lot covered by the deed. The
prevalent doctrine, to borrow from Fortune Motors, (Phils.), Inc.  v. Court of
Appeals, 52 "is that an action for the annulment or rescission of a sale of real
property does not operate to efface the fundamental and prime objective and
nature of the case, which is to recover said real property."
And lest it be overlooked, the Court, in G.R. No. 154538 (Spouses Jose
and Amelita  Usi  v. Ruperta  Cano Vda. de Viray), again in effect ruled with
finality that petitioner Vda. de Viray has a better possessory right over Lot 733-
F (Fajardo Plan). Thus, the Court's decision in G.R. No. 122287 juxtaposed with
that in G.R. No. 154538 would suffice to bar the Sps. Usi's accion publiciana, as
the spouses had invoked all along their ownership over the disputed Lot 733-F as
basis to defeat any claim of the right of possession. While an accion
reivindicatoria is not barred by a judgment in an ejectment case, such judgment
constitutes a bar to the institution of the accion publiciana,  because the matter of
possession between the same parties has become res judicata  and cannot be
delved into in a new action. 53
The doctrine of res judicata is a basic postulate to the end that
controversies and issues once decided on the merits by a court of competent
jurisdiction shall remain in repose. It is simply unfortunate that the RTC, in Civil
Case No. 01-1118(M), did not apply the doctrine of res judicata to the instant
case, despite petitioners, as respondents below, had raised that ground both in
their motion to dismiss and answer to the underlying petition.
WHEREFORE, the instant petition is GRANTED. The assailed Decision
dated July 24, 2009 and Resolution dated June 2, 2010 of the Court of Appeals in
CA-G.R. CV No. 90344 are REVERSED and SET ASIDE. The Decision dated June
21, 2007 in Civil Case No. 01-1118(M) of the RTC, Branch 55 in Macabebe,
Pampanga is accordingly REINSTATED.
Costs against respondents.
SO ORDERED.
|||  (Vda. de Viray v. Spouses Usi, G.R. No. 192486, [November 21,
2012], 699 PHIL 205-235)

G.R. No. 198356, April 20, 2015

ESPERANZA SUPAPO AND THE HEIRS OF ROMEO SUPAPO, NAMELY:

ESPERANZA, REX EDWARD, RONALD TROY, ROMEO, JR., SHEILA
LORENCE, ALL SURNAMED SUPAPO, AND SHERYL FORTUNE SUPAPO-
SANDIGAN, Petitioners, v. SPOUSES ROBERTO AND SUSAN DE JESUS,
MACARIO BERNARDO, AND THOSE PERSONS CLAIMING RIGHTS UNDER
THEM, Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1 filed by petitioners Esperanza

Supapo and Romeo Supapo2 (Spouses Supapo) to assail the February 25, 2011
decision3 and August 25, 2011 resolution4 of the Court of Appeals (CA) in CA-G.R.
SP No. 111674.

Factual Antecedents

The Spouses Supapo filed a complaint5 for accion publiciana  against Roberto and

Susan de Jesus (Spouses de Jesus), Macario Bernardo (Macario), and persons
claiming rights under them (collectively, the respondents), with the Metropolitan
Trial Court (MeTC) of Caloocan City.

The complaint sought to compel the respondents to vacate a piece of land located
in Novaliches, Quezon City, described as Lot 40, Block 5 (subject lot). The subject
lot is covered by Transfer Certificate of Title (TCT) No. C-284416 registered and
titled under the Spouses Supapo's names. The land has an assessed value of
thirty-nine thousand nine hundred eighty pesos (39,980.00) as shown in the
Declaration of Real Property Value (tax declaration) issued by the Office of the
City Assessor of Caloocan.7

The Spouses Supapo did not reside on the subject lot. They also did not employ
an overseer but they made sure to visit at least twice a year. 8 During one of their
visits in 1992, they saw two (2) houses built on the subject lot. The houses were
built without their knowledge and permission. They later learned that the Spouses
de Jesus occupied one house while Macario occupied the other one.9

The Spouses Supapo demanded from the respondents the immediate surrender of
the subject lot by bringing the dispute before the appropriate Lupong
Tagapamayapa. The Lupon issued a Katibayan Upang Makadulog sa
Hukuman (certificate to file action) for failure of the parties to settle amicably.10

The Spouses Supapo then filed a criminal case11 against the respondents for
violation of Presidential Decree No. 772 or the Anti-Squatting Law.12 The trial
court convicted the respondents. The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, this Court finds accused ROBERTO DE
JESUS, SUSAN DE JESUS and MACARIO BERNARDO, GUILTY beyond reasonable
doubt for Violation of Presidential Decree No. 772, and each accused is hereby
ordered to pay a fine of ONE THOUSAND PESOS (P1,000.00), and to vacate the
subject premises.

SO ORDERED.13 (Emphasis supplied.)

The respondents appealed their conviction to the CA. 14 While the appeal was
pending, Congress enacted Republic Act (RA) No. 8368, otherwise known as "An
Act Repealing Presidential Decree No. 772," which resulted to the dismissal of the
criminal case.15

On April 30, 1999, the CA's dismissal of the criminal case became final.16

Notwithstanding the dismissal, the Spouses Supapo moved for the execution of
the respondents' civil liability, praying that the latter vacate the subject lot. The
Regional Trial Court (RTC) granted the motion and issued the writ of execution.
The respondents moved for the quashal of the writ but the RTC denied the same.
The RTC also denied the respondents' motion for reconsideration.

The respondents thus filed with the CA a petition for certiorari to challenge the
RTC's orders denying the quashal of the writ and the respondent's motion for
reconsideration.17 The CA granted the petition and held that with the repeal of
the Anti-Squatting Law, the respondents' criminal and civil liabilities were
extinguished.18 The dispositive portion of the decision reads:

WHEREFORE, premises considered, the petition for certiorari with prayer for
injunction is GRANTED. The orders dated June 5, 2003 and July 24, 2003 of
Branch 131 of the Regional Trial Court of Caloocan City in Criminal Case No. C-
45610 are REVERSED and SET ASIDE. Said court is hereby
permanently ENJOINED from further executing or implementing its decision
dated March 18, 1996.

SO ORDERED.

The CA, however, underscored that the repeal of the Anti-Squatting Law does not
mean that people now have unbridled license to illegally occupy lands they do not
own, and that it was not intended to compromise the property rights of legitimate
landowners.19 In cases of violation of their property rights, the CA noted that
recourse may be had in court by filing the proper action for recovery of
possession.

The Spouses Supapo thus filed the complaint for action publiciana.20

After filing their Answer,21 the respondents moved to set their affirmative

defenses for preliminary hearing22 and argued that: (1) there is another action
pending between the same parties; (2) the complaint for accion publiciana is
barred by statute of limitations; and (3) the Spouses Supapo's cause of action is
barred by prior judgment.

The MeTC Ruling23

The MeTC denied the motion to set the affirmative defenses for preliminary
hearing. It ruled that the arguments advanced by the respondents are evidentiary
in nature, which at best can be utilized in the course of the trial. The MeTC
likewise denied the respondents' motion for reconsideration.

From the MeTC's ruling, the respondents filed a petition for certiorari with the
RTC.24

The RTC Ruling25

The RTC granted the petition for certiorari on two grounds, viz.: (i) the action has
prescribed; and (ii) accion publiciana falls within the exclusive jurisdiction of the
RTC.

It held that in cases where the only issue involved is possession, the MeTC has
jurisdiction if the action for forcible entry or unlawful detainer is filed within one
(1) year from the time to demand to vacate was made. Otherwise, the complaint
for recovery of possession should be filed before the RTC.

The dispositive portion of the RTC decision reads:

WHEREFORE, premises considered, the instant petition is hereby GRANTED.

The Orders dated October 24, 2008 and February 23, 2009 are hereby
declared NULL and VOID.

The Public Respondent is hereby directed to DISMISS Civil Case No. 08-29245

for lack of jurisdiction.

SO ORDERED.26

In their motion for reconsideration,27 the Spouses Supapo emphasized that the

court's jurisdiction over an action involving title to or possession of land is
determined by its assessed value; that the RTC does not have an exclusive
jurisdiction on all complaints for accion publiciana; and that the assessed value of
the subject lot falls within MeTC's jurisdiction.

The RTC denied the petitioners' motion for reconsideration.

It held that although the MeTC had jurisdiction based on the assessed value of
the subject lot, the Spouses Supapos' cause of action had already prescribed, the
action having been filed beyond the ten (l0)-year prescriptive period under Article
555 of the Civil Code.28 As it was not proven when the actual demand to vacate
was made, the RTC ruled that the reckoning period by which the ejectment suit
should have been filed is counted from the time the certificate to file action was
issued. The certificate to file action was issued on November 25, 1992, while the
complaint for accion publiciana was filed only on March 7, 2008, or more than ten
(10) years thereafter.

Dissatisfied with the RTC ruling, the Spouses Supapo appealed to the CA.29

The CA Ruling30

The CA dismissed the appeal and held that the complaint for accion
publiciana should have been lodged before the RTC and that the period to file the
action had prescribed.

The dispositive portion of the CA decision reads:

WHEREFORE, the appeal is DENIED. The Decision dated June 30, 2009 and
Order dated October 19, 2009 are AFFIRMED.

SO ORDERED

The Spouses Supapo moved31 but failed32 to secure a reconsideration of the CA

decision; hence, they came to us through the present petition.

The Petition

In seeking reversal of the CA's ruling, the Spouses Supapo essentially argue that:

(1) the MeTC exercises exclusive original jurisdiction over accion

publiciana where the assessed value of the property does not exceed
P20,000.00, or P50,000.00 if the property is located in Metro Manila; and
that
(2) prescription had not yet set in because their cause of action is
imprescriptible under the Torrens system.

The Respondents' Case33

The respondents argue that the complaint for accion publiciana was (1) filed in
the wrong court; (2) barred by prescription; and (3) barred by res judicata.

Issues

The issues for resolution are:

I. Whether the MeTC properly acquired jurisdiction;

II. Whether the cause of action has prescribed; and 
III. Whether the complaint for accion publiciana is barred by res judicata.

Our Ruling

The petition is meritorious.

We hold that: (1) the MeTC properly acquired jurisdiction; (2) the cause of action
has not prescribed; and (3) the complaint is not barred by res judicata.

Accion Publiciana and the Jurisdiction of the  MeTC

Accion publiciana is an ordinary civil proceeding to determine the better right of

possession of realty independent of title. It refers to an ejectment suit filed after
the expiration of one year from the accrual of the cause of action or from the
unlawful withholding of possession of the realty.34

In the present case, the Spouses Supapo filed an action for the recovery of
possession of the subject lot but they based their better right of possession on a
claim of ownership.

This Court has held that the objective of the plaintiffs in accion publiciana is to
recover possession only, not ownership. However, where the parties raise the
issue of ownership, the courts may pass upon the issue to determine who
between the parties has the right to possess the property. 35

This adjudication is not a final determination of the issue of ownership; it is only

for the purpose of resolving the issue of possession, where the issue of ownership
is inseparably linked to the issue of possession. The adjudication of the issue of
ownership, being provisional, is not a bar to an action between the same parties
involving title to the property. The adjudication, in short, is not conclusive on the
issue of ownership.36

Thus, while we will dissect the Spouses Supapo's claim of ownership over the
subject property, we will only do so to determine if they or the respondents
should have the right of possession.

Having thus determined that the dispute involves possession over a real property,
we now resolve which court has the jurisdiction to hear the case.

Under Batas Pambansa Bilang 129,37 the jurisdiction of the RTC over actions

involving title to or possession of real property is plenary.38

RA No. 7691,39 however, divested the RTC of a portion of its jurisdiction and

granted the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts the exclusive and original jurisdiction to hear actions where the
assessed value of the property does not exceed Twenty Thousand Pesos
(P20,000.00), or Fifty Thousand Pesos (P50,000.00), if the property is located in
Metro Manila.
Section 1 of RA No. 7691 states:

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the

"Judiciary Reorganization Act of 1980," is hereby amended to read as follows:
Section. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise
exclusive original jurisdiction:

(2) In all civil actions which involve the title to, or possession of, real property,
or any interest therein, where the assessed value of the property involved
exceeds Twenty thousand pesos (P20,000.00) or, for civil actions in
Metro Manila, where such value exceeds Fifty thousand pesos
(P50,000.00) x x x. (Emphasis supplied.)

Section 3 of the same law provides:

Section. 3. Section 33 of the same law is hereby amended to read as follows:
Section. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases. - Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

xxxx

(3) Exclusive original jurisdiction in all civil actions which involve title to,
or possession of, real property, or any interest therein where the assessed
value of the property or interest therein does not exceed Twenty
thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where
such assessed value does not exceed Fifty thousand pesos
(P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees,
litigation expenses and costs x x x. (Emphasis supplied.)

In view of these amendments, jurisdiction over actions involving title to or

possession of real property is now determined by its assessed value.40 The
assessed value of real property is its fair market value multiplied by the
assessment level. It is synonymous to taxable value.41

In Quinagoran v. Court of Appeals,42 we explained:

[D]oes the RTC have jurisdiction over all cases of recovery of possession
regardless of the value of the property involved?

The answer is no. The doctrine on which the RTC anchored its denial of
petitioner's Motion to Dismiss, as affirmed by the CA — that all cases of recovery
of possession or accion publiciana lies with the regional trial courts regardless of
the value of the property — no longer holds true. As tilings now stand, a
distinction must be made between those properties the assessed value of
which is below P20,000.00, if outside Metro Manila; and P50,000.00, if
within.43 (Emphasis supplied.)

In this regard, the complaint must allege the assessed value of the real property
subject of the complaint or the interest thereon to determine which court has
jurisdiction over the action. This is required because the nature of the action and
the court with original and exclusive jurisdiction over the same is determined by
the material allegations of the complaint, the type of relief prayed for by the
plaintiff, and the law in effect when the action is filed, irrespective of whether the
plaintiffs are entitled to some or all of the claims asserted therein.44
In the present case, the Spouses Supapo alleged that the assessed value of the
subject lot, located in Metro Manila, is P39,980.00. This is proven by the tax
declaration45 issued by the Office of the City Assessor of Caloocan. The
respondents do not deny the genuineness and authenticity of this tax declaration.

Given that the Spouses Supapo duly complied with the jurisdictional
requirements, we hold that the MeTC of Caloocan properly acquired jurisdiction
over the complaint for accion publiciana.

The cause of action  has not prescribed

The respondents argue that the complaint for accion publiciana is dismissible for
being filed out of time.

They invoke Article 555 of the Civil Code, which states: Art. 555. A possessor
may lose his possession:

xxxx

(4) By the possession of another, subject to the provisions of Article 537, if the
new possession has lasted longer than one year. But the real right of
possession is not lost till after the lapse of ten years. (Emphasis supplied.)

The respondents point out that the Spouses Supapo filed the complaint for accion
publiciana on March 7, 2008 or more than ten (10) years after the certificate to
file action was issued on November 25, 1992. The respondents contend that the
Spouses Supapo may no longer recover possession of the subject property, the
complaint having been filed beyond the period provided by law.

Further, while the respondents concede that the Spouses Supapo hold a TCT over
the subject property, and assuming a Torrens title is imprescriptible and
indefeasible, they posit that the latter have lost their right to recover possession
because of laches.

On their part, the Spouses Supapo admit that they filed the complaint for accion
publiciana more than ten (10) years after the certificate to file action was issued.
Nonetheless, they argue that their cause of action is imprescriptible since the
subject property is registered and titled under the Torrens system.

We rule that the Spouses Supapo's position is legally correct.

At the core of this controversy is a parcel of land registered under the Torrens
system. The Spouses Supapo acquired the TCT on the subject lot in
1979.46 Interestingly, the respondents do not challenge the existence,
authenticity and genuineness of the Supapo's TCT.47

In defense, the respondents rest their entire case on the fact that they have
allegedly been in actual, public, peaceful and uninterrupted possession of the
subject property in the concept of an owner since 1992. The respondents contend
that they built their houses on the subject lot in good faith. Having possessed the
subject lot for more than ten (10) years, they claim that they can no longer be
disturbed in their possession.48
Under the undisputed facts of this case, we find that the respondents' contentions
have no legal basis.

In a long line of cases, we have consistently ruled that lands covered by a title

cannot be acquired by prescription or adverse possession. We have also
held that a claim of acquisitive prescription is baseless when the land involved is
a registered land because of Article 112649 of the Civil Code in relation to Act 496
[now, Section 47 of Presidential Decree (PD) No. 152950].51

The Spouses Supapo (as holders of the TCT) enjoy a panoply of benefits under
the Torrens system. The most essential insofar as the present case is concerned
is Section 47 of PD No. 1529 which states:

Section 47. Registered land not subject to prescriptions. No title to registered

land in derogation of the title of the registered owner shall be acquired by
prescription or adverse possession.

In addition to the imprescriptibility, the person who holds a Torrens Title over a
land is also entitled to the possession thereof. 52 The right to possess and occupy
the land is an attribute and a logical consequence of ownership. 53 Corollary to this
rule is the right of the holder of the Torrens Title to eject any person illegally
occupying their property. Again, this right is imprescriptible. 54

In Bishop v. CA,55 we held that even if it be supposed that the holders of the
Torrens Title were aware of the other persons' occupation of the
property, regardless of the length of that possession, the lawful owners have
a right to demand the return of their property at any time as long as the
possession was unauthorized or merely tolerated, if at all.56

Even if the defendant attacks the Torrens Title because of a purported sale or
transfer of the property, we still rule in favor of the holder of the Torrens Title if
the defendant cannot adduce, in addition to the deed of sale, a duly-registered
certificate of title proving the alleged transfer or sale.

A case in point is Umpoc v. Mercado57 in which we gave greater probative weight

to the plaintiffs TCT vis-a-vis the contested unregistered deed of sale of the
defendants. Unlike the defendants in Umpoc, however, the respondents did not
adduce a single evidence to refute the Spouses Supapo's TCT. With more reason
therefore that we uphold the indefeasibility and imprescriptibility of the Spouses
Supapo's title.

By respecting the imprescriptibility and indefeasibility of the Spouses Supapo's

TCT, this Court merely recognizes the value of the Torrens System in ensuring
the stability of real estate transactions and integrity of land registration.

We reiterate for the record the policy behind the Torrens System, viz.:

The Government has adopted the Torrens system due to its being the most
effective measure to guarantee the integrity of land titles and to protect their
indefeasibility once the claim of ownership is established and recognized. If a
person purchases a piece of land on the assurance that the seller's title thereto is
valid, he should not run the risk of being told later that his acquisition was
ineffectual after all, which will not only be unfair to him as the purchaser, but will
also erode public confidence in the system and will force land transactions to be
attended by complicated and not necessarily conclusive investigations and proof
of ownership. The further consequence will be that land conflicts can be even
more abrasive, if not even violent.58

With respect to the respondents' defense59 of laches, suffice it to say that the
same is evidentiary in nature and cannot be established by mere allegations in
the pleadings.60 In other words, the party alleging laches must adduce in court
evidence proving such allegation. This Court not being a trier of facts cannot rule
on this issue; especially so since the lower courts did not pass upon the same.

Thus, without solid evidentiary basis, laches cannot be a valid ground to deny the
Spouses Supapo's petition.61 On the contrary, the facts as culled from the records
show the clear intent of the Spouses Supapo to exercise their right over and
recover possession of the subject lot, viz.: (1) they brought the dispute to the
appropriate Lupon; (2) they initiated the criminal complaint for squatting; and (3)
finally, they filed the action publiciana. To our mind, these acts negate the
allegation of laches.

With these as premises, we cannot but rule that the Spouses Supapo's right to
recover possession of the subject lot is not barred by prescription.

The action is not barred by prior judgment

As a last-ditch effort to save their case, the respondents invoke res judicata. They

contend that the decision of the CA in CA-G.R. SP No. 78649 barred the filing of
the action publiciana.

To recall, CA-G.R. SP No. 78649 is the petition for certiorari filed by the

respondents to challenge the RTC's issuance of the writ enforcing their civil
liability (i.e., to vacate the subject property) arising from their conviction under
the Anti-Squatting Law. The CA granted the petition and permanently enjoined
the execution of the respondents' conviction because their criminal liability had
been extinguished by the repeal of the law under which they were tried and
convicted. It follows that their civil liability arising from the crime had also been
erased.

The respondents' reliance on the principle of res judicata is misplaced.

Res judicata embraces two concepts: (1) bar by prior judgment as enunciated in

Rule 39, Section 47(b) of the Rules of Civil Procedure; and (2) conclusiveness of
judgment in Rule 39, Section 47(c).62

"Bar by prior judgment" means that when a right or fact had already been
judicially tried on the merits and determined by a court of competent jurisdiction,
the final judgment or order shall be conclusive upon the parties and those in
privity with them and constitutes an absolute bar to subsequent actions involving
the same claim, demand or cause of action.63

The requisites64 for res judicata under the concept of bar by prior judgment are:

(1) The former judgment or order must be final;

(2) It must be a judgment on the merits;
(3) It must have been rendered by a court having jurisdiction over the subject
matter and the parties; and
(4) There must be between the first and second actions, identity of
parties, subject matter, and cause of action.

Res judicata is not present in this case.

While requisites one to three may be present, it is obvious that the there is no
identity of subject matter, parties and causes of action between the criminal
case prosecuted under the Anti-Squatting Law and the civil action for the
recovery of the subject property.

First, there is no identity of parties. The criminal complaint, although initiated

by the Spouses Supapo, was prosecuted in the name of the people of the
Philippines. The  accion publiciana, on the other hand, was filed by and in the
name of the Spouses Supapo.

Second, there is no identity of subject matter. The criminal case involves the
prosecution of a crime under the Anti-Squatting Law while the accion publiciana is
an action to recover possession of the subject property.

And third, there is no identity of causes of action. The people of the

Philippines filed the criminal case to protect and preserve governmental interests
by prosecuting persons who violated the statute. The Spouses Supapo filed
the accion publiciana to protect their proprietary interests over the subject
property and recover its possession.

Even casting aside the requirement of identity of causes of action, the defense
of res judicata has still no basis.

The concept of "conclusiveness of judgment" does not require that there is

identity of causes of action provided that there is identity of issue and identity of
parties.65

Under this particular concept of res judicata, any right, fact, or matter in issue
directly adjudicated or necessarily involved in the determination of an action
before a competent court in which judgment is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated
between the parties and their privies, whether or not the claim, demand,
purpose, or subject matter of the two actions is the same.66

As already explained, there is no identity of parties between the criminal

complaint under the Anti-Squatting law and the civil action for accion
publiciana. For this reason alone, "collusiveness of judgment" does not apply.

Even if we assume, for the sake of argument, that there is identity of parties,
"conclusiveness of judgment" still does not apply because there is no identity of
issues. The issue in the criminal case is whether the respondents (accused
therein) committed the crime alleged in the information, while the only issue
in accion publiciana is whether the Spouses Supapo have a better right than the
respondents to possess and occupy the subject property.

For all these reasons, the defense of res judicata is baseless. 

Final Note

As a final note, we stress that our ruling in this case is limited only to the issue of
determining who between the parties has a better right to possession. This
adjudication is not a final and binding determination of the issue of ownership. As
such, this is not a bar for the parties or even third persons to file an action for the
determination of the issue of ownership.

WHEREFORE, premises considered, we GRANT the petition, and

consequently REVERSE and SET ASIDE the February 25, 2011 decision and
August 25, 2011 resolution of the Court of Appeals in CA-G.R. SP No. 111674.

SO ORDERED.

[G.R. No. 185124. January 25, 2012.]

REPUBLIC OF THE PHILIPPINES, represented by the

NATIONAL IRRIGATION ADMINISTRATION
(NIA),  petitioner, vs. RURAL BANK OF KABACAN, INC., LITTIE
SARAH A. AGDEPPA, LEOSA NANETTE AGDEPPA and
MARCELINO VIERNES, MARGARITA TABOADA, PORTIA
CHARISMA RUTH ORTIZ, represented by LINA ERLINDA A.
ORTIZ and MARIO ORTIZ, JUAN MAMAC and GLORIA
MATAS,respondents.

DECISION

SERENO,  J p:

Before the Court is a Petition for Review on Certiorari under Rule 45 of

the Rules of Court, seeking the reversal of the 12 August 2008 Court of
Appeals (CA) Decision and 22 October 2008 Resolution in CA-G.R. CV No.
65196.
 The assailed issuances affirmed with modification the 31 August 1999
"Judgment" promulgated by the Regional Trial Court (RTC), Branch 22, Judicial
Region, Kabacan, Cotabato. The RTC had fixed the just compensation for the
value of the land and improvements thereon that were expropriated by
petitioner, but excluded the value of the excavated soil. Petitioner Republic of
the Philippines is represented in this case by the National Irrigation Authority
(NIA).

The Facts

NIA is a government-owned-and-controlled corporation created under

Republic Act No. (R.A.) 3601 on 22 June 1963. It is primarily responsible for
irrigation development and management in the country. Its charter was
amended by Presidential Decree (P.D.) 552 on 11 September 1974 and P.D.
1702 on 17 July 1980. To carry out its purpose, NIA was specifically authorized
under P.D. 552 to exercise the power of eminent domain. 1
NIA needed some parcels of land for the purpose of constructing the
Malitubog-Marigadao Irrigation Project. On 08 September 1994, it filed with
the RTC of Kabacan, Cotabato a Complaint for the expropriation of a portion of
three (3) parcels of land covering a total of 14,497.91 square meters. 2 The
case was docketed as Special Civil Case No. 61 and was assigned to RTC-
Branch 22. The affected parcels of land were the following: ESTCHa
1) Lot No. 3080 — covered by Transfer Certificate of Title (TCT) No.
T-61963 and registered under the Rural Bank of Kabacan
2) Lot No. 455 — covered by TCT No. T-74516 and registered under
the names of RG May, Ronald and Rolando, all surnamed Lao
3) Lot No. 3039 — registered under the name of Littie Sarah
Agdeppa 3
On 11 July 1995, NIA filed an Amended Complaint to include Leosa
Nanette A. Agdeppa and Marcelino Viernes as registered owners of Lot No.
3039. 4
On 25 September 1995, NIA filed a Second Amended Complaint to allege
properly the area sought to be expropriated, the exact address of the
expropriated properties and the owners thereof. NIA further prayed that it be
authorized to take immediate possession of the properties after depositing with
the Philippine National Bank the amount of P19,246.58 representing the
provisional value thereof. 5
On 31 October 1995, respondents filed their Answer with Affirmative and
Special Defenses and Counterclaim. 6 They alleged, inter alia, that NIA
had no authority to expropriate portions of their land, because it was not a
sovereign political entity; that it was not necessary to expropriate their
properties, because there was an abandoned government property adjacent to
theirs, where the project could pass through; that Lot No. 3080 was no longer
owned by the Rural Bank of Kabacan; that NIA's valuation of their expropriated
properties was inaccurate because of the improvements on the land that
should have placed its value at P5 million; and that NIA never negotiated with
the landowners before taking their properties for the project, causing
permanent and irreparable damages to their properties valued at P250,000.7
On 11 September 1996, the RTC issued an Order forming a committee
tasked to determine the fair market value of the expropriated properties to
establish the just compensation to be paid to the owners. The committee was
composed of the Clerk of Court of RTC Branch 22 as chairperson and two (2)
members of the parties to the case. 8
 On 20 September 1996, in response to the expropriation Complaint,
respondents-intervenors Margarita Tabaoda, Portia Charisma Ruth Ortiz, Lina
Erlinda Ortiz, Mario Ortiz, Juan Mamac and Gloria Matas filed their Answer-in-
Intervention with Affirmative and Special Defenses and Counter-Claim. They
essentially adopted the allegations in the Answer of the other respondents and
pointed out that Margarita Tabaoda and Portia Charisma Ruth Ortiz were the
new owners of Lot No. 3080, which the two acquired from the Rural Bank of
Kabacan. They further alleged that the four other respondents-intervenors
were joint tenants-cultivators of Lot Nos. 3080 and 3039. 9 TIEHSA
On 10 October 1996, the lower court issued an Order stating it would
issue a writ of possession in favor of NIA upon the determination of the fair
market value of the properties, subject of the expropriation
proceedings. 10 The lower court later amended its ruling and, on 21 October
1996, issued a Writ of Possession in favor of NIA. 11
On 15 October 1996, the committee submitted a Commissioners'
Report 12 to the RTC stating the following observations:
In the process of ocular inspection, the following were jointly
observed:
1) The area that was already occupied is 6x200 meters which is
equivalent to 1,200 square meters;
2) The area which is to be occupied is 18,930 square meters, more or
less;
3) That the area to be occupied is fully planted by gmelina trees with
a spacing of 1x1 meters;
4) That the gmelina tress found in the area already occupied and
used for [the] road is planted with gmelina with spacing of 2x2
and more or less one (1) year old;
5) That the gmelina trees found in the area to be occupied are
already four (4) years old;
6) That the number of banana clumps (is) two hundred twenty (220);
7) That the number of coco trees found (is) fifteen (15). 13
The report, however, stated that the committee members could not agree
on the market value of the subject properties and recommended the
appointment of new independent commissioners to replace the ones coming
from the parties only. 14 On 22 October 1996, the RTC issued an
Order 15 revoking the appointments of Atty. Agdeppa and Engr. Mabang as
members of the committee and, in their stead, appointed Renato Sambrano,
Assistant Provincial Assessor of the Province of Cotabato; and Jack Tumacmol,
Division Chief of the Land Bank of the Philippines-Kidapawan
Branch. 16 DCcHAa
On 25 November 1996, the new committee submitted its Commissioners'
Report to the lower court. The committee had agreed that the fair market
value of the land to be expropriated should be P65 per square meter based on
the zonal valuation of the Bureau of Internal Revenue (BIR). As regards the
improvement on the properties, the report recommended the following
compensation:
a. P200 for each gmelina tree that are more than four (4) years old
b. P150 for each gmelina tree that are more than one (1) year old
c. P164 for each coco tree
 d. P270 for each banana clump 17
On 03 December 1997, the committee submitted to the RTC another
report, which had adopted the first Committee Report, as well as the former's
25 November 1996 report. However, the committee added to its computation
the value of the earthfill excavated from portions of Lot Nos. 3039 and
3080. 18 Petitioner objected to the inclusion of the value of the excavated soil
in the computation of the value of the land. 19

The Ruling of the Trial Court

On 31 August 1999, the RTC promulgated its "Judgment," 20 the

dispositive portion of which reads:
WHEREFORE, IN VIEW of all the foregoing considerations, the
court finds and so holds that the commissioners have arrived at and
were able to determine the fair market value of the properties. The
court adopts their findings, and orders:
1. That 18,930 square meters of the lands owned by the defendants
is hereby expropriated in favor of the Republic of the Philippines
through the National Irrigation Administration;
2. That the NIA shall pay to the defendants the amount of
P1,230,450 for the 18,930 square meters expropriated in
proportion to the areas so expropriated;
3. That the NIA shall pay to the defendant-intervenors, owners of
Lot No. 3080, the sum of P5,128,375.50, representing removed
earthfill; TACEDI
4. That the NIA shall pay to the defendants, owners of Lot No. 3039,
the sum of P1,929,611.30 representing earthfill;
5. To pay to the defendants the sum of P60,000 for the destroyed G-
melina trees (1 year old);
6. To pay to the defendants the sum of P3,786,000.00 for the 4-year
old G-melina trees;
7. That NIA shall pay to the defendants the sum of P2,460.00 for the
coconut trees;
8. That all payments intended for the defendant Rural Bank of
Kabacan shall be given to the defendants and intervenors who
have already acquired ownership over the land titled in the
name of the Bank. 21
NIA, through the Office of the Solicitor General (OSG), appealed the
Decision of the RTC to the CA, which docketed the case as CA-G.R. CV No.
65196. NIA assailed the trial court's adoption of the Commissioners' Report,
which had determined the just compensation to be awarded to the owners of
the lands expropriated. NIA also impugned as error the RTC's inclusion for
compensation of the excavated soil from the expropriated properties. Finally, it
disputed the trial court's Order to deliver the payment intended for the Rural
Bank of Kabacan to defendants-intervenors, who allegedly acquired ownership
of the land still titled in the name of the said rural bank. 22

The Ruling of the Court of Appeals

On 12 August 2008, the CA through its Twenty-First (21st) Division,

promulgated a Decision 23 affirming with modification the RTC Decision. It
ruled that the committee tasked to determine the fair market value of the
properties and improvements for the purpose of arriving at the just
compensation, properly performed its function. The appellate court noted that
the committee members had conducted ocular inspections of the area
surrounding the expropriated properties and made their recommendations
based on official documents from the BIR with regard to the zonal valuations of
the affected properties. 24 The CA observed that, as far as the valuation of the
improvements on the properties was concerned, the committee members took
into consideration the provincial assessor's appraisal of the age of the trees,
their productivity and the inputs made. 25 The appellate court further noted
that despite the Manifestation of NIA that it be allowed to present evidence to
rebut the recommendation of the committee on the valuations of the
expropriated properties, NIA failed to do so. 26  
The assailed CA Decision, however, deleted the inclusion of the value of
the soil excavated from the properties in the just compensation. It ruled that
the property owner was entitled to compensation only for the value of the
property at the time of the taking. 27 In the construction of irrigation projects,
excavations are necessary to build the canals, and the excavated soil cannot
be valued separately from the land expropriated. Thus, it concluded that NIA,
as the new owner of the affected properties, had the right to enjoy and make
use of the property, including the excavated soil, pursuant to the latter's
objectives. 28 CaAcSE
Finally, the CA affirmed the trial court's ruling that recognized
defendants-intervenors Margarita Tabaoda and Portia Charisma Ruth Ortiz as
the new owners of Lot No. 3080 and held that they were thus entitled to just
compensation. The appellate court based its conclusion on the non-
participation by the Rural Bank of Kabacan in the expropriation proceedings
and the latter's Manifestation that it no longer owned Lot No. 3080. 29
On 11 September 2008, the NIA through the OSG filed a Motion for
Reconsideration of the 12 August 2008 Decision, but that motion was
denied. 30
Aggrieved by the appellate court's Decision, NIA now comes to this Court
via a Petition for Review on Certiorari under Rule 45.

The Issues

The following are the issues proffered by petitioner:

THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE
TRIAL COURT'S FINDING OF JUST COMPENSATION OF THE LAND
AND THE IMPROVEMENTS THEREON BASED ON THE REPORT OF THE
COMMISSIONERS.
THE COURT OF APPEALS ERRED IN RULING THAT THE PAYMENT
OF JUST COMPENSATION FOR LOT NO. 3080 SHOULD BE MADE TO
RESPONDENTS MARGARITA TABOADA AND PORTIA CHARISMA RUTH
ORTIZ. 31

The Court's Ruling

On the first issue, the Petition is not meritorious.

In expropriation proceedings, just compensation is defined as the full and
fair equivalent of the property taken from its owner by the expropriator. The
measure is not the taker's gain, but the owner's loss. The word "just" is used
to intensify the meaning of the word "compensation" and to convey thereby
the idea that the equivalent to be rendered for the property to be taken shall
be real, substantial, full and ample. 32 The constitutional limitation of "just
compensation" is considered to be a sum equivalent to the market value of the
property, broadly defined as the price fixed by the seller in open market in the
usual and ordinary course of legal action and competition; or the fair value of
the property; as between one who receives and one who desires to sell it, fixed
at the time of the actual taking by the government. 33
In the instant case, we affirm the appellate court's ruling that the
commissioners properly determined the just compensation to be awarded to
the landowners whose properties were expropriated by petitioner. TEHDIA
The records show that the trial court dutifully followed the procedure
under Rule 67 of the 1997 Rules of Civil Procedure when it formed a committee
that was tasked to determine the just compensation for the expropriated
properties. The first set of committee members made an ocular inspection of
the properties, subject of the expropriation. They also determined the exact
areas affected, as well as the kinds and the number of improvements on the
properties. 34 When the members were unable to agree on the valuation of
the land and the improvements thereon, the trial court selected another batch
of disinterested members to carry out the task of determining the value of the
land and the improvements.
The new committee members even made a second ocular inspection of
the expropriated areas. They also obtained data from the BIR to determine the
zonal valuation of the expropriated properties, interviewed the adjacent
property owners, and considered other factors such as distance from the
highway and the nearby town center. 35 Further, the committee members also
considered Provincial OrdinanceNo. 173, which was promulgated by the
Province of Cotabato on 15 June 1999, and which provide for the value of the
properties and the improvements for taxation purposes. 36
We can readily deduce from these established facts that the committee
members endeavored a rigorous process to determine the just compensation
to be awarded to the owners of the expropriated properties. We cannot, as
petitioner would want us to, oversimplify the process undertaken by the
committee in arriving at its recommendations, because these were not based
on mere conjectures and unreliable data.
In National Power Corporation v. Diato-Bernal, 37 this Court emphasized
that the "just"-ness of the compensation could only be attained by using
reliable and actual data as bases for fixing the value of the condemned
property. The reliable and actual data we referred to in that case were the
sworn declarations of realtors in the area, as well as tax declarations and zonal
valuation from the BIR. In disregarding the Committee Report assailed by the
National Power Corporation in the said case, we ruled thus:
It is evident that the above conclusions are highly speculative
and devoid of any actual and reliable basis. First, the market values
of the subject property's neighboring lots were mere estimates and
unsupported by any corroborative documents, such as sworn
declarations of realtors in the area concerned, tax declarations or
zonal valuation from the Bureau of Internal Revenue for the
contiguous residential dwellings and commercial establishments. The
report also failed to elaborate on how and by how much the
community centers and convenience facilities enhanced the value of
respondent's property. Finally, the market sales data and price
listings alluded to in the report were not even appended thereto.
 As correctly invoked by NAPOCOR, a commissioners' report of
land prices which is not based on any documentary evidence is
manifestly hearsay and should be disregarded by the court. ETAICc
The trial court adopted the flawed findings of the commissioners
hook, line, and sinker. It did not even bother to require the
submission of the alleged "market sales data" and "price listings."
Further, the RTC overlooked the fact that the recommended just
compensation was gauged as of September 10, 1999 or more than
two years after the complaint was filed on January 8, 1997. It is
settled that just compensation is to be ascertained as of the time of
the taking, which usually coincides with the commencement of the
expropriation proceedings. Where the institution of the action
precedes entry into the property, the just compensation is to be
ascertained as of the time of the filing of the complaint. Clearly, the
recommended just compensation in the commissioners' report is
unacceptable. 38
In the instant case, the committee members based their
recommendations on reliable data and, as aptly noted by the appellate court,
considered various factors that affected the value of the land and the
improvements. 39
Petitioner, however, strongly objects to the CA's affirmation of the trial
court's adoption of Provincial Ordinance No. 173. The OSG, on behalf of
petitioner, strongly argues that the recommendations of the committee formed
by the trial court were inaccurate. The OSG contends that the ordinance
reflects the 1999 market values of real properties in the Province of Cotabato,
while the actual taking was made in 1996.40
We are not persuaded.
We note that petitioner had ample opportunity to rebut the testimonial,
as well as documentary evidence presented by respondents when the case was
still on trial. It failed to do so, however. The issue raised by petitioner was
adequately addresses by the CA's assailed Decision in this wise:
A thorough scrutiny of the records reveals that the second set
of Commissioners, with Atty. Marasigan still being the Chairperson
and Mr. Zambrano and Mr. Tomacmol as members, was not arbitrary
and capricious in performing the task assigned to them. We note that
these Commissioners were competent and disinterested persons who
were handpicked by the court a quo due to their expertise in
appraising the value of the land and the improvements thereon in the
province of Cotabato. They made a careful study of the area affected
by the expropriation, mindful of the fact that the value of the land
and its may be affected by many factors. The duly appointed
Commissioners made a second ocular inspection of the subject area
on 4 September 1997; went to the BIR office in order to get the BIR
zonal valuation of the properties located in Carmen, Cotabato;
interviewed adjacent property owners; and took into consideration
various factors such as the location of the land which is just less than
a kilometer away from the Poblacion and half a kilometer away from
the highway and the fact that it is near a military reservation. With
regard to the improvements, the Commissioners took into
consideration the valuation of the Provincial Assessor, the age of the
trees, and the inputs and their productivity.
Thus, it could not be said that the schedule of market values in
Ordinance No. 173 was the sole basis of the Commissioners in
 arriving at their valuation. Said ordinance merely gave credence to
their valuation which is comparable to the current price at that time.
Besides, Mr. Zambrano testified that the date used as bases for
Ordinance No. 173 were taken from 1995 to 1996. 41
Moreover, factual findings of the CA are generally binding on this Court.
The rule admits of exceptions, though, such as when the factual findings of the
appellate court and the trial court are contradictory, or when the findings are
not supported by the evidence on record. 42 These exceptions, however, are
not present in the instant case. DTIaCS
Thus, in the absence of contrary evidence, we affirm the findings of the
CA, which sustained the trial court's Decision adopting the committee's
recommendations on the just compensation to be awarded to herein
respondents. 
We also uphold the CA ruling, which deleted the inclusion of the value of
the excavated soil in the payment for just compensation. There is no legal
basis to separate the value of the excavated soil from that of the expropriated
properties, contrary to what the trial court did. In the context of expropriation
proceedings, the soil has no value separate from that of the expropriated land.
Just compensation ordinarily refers to the value of the land to compensate for
what the owner actually loses. Such value could only be that which prevailed at
the time of the taking.
In National Power Corporation v. Ibrahim, et al., 43 we held that rights
over lands are indivisible, viz.:
[C]onsequently, the CA's findings which upheld those of the trial
court that respondents owned and possessed the property and that
its substrata was possessed by petitioner since 1978 for the
underground tunnels, cannot be disturbed. Moreover, the Court
sustains the finding of the lower courts that the sub-terrain portion of
the property similarly belongs to respondents. This conclusion is
drawn from Article 437 of theCivil Code which provides:
ART. 437. The owner of a parcel of land is the owner of its
surface and of everything under it, and he can construct
thereon any works or make any plantations and excavations
which he may deem proper, without detriment to servitudes
and subject to special laws and ordinances. He cannot complain
of the reasonable requirements of aerial navigation.
Thus, the ownership of land extends to the surface as well
as to the subsoil under it.
xxx xxx xxx
Registered landowners may even be ousted of ownership and
possession of their properties in the event the latter are reclassified
as mineral lands because real properties are characteristically
indivisible. For the loss sustained by such owners, they are entitled to
just compensation under the Mining Laws or in appropriate
expropriation proceedings.
Moreover, petitioner's argument that the landowners' right
extends to the sub-soil insofar as necessary for their practical
interests serves only to further weaken its case. The theory would
limit the right to the sub-soil upon the economic utility which such
area offers to the surface owners. Presumably, the landowners' right
extends to such height or depth where it is possible for them to
 obtain some benefit or enjoyment, and it is extinguished beyond such
limit as there would be no more interest protected by law. HEScID
Hence, the CA correctly modified the trial court's Decision when it ruled
thus:
We agree with the OSG that NIA, in the construction of
irrigation projects, must necessarily make excavations in order to
build the canals. Indeed it is preposterous that NIA will be made to
pay not only for the value of the land but also for the soil excavated
from such land when such excavation is a necessary phase in the
building of irrigation projects. That NIA will make use of the
excavated soil is of no moment and is of noconcern to the landowner
who has been paid the fair market value of his land. As pointed out
by the OSG, the law does not limit the use of the expropriated land
to the surface area only. Further, NIA, now being the owner of the
expropriated property, has the right to enjoy and make use of the
property in accordance with its mandate and objectives as provided
by law. To sanction the payment of the excavated soil is to allow the
landowners to recover more than the value of the land at the time
when it was taken, which is the true measure of the damages, or just
compensation, and would discourage the construction of important
public improvements. 44
On the second issue, the Petition is meritorious.
The CA affirmed the ruling of the trial court, which had awarded the
payment of just compensation — intended for Lot No. 3080 registered in the
name of the Rural Bank of Kabacan — to the defendants-intervenors on the
basis of the non-participation of the rural bank in the proceedings and the
latter's subsequent Manifestation that it was no longer the owner of that lot.
The appellate court erred on this matter.
It should be noted that eminent domain cases involve the expenditure of
public funds. 45 In this kind of proceeding, we require trial courts to be more
circumspect in their evaluation of the just compensation to be awarded to the
owner of the expropriated property. 46 Thus, it was imprudent for the
appellate court to rely on the Rural Bank of Kabacan's mere declaration of non-
ownership and non-participation in the expropriation proceeding to validate
defendants-intervenors' claim of entitlement to that payment.
The law imposes certain legal requirements in order for a conveyance of
real property to be valid. It should be noted that Lot No. 3080 is a registered
parcel of land covered by TCT No. T-61963. In order for the reconveyance of
real property to be valid, the conveyance must be embodied in a public
document 47 and registered in the office of the Register of Deeds where the
property is situated. 48
We have scrupulously examined the records of the case and
found no proof of conveyance or evidence of transfer of ownership of Lot No.
3080 from its registered owner, the Rural Bank of Kabacan, to defendants-
intervenors. As it is, the TCT is still registered in the name of the said rural
bank. It is not disputed that the bank did not participate in the expropriation
proceedings, and that it manifested that it nolonger owned Lot No. 3080. The
trial court should have nevertheless required the rural bank and the
defendants-intervenors to show proof or evidence pertaining to the conveyance
of the subject lot. The court cannot rely on mere inference, considering that
the payment of just compensation is intended to be awarded solely owner
based on the latter's proof of ownership. IATSHE
 The trial court should have been guided by Rule 67, Section 9 of the 1997
Rules of Court, which provides thus:
SEC. 9. Uncertain ownership; conflicting claims. — If the
ownership of the property taken is uncertain, or there are conflicting
claims to any part thereof, the court may order any sum or sums
awarded as compensation for the property to be paid to the court for
the benefit of the person adjudged in the same proceeding to be
entitled thereto. But the judgment shall require the payment of the
sum or sums awarded to either the defendant or the court before the
plaintiff can enter upon the property, or retain it for the public use or
purpose if entry has already been made.
Hence, the appellate court erred in affirming the trial court's Order to
award payment of just compensation to the defendants-intervenors. There is
doubt as to the real owner of Lot No. 3080. Despite the fact that the lot was
covered by TCT No. T-61963 and was registered under its name, the Rural
Bank of Kabacan manifested that the owner of the lot was no longer the bank,
but the defendants-intervenors; however, it presented no proof as to the
conveyance thereof. In this regard, we deem it proper to remand this case to
the trial court for the reception of evidence to establish the present owner of
Lot No. 3080 who will be entitled to receive the payment of just compensation.
WHEREFORE, the Petition is PARTLY GRANTED. The 12 August 2008
CA Decision in CA-G.R. CV No. 65196, awarding just compensation to the
defendants as owners of the expropriated properties and deleting the inclusion
of the value of the excavated soil, is
hereby AFFIRMED with MODIFICATION. The case is hereby REMANDED to
the trial court for the reception of evidence to establish the present owner of
Lot No. 3080. No pronouncements as to cost. SO ORDERED. ||| (Republic v.
Rural Bank of Kabacan, Inc., G.R. No. 185124, [January 25, 2012], 680 PHIL
247-265)

[G.R. No. 225176. January 19, 2018.]

ESMERALDO GATCHALIAN, duly represented by SAMUEL

GATCHALIAN, petitioner, vs. CESAR FLORES, JOSE LUIS
ARANETA, CORAZON QUING, and CYNTHIA
FLORES, respondents.
 DECISION

TIJAM, J  p:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules

of Court filed by Esmeraldo Gatchalian, represented herein by Samuel C.
Gatchalian (petitioner) assailing the Amended Decision 1 dated October 23,
2015 and Resolution 2 dated June 15, 2016 of the Court of Appeals (CA) in
CA-G.R. SP No. 126530, which affirmed the Decision 3 dated June 8, 2012 of
the Regional Trial Court (RTC), Branch 196 of Parañaque City in Civil Case No.
12-0050, dismissing the complaint for ejectment filed by petitioners against
Cesar Flores, Jose Paolo 4 Araneta, Corazon Quing and Cynthia Flores
(collectively as respondents), which was originally filed in the Metropolitan Trial
Court (MeTC), Branch 77 of Parañaque City, in Civil Case No. 2011-
49. HTcADC
The pertinent facts as found by the CA are as follows:
Petitioner is one of the co-owners of a parcel of land (Road Lot
23) covered by Transfer Certificate of Title No. 79180 located at
Brgy. Vitalez, Parañaque City. Road Lot 23 is registered under the
name of petitioner's parents, spouses Sixto Gatchalian and Liceria
Gatchalian. On June 2, 2011, petitioner filed a Complaint for
Ejectment with Damages against respondents Cesar Flores, Jose
Paolo Araneta (sic), Corazon Quing and Cynthia Flores
(respondents) with the Metropolitan Trial Court (MeTC) of
Parañaque City, Branch 77 and docketed as Civil Case No. 2011-49.
The survey conducted on the property established that the lot
of Segundo Mendoza encroached a portion of Road Lot 23 which the
Gatchalian's had tolerated. But after several years, the lot of
Segundo Mendoza was sold and subdivided among the new owners
including herein respondents. When the latter demonstrated acts of
gross ingratitude to the Gatchalian family, petitioner and his family
were constrained to withdraw their tolerated possession, use and
occupation of the portion of Road Lot 23. Verbal and written
demands to vacate were then served upon them but remained
unheeded. Their dispute reached the Lupong Tagapamayapa but all
in vain. Hence, the filing of the ejectment case against the
respondents.
For their part, respondents denied that they usurped the
property of petitioner. In fact, it was the Gatchalians who have
encroached on Road Lot 23 when they put up a fence in their
(respondents) property. They insisted that Road Lot 23 is a public
road and is now known as "Don Juan Street Gat-Mendoza." In the
subdivision plan of the GAT Mendoza Housing area, Road Lot 23 is
constituted as a right of way. Respondents believed that petitioner
has no cause of action against them and has no authority to file the
instant case because it is the City Government of Parañaque which
has the right to do so. 5
On December 9, 2011, the MeTC rendered a Decision 6 ordering
respondents to vacate Road Lot 23, thus:
WHEREFORE, premises considered, judgment is hereby
rendered as follows ordering the defendants CESAR FLORES, JOSE
PAOLO ARANETA, CORAZON QUING AND CYNTHIA FLORES and all
persons claiming rights under them, to wit:
 1) to vacate the 140.50 square meter portion of the Road (Lot
23) encroached by them which is covered by TCT No. 79180 and
located at Don Juan St., Barangay Vitalez, Parañaque City;
2) to pay reasonable amount of rental in the amount of
P20,000.00 a month plus legal rate of interest reckoned from June
2, 2011 until the defendants shall have fully vacated the encroached
portion of the Road (Lot 23);
3) P20,000.00 as and (sic) for Attorney's fees;
4) Cost of suit.
SO ORDERED. 7
Respondents appealed the same to the RTC, which reversed the ruling of
the MeTC in its Decision 8 dated June 8, 2012, to wit:
WHEREFORE, premises considered, the appealed Decision
dated December 9, 2011 by Branch 78 of the Metropolitan Trial
Court of Parañaque docketed under Civil Case No. 2011-49 is
REVERSED and the Complaint dated June 2, 2011 is herewith
DISMISSED for lack of merit.
SO ORDERED. 9
Aggrieved, petitioner appealed to the CA. The latter in its
Decision 10 dated March 13, 2015, reversed the RTC and reinstated the ruling
of the MeTC. However, upon reconsideration, the CA reversed itself and
affirmed the RTC, thus:
WHEREFORE, respondent's Motion for Reconsideration is
hereby GRANTED. Accordingly, we REVERSE and SET ASIDE our
findings in our Decision dated March 13, 2015. The instant petition
fore review is hereby DISMISSED and the Decision dated June 8,
2012 of the Regional Trial Court of Parañaque City, Branch 196 in
Civil Case No. 12-0050 is UPHELD.
SO ORDERED. 11
Hence, this petition.
Petitioner claimed that the CA committed grave error in ruling that the
private character of Road Lot 23 has been stripped by Municipal Ordinance No.
88-04, series of 1988 constituting the said road lot as a public right-of-way.
Petitioner also claimed that the CA erred in stating that by virtue of laches, the
road lot has been converted to public property of the municipality. aScITE
Petitioner further alleged that the road lot is still private property it being
covered by TCT No. 79180 under the name of Spouses Sixto Gatchalian and
Liceria Gatchalian. The mere usage by the public of the road lot does not make
it public property. To convert the same to public property, it must be
expropriated by the government or the registered owner must donate or sell
the same to the government.
The petition is granted.
At the outset, petitioner filed before the MeTC an action for ejectment
against the respondents. It is settled that in ejectment proceedings, the only
issue for the Court's resolution is, who between the parties is entitled to the
physical or material possession of the subject property. Issues as to ownership
are not involved, except only for the purpose of determining the issue of
possession. 12
In the instant case, petitioner asserts that he is entitled to the possession
of the road lot being one of the co-owners of the same since it is registered
under the name of petitioner's parents. While respondents do not claim
ownership of the subject lot, they argued that the road lot is now public
property because of Ordinance No. 88-04, series of 1988 constituting it as
"Don Juan St. Gat-Mendoza." As such, petitioner cannot evict respondents.
It is undisputed that the road lot is registered under the name of
petitioner's parents. Even the respondents did not dispute this fact. It is also
undisputed that the municipal government has not undertaken any
expropriation proceedings to acquire the subject property neither did the
petitioner donate or sell the same to the municipal government. Therefore,
absent any expropriation proceedings and without any evidence that the
petitioner donated or sold the subject property to the municipal government,
the same is still private property.
In the case of Woodridge School, Inc. v. ARB Construction Co.,
Inc., 13 this Court held that:
In the case of Abellana, Sr. v. Court of Appeals, the Court held
that "the road lots in a private subdivision are private property,
hence, the local government should first acquire them by donation,
purchase or expropriation, if they are to be utilized as a public
road." Otherwise, they remain to be private properties of the
owner-developer.
Contrary to the position of petitioners, the use of the
subdivision roads by the general public does not strip it of its
private character. The road is not converted into public property by
mere tolerance of the subdivision owner of the public's passage
through it. To repeat, "the local government should first acquire
them by donation, purchase or expropriation, if they are to be
utilized as a public road." 14
As reiterated in the recent case of Republic of the Philippines,
represented by the Department of Public Works and Highways (DPWH) v. Sps.
Llamas, 15 this Court held that:
As there is no such thing as an automatic cessation to [the]
government of subdivision road lots, an actual transfer must first be
effected by the subdivision owner: "subdivision streets belonged to
the owner until donated to the government or until expropriated
upon payment of just compensation." 16
Since the local government of Parañaque has not purchased nor
undertaken any expropriation proceedings, neither did the petitioner and his
siblings donate the subject property, the latter is still a private property and
Ordinance No. 88-04 did not convert the same to public property.
As to the CA's finding that by virtue of laches the subject property has
been converted into public property, We do not agree.
It is well-settled that an "owner of [a] registered land does not lose his
rights over a property on the ground of laches as long as the opposing
claimant's possession was merely tolerated by the owner." 17
A torrens title is irrevocable and its validity can only be challenged in a
direct proceeding. 18 A torrens title is an indefeasible and impresciptible title
to a property in favor of the person in whose name the title appears. The
owner is entitled to all the attributes of ownership of the property, including
possession. The person who has a torrens title over a land is entitled to
possession thereof. As such, petitioner can file an ejectment case against
herein respondents who encroached upon a portion of petitioner's property.
 WHEREFORE, premises considered, the petition is GRANTED. The
Amended Decision dated October 23, 2015 and Resolution dated June 15,
2016 of the Court of Appeals in CA-G.R. SP No. 126530 are hereby REVERSED
and SET ASIDE. The Decision dated December 9, 2011 of the Metropolitan
Trial Court in Civil Case No. 2011-49 is REINSTATED. HEITAD
SO ORDERED.
|||  (Gatchalian v. Flores, G.R. No. 225176, [January 19, 2018])

[G.R. No. 202448. December 13, 2017.]

JOSEPH O. REGALADO, petitioner, vs. EMMA DE LA RAMA VDA.

DE LA PENA, 1 JESUSA 2 DE LA PENA, JOHNNY DE LA PENA,
 JOHANNA DE LA PENA, JOSE DE LA PENA, JESSICA DE LA
PENA, and JAIME ANTONIO DE LA PENA, respondents.

DECISION

DEL CASTILLO, J  p:

This Petition for Review on Certiorari seeks to reverse and set aside the
May 28, 2012 Decision 3 of the Court of Appeals (CA) in CA-G.R. CV No.
02994, which affirmed the January 20, 2009 Decision 4 of the Regional Trial
Court (RTC) of Bacolod City, Branch 42 in Civil Case No. 98-10187 for
"Recovery of Possession and Damages with Injunction." ETHIDa
Factual Antecedents

Emma, Jesusa, Johnny, Johanna, Jose, Jessica, and Jaime Antonio

(Jaime); all surnamed de la Pena (respondents), are the registered owners of
two parcels of land with a total area of 44 hectares located in Murcia, Negros
Occidental. These properties are referred to as Lot Nos. 138-D and 138-S, and
are respectively covered by Transfer Certificates of Title No. T-103187 and T-
103189 5 (subject properties).
Purportedly, in 1994, without the knowledge and consent of respondents,
Joseph Regalado (petitioner) entered, took possession of, and planted sugar
cane on the subject properties without paying rent to respondents. In the crop
year 1995-1996, respondents discovered such illegal entry, which prompted
them to verbally demand from petitioner to vacate the properties but
to no avail. 6
Later, the parties appeared before the Barangay Office of Cansilayan,
Murcia, Negros Occidental but failed to arrive at any amicable settlement. On
September 29, 1997, the Lupon Tagapamayapa of said Barangay issued a
Certificate to File Action; 7 and, on March 9, 1998, respondents filed a
Complaint 8 for recovery of possession and damages with injunction against
petitioner.
In his Answer, 9 petitioner countered that in 1994, Emma, Jesusa,
Johnny, Johanna, and Jessica executed their separate Waivers of Undivided
Share of Lands renouncing their rights and interests over the subject
properties in favor of Jaime. In turn, Jaime subsequently waived his rights and
interests on the same properties to petitioner. 10 Petitioner claimed that
respondents did not attempt to enter the properties as they already
intentionally relinquished their interests thereon.
Thereafter, petitioner filed a Motion to Dismiss 11 on the ground, among
others, that the RTC has no jurisdiction over the subject matter of the case.
Petitioner posited that based on the allegations in the Complaint, the action
involved recovery of physical possession of the properties in dispute; said
Complaint was also filed within one year from the date the parties had a
confrontation before the Barangay; and thus, the case was one for Ejectment
and must be filed with the proper Municipal Trial Court (MTC).
In their Reply, 12 respondents alleged that the waiver of rights in favor
of Jaime was conditioned on the payment of their P6.7 million loan with the
Republic Planters Bank (RPB) and Philippine National Bank (PNB); and, in case
the subject properties would be sold, its proceeds shall be equally distributed
to respondents. They further stated that such waiver bestowed rights over the
properties solely upon Jaime. They added that the subsequent waiver executed
by Jaime to petitioner should have been with conformity of the banks where
the properties were mortgaged; and conditioned on the payment of the P6.7
million loan. They pointed out that neither Jaime nor petitioner paid any
amount to RPB or PNB; and as a result, the waivers of rights in favor of Jaime,
and later to petitioner, were void.
Subsequently, in their Opposition to Motion to Dismiss, 13 respondents
contended that the RTC had jurisdiction over the case because their demand
for petitioner to vacate the properties was made during the crop year 1995-
1996, which was earlier than the referral of the matter
to Barangay Cansilayan.
On July 31, 2000, the RTC denied the Motion to Dismiss. It held that it
had jurisdiction over the case because the area of the subject properties was
44 hectares, more or less, and "it is safe to presume that the value of the
same is more than P20,000.00." 14
Ruling of the Regional Trial Court

On January 20, 2009, the RTC rendered a Decision ordering petitioner to

turn over the subject properties to respondents and to pay them P50,000.00
as attorney's fees.
The RTC ratiocinated that the waiver of rights executed by Jaime to
petitioner was coupled with a consideration. However, petitioner failed to prove
that he paid a consideration for such a waiver; as such, petitioner was not
entitled to possess the subject properties.
Both parties appealed to the CA.
On one hand, petitioner reiterated that the RTC had no jurisdiction over
the case. He also maintained that respondents already waived their shares and
rights over the properties to Jaime, who, in turn, renounced his rights to
petitioner.
On the other hand, respondents assailed the RTC Decision in so far as it
failed to award them damages as a result of petitioner's purported illegal entry
and possession of the subject properties.
Ruling of the Court of Appeals

On May 28, 2012, the CA affirmed the RTC Decision.

The CA dismissed respondents' appeal because they did not establish
entitlement to damages. It likewise dismissed the appeal interposed by
petitioner for failing to establish that he gave any consideration in relation to
Jaime's waiver of rights in his (petitioner) favor.
In addition, the CA ruled that the RTC had jurisdiction over this case
considering that the parties stipulated on the jurisdiction of the RTC but also
because the assessed value of the subject properties is presumed to have
exceeded P20,000.00.

Issues

Hence, petitioner filed this Petition raising the issues as follows:

I. DID THE REGIONAL TRIAL COURT HAVE JURISDICTION OVER THE
SUBJECT MATTER OF THE CASE?
II. DID THE COURT OF APPEALS ERR IN RULING THAT PETITIONER
SHOULD RETURN POSSESSION OF THE PROPERTIES SUBJECT
OF THIS CASE TO THE RESPONDENTS?
 III. SHOULD THE PETITIONER BE AWARDED DAMAGES? 15
Petitioner's Arguments

Petitioner insists that respondents filed their Complaint for recovery of

physical possession of the subject properties on March 9, 1998 or within one
year from the date the parties had their confrontation before the Barangay of
Cansilayan (September 29, 1997). As such, he maintains that the RTC did not
have jurisdiction over the case. cSEDTC
Petitioner also posits that even granting that this action is considered a
plenary action to recover right of possession, the RTC still had no jurisdiction
because the tax declarations of the properties were not submitted, and
consequently, it cannot be determined whether it is the MTC or RTC which has
jurisdiction over the case.
Moreover, petitioner argues that Jaime's waiver in his (petitioner's) favor
was coupled with the following considerations: 1) P400,000.00 cash; 2) a car
worth P350,000.00; and 3) a convenience store worth P1,500,000.00. He adds
that the delivery of the properties to him confirms that he (petitioner) gave
said considerations to Jaime.
Later, in his Manifestation and Motion, 16 petitioner points out that
although the body of the assailed CA Decision made reference to the January
20, 2009 RTC Decision, its dispositive portion pertained to a different case, to
wit:
WHEREFORE, premises considered, the August 29,
2008 Decision of the Regional Trial Court, Branch 10 in Civil
Case No. CEB-30866 is AFFIRMED.
Costs against both appellants.
SO ORDERED. 17 (Underlining ours)
Consequently, petitioner prays that the dispositive portion of the CA
Decision be rectified to refer to the actual case subject of the appeal.
Respondents' Arguments

On the other hand, respondents contend that the CA did not commit any
reversible error in rendering the assailed Decision. They insist that petitioner's
contentions are unsubstantial to merit consideration.

Our Ruling

The Court grants the Petition.

In our jurisdiction, there are three kinds of action for recovery of
possession of real property: 1) ejectment (either for unlawful detainer or
forcible entry) in case the dispossession has lasted for not more than a year;
2) accion publiciana or a plenary action for recovery of real right of possession
when dispossession has lasted for more than one year; and, 3) accion
reinvindicatoria or an action for recovery of ownership. 18
Pursuant to Republic Act No. 7691 (RA 7691), 19 the proper Metropolitan
Trial Court (MeTC), MTC, or Municipal Circuit Trial Court (MCTC) has exclusive
original jurisdiction over ejectment cases. Moreover, jurisdiction of the MeTC,
MTC, and MCTC shall include civil actions involving title to or possession of real
property, or any interest therein where the assessed value of the property
does not exceed P20,000.00 (or P50,000.00 in Metro Manila). 20 On the other
hand, the RTC has exclusive original jurisdiction over civil actions involving title
to or possession of real property, or any interest therein in case the assessed
value of the property exceeds P20,000.00 (or P50,000.00 in Metro Manila). 21
Jurisdiction is thus determined not only by the type of action filed but
also by the assessed value of the property. It follows that in accion
publiciana and reinvindicatoria, the assessed value of the real property is a
jurisdictional element to determine the court that can take cognizance of the
action. 22
In this case, petitioner consistently insists that a) the Complaint is one
for ejectment; or b) if the same is deemed an accion publiciana, the RTC still
lacks jurisdiction as the assessed value of the subject properties was not
alleged in the Complaint.
As such, to ascertain the proper court that has jurisdiction, reference
must be made to the averments in the complaint, and the law in force at the
commencement of the action. This is because only the facts alleged in the
complaint can be the basis for determining the nature of the action, and the
court that can take cognizance of the case. 23
Here, the pertinent portions of the Complaint read:
2. That plaintiffs [herein respondents] are the owners of two
(2) parcels of land known as Lot No. 138-D with Transfer Certificate
of Title No. T-103187 and Lot No. 138-S with Transfer Certificate of
Title No. T-103189, with a total land area of 44 hectares, all of
Murcia Cadastre x x x;
3. That sometime in 1994, without the knowledge and consent
of herein plaintiffs, the defendant [herein petitioner] entered into
and took possession of the aforementioned parcels of land and
planted sugar cane without paying any rental to herein
plaintiffs; SDAaTC
4. That plaintiffs discovered the illegal entry and occupation by
the defendant of the aforementioned property and demand to
vacate the property was made orally to the defendant sometime in
1995-96 crop year but defendant refused and still refuses to vacate
the premises;
5. A confrontation before the Brgy. Kapitan of Brgy[.]
Cansilayan, Murcia, Negros Occidental, and before the Pangkat
Tagapag[ka]sundo between herein parties where plaintiffs again
demanded orally for the defendant to vacate the premises but
defendant refused to vacate the premises and no amicable
settlement was reached during the confrontation of the parties, thus
a certificate to file action has been issued x x x;
6. That plaintiffs were barred by the defendant from entering
the property of the plaintiffs for the latter to take possession of the
same and plant sugar cane thereby causing damages to the
plaintiffs;
7. That because of the refusal of the defendant to allow the
plaintiffs to take possession and control of their own property,
plaintiffs were constrained to seek the aid of counsel and
consequently thereto this complaint. 24
Under Section 1, 25 Rule 70 of the Rules of Court, there are special
jurisdictional facts that must be set forth in the complaint to make a case for
ejectment, which, as mentioned, may either be for forcible entry or unlawful
detainer.
 In particular, a complaint for forcible entry must allege the plaintiff's prior
physical possession of the property; the fact that plaintiff was deprived of its
possession by force, intimidation, threat, strategy, or stealth; and the action
must be filed within one year from the time the owner or the legal possessor
learned of their dispossession. 26 On the other hand, a complaint for unlawful
detainer must state that the defendant is unlawfully withholding possession of
the real property after the expiration or termination of his or her right to
possess it; and the complaint is filed within a year from the time such
possession became unlawful. 27
In the instant case, respondents only averred in the Complaint that they
are registered owners of the subject properties, and petitioner unlawfully
deprived them of its possession. They did not assert therein that they were
dispossessed of the subject properties under the circumstances necessary to
make a case of either forcible entry or unlawful detainer. Hence, in the
absence of the required jurisdictional facts, the instant action is not one for
ejectment. 28
Nonetheless, the Court agrees with petitioner that while this case is
an accion publiciana, there was no clear showing that the RTC has jurisdiction
over it.
Well-settled is the rule that jurisdiction is conferred only by law. It cannot
be presumed or implied, and must distinctly appear from the law. It cannot
also be vested upon a court by the agreement of the parties; or by the court's
erroneous belief that it had jurisdiction over a case. 29
To emphasize, when respondents filed the Complaint in 1998, RA
7691 was already in force as it was approved on March 25, 1994 and took
effect on April 15, 1994. 30 As such, it is necessary that the assessed value of
the subject properties, or its adjacent lots (if the properties are not declared
for taxation purposes) 31 be alleged to ascertain which court has jurisdiction
over the case. 32
As argued by petitioner, the Complaint failed to specify the assessed
value of the subject properties. Thus, it is unclear if the RTC properly acquired
jurisdiction, or the MTC has jurisdiction, over respondents' action.
Also worth noting is the fact that the RTC took cognizance of the
Complaint only on the presumption that the assessed value of the properties
exceeds P20,000.00. Aside from affirming such presumption, the CA, in turn,
declared that the RTC had jurisdiction because the parties stipulated on it.
However, as discussed, jurisdiction cannot be presumed. It cannot be
conferred by the agreement of the parties, or on the erroneous belief of the
court that it had jurisdiction over a case.
Indeed, in the absence of any allegation in the Complaint of the assessed
value of the subject properties, it cannot be determined which court has
exclusive original jurisdiction over respondents' Complaint. Courts cannot
simply take judicial notice of the assessed value, or even market value of the
land. 33 Resultantly, for lack of jurisdiction, all proceedings before the RTC,
including its decision, are void, 34 which makes it unnecessary to discuss the
other issues raised by petitioner.
As a final note, while the modification of the clerical error in the
dispositive portion of the CA Decision is rendered irrelevant by the dismissal of
the Complaint for lack of jurisdiction, the Court, nonetheless, reminds the CA
and all other courts to be more circumspect in rendering their decision,
including ensuring the correctness of the information in their issuances. After
all, courts are duty-bound to render accurate decisions, or that which clearly
and distinctly express the facts and the law on which the same is
based. 35 acEHCD
WHEREFORE, the Petition is GRANTED. The May 28, 2012 Decision of
the Court of Appeals in CA-G.R. CV No. 02994 is REVERSED and SET ASIDE.
Accordingly, the Complaint in Civil Case No. 98-10187 is DISMISSED.
SO ORDERED.
|||  (Regalado v. De la Pena, G.R. No. 202448, [December 13, 2017])
 [G.R. No. 229645. June 6, 2018.]

NORMA M. BALEARES, DESIDERIO M. BALEARES, GERTRUDES

B. CARIASA, RICHARD BALEARES, JOSEPH BALEARES, SUSAN
B. DELA CRUZ, MA. JULIA B. RECTRA, and EDWIN
BALEARES, petitioners, vs. FELIPE B. ESPANTO, rep. by
MARCELA B. BALEARES, Attorney-in-Fact, respondent.

DECISION

VELASCO, JR., J  p:

For review in the instant Petition 1 is the Decision 2 promulgated on

January 31, 2017 by the Court of Appeals (CA) in CA-G.R. SP No. 144007,
which affirmed the Decision 3 and the Order 4 dated July 24, 2015 and
December 29, 2015, respectively, of the Regional Trial Court (RTC) of Makati
City, Branch 137 in Civil Case No. 15-113 (For Ejectment). CAIHTE
The controversy arose from the following antecedents:
The herein respondent is the current registered owner of a parcel of land
with improvements situated at No. 3288 A. Mabini St., Poblacion, Makati City
(subject property), and covered by Transfer Certificate of Title (TCT) No.
225428. The herein petitioners, on the other hand, were the heirs of Santos
Baleares (Santos), one of the original co-owners of the subject
property 5 (previously covered by TCT No. 9482), 6 together with his siblings
Tomasa, Julia, Matilde, Marcela, Gloria (now deceased), all surnamed Baleares,
and his nephew, Ernest B. Nonisa, Jr. (now deceased).
Way back on February 18, 1988, the Baleares siblings mortgaged the
subject property to Arnold Maranan (Arnold). 7 The mortgage was registered
and annotated at the back of TCT No. 9482 as Entry No. 47847. 8 Unknown to
the petitioners, the subject property was apparently foreclosed and sold at
public auction on August 13, 1996, where Arnold appeared to be the highest
bidder. 9
Contrariwise, sometime in 1998, believing that Arnold failed to enforce
his mortgaged right over the subject property within the 10-year prescriptive
period, the petitioners, as heirs of Santos and the possessors and occupants
thereof, 10 lodged a Complaint for the Cancellation of the Mortgage
Inscription on TCT No. 9482 grounded on prescription before Branch 134 of
RTC-Makati City, docketed as Civil Case No. 98-1360. 11 During its
pendency, however, a Certificate of Sale 12 dated March 2, 1999 was allegedly
issued to Arnold. TCT No. 9482 was consequently cancelled and a new one,
TCT No. 225363, was issued in his favor. 13
Sometime thereafter in April 2000, respondent and his mother likewise
filed a complaint against Arnold but for Nullification of Mortgage and/or
Foreclosure with TRO/Injunction based also on prescription of the latter's
mortgaged right. This was lodged before Branch 135 of RTC-Makati City
and docketed as Civil Case No. 00-523. 14 Purportedly, respondent and his
mother were among the co-owners of the subject property; the latter
(respondent's mother) being one of the Baleares siblings.
 On July 18, 2003, the RTC rendered a Decision 15 in Civil Case No.
98-1360 (cancellation of mortgage inscription) in favor of the
petitioners. The RTC held that there was no valid extrajudicial foreclosure of
mortgage and auction sale for non-compliance with the notice and posting of
publication requirements set forth under Act No. 3135, as amended. And, since
the alleged mortgage loan had been due for more than 10 years, without
Arnold having exercised his mortgaged right, thus, the inscription on TCT No.
9482 can now be cancelled on the ground of prescription. The RTC, thus,
ordered the Register of Deeds of Makati City to cancel Entry No. 47847 dated
February 18, 1988 at the back of TCT No. 9482. 16 The CA affirmed this
decision, which became final and executory on February 1, 2008. 17
In the same year, all this notwithstanding, Arnold was able to sell 18 the
subject property to none other than the respondent himself. Later, TCT No.
225428 was issued in respondent's name. The latter, however, did not
immediately take possession of the subject property. Instead, he allowed the
petitioners, who were its actual occupants, to remain therein as they are his
blood relatives. 19
After some time, the respondent sent a demand letter to the petitioners
for them to vacate the subject property as he wanted to construct an
apartment thereon but they refused. In so refusing, the petitioners maintained
that they have a better right of possession over the subject property being the
heirs of its original owners. 20 On June 17, 2009, a final demand was made for
the petitioners to vacate the subject property and to pay the reasonable
rentals thereon, 21 but this remained unheeded. Even the subsequent
barangay settlement proved futile. Thus, the respondent instituted
a Complaint for Unlawful Detainer before the MeTC-Makati City against the
petitioners, docketed as Civil Case No. 98995 (the origin of this Petition).
In their Verified Answer with Motion to Dismiss and Counterclaim, the
petitioners averred that the MeTC has no jurisdiction over the instant action, as
it is one for recovery of possession and not for unlawful detainer. They also
raise the existence of litis pendentia, as there are allegedly two pending cases
involving similar issues of ownership and possession that are still pending
before the RTC-Makati City. They maintained that they are co-owners of the
subject property, thus, their right to stay thereon was not because of the
respondent's tolerance. 22
In a Decision dated August 11, 2014, the MeTC ruled for the respondent
and granted the Complaint. It found the complaint to be sufficient for an
unlawful detainer case and upheld that the case should not be dismissed on
the ground of litis pendentia, as the issues in the alleged two pending cases
before the RTC-Makati City do not abate ejectment suit. The MeTC, thus,
ordered the petitioners and all persons claiming rights under them to vacate
the subject property and to peaceably surrender its possession to the
respondent. The petitioners were also ordered to pay the respondent these
amounts (1) P5,000.00 per month as reasonable compensation for use and
occupation of the subject property reckoned from December 22, 2008 and
every month thereafter until they fully vacated the same; (2) P15,000.00 as
attorney's fees; and (3) the costs of suit. 23 The subsequent Motion for
Reconsideration was denied in an Order 24 dated October 24, 2014 for being a
prohibited pleading. DETACa
On appeal, the RTC, in a Decision dated July 24, 2015, affirmed in its
entirety the MeTC ruling. The petitioners moved to reconsider the same but it
was similarly denied for lack of merit in an Order dated December 29, 2015.
In the interim, the respondent moved for the execution of the RTC
Decision, which was granted in an Order 25 dated December 26, 2016
pursuant to Section 21, 26 Rule 70 of the Rules of Court in relation to Section
21 27 of the Revised Rule on Summary Procedure.
On further appeal, the CA, in the now assailed Decision dated January 31,
2017, affirmed both the Decision and the Order of the RTC. The CA also
ordered the petitioners to pay six percent (6%) interest rate of the outstanding
obligation from finality of judgment until fully satisfied. The CA rejected the
petitioners' argument that the RTC Decision in Civil Case No. 98-1360 binds
the respondent for being a mere transferee of Arnold under the doctrine of res
judicata.
Hence, this Petition raising these arguments: (1) the CA erred in not
finding that respondent is a transferee pendete lite with respect to the subject
property; and (2) the CA erred in ruling that the respondent's ejectment
complaint is not barred by the final and executory Decision in Civil Case No.
98-1360 against Arnold, his transferor, with respect to the subject
property. 28
In essence, the pivotal issue that must be resolved here is who between
the petitioners and the respondent has a better right of possession over the
subject property? The petitioners who are in possession of the same
continuously for a long period of time or the respondent whose right of
possession is anchored on a Torrens title obtained through purchase from
someone whose right over the subject property has long ceased and he has
knowledge of such fact?
This Court rules for the petitioners.
Generally, the factual findings of the trial courts, especially when affirmed
on appeal by the CA, are binding and conclusive upon this Court. This rule,
however, admits of several exceptions and one of which is when the CA
manifestly overlooked certain relevant facts not disputed by the parties, which,
if properly considered, would justify a different conclusion. In which case, this
Court can go over the records and re-examine the evidence presented by the
parties in order to arrive at a much better and just resolution of the case.
This case involved an action for unlawful detainer filed by the respondent
against the petitioners. An action for unlawful detainer is summary in nature
and the only issue that needs to be resolved is who is entitled to physical
possession of the premises, possession referring to possession de facto, and
not possession de jure. Nonetheless, where the parties to an ejectment case
raise the issue of ownership and such is inseparably linked to that of
possession, the courts may pass upon that issue to determine who between
the parties has the better right to possess the property. The adjudication of the
ownership issue, however, is not final and binding. The same is only for the
purpose of resolving the issue of possession. Otherwise stated, the
adjudication of the issue of ownership is only provisional, and not a bar to an
action between the same parties involving title to the property. 29
Here, the petitioners claim that they have a better right of possession
over the subject property as they are the heirs of one of its original co-owners
and they have been in lawful possession and occupation thereof ever since,
thus, they cannot be dispossessed of the subject property. The respondent, on
the other hand, based his claim of ownership and right of possession over the
subject property on a certificate of title issued in his name. However, the
respondent, being a mere transferee of the subject property who has
knowledge that his transferor's mortgaged right over the same has been
cancelled with finality by the court, merely stepped into his transferor's shoes,
thus, he has no right over the subject property.
 It is true that a title issued under the Torrens system is entitled to all the
attributes of property ownership, which necessarily includes possession. 30 As
such, ordinarily, the Torrens title holder over the subject properties is
considered the rightful owner who is entitled to possession thereof. But, in this
case, it has not been disputed that the petitioners have been in continuous
possession of the subject property in the concept of ownership and not by
mere tolerance of the respondent. Moreover, the latter has knowledge that his
transferor has no more right to enforce the mortgage over the subject property
on the ground of prescription as stated in the RTC Decision in Civil Case No.
98-1360. The trial court also declared therein that Arnold's extrajudicial
foreclosure and auction sale of the subject property was non-existent and void,
which ruling already attained finality. As such, it would appear that the
respondent's right over the subject property is highly questionable. Under
these circumstances, the respondent cannot simply oust the petitioners from
possession through the summary procedure of an ejectment
proceeding. aDSIHc
It bears stressing that the herein ruling is limited only to the
determination as to who between the parties has the better right of
possession. It will not in any way bar any of the parties from filing an action
with the proper court to resolve conclusively the issue of ownership.
WHEREFORE, premises considered, the present petition is GRANTED.
The CA Decision dated January 31, 2017 in CA-G.R. SP No. 144007
is REVERSED and SET ASIDE. A new judgment is rendered DISMISSING the
Complaint in Civil Case No. 98995 for lack of merit. SO ORDERED.
|||  (Baleares v. Espanto, G.R. No. 229645, [June 6, 2018])
 [G.R. No. 217296. October 11, 2017.]

SPOUSES ERWIN C. SANTIAGO and MARINELA A. SANTIAGO;

SPOUSES GAUDENCIO A. MANIMTIM, JR. and EDITHA P.
MANIMTIM; SPOUSES RAMIRO C. ALBARAN and ELVA C.
ALBARAN; and CESAR F. ODAN, petitioners, vs. NORTHBAY
KNITTING, INC., respondent.

DECISION

PERALTA, J  p:

Before the Court is a Petition for Review seeking to annul and set aside
the Decision 1 of the Court of Appeals (CA), dated September 26, 2014, as
well as its Resolution 2 dated February 25, 2015 in CA-G.R. SP No. 132962,
reversing the Decision 3 of the Malabon Regional Trial Court (RTC) dated May
29, 2013 in Civil Case No. ACV 12-008-MN.
The procedural and factual antecedents of the case are as follows:
Respondent Northbay Knitting, Inc. (NKI) filed a Complaint for Ejectment
before the Metropolitan Trial Court (MeTC) of Navotas City against petitioners
spouses Ramiro and Elva Albaran (the Spouses Albaran) who were doing
business under the name REA General Marine Services (REA), spouses
Gaudencio and Editha Manimtim (the Spouses Manimtim) who were doing
business under the name Junedith Brokerage Corporation (JBC), spouses Erwin
and Marinela Santiago (the Spouses Santiago) who were doing business under
the name Quick Care Cargo Handler (QCCH), and Cesar Odan who was doing
business under the name Transment Freight Forwarder (TFF).
NKI alleged that it owns the subject property, a parcel of land in Phase I,
North Side of the Dagat-Dagatan Project in Navotas covered by Transfer
Certificate of Title (TCT) No. M-38092. All petitioners were simply allowed to
occupy said property by NKI and they were not paying any rent. On March 5,
2009, NKI sent demand letters to petitioners asking them to vacate the
property within five (5) days from receipt and to pay rent in the event that
they refuse to vacate within the grace period given. However, despite receipt
of said letters, petitioners refused to vacate or pay the necessary rent. Thus,
on April 14, 2009, NKI filed an ejectment complaint against
petitioners. CAIHTE
For their part, petitioners averred that NKI merely exists on paper as its
certificate of registration had already been revoked by the Securities and
Exchange Commission (SEC) for failure to operate. NKI only became the
registered owner of the subject property on June 16, 2008, while petitioners
came into possession of said property through their predecessor-in-interest,
Hermeginildo Odan, and have been continuously in possession since 1970.
Odan had leased the property from the family of the late Francisco Felipe
Gonzales. Later, he subleased the property to petitioners. The government
likewise expropriated the subject property and declared it as an Area for
Priority Development or Urban Land Reform Zone under Proclamation No. 3384
dated April 13, 1983. Being tenants and actual occupants of the place,
petitioners could not be evicted. Then a Conditional Contract to Sell was
entered into between NKI and National Housing Authority (NHA). NKI violated
the terms of said contract, causing the automatic cancellation of the same.
Sometime in 2008, the NHA sold the property to NKI without giving
petitioners, as the actual occupants, the right of first refusal granted under the
law. Thus, petitioners filed a case questioning said sale which was docketed as
Civil Case No. 06-11-MN. Petitioners contended that this case on the issue of
their right of first refusal is a prejudicial question that must be resolved first
before the MeTC can take cognizance of the ejectment case.
On June 11, 2012, the Navotas MeTC rendered a Decision in favor of NKI,
thus:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff Northbay Knitting, Inc. and against
defendants as follows:
1. ORDERING defendants-spouses Ramiro Albaran & Elva
Albaran, spouses Gaudencio Manimtim & Edith Manimtim, Junedith
Brokerage Corporation, spouses Erwin Santiago & Marinela
Santiago, and Cesar Odan, and all persons claiming rights under
them to remove the improvements they introduced on the property
located in Phase 1, North Side of the Dagat-Dagatan Project in
Navotas, Metro Manila covered by Transfer Certificate of Title (TCT)
No. M-38092 issued by the Registry of Deeds of Malabon City in the
name of the plaintiff Northbay Knitting, Inc.;
2. ORDERING defendants-spouses Ramiro Albaran & Elva
Albaran, spouses Gaudencio Manimtim & Edith Manimtim, Junedith
Brokerage Corporation, spouses Erwin Santiago & Marinela
Santiago, and Cesar Odan, and all persons claiming rights under
them to PEACEFULLY VACATE AND VOLUNTARILY SURRENDER to
plaintiff Northbay Knitting, Inc. the possession of the said lot
situated in Phase 1, North Side of the Dagat-Dagatan Project in
Navotas, Metro Manila covered by Transfer Certificate of Title (TCT)
No. M-38092 issued by the Registry of Deeds of Malabon City in the
name of the plaintiff Northbay Knitting, Inc.; DETACa
3. ORDERING each defendant named-above to each pay
plaintiff the amount of TWO THOUSAND PESOS (Php2,000.00) per
month for the use and occupation of the above-described property
computed from May 4, 2009 until possession of said property is
surrendered and turned-over to plaintiff; and
4. ORDERING defendants jointly and severally to pay plaintiff
the amount of Php20,000.00, as and by way of attorney's fees.
The Counterclaim of defendants-spouses Albaran, Santiago,
and Odan is hereby DISMISSED for lack of merit.
SO ORDERED. 4
On May 29, 2013, however, the Malabon RTC set aside the MeTC Decision
for lack of jurisdiction, since NKI failed to show a case of Unlawful Detainer, to
wit:
WHEREFORE, pursuant to Sec. 8 par. 2, Rule 40 of the Rules
of Court, this Court hereby assumes jurisdiction over this case.
 In the meantime, let this case be set for preliminary
conference on July 24, 2013 at 8:30 o'clock in the morning.
SO ORDERED. 5
Upon appeal, the CA ruled:
WHEREFORE, premises considered, the instant Petition for
Review is hereby GRANTED. The assailed Decision dated May 29,
2013 and Order dated October 29, 2013 of the Regional Trial Court
(RTC), Branch 170, Malabon City in Civil Case No. ACV 12-008-MN
are hereby REVERSED and SET ASIDE. The Decision dated June
11, 2012 of the Metropolitan Trial Court, Branch 54, Navotas City is
hereby AFFIRMED and REINSTATED.
SO ORDERED. 6
Hence, this petition.
The Court's Ruling
The petition is devoid of merit.
Settled is the rule that jurisdiction over the subject matter is conferred by
law and is determined by the material allegations of the complaint. It cannot
be acquired through, or waived by, any act or omission of the parties, neither
can it be cured by their silence, acquiescence, or even express consent. 7 In
ejectment cases, the complaint should embody such statement of facts as to
bring the party clearly within the class of cases for which the statutes provide a
remedy, as these proceedings are summary in nature. The complaint must
show enough on its face to give the court jurisdiction without resort to parol
evidence. 8 aDSIHc
A complaint sufficiently alleges a cause of action for unlawful detainer if it
states the following:
1) possession of property by the defendant was initially by contract with
or by tolerance of the plaintiff;
2) eventually, such possession became illegal upon notice by plaintiff to
defendant of the termination of the latter's right of possession;
3) thereafter, the defendant remained in possession of the property and
deprived the plaintiff of the enjoyment of the same; and
4) within one (1) year from the last demand on defendant to vacate the
property, the plaintiff instituted the complaint for ejectment. 9
Here, as the CA aptly found, NKI's complaint sufficiently shows all the
allegations required to support a case for unlawful detainer, thereby vesting
jurisdiction in the MeTC over the case. NKI stated that it is the absolute owner
of the subject property, as evidenced by TCT No. M-38092, and supported by
Tax Declaration No. C-002-08822-C and real property tax receipt for the tax
due in 2008. Petitioners, who are the actual occupants of said property, never
paid rent but continued to possess the property upon NKI's mere tolerance.
Despite receipt of NKI's demand letters to vacate, petitioners refused and
continued to occupy the property.
The statements in the complaint that petitioners' possession of the
property in question was by mere tolerance of NKI clearly make out a case for
unlawful detainer. Unlawful detainer involves the person's withholding from
another of the possession of the real property to which the latter is entitled,
after the expiration or termination of the former's right to hold possession
under the contract, either expressed or implied. A requisite for a valid cause of
action in an unlawful detainer case is that possession must be originally lawful,
and such possession must have turned unlawful only upon the expiration of the
right to possess. It must be shown that the possession was initially lawful;
hence, the basis of such lawful possession must be established. If, as in the
instant case, the claim is that such possession is by mere tolerance of the
plaintiff, the acts of tolerance must be proved. 10
Here, petitioners claim that NKI only became the registered owner of the
subject property on June 16, 2008. However, from that time when the title to
the disputed property was registered in NKI's name on June 16, 2008 until the
time when it sent the demand letters to vacate on March 5, 2009, petitioners'
possession had certainly been one upon mere tolerance of the owner. NKI's
right to possess the property had then become absolute and undeniable. And
when NKI demanded that they leave the premises and petitioners refused to
do so, their possession had already become unlawful. As the registered owner,
NKI had a right to the possession of the property, which is one of the
attributes of its ownership. 11 ETHIDa
Further, petitioners argue that there is a pending action questioning the
validity of the sale of the disputed property to NKI, consequently affecting the
validity of its title to said property. Such argument is clearly a collateral attack
on NKI's title, which is not allowed in an unlawful detainer case. A certificate of
title cannot be subject to a collateral attack and can be altered, modified, or
cancelled only in a direct proceeding in accordance with law. 12 A Torrens
Certificate of Title cannot be the subject of collateral attack. Such attack must
be direct and not by a collateral proceeding. Considering that this is an
unlawful detainer case wherein the sole issue to be decided is possession de
facto rather than possession de jure, a collateral attack by petitioners on NKI's
title is proscribed. The present case only covers the issue of who has the better
right of possession in relation to the issue of disputed ownership of the subject
properties. Questions as to the validity of NKI's title can be ventilated in a
proper suit instituted separately to directly attack its validity, an issue that
cannot be definitively resolved in the extant unlawful detainer case. 13
It has been held time and again that the only issue for resolution in an
unlawful detainer case is physical or material possession of the premises,
independent of any claim of ownership by any of the party litigants. Possession
refers to possession de facto, and not possession de jure. It does not even
matter if a party's title to the property is questionable. Where the parties to an
ejectment case raise the issue of ownership, the courts may pass upon that
issue to determine who between the parties has the better right to possess the
property. However, where the issue of ownership is inseparably linked to that
of possession, as in this case, adjudication of the ownership issue is not final
and binding, but merely for the purpose of resolving the issue of possession.
The adjudication of the issue of ownership is only provisional, and not a bar to
an action between the same parties involving title to the property. 14
An ejectment suit is likewise summary in nature and is not susceptible to
circumvention by the simple expedient of asserting ownership over the
property. In forcible entry and unlawful detainer cases, even if the defendant
raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the
lower courts and the CA, nonetheless, have the undoubted competence to
provisionally resolve the issue of ownership for the sole purpose of determining
the issue of possession. Such decision, however, does not bind the title or
affect the ownership of the land nor is conclusive of the facts found in said
case between the same parties but upon a separate cause of action involving
possession. 15
 Therefore, the Court finds no cogent reason to depart from the assailed
rulings of the CA.
WHEREFORE, PREMISES CONSIDERED, the Court DENIES the
petition and AFFIRMS the Decision of the Court of Appeals dated September
26, 2014 as well as its Resolution dated February 25, 2015 in CA-G.R. SP No.
132962.
SO ORDERED.
|||  (Spouses Santiago v. Northbay Knitting, Inc., G.R. No. 217296,
[October 11, 2017])

[G.R. No. 196074. October 4, 2017.]

FLORENCIA ARJONILLO, petitioner, vs. DEMETRIA PAGULAYAN,

as substituted by her heirs namely: HERMANA VDA. DE
CAMBRI, PORFIRIO T. PAGULAYAN, and VICENTE, MAGNO,
PEDRO, FLORENCIO, MELECIO, LERMA, all surnamed
MATALANG, and AUREA MATALANG-DELOS
SANTOS, respondent.

DECISION

MARTIRES, J  p:

This is a Petition for Review on Certiorari assailing the

Decision 1 promulgated on 7 January 2011 and Resolution 2 dated 16 March
2011 of the Court of Appeals (CA) in CA-G.R. CV No. 89206, which reversed
and set aside the Decision 3 dated 31 August 2006 of the Regional Trial Court,
Branch 2 of Tuguegarao City (RTC), in Civil Case No. 4778.

THE FACTS

Avelardo Cue (Cue) died intestate on 8 December 1987 in Tuguegarao,

Cagayan. Cue died single with no surviving descendants or ascendants but was
survived by the following: 1) his brother, Felix Cue; 2) Alfonsa Sim and
Rodolfo Sia, his niece and nephew by his deceased sister Marta Cue; 3) the
herein petitioner Florencia Arjonillo (Arjonillo), his niece by his deceased sister
Angelita Cue; and 4) Antonio, Isidra, Jacinto, Juanio, Nenita and Teodora, all
surnamed Cue, his nieces and nephews by his deceased brother Francisco Cue.
On 21 June 1989, they executed an extrajudicial settlement of the estate of
Cue.
According to the heirs of Cue, the decedent acquired the following
properties during his lifetime:
a) Lot 999-B-3-B, Psd-57204, being a portion of Lot 999-B-3, Psd-
52698, located at Poblacion, Tuguegarao, Cagayan, with an
area of two hundred ten (210) square meters, more or less;
bounded on the N. along line 1-2 by Calle Commercio; on the N
and E, along lines 2-3-4 by Lot 999-B-3-A, of the subdivision
plan, and on the S, along line 4-1 by Lot 999-A, Psd-46471
(Pedro Abraham and Josefina Abraham); reasonably assessed
at P105,000.00;
 b) A 2-storey commercial building erected on lot 999-B-3-B, Psd-
57204, made of strong materials; assessed at P73,320.00. 4
Lot 999-B-3-B, however, is registered in the name of Demetria
Pagulayan (Pagulayan) per Transfer Certificate of Title (TCT) No. T-35506,
issued by the Register of Deeds for the Province of Cagayan.
Some of the heirs of Cue, including Arjonillo, instituted Civil Case No.
4778 with the RTC for "Reivindicacion, with Partition and Application for
Temporary Restraining Order and Preliminary Mandatory Injunction." 5 They
alleged that although the property was registered in the name of Pagulayan, it
was Cue who purchased it using his own funds; that being his paramour,
Pagulayan exercised undue influence on him in order to register the property
exclusively in her own name; and that the registration of the property in the
name of Pagulayan is void as it is against public policy.
On the other hand, Pagulayan alleged that she acquired the property
from Spouses Chua Bun Gui 6 and Esmeralda Valdepanas Chua (Spouses
Chua) for and in consideration of P20,000.00 which was acknowledged to have
been received in full by the vendors as evidenced by the deed of absolute sale
executed on 25 August 1976. 7 She prayed in her answer that the complaint
be dismissed since the plaintiffs have no legal personality or cause of action
against her.
The Ruling of the RTC

On 31 August 2006, the RTC rendered a decision declaring that

Pagulayan is not the rightful owner of the subject property and, consequently,
ordered the partition of the subject lot and building among the heirs of Cue.
According to the RTC, "[Demetria] failed to substantiate her financial capability
to acquire the properties subject of the suit, more so to erect and put up a
building thereon jointly with Avelardo Cue." 8 Its findings were based, among
others, on the testimony of Dr. Benito Valdepanas (Dr. Valdepanas), who is a
nephew of Spouses Chua:
After making a thorough evaluation on the merits of the case,
as it has been well substantiated by the testimonies of witnesses
presented during the court proceedings, Demetria Pagulayan failed
to prove her claim that she bought the lot in question and put up a
building thereon. Noted as well in the records of the case is the
Deposition of a witness who testified among others that he knows
the lot described in TCT No. T-35506; that said witness has
personal knowledge of the sale of the lot in question by his uncle to
the late Avelardo Cue; and that Defendant Demetria Pagulayan is a
mere salesgirl of the late Avelardo Cue.
The allegations of the Plaintiffs as above-discussed have been,
in the mind of the Court, preponderantly proven as evidenced by
the testimonies and documents presented during the trial of the
case." 9
The Ruling of the CA

Upon review, the CA, in its Decision dated 7 January 2011, reversed and
set aside the RTC decision and dismissed the case. A motion for
reconsideration was filed which was denied in the CA Resolution dated 16
March 2011.
In dismissing the case, the CA found that petitioners failed to discharge
the burden of proving their allegation that the properties in dispute form part
of the estate of Cue. It was also found that the testimonies of their witnesses
could be considered as mere hearsay because they did not have personal
knowledge of the circumstances attending the execution of the deed of sale in
favor of Pagulayan and the consequent issuance of TCT No. T-35506 in her
name. 10

ISSUES

Arjonillo is now before the Court assailing the decision of the CA on the
following grounds:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
REVERSED OR SET ASIDE THE TRIAL COURT'S 31 AUGUST
2006 DECISION AND DISMISSING THE COMPLAINT IN CIVIL
CASE NO. 4778 ABANDONING THE FACTUAL FINDINGS OF THE
COURT A QUO.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
RULED ON THE INDEFEASIBILITY OF RESPONDENT DEMETRIA
PAGULAYAN'S TITLE AND CATEGORICALLY DECLARED THAT
THE OWNERSHIP OF THE DISPUTED PROPERTIES BELONG TO
HER.
III. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR
WHEN IT CONSIDERED WITNESS DR. BENITO VALDEPANAS'
TESTIMONY AS HEARSAY. 11

THE COURT'S RULING

The petition is without merit.

When a case is appealed to the CA, it is thrown wide open for review by
that court which thereby has the authority to affirm, reverse, or modify the
assailed decision of the lower court. The appellate court can render an entirely
new decision in the exercise of its power of review in order to correct patent
errors committed by the lower courts. 12
Arjonillo and her co-heirs claim that the subject properties were owned
by their predecessor, Cue. They sought to recover its full possession from
Pagulayan by filing an accion reivindicatoria before the RTC. It is then
incumbent upon them to convince the court by competent evidence that the
subject properties form part of Cue's estate because in order to successfully
maintain actions for recovery of ownership of a real property, the complainants
must prove the identity of the land and their title thereto as provided under
Article 434 of the Civil Code.13 They have the burden of proof to establish the
averments in the complaint by preponderance of evidence, 14 relying on the
strength of their own evidence and not upon the weakness of their opponent's
evidence. 15
Rather than dispensing with their burden of proof as required under the
law, Arjonillo and her co-heirs concentrated on attacking Pagulayan's claim of
ownership over the subject properties on the ground of the latter's alleged lack
of financial capability to purchase the land and erect a building thereon. It was
consistently emphasized that Pagulayan was a mere salesgirl who only had an
annual salary of P1,950.00 in 1976. 16 On this basis, Arjonillo and her co-heirs
maintained that Pagulayan could not have acquired the property on 25 August
1976 as reflected in the Deed of Absolute Sale executed by Spouses Chua. 17
They also tried to prove that contrary to what appears in the deed of
sale, the actual transaction transpired between Chua Bun Gui and Cue. But
Chua Bun Gui did not testify during the trial. Neither his wife nor any witness
to the sale was presented. Instead, Arjonillo and her co-heirs presented the
testimony of Dr. Valdepanas who, as earlier noted, is the nephew of Spouses
Chua and has a clinic adjacent to the property under scrutiny. The subject of
his testimony, however, is not of matters he himself knows; thus, it should be
disregarded for being hearsay.
Dr. Valdepanas testified as follows:
Q: Now, you said a while ago that Chua Bun [Gui] was the former
owner of the lot in question, what did Chua Bun [Gui] do with
the lot in question?
A: Two or three days after the fire that was August 22, 1977 my
uncle Chua Bun [Gui] went home to had a cup of coffee he told
me that he sold the lot in question to Avelardo Cue when in fact
I was also interested to buy it.
Q: Are we made to understand that the transaction regarding the
sale of the lot in question to Avelardo Cue was made in your
house?
A: No, sir. Avelardo Cue told me that the lot in question was sold in
installment basis when infact I offered to purchase the lot in
question in cash basis, sir.
xxx xxx xxx
Q: Were you present whenever the late Avelardo Cue made
payments to your uncle Chua Bun Gin?
A: [A]side from knowing it personally, the late Avelardo Cue told me
that he paid fifty percent of the purchased price and the
remaining balance on installment basis, sir. 18
Despite claiming knowledge of the terms and conditions of the sale,
perusal of the deed of absolute sale revealed that Dr. Valdepanas was neither
a party nor a witness to the transaction. It is noticeable that Dr. Valdepanas
merely repeated statements he heard from Cue and Chua Bun Gui. When
asked if he was present whenever Cue paid Chua Bun Gui, he did not give a
categorical answer but simply claimed that he knew about it personally. More
importantly, proponent offered the testimony to prove "that the lot in question
was purchased by the late Avelardo Cue and not by the defendant, Demetria
Pagulayan, although the Deed of Sale was in the name of the said defendant
Demetria Pagulayan." 19 It was offered as evidence of the truth of the fact
being asserted. Clearly, the above-quoted testimony is hearsay and thus
inadmissible in evidence. A witness can only testify on facts within his personal
knowledge. 20 This is a substantive prerequisite for accepting testimonial
evidence that establishes the truth of a disputed fact. 21 Unless the testimony
falls under any of the recognized exceptions, hearsay evidence whether
objected to or not cannot be given credence for it has no probative value. 22
On the other hand, to shed light on how she could afford to purchase the
land, Pagulayan testified that she worked with free board and lodging from
1954 to 1976 and deposited her earnings in an account with the Philippine
National Bank. 23 She further testified that she withdrew some of the money
and used it in re-selling palay and pigs. 24
The following documents were offered and admitted in evidence 25 to
support Pagulayan's claim that it is indeed she who owns the land in question:
1) a notarized deed of absolute sale 26 executed by Spouses Chua on 25
August 1976 conveying the property to Pagulayan; 2) TCT No. T-
35506 27 registered in the name of Pagulayan; and 3) Real Property Tax
Receipts for 1993 28 and 1994 29 which were offered to prove that the land's
tax declaration was in the name of Pagulayan.
We agree with the finding of the CA that "[t]he documentary and
testimonial evidence on record clearly support [Pagulayan's] ownership of the
disputed property as reflected in TCT No. T-35506, which was issued in her
name pursuant to the aforesaid Deed of Sale." 30 It is fundamental that a
certificate of title serves as evidence of an indefeasible and incontrovertible
title to the property in favor of the person whose name appears therein. The
titleholder is entitled to all the attributes of ownership, including possession of
the property. 31
Though it has been held that placing a parcel of land under the mantle of
the Torrens system does not mean that ownership thereof can no longer be
disputed, 32 this Court cannot ignore the fact that Arjonillo, together with her
co-heirs, failed to discharge the burden of proving their claim by a
preponderance of evidence as required under the law. Based on the foregoing,
we find no persuasive argument in the instant petition that will convince us to
overturn the assailed judgment of the appellate court.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The
Decision and Resolution of the Court of Appeals dated 7 January 2011 and 16
March 2011, respectively, in CA-G.R. CV No. 89206 are AFFIRMED.
SO ORDERED.
|||  (Arjonillo v. Pagulayan, G.R. No. 196074, [October 4, 2017])
 [G.R. No. 211170. July 3, 2017.]

SPOUSES MAXIMO ESPINOZA and WINIFREDA DE

VERA, petitioners, vs. SPOUSES ANTONIO MAYANDOC and
ERLINDA CAYABYAB MAYANDOC, respondents.

DECISION

PERALTA, **  J p:

Before this Court is the Petition for Review on Certiorari under Rule 45,
dated March 21, 2014, of petitioners-spouses Maximo Espinoza and Winifreda
De Vera, that seeks to reverse and set aside the Decision 1 dated September
17, 2013 and Resolution dated January 28, 2014, both of the Court of
Appeals (CA) which, in turn, affirmed with modifications the Decision 2 dated
February 18, 2011 of the Regional Trial Court (RTC), Branch 42, Dagupan City,
in a complaint for useful expenses under Articles 448 3 and 546 4 of the New
Civil Code of the Philippines.
The facts follow.
A parcel of land located in Dagupan City was originally owned by Eusebio
Espinoza. After the death of Eusebio, the said parcel of land was divided
among his heirs, namely: Pastora Espinoza, Domingo Espinoza and Pablo
Espinoza. Petitioner Maximo is the son of Domingo Espinoza, who died on
November 3, 1965, and Agapita Cayabyab, who died on August 11,
1963. SDAaTC
Thereafter, on May 25, 1972, Pastora Espinoza executed a Deed of Sale
conveying her share of the same property to respondents and Leopoldo
Espinoza. However, on that same date, a fictitious deed of sale was executed
by petitioner Maximo's father, Domingo Espinoza, conveying the three-fourth
(3/4) share in the estate in favor of respondent Erlinda Cayabyab Mayandoc's
parents; thus, TCT No. 28397 was issued in the names of the latter.
On July 9, 1977, a fictitious deed of sale was executed by Nemesio
Cayabyab, Candida Cruz, petitioners-spouses Maximo Espinoza and Winifreda
De Vera and Leopoldo Espinoza over the land in favor of respondents-spouses
Antonio and Erlinda Mayandoc; thus, TCT No. 37403 was issued under the
names of the latter.
As a result of the foregoing, petitioners filed an action for annulment of
document with prayer for the nullification of TCT No. 37403 and, on August 16,
1999, the RTC, Branch 40, Dagupan City rendered a Decision in favor of
petitioners and ordering respondents to reconvey the land in dispute and to
pay attorney's fees and the cost of the suit.
Respondents appealed, but the CA, in its Decision dated February 6,
2004, affirmed the RTC with modifications that the award of attorney's fees
and litigation expenses be deleted for lack of factual basis. The said CA
Decision became final and executory on March 8, 2004.
Thus, respondents filed a complaint for reimbursement for useful
expenses, pursuant to Articles 448 and 546 of the New Civil Code, alleging that
the house in question was built on the disputed land in good faith sometime in
1995 and was finished in 1996. According to respondents, they then believed
themselves to be the owners of the land with a claim of title thereto and were
never prevented by the petitioners in constructing the house. They added that
the new house was built after the old house belonging to respondent Erlinda
Mayandoc's father was torn down due to termite infestation and would not
have reconstructed the said house had they been aware of the defect in their
title. As such, they claimed that they are entitled to reimbursement of the
construction cost of the house in the amount of P800,000.00. They further
asserted that at the time that their house was constructed, they were
possessors in good faith, having lived over the land in question for many years
and that petitioners questioned their ownership and possession only in 1997
when a complaint for nullity of documents was filed by the latter. AaCTcI
Petitioners, in their Answer, argued that respondents can never be
considered as builders in good faith because the latter were aware that the
deeds of sale over the land in question were fictitious and, therefore, null and
void; thus, as builders in bad faith, they lose whatever has been built over the
land without right to indemnity.
Respondents, on January 5, 2011, manifested their option to buy the land
where the house stood, but petitioners expressed that they were not interested
to sell the land or to buy the house in question.
The RTC, on February 18, 2011, rendered its Decision with the following
dispositive portion:
WHEREFORE, judgment is hereby rendered requiring the
defendants to sell the land, where the plaintiffs' house stands, to
the latter at a reasonable price based on the zonal value determined
by the Bureau of Internal Revenue (BIR).
SO ORDERED. 5
Petitioners appealed to the CA, but the latter, in its Decision dated
September 17, 2013, affirmed the decision of the RTC with modifications. The
dispositive portion of the Decision reads:
WHEREFORE, the Decision dated February 18, 2011 by the
Regional Trial Court, Branch 42 of Dagupan City, in Civil Case No.
2005-0271-D is hereby AFFIRMED with MODIFICATIONS.
Let the case be REMANDED to the aforementioned trial court
for further proceedings consistent with the proper application of
Articles 448, 546 and 548 of the New Civil Code and to render a
complete judgment of the case. acEHCD
 SO ORDERED. 6
The motion for reconsideration of petitioners were subsequently denied
by the CA in its Resolution dated January 28, 2014.
Hence, the present petition.
Petitioners raise the following issues:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT THE PETITIONERS WERE NOT ABLE TO PROVE BAD FAITH ON
THE PART OF THE RESPONDENTS.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
RULING THAT RES JUDICATA DOES NOT APPLY IN THE INSTANT
CASE.
According to petitioners, whether or not respondents were in bad faith in
introducing improvements on the subject land is already moot, since the
judgment rendered by the RTC of Dagupan City, Branch 40 and affirmed by
the CA, that declared the two Deeds of Definite/Absolute Sale dated May 25,
1972 and July 9, 1977 as null and void, had long become final and executory
on March 8, 2004. They also argue that respondents had not successfully
shown any right to introduce improvements on the said land as their claim of
laches and acquisitive prescription have been rejected by the CA on appeal;
thus, it follows that the respondents were builders in bad faith because
knowing that the land did not belong to them and that they had no right to
build thereon, they still caused the house to be erected. They further insist
that respondents are deemed builders in bad faith because their house has
been built and reconstructed into a bigger one after respondent Erlinda's
parents forged a fictitious sale. Finally, they claim that the principle of res
judicata in the mode of "conclusiveness of judgment" applies in this case.
The petition lacks merit.
The findings of facts of the Court of Appeals are conclusive and binding
on this Court 7 and they carry even more weight when the said court affirms
the factual findings of the trial court. 8 Stated differently, the findings of the
Court of Appeals, by itself, which are supported by substantial evidence, are
almost beyond the power of review by this Court. 9 Although this rule is
subject to certain exceptions, this Court finds none that is applicable in this
case. Nevertheless, the petition still fails granting that an exception obtains.
To be deemed a builder in good faith, it is essential that a person asserts
title to the land on which he builds, i.e., that he be a possessor in the concept
of owner, and that he be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it. 10 The RTC, as affirmed by the CA,
found respondents to be builders in good faith, thus:
The plaintiffs are builders in good faith. As asserted by
plaintiffs and not rebutted by defendants, the house of plaintiffs was
built on the lot owned by defendants in 1995. The complaint for
nullity of documents and reconveyance was filed in 1997, about two
years after the subject conjugal house was constructed.
Defendants-spouses believed that at the time when they
constructed their house on the lot of defendants, they have a claim
of title. Art. 526, New Civil Code, states that a possessor in good
faith is one who has no knowledge of any flaw or defect in his title
or mode of acquisition. This determines whether the builder acted in
 good faith or not. Surely, plaintiffs would not have constructed the
subject house which plaintiffs claim to have cost them P800,000.00
to build if they knew that there is a flaw in their claim of title.
Nonetheless, Art. 527, New Civil Code, states clearly that good faith
is always presumed, and upon him who alleges bad faith on the part
of the possessor lies the burden of proof. The records do not show
that the burden of proof was successfully discharged by the
defendants. EcTCAD
xxx xxx xxx
Plaintiffs are in good faith in building their conjugal house in
1995 on the lot they believed to be their own by purchase. They
also have in their favor the legal presumption of good faith. It is the
defendants who had the burden to prove otherwise. They failed to
discharge such burden until the Regional Trial Court, Br. 40,
Dagupan City, promulgated an adverse ruling in Civil Case No. 97-
0187-D. Thus, Art. 448 comes in to protect the plaintiffs-owners of
their improvement without causing injustice to the lot owner. Art.
448 comes in to protect the plaintiff-owners of their improvement
without causing injustice to the lot owner. Art. 448 provided a just
resolution of the resulting "forced-ownership" by giving the
defendants lot owners the option to acquire the conjugal house after
payment of the proper indemnity or to oblige the builder plaintiffs to
pay for the lot. It is the defendants-lot owners who are authorized
to exercise the option as their right is older, and under the principle
of accession where the accessory (house) follows the principal. x x
x. 11
The settled rule is bad faith should be established by clear and convincing
evidence since the law always presumes good faith. 12 In this particular case,
petitioners were not able to prove that respondents were in bad faith in
constructing the house on the subject land. Bad faith does not simply connote
bad judgment or negligence. 13 It imports a dishonest purpose or some moral
obliquity and conscious doing of a wrong. 14 It means breach of a known duty
through some motive, interest or ill will that partakes of the nature of
fraud. 15 For anyone who claims that someone is in bad faith, the former has
the duty to prove such. Hence, petitioners err in their argument that
respondents failed to prove that they are builders in good faith in spite of the
findings of the RTC and the CA that they are.
As such, Article 448 16 of the Civil Code must be applied. It applies when
the builder believes that he is the owner of the land or that by some title he
has the right to build thereon, 17 or that, at least, he has a claim of title
thereto. 18 In Tuatis v. Spouses Escol, et al., 19 this Court ruled that the
seller (the owner of the land) has two options under Article 448: (1) he may
appropriate the improvements for himself after reimbursing the buyer (the
builder in good faith) the necessary and useful expenses under Articles
546 20 and 548 21 of the Civil Code; or (2) he may sell the land to the buyer,
unless its value is considerably more than that of the improvements, in which
case, the buyer shall pay reasonable rent, thus: SDHTEC
The rule that the choice under Article 448 of the Civil
Code belongs to the owner of the land is in accord with the principle
of accession, i.e., that the accessory follows the principal and not
the other way around. Even as the option lies with the landowner,
the grant to him, nevertheless, is preclusive. The landowner cannot
refuse to exercise either option and compel instead the owner of the
building to remove it from the land.
 The raison d'etre for this provision has been enunciated thus:
Where the builder, planter or sower has acted in good faith, a
conflict of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the
impracticability of creating a state of forced co-ownership, the law
has provided a just solution by giving the owner of the land the
option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land and
the sower the proper rent. He cannot refuse to exercise either
option. It is the owner of the land who is authorized to exercise the
option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing. 22
The CA, therefore, did not err in its ruling that instead of requiring the
petitioners to sell the land, the RTC must determine the option which the
petitioners would choose. As aptly ruled by the CA:
The rule that the right of choice belongs to the owner of the
land is in accordance with the principle of accession. However, even
if this right of choice is exclusive to the land owner, he cannot
refuse to exercise either option and demand, instead for the
removal of the building.
Instead of requiring defendants-appellants to sell the land, the
court a quo must determine the option which they would choose.
The first option to appropriate the building upon payment of
indemnity or the second option, to sell the land to the plaintiffs-
appellees. Moreover, the court a quo should also ascertain: (a)
under the first option, the amount of indemnification for the
building; or (b) under the second option, the value of the subject
property vis-à-vis that of the building, and depending thereon, the
price of, or the reasonable rent for, the subject property.
Hence, following the ruling in the recent case of Briones v.
Macabagdal, this case must be remanded to the court a quo for the
conduct of further proceedings to assess the current fair market of
the land and to determine other matters necessary for the proper
application of Article 448, in relation to Articles 546 and 548 of
the New Civil Code. 23
Therefore, this Court agrees with the CA that there is a need to remand
the case to the RTC for further proceedings, specifically, in assessing the
current fair market value of the subject land and other matters that are
appropriate in the application of Article 448, in relation to Articles 546 and 548
of the New Civil Code.
As to the issue of res judicata, the CA is correct in its ruling that there is
no identity of subject matter and cause of action between the prior case of
annulment of document and the present case, thus: HSAcaE
In the instant case, res judicata will not apply since there is no
identity of subject matter and cause of action. The first case is for
annulment of document, while the instant case is for reimbursement
of useful expenses as builders in good faith under article 448 in
relation to Articles 546 and 548 of the New Civil Code.
Moreover, We are not changing or reversing any findings of
the RTC and by this Court in Our 6 February 2004 decision. The
Court is still bound by this judgment insofar as it found the Deeds of
 Absolute Sale null and void, and that defendants-appellants are the
rightful owners of the lot in question.
However, if the court a quo did not take cognizance of the
instant case, plaintiffs-appellees shall lose ownership of the building
worth Php316,400.00 without any compensation. While, the
defendant-appellants not only will recover the land but will also
acquire a house without payment of indemnity. The fairness of the
rules enunciated in Article 448 is explained by the Supreme Court in
the case of Depra v. Dumlao, viz.:
Where the builder, planter or sower has acted in
good faith, a conflict of rights arises between the owners,
and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of
the land. In view of the impracticability of creating a
state of forced ownership, the law has provided a just
solution by giving the owner of the land the option to
acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for
the land and the sower to pay the proper rent. It is the
owner of the land who is authorized to exercise the
option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of
the accessory thing.
Finally, "the decision of the court a quo should not be viewed
as a denigration of the doctrine of immutability of final judgments,
but a recognition of the equally sacrosanct doctrine that a person
should not be allowed to profit or enrich himself inequitably at
another's expense." 24
The well-settled rule is that the principle or rule of res judicata is
primarily one of public policy. It is based on the policy against multiplicity of
suits, 26 whose primary objective is to avoid unduly burdening the dockets of
the courts. 27 In this case, however, such principle is inapplicable. AScHCD
WHEREFORE, the Petition for Review on Certiorari under Rule 45, dated
March 21, 2014, of petitioners-spouses Maximo Espinoza and Winifreda De
Vera, is DENIED. Consequently, the Decision dated September 17, 2013 and
Resolution dated January 28, 2014, both of the Court of Appeals
are AFFIRMED.
SO ORDERED.
|||  (Spouses Espinoza v. Spouses Mayandoc, G.R. No. 211170, [July 3,
2017], 812 PHIL 95-107)
 [G.R. No. 199353. April 4, 2018.]

LEVISTE MANAGEMENT SYSTEM, INC., petitioner, vs. LEGASPI

TOWERS 200, INC., and VIVIAN Y. LOCSIN and PITONG
MARCORDE, respondents.

ENGR. NELSON Q. IRASGA, in his capacity as Municipal

Building Official of Makati, Metro Manila and HON. JOSE P. DE
JESUS, in his capacity as Secretary of the Dept. of Public
Works and Highways, third party respondents.

[G.R. No. 199389. April 4, 2018.]

LEGASPI TOWERS 200, INC., petitioner, vs. LEVISTE

MANAGEMENT SYSTEM, INC., ENGR. NELSON Q. IRASGA, in his
capacity as Municipal Bldg. Official of Makati, Metro Manila,
and HON. JOSE P. DE JESUS, in his capacity as Secretary of the
Department of Public Works and Highways, respondents.

DECISION

LEONARDO-DE CASTRO, **  J p:

The Civil Code provisions on builders in good faith presuppose that

the owner of the land and the builder are two distinct persons who are not
bound either by specific legislation on the subject property or by contract.
Properties recorded in accordance with Section 4 1 of Republic Act No.
4726 2 (otherwise known as the Condominium Act) are governed by said Act;
while the Master Deed and the By Laws of the condominium corporation
establish the contractual relations between said condominium corporation and
the unit owners. HTcADC
These are consolidated petitions under Rule 45 filed by Leviste
Management System, Inc. (LEMANS) and Legaspi Towers 200, Inc. (Legaspi
Towers), both assailing the Decision 3 dated May 26, 2011 of the Court of
Appeals in CA-G.R. CV No. 88082. The assailed Decision 4 affirmed the
October 25, 2005 Decision of the Regional Trial Court (RTC), Branch 135 of
Makati City in Civil Case No. 91-634.
The facts, as culled by the Court of Appeals from the records, follow:
Legaspi Towers is a condominium building located at Paseo de
Roxas, Makati City. It consists of seven (7) floors, with a unit on
the roof deck and two levels above said unit called
Concession 2 and Concession 3. The use and occupancy of the
condominium building is governed by the Master Deed with
Declaration of Restrictions of Legaspi Towers (hereafter "Master
Deed") annotated on the transfer certificate of title of the
developer, Legaspi Towers Development Corporation.
Concession 3 was originally owned by Leon Antonio Mercado.
On 9 March 1989, Lemans, through Mr. Conrad Leviste, bought
Concession 3 from Mercado.
Sometime in 1989, Lemans decided to build another unit
(hereafter "Concession 4") on the roof deck of Concession 3.
Lemans was able to secure the building permit for the construction
of Concession 4 and commenced the construction thereof on
October 1990.
Despite Legaspi Corporation's notice that the construction of
Concession 4 was illegal, Lemans refused to stop its construction.
Due to this, Legaspi Corporation forbade the entry of Lemans'
construction materials to be used in Concession 4 in the
condominium. Legaspi Corporation similarly wrote letters to the
Building Official Nelson Irasga ("hereafter Irasga"), asking that the
[building] permit of Lemans for Concession 4 be cancelled. Irasga,
however, denied the requested cancellation, stating that the
applicant complied with the requirements for a building permit and
that the application was signed by the then president of Legaspi
Corporation.
Lemans filed the Complaint dated February 20, 1991 with the
RTC, praying among others that a writ of mandatory injunction be
issued to allow the completion of the construction of Concession 4.
On 3 April 1991, the RTC issued the writ prayed for by Lemans.
Later, Legaspi Corporation filed the Third Party Complaint
dated October 7, 1991. This was against Irasga, as the Municipal
Building Official of Makati, and Jose de Jesus (hereafter "De Jesus"),
as the Secretary of Public Works and Highways (collectively referred
to as the "third-party defendants-appellees") so as to nullify the
building permit issued in favor of Lemans for the construction of
Concession 4.
After the parties had presented and formally offered their
respective pieces of evidence, but before the rendition of a
judgment on the main case, the RTC, in its Order dated May 24,
2002, found the application of Article 448 of the Civil Code and the
 ruling in the Depra vs. Dumlao [case] (hereafter "Depra Case") to
be proper.
Lemans moved for the reconsideration o[f] the
aforementioned order. The RTC denied this and further ruled:
The main issue in this case is whether or not
[LEMANS] owns the air space above its condominium
unit. As owner of the said air space, [LEMANS] contends
that its construction of another floor was in the exercise
of its rights.
It is the [finding] of the Court that [LEMANS] is not
the owner of the air space above its unit. [LEMANS']
claim of ownership is without basis in fact and in law.
The air space which [LEMANS] claims is not on top of its
unit but also on top of the condominium itself, owned
and operated by defendant Legaspi Towers.
Since it appears that both plaintiff and defendant
Legaspi Towers were in good faith, the Court finds the
applicability of the ruling in Depra vs. Dumlao, 136 SCRA
475.
From the foregoing, Lemans filed the Petition
for Certiorari dated November 13, 2002 with the [Court of Appeals],
docketed as CA G.R. SP. No. 73621, which was denied in the
Decision promulgated on March 4, 2004. The Court did not find
grave abuse of discretion, amounting to lack or excess of
jurisdiction, on the RTC's part in issuing the above orders. Lemans
sought reconsideration of this decision but failed. aScITE
Meanwhile, Lemans adduced evidence before the RTC to
establish that the actual cost for the construction of Concession 4
was Eight Hundred Thousand Eight Hundred Ninety-Seven and
96/100 Pesos (PhP800,897.96) and that the fair market value of
Concession 4 was Six Million Pesos (PhP6,000,000.00). Afterwards,
the RTC rendered the Assailed Decision. 5
Reiterating its previous ruling regarding the applicability of Article 448 of
the Civil Code to the case, the RTC in its October 25, 2005 Decision disposed
of the dispute in this wise:
WHEREFORE, judgment is hereby rendered ordering defendant
Legaspi Towers 200, Inc. to exercise its option to appropriate the
additional structure constructed on top of the penthouse owned by
plaintiff Leviste Management Systems, Inc. within sixty [60] days
from the time the Decision becomes final and executory. Should
defendant Legaspi Towers 200, Inc. choose not to appropriate the
additional structure after proper indemnity, the parties shall agree
upon the terms of the lease and in case of disagreement, the Court
shall fix the terms thereof.
For lack of merit, the third party complaint and the
counterclaims are hereby dismissed.
Costs against the plaintiff. 6
When the parties' respective motions for reconsideration were denied by
the trial court, both elevated the matter to the Court of Appeals.
 On May 26, 2011, the Court of Appeals, acting on the consolidated
appeals of LEMANS and Legaspi Towers, rendered its Decision affirming the
decision of the RTC of Makati City.
The Court of Appeals held that the appeal of LEMANS should be dismissed
for failure to comply with Section 13, Rule 44 in relation to Section 1 (f), Rule
50 of the Rules of Court, as the subject index of LEMANS' brief did not contain
a digest of its arguments and a list of textbooks and statutes it cited. 7 For this
reason, the appellate court no longer passed upon the sole issue raised by
LEMANS, i.e., whether its construction of Concession 4 should be valued at its
actual cost or its market value.
As regards the appeal of Legaspi Towers, the Court of Appeals held that
while Concession 4 is indeed a nuisance, LEMANS has been declared a builder
in good faith, and noted that Legaspi Towers failed to contest this declaration.
Since Concession 4 was built in good faith, it cannot be demolished. The Court
of Appeals likewise affirmed the validity of the building permit for Concession
4, holding that if the application and the plans appear to be in conformity with
the requirements of governmental regulation, the issuance of the permit may
be considered a ministerial duty of the building official. 8
The Motion for Partial Reconsideration of Legaspi Towers and the Motion
for Reconsideration of LEMANS were denied for lack of merit in the appellate
court's Resolution 9 dated November 17, 2011.
Consequently, LEMANS and Legaspi Towers filed separate Petitions for
Review on Certiorari with this Court based on the following grounds:

[LEMANS PETITION:]
I
THE COURT OF APPEALS ERRED WHEN IT FAILED TO APPLY
THE DEPRA  VS. DUMLAO DOCTRINE WHEN IT REFUSED TO RULE
ON THE PROPER VALUATION OF THE SUBJECT PROPERTY FOR THE
PURPOSE OF DETERMINING THE PURCHASE PRICE IN THE EVENT
THAT RESPONDENT LEGASPI TOWERS EXERCISES ITS OPTION TO
PURCHASE THE PROPERTY.
II
THE COURT OF APPEALS ERRED WHEN, REFUSING TO RULE ON THE
VALUATION OF THE SUBJECT PROPERTY, IT DISREGARDED THE
EVIDENCE ALREADY SUBMITTED AND PART OF THE RECORDS. 10
[LEGASPI TOWERS PETITION:]
I. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT [LEGASPI
TOWERS] HAS THE RIGHT TO DEMOLISH CONCESSION 4 FOR
BEING AN ILLEGAL CONSTRUCTION.
II. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
BUILDING PERMIT OF CONCESSION 4 IS NOT VALIDLY
ISSUED. 11
At the crux of the present controversy is the legal issue whether Article
448 of the Civil Code and our ruling in Depra v. Dumlao 12 are applicable to
the parties' situation.
Prior to answering this key question, we dispose of a procedural matter.
LEMANS has taken the position that in light of the finality of the trial court's
Order dated May 24, 2002 holding that Article 448 of the Civil Code and
the Depra case should be applied in this case, Legaspi Towers is now bound by
same and may no longer question the former's status as a builder in good
faith. The Court of Appeals in its assailed Decision appears to subscribe to the
same view when it ruled that, despite the fact that Concession 4 was a
nuisance, the previous declaration that LEMANS is a builder in good faith limits
Legaspi Towers' options to those provided in Article 448.
The Court does not agree with LEMANS and the Court of Appeals.
At the outset, it must be pointed out that the May 24, 2002 RTC Order is
an interlocutory order that did not finally dispose of the case and, on the
contrary, set the case for hearing for reception of evidence on the amount of
expenses spent by LEMANS in the construction of Concession 4. For this
reason, it is apropos to discuss here the remedies available to a party
aggrieved by interlocutory orders of the trial court.
Section 1, Rule 41 of the Rules of Court pertinently states:
RULE 41
Appeal from the Regional Trial Courts
SECTION 1. Subject of appeal. — An appeal may be taken
from a judgment or final order that completely disposes of the case,
or of a particular matter therein when declared by these Rules to be
appealable. HEITAD
No appeal may be taken from:
(a) An order denying a motion for new trial or reconsideration;
(b) An order denying a petition for relief or any similar motion
seeking relief from judgment;
(c) An interlocutory order;
(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judgment by
consent, confession or compromise on the ground of
fraud, mistake or duress, or any other ground vitiating
consent;
(f) An order of execution;
(g) A judgment or final order for or against one or more of
several parties or in separate claims, counterclaims, cross-
claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom; and
(h An order dismissing an action without prejudice.
In all the above instances where the judgment or final order is
not appealable, the aggrieved party may file an appropriate special
civil action under Rule 65. (Emphases supplied.)
Hence, we explained in Crispino v. Tansay 13 that:
The remedy against an interlocutory order is not appeal but a
special civil action for certiorari under Rule 65 of the Rules of Court.
The reason for the prohibition is to prevent multiple appeals in a
single action that would unnecessarily cause delay during trial.
In Rudecon v. Singson:
The rule is founded on considerations of orderly
procedure, to forestall useless appeals and avoid undue
inconvenience to the appealing party by having to assail
 orders as they are promulgated by the court, when all
such orders may be contested in a single appeal.
Faced with an interlocutory order, parties may instantly
avail of the special civil action of certiorari. This would entail
compliance with the strict requirements under Rule 65 of
the Rules of Court. Aggrieved parties would have to prove that
the order was issued without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction
and that there is neither appeal nor any plain, speedy, and
adequate remedy in the ordinary course of law.
This notwithstanding, a special civil action
for certiorari is not the only remedy that aggrieved parties
may take against an interlocutory order, since an
interlocutory order may be appealed in an appeal of the
judgment itself. In Investments, Inc. v. Court of Appeals it was
held:
Unlike a "final" judgment or order, which is appealable,
as above pointed out, an "interlocutory" order may
not be questioned on appeal except only as part of
an appeal that may eventually be taken from the
final judgment rendered in the case. (Emphases
supplied; citations omitted.)
From the foregoing disquisition in Crispino, a party who wishes to assail
an interlocutory order may (a) immediately file a petition for certiorari if
appropriate and compliant with the stringent requirements of Rule 65 or (b)
await judgment and question the interlocutory order in the appeal of the main
decision. Notably, in the case at bar, LEMANS filed a petition
for certiorari against the RTC's May 24, 2002 14 and August 19,
2002 15 Orders while Legaspi Towers chose to simply appeal the main
decision.
This Court is not bound by the interlocutory orders of the trial court nor
by the Court of Appeals' Decision dated March 4, 2004 in CA-G.R. SP No.
73621, i.e., LEMANS' petition for certiorari of said interlocutory orders.
To begin with, the Court of Appeals' decision in CA-G.R. SP No. 73621
was never elevated to this Court. Secondly, in resolving LEMANS' petition
for certiorari, the Court of Appeals itself ruled, among others, that:
It is noteworthy to state that the petitioner imputes grave
abuse of discretion on the part of the respondent judge in ruling
that Article 448 and the case of Depra v. Dumlao (136 SCRA
475) are applicable in the case at bar. At most, these are
considered mere errors of judgment, which are not proper for
resolution in a petition for certiorari under Rule 65.
The error is not jurisdictional, and certiorari is not available
to correct errors in judgment or conclusions of law and fact
not amounting to excess or lack of jurisdiction. In the
extraordinary writ of certiorari, neither questions of fact nor even of
law are entertained, but only questions of lack or excess of
jurisdiction or grave abuse of discretion. 16 (Emphases supplied.)
We are not so constrained in these consolidated petitions under Rule 45
for as we observed in E.I. Dupont De Nemours and Co. v. Francisco: 17
The special civil action of certiorari under Rule 65 is intended
to correct errors of jurisdiction. Courts lose competence in relation
 to an order if it acts in grave abuse of discretion amounting to lack
or excess of jurisdiction. A petition for review under Rule 45, on
the other hand, is a mode of appeal intended to correct
errors of judgment. Errors of judgment are errors committed by a
court within its jurisdiction. This includes a review of the
conclusions of law of the lower court and, in appropriate
cases, evaluation of the admissibility, weight, and inference
from the evidence presented. (Emphases supplied; citations
omitted.)
In all, there is no procedural bar for this Court to pass upon the previous
interlocutory orders of the court a quo and examine the legal conclusions
therein in the present consolidated appeals of the trial court's decision. We are
compelled to undertake such a review in light of the novelty of the main issue
presented in these petitions. The Court, after all, is the final arbiter of all legal
questions properly brought before it. 18
We proceed to the merits of these consolidated cases.
First, we find no cogent reason to disturb the finding of the lower courts
that it is Legaspi Towers which owns the air space above Concession 3 as the
same is in keeping with the facts and the applicable law. We quote with
approval the following discussion from the Court of Appeals Decision dated
March 4, 2004 in CA-G.R. SP No. 73621:
As correctly pointed out by the private respondent Legaspi,
the air space wherein Concession 4 was built is not only
above Concession 3, but above the entire condominium building.
The petitioner's [LEMANS'] ownership of Concession 3 does not
necessarily extend to the area above the same, which is actually the
"air space" of the entire condominium building. The ownership of
the air space above Concession 3 is not a necessary incident of
the ownership of Concession 3. ATICcS
It may be well to state here the following provisions
of Republic Act No. 4726, otherwise known as The Condominium
Act:
Section 2. A condominium is an interest in real
property consisting of a separate interest in a unit in a
residential, industrial or commercial building and an
undivided interest in common directly or indirectly, in the
land on which it is located and in other common areas of
the building. A condominium may include, in addition, a
separated interest on other portions of such real
property. Title to the common areas, including the land,
or the appurtenant interests in such areas, may be held
by a corporation specially formed for the purpose
(hereinafter known as the "condominium corporation") in
which the holders of separate interests shall
automatically be members or shareholders, to the
exclusion of others, in proportion to the appurtenant
interest of their respective units in the common areas.
(RA 4726, The Condominium Act)
Section 3 (d). "Common areas" means the entire
project excepting all units separately granted or held or
reserved.
Section 6. Unless otherwise expressly provided in
the enabling or master deed or the declaration of
 restrictions, the incidents of the condominium grant are
as follows:
(a) The boundary of the unit granted are the interior
surfaces of the perimeter walls, ceilings, windows
and doors thereof. The following are not part of the
unit — bearing walls, columns, walls, roofs,
foundations and other common structural elements
of the building x x x.
Evidently, what a unit includes is only the four walls, ceilings,
windows and doors thereof. It certainly does not include the roof or
the areas above it.
In a condominium, common areas and facilities are "portions
of the condominium property not included in the units," whereas, a
unit is "a part of the condominium property which is to be subject to
private ownership." Inversely, that which is not considered a unit
should fall under common areas and facilities.
Inasmuch as the air space or the area above Concession 3 is
not considered as part of the unit, it logically forms part of the
common areas.
The petitioner's efforts to establish that Concession 3 and the
open area in the roof deck are reserved and separately granted
from the condominium project are futile, inasmuch as even if the
same is established, it would not prove that the area above it is not
part of the common area. Admittedly, there is nothing in the Master
Deed which prohibits the construction of an additional unit on top of
Concession 3, however, there is also nothing which allows the
same. The more logical inference is that the unit is limited to that
stated in the Condominium Act, considering that the Master Deed
with Declaration of Restrictions does not expressly declare
otherwise.
To allow the petitioner's claim over the air space would not
prevent the petitioner from further constructing another unit on top
of Concession 4 and so on. This would clearly open the door to
further "impairment of the structural integrity of the condominium
building" which is explicitly proscribed in the Master Deed. 19
Significantly, the parties are no longer questioning before us the past
rulings regarding Legaspi Towers' ownership of the air space above Concession
3 which is the air space above the condominium building itself. The principal
bones of contention here are the legal consequences of such ownership and
the applicability of Article 448 of the Civil Code and our ruling in Depra v.
Dumlao 20 on the factual antecedents of these cases.
The ruling of this Court in Depra v. Dumlao extensively cited by both
parties pertains to the application of Articles 448 and 546 of the Civil Code,
which respectively provide:
Art. 448. The owner of the land on which anything has been
built, sown or planted in good faith, shall have the right
to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if
its value is considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the land
 does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and
in case of disagreement, the court shall fix the terms thereof.
Art. 546. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the thing
until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in
good faith with the same right of retention, the person who has
defeated him in the possession having the option of refunding the
amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.
To recap, the defendant in Depra constructed his house on his lot but, in
good faith, encroached on an area of 34 square meters of the property of
plaintiff on which defendant's kitchen was built. The Court ruled that pursuant
to Article 448 of the Civil Code, plaintiff, as the owner of the land, has the
option either to pay for the encroaching part of the kitchen, or to sell the
encroached 34 square meters of his lot to the defendant, the builder in good
faith. The owner of the land cannot refuse to pay for the encroaching part of
the building and to sell the encroached part of the land. Pursuant to Articles
448 and 546 of the Civil Code, the Court remanded the case to the RTC to
determine the following:
(1) the present fair price of the 34-square meter encroached area of the
land;
(2) the amount of expenses spent in building the kitchen;
(3) the increase in value the area may have acquired by reason of the
building; and TIADCc
(4) whether the value of the 34-square meter area is considerably more
than that of the kitchen built thereon.
After the RTC has determined the four items above, the RTC shall grant
the owner a period of 15 days to exercise his option whether (a) to
appropriate the kitchen by paying the amount of expenses spent for building
the same or the increase of such area's value by reason of the
building or (b) to oblige the builder in good faith to pay the price of said area.
The Court thereafter provided for further contingencies based on the RTC
finding in the fourth item.
In the case at bar, LEMANS prays that, pursuant to Depra, the Court
should determine the value of Concession 4, and find such value to be Six
Million Eight Hundred Thousand Eight Hundred Ninety-Seven and 96/100 Pesos
(P6,800,897.96) plus legal interest. Legaspi Towers, on the other hand, prays
for the extrajudicial abatement of Concession 4, on the ground that the
applicable provision of the Civil Code is Article 699, which provides:
Article 699. The remedies against a public nuisance are:
(1) A prosecution under the Penal code or any local ordinance;
or
(2) A civil action; or
(3) Abatement, without judicial proceedings.
Legaspi Towers also argues that Concession 4 is an illegal construction,
for being in violation of the Condominium Act and the By Laws of Legaspi
Towers. Legaspi Towers stresses that LEMANS failed to comply with
the Condominium Act, which requires the consent of the registered owners of
the condominium project for the amendment of the Master Deed.
 Indeed, the last paragraph of Section 4 of the Condominium
Act provides:
The enabling or master deed may be amended or revoked
upon registration of an instrument executed by the registered
owner or owners of the property and consented to by all registered
holders of any lien or encumbrance on the land or building or
portion thereof. The term "registered owner" shall include the
registered owners of condominiums in the project. Until registration
of a revocation, the provisions of this Act shall continue to apply to
such property.
The Master Deed of Legaspi Towers 21 states the number of stories and
basements, and the number of units and accessories, and contains as an
attachment a diagrammatic floor plan of the building as required by Section 4
(b) 22 of the Condominium Act. Section 2 of the Master Deed states:
Section 2. The Building and the Units. — The building included
in the condominium project is a commercial building constructed of
reinforced concrete and consisting of seven (7) storeys with a
basement, a ground floor, a deck roof, and two levels above the
deck roof. x x x. 23
The construction by LEMANS of Concession 4 contravenes the Master
Deed by adding a third level above the roof deck. As pointed out by Legaspi
Towers and shown in the records, the Master Deed was never amended to
reflect the building of Concession 4. Furthermore, LEMANS failed to procure the
consent of the registered owners of the condominium project as required in the
last paragraph of Section 4 of the Condominium Act.
The By-Laws of Legaspi Towers 24 specifically provides that
extraordinary improvements or additions must be approved by the members in
a regular or special meeting called for the purpose prior to the construction:
ARTICLE V
IMPROVEMENTS AND ADDITIONS
xxx xxx xxx
Section 2. Extraordinary Improvements. — Improvements or
additions to the common areas which shall cost more than
P100,000.00 or which involve structural construction or modification
must be approved by the members in a regular or special meeting
called for the purpose before such improvements or additions are
made. x x x. 25
Said By-Laws also provides for the process by which violations of the
Master Deed are redressed, and the same coincides with the prayer of Legaspi
Towers:
ARTICLE VII
ABATEMENT OF VIOLATIONS
Section 1. Power to Abate Violations. — In the event that any
member or his tenant or lessee fails or refuses to comply with any
limitation, restriction, covenant or condition of the Master Deed with
Declaration of Restrictions, or with the rules and regulations on the
use, enjoyment and occupancy of office/units or other property in
the project, within the time fixed in the notice given him by the
Board of Directors, the latter or its duly authorized representative
shall have the right to enjoin, abate or remedy the continuance of
such breach or violation by appropriate legal proceedings.
 The Board shall assess all expenses incurred in abatement of
the violation, including interest, costs and attorney's fees, against
the defaulting member. 26
Instead of procuring the required consent by the registered owners of the
condominium project pursuant to the Condominium Act, or having Concession
4 approved by the members in a regular or special meeting called for the
purpose pursuant to the By-Laws, LEMANS merely had an internal
arrangement with the then president of Legaspi Towers. The same, however,
cannot bind corporations, which includes condominium corporations such as
Legaspi Towers, as they can act only through their Board of Directors. 27
Unperturbed, LEMANS argues that the internal arrangement shows its
good faith in the construction of Concession 4, and claims the application of
the aforementioned Articles 448 and 546 of the Civil Code.For reference,
Article 448 provides:
Art. 448. The owner of the land on which anything has been
built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment
of the indemnity provided for in Articles 546 and 548, or to oblige
the one who built or planted to pay the price of the land, and the
one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more
than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof. AIDSTE
Firstly, it is recognized in jurisprudence that, as a general rule, Article
448 on builders in good faith does not apply where there is a contractual
relation between the parties. 28
Morever, in several cases, this Court has explained that the raison
d'etre for Article 448 of the Civil Code is to prevent the impracticability of
creating a state of forced co-ownership:
The rule that the choice under Article 448 of the Civil
Code belongs to the owner of the land is in accord with the principle
of accession, i.e., that the accessory follows the principal and not
the other way around. Even as the option lies with the landowner,
the grant to him, nevertheless, is preclusive. The landowner cannot
refuse to exercise either option and compel instead the owner of the
building to remove it from the land.
The raison d'etre for this provision has been enunciated thus:
Where the builder, planter or sower has acted in good faith, a
conflict of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the
impracticability of creating a state of forced co-ownership, the law
has provided a just solution by giving the owner of the land the
option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land and
the sower the proper rent. He cannot refuse to exercise either
option. It is the owner of the land who is authorized to exercise the
option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing. 29
 In the case at bar, however, the land belongs to a condominium
corporation, wherein the builder, as a unit owner, is considered a stockholder
or member in accordance with Section 10 of the Condominium Act, which
provides:
SECTION 10. Whenever the common areas in a condominium
project are held by a condominium corporation, such corporation
shall constitute the management body of the project. The corporate
purposes of such a corporation shall be limited to the holding of the
common areas, either in ownership or any other interest in real
property recognized by law, to the management of the project, and
to such other purposes as may be necessary, incidental or
convenient to the accomplishment of said purposes. The articles of
incorporation or by-laws of the corporation shall not contain any
provision contrary to or inconsistent with the provisions of this Act,
the enabling or master deed, or the declaration of restrictions of the
project. Membership in a condominium corporation, regardless of
whether it is a stock or non-stock corporation, shall not be
transferable separately from the condominium unit of which it is an
appurtenance. When a member or stockholder ceases to own a unit
in the project in which the condominium corporation owns or holds
the common areas, he shall automatically cease to be a member or
stockholder of the condominium corporation.
The builder is therefore already in a co-ownership with other unit owners
as members or stockholders of the condominium corporation, whose legal
relationship is governed by a special law, the Condominium Act. It is a basic
tenet in statutory construction that between a general law and a special law,
the special law prevails. Generalia specialibus non derogant. 30 The provisions
of the Civil Code, a general law, should therefore give way to the Condominium
Act, a special law, with regard to properties recorded in accordance with
Section 4 31 of said Act. Special laws cover distinct situations, such as the
necessary co-ownership between unit owners in condominiums and the need to
preserve the structural integrity of condominium buildings; and these special
situations deserve, for practicality, a separate set of rules.
Articles 448 and 546 of the Civil Code on builders in good faith are
therefore inapplicable in cases covered by the Condominium Act where
the owner of the land and the builder are already bound by specific
legislation on the subject property (the Condominium Act), and by contract
(the Master Deed and the By-Laws of the condominium corporation). This
Court has ruled that upon acquisition of a condominium unit, the purchaser not
only affixes his conformity to the sale; he also binds himself to a contract with
other unit owners. 32
In accordance therefore with the Master Deed, the By-Laws of Legaspi
Towers, and the Condominium Act, the relevant provisions of which were
already set forth above, Legaspi Towers is correct that it has the right to
demolish Concession 4 at the expense of LEMANS. Indeed, the application of
Article 448 to the present situation is highly iniquitous, in that an owner, also
found to be in good faith, will be forced to either appropriate the illegal
structure (and impliedly be burdened with the cost of its demolition) or to allow
the continuance of such an illegal structure that violates the law and the
Master Deed, and threatens the structural integrity of the condominium
building upon the payment of rent. The Court cannot countenance such an
unjust result from an erroneous application of the law and jurisprudence.
 We will no longer pass upon the issue of the validity of building permit for
Concession 4 as the same has no bearing on the right of Legaspi Towers to an
abatement of Concession 4.
Finally, we are constrained to deny the Petition of LEMANS in view of our
ruling that the doctrine in Depra and Articles 448 and 546 of the Civil
Code were improperly applied in these cases.
WHEREFORE, the Petition in G.R. No. 199353 is hereby DENIED for
lack of merit. The Petition in G.R. No. 199389 is GRANTED. The Decision
dated May 26, 2011 and Resolution dated November 17, 2011 of the Court of
Appeals in CA-G.R. CV No. 88082 are REVERSED and SET ASIDE. Leviste
Management System, Inc. is ORDERED to remove Concession 4 at its own
expense. No pronouncement as to costs. SO ORDERED. |||  (Leviste
Management System, Inc. v. Legaspi Towers 200, Inc., G.R. Nos. 199353 &
199389, [April 4, 2018])

[G.R. No. 211947. July 3, 2017.]

HEIRS OF CAYETANO CASCAYAN, represented by LA PAZ

MARTINEZ, petitioners, vs. SPOUSES OLIVER and EVELYN
GUMALLAOI, and the MUNICIPAL ENGINEER OF BANGUI,
ILOCOS NORTE, respondents.

RESOLUTION

LEONEN, J  p:

This resolves a Petition for Review on Certiorari 1 filed under Rule 45 of

the Rules of Court praying that the Court of Appeals Decision 2 dated July 31,
2013 and Resolution 3 dated February 25, 2014 in CA-G.R. CV No. 96900 be
reversed and set aside.
On September 10, 2007, La Paz Cascayan-Martinez, Elpidio Cascayan,
Evangeline Cascayan-Siapco, Flor Cascayan, Nene Cascayan-Alupay, and
Virginia Cascayan-Avida (the Cascayan Heirs), 4 all heirs of Cayetano
Cascayan (Cayetano), filed a complaint for Recovery of Possession, Demolition,
and Damages against the spouses Oliver and Evelyn Gumallaoi (Spouses
Gumallaoi) before Branch 19, Regional Trial Court, Bangui, Ilocos Norte. 5 The
Cascayan Heirs alleged that by virtue of a free patent application, they were
co-owners of a parcel of land covered by Original Certificate of Title (OCT) No.
P-78399, 6 denominated as Lot No. 20028, described as follows:
A parcel of cornland (Lot No. 20028, Cad. 734-D, Bangui Cadastre),
bounded on the Northeast by Lot No. 20026; on the Southeast by
an Alley; and on the Southwest by Lots Nos. 20029 and 20027 of
Cad. 734-D, containing an aggregate area of 1,083 sq. mts., more
or less, covered under Katibayan ng Orihinal na Titulo Blg. No. P-
78399 with Tax Declaration No. 03-006-00652 with Market Value of
Php3,510.00. 7
The Cascayan Heirs affirmed that the Spouses Gumallaoi bought Lot No.
20029, an adjacent lot, described as follows:
A parcel of land (Lot No. 20029, Cad. 734-D, Bangui Cadastre),
bounded on the Northeast by Lot No. 20028; on the Southeast by
an Alley; and on the Southwest by Lot No. 20030; and on the
Northwest by Lot No. 20027 of Cad. 734-D, containing an aggregate
area of 999 sq. mts., more or less, covered under Tax Declaration
No. 03-006-00673. 8
The Spouses Gumallaoi built a residential house on Lot No. 20029 which
the Cascayan Heirs alleged encroached on Lot No. 20028 after renovations and
improvements. 9 The Spouses Gumallaoi ignored the notifications that they
had encroached into Lot No. 20028. 10 On May 31, 2001, the Spouses
Gumallaoi applied for a Building Permit. Due to renovations on their residential
house, they further encroached on Lot No. 20028. 11 Thus, the Cascayan
Heirs prayed that the Spouses Gumallaoi be directed to vacate Lot No. 20028
and to restore it to their possession. They likewise prayed that the municipal
engineer of Bangui issue the necessary demolition permit as well as cause the
demolition of the portion of the house that encroached on Lot No. 20028.
Finally, they prayed to be paid damages. 12
In response, and by way of counterclaim, the Spouses Gumallaoi
maintained that they were the true owners of both Lot Nos. 20029 and
20028. 13 They claimed that the Cascayan Heirs secured a free patent to Lot
No. 20028 through manipulation. They asserted that the supporting affidavits
for the Cascayan Heirs' free patent application were obtained through fraud
and deception. They attached in their Amended Answer the affidavits by the
same affiants disowning the latter's previous affidavits. 14 Thus, the Spouses
Gumallaoi prayed that they be declared the legal owners of Lot No. 20028, that
OCT No. P-78399 be annulled, and that they be paid damages. 15
By agreement of the parties, Engr. Gregorio Malacas was appointed to
determine whether Lot No. 20028 was included in the lot claimed by the
Spouses Gumallaoi. In his report, he said:
From the datas (sic) of the verification survey that was
executed over the premises of the subject, it appears that a two (2)
[-]storey residential [b]uilding owned by the defendants was
erected partly on Lot 20028 and partly on Lot 20029. 16
 The parties decided to submit the case for resolution with the position
papers and the evidence on record as bases. 17
On January 21, 2010, the Regional Trial Court 18 rendered a Decision
declaring the Spouses Gumallaoi the legal owners of Lot No. 20028. It ruled
that petitioners did not prove that they or their predecessor-in-interest had
been in possession of it. Conversely, noting that the bigger portion of the
Spouses Gumallaoi's residence had been constructed on this land, the Regional
Trial Court found that it was more likely that the residence was intended to be
constructed on Lot No. 20028. 19 The Regional Trial Court found
inconsistencies between the claims of the Cascayan Heirs and the evidence
they presented in support of their free patent application. It concluded that
OCT No. P-78399 had been secured through fraud, without legal and proper
basis, and hence, disregarded it:
It can be gleaned from the documentary evidence of the
plaintiffs that their predecessor Cayetano Cascayan was the
declared owner of a parcel of sugarland with an area of 1,600
square meters under Tax Declaration No. 28278-A, series of 1926
which cancelled Tax Declaration No. 28278. Tax Declaration No.
28278-A was later cancelled by Tax Declaration No. 28278-B which
was issued in 1932, also covering the same area. Later, it was
revised in 1949 under Tax Declaration No. 005179, this time
covering a bigger area of 1,950 square meters. As per the plaintiffs,
the same parcel of land was issued Tax Declaration No. 601683,
series of 1985 although the land area is indicated only to be 1,940
square meters.
Sometime in the year 1984, a parcel of land designated as Lot
No. 20028 consisting of 1,083 square meters was surveyed for
Marcelino Alupay as shown in the technical description issued by the
Community Environment and Natural Resources Office (CENRO),
Bangui, Ilocos Norte which conducted the survey from November 2
to 25, 2002 and approved the said technical description on October
12, 1984. Almost 20 years after the said survey or on February 25,
2004, plaintiffs through La Paz Cascayan filed an Application for
Free Patent over Lot No. 20028. In support of the application, said
plaintiff submitted as one of the requirements an Affidavit executed
by Marcelino Alupay dated March 24, 2004 stating that there was a
mistake in placing his name as survey claimant over the said lot.
The applicant also submitted, among others, the Affidavit of
Estrelita Balbag and Jalibert Malapit who then attested that plaintiffs
as heirs of Cayetano Cascayan have continuously occupied and
cultivated Lot No. 20028; the Affidavit of Isauro Pinget, Elvira
Pinget and Sixto Rigates stating that the lot was declared in the
name of Cayetano Cascayan under Tax Declaration No. 03-006-
00652, series of 2003; and a Certification from Christopher Malapit,
Barangay Chairman of Brgy. Dadaor, Bangui that the notice of
application for free patent was posted from February 24 to March
24, 2004. As per an Order issued on July 1, 2004, the CENRO
approved the application and Katibayang ng Orihinal na Titulo Blg.
P-78399 was issued on the same date.
From these evidences of the plaintiffs, there is clear and
serious disconnect in their claim that the parcel of land declared
earlier in the name of their predecessor is the same as Lot No.
20028. The Court notes that indeed the tax declarations issued in
the name of Cayetano Cascayan in 1926, 1932, 1949 and 1985
bear the same boundaries — Florencio Molina on the north,
Bernardo Acido on the East and Pedro Corpuz on the south and
west. It also notes that as shown at the back of the tax declaration
issued in 1985, it cancelled Tax Declaration No. 501883 and not the
tax declaration issued in 1949. At any rate, granting that said tax
declaration issued in 1985 refers to the same lot mentioned in the
tax declarations issued in 1926, 1932 and 1949 because of the
similar boundaries indicated, there is simply no basis to show that it
is the same as Lot No. 20028. The Court even wonders why the
1985 tax declaration still refer[red] to a lot with an area of 1,940
square meters if it was already surveyed earlier in 1982 and was
found to have an area of only 1,083 square meters. Not only that, if
the plaintiffs were the owners of Lot No. 20028, it also wonders why
the survey thereof was conducted for Marcelino Alupay and not for
Cayetano Cascayan who, as per another technical description also
issued by the CENRO, was the claimant in the survey also
conducted in 1982 of Lot No. 20033 which is just adjacent to the lot
in question. It further wonders in the absence of any explanation
how it came about that Lot No. 20028 consisted of only 1,083
square meters which is substantially different to its area th[a]n as
originally declared in the name of Cayetano Cascayan.
At this juncture, it is noteworthy that Tax Declaration No. 03-
006-00652, series of 2003 in the name of the Heirs of Cayetano
Cascayan who obviously secured the same for purposes [of] their
application for free patent, was not also earlier declared in the name
of either Marcelino Alupay or Cayetano Cascayan. A perusal of the
evidences of the defendants spouses . . . show that the owner was
unknown. In fact, as shown in Tax Declaration No. 97-006-00654, it
preceded Tax Declaration No. 03-006-00652 which is the same tax
declaration issued to the plaintiffs in 2003 before they applied for
the free patent. It is thus clear that, the lot being declared then to
an unknown person, plaintiffs took it upon themselves and claimed
it, secured a tax declaration in their name in 2003 and applied
thereafter for a free patent therefor the following year.
In other words, plaintiffs obviously applied for a free patent
without any basis. It is clear from their evidence that they were
never in possession of the property in suit before they applied for
the free patent. While plaintiffs submitted affidavits to show that
they have occupied and cultivated Lot No. 20028 and that it was
declared in the name of the heirs of Cayetano Cascayan in support
of their application for free patent, it appears that such evidences
have been manipulated. It appears that while they were not in fact
cultivating the property and that it was declared in the name of the
heirs of Cayetano Cascayan only in 2003, they were able to present
false information about their true status as claimants. In fact,
Estrelita Balbag and Jalibert Malapit, who then in the year 2004
attested in support of plaintiffs' application for free patent that
plaintiffs and their predecessor have been in continuous possession
of Lot No. 20028 since 1944 or 1945, have retracted their said
Affidavits. Thus, in the subsequent Affidavits they have executed on
September 19, 2007 which defendants spouses submitted in
support of their claim, Estrelita Balbag on her part alleged that she
has no knowledge about the contents of her earlier affidavit which
was not explained to her and that she is not aware of the matters
concerning Lot No. 20028 while Jalibert Malapit stated that his
signature on the Affidavit is not his real signature.
Likewise, Barangay Chairman Christopher Malapit also
retracted the Certification he issued on March 24, 2004 in support
[of] the application of the plaintiffs for free patent by stating in his
subsequent Affidavit dated September 19, 2007 also submitted by
the defendants spouses that there was no posting made of the
notice of application for free patent and that when he was asked to
sign by Elsa Martinez, daughter of La Paz Martine[z], he was not
aware of the contents of the Certification and that he was made to
believe that it will be used for another purpose than an application
for free patent . . .
Also, Marcelino Alupay retracted the Affidavit which he
executed on March 24, 2004 in favor of the plaintiffs in connection
with their application for free patent, stating that there was a
mistake in placing his name as survey claimant and that the lot
applied for is in the actual possession and cultivation of the heirs of
Cayetano Cascayan. Thus in another Affidavit he executed on
September 19, 2007, he alleged that he had no knowledge of the
contents of what he signed and that it was not explained to him.
In any case, contrary to the claim of plaintiffs that they were
in possession of Lot No. 20028, it appears that even by the year
2004 when plaintiffs applied for a free patent, defendants spouses
have already been in possession of Lot No. 20028 together with the
adjacent Lot No. 20029. This is clear from the fact that the bigger
portion of their house was constructed over the lot in dispute. By
constructing their house both on the two lots, it is unthinkable that
they would have done so under notice or threat that they will
eventually be evicted and a substantial part of their house
demolished. Under the circumstances, the Court cannot believe the
claim of the plaintiffs that they have repeatedly warned the
defendants spouses about the encroachment. If this were true, it is
surprising that when the defendants spouses supposedly extended
their house, they did not file a case to immediately stop the
construction.
xxx xxx xxx
In fact, all these observations lead the Court to believe that
the issuance of the free patent was not made in accordance with the
procedure laid down by Commonwealth Act No. 141, otherwise
known as the Public Land Act. As provided in Section 91 thereof, an
investigation should be conducted for the purpose of ascertaining
whether the material facts set out in the application are true. In this
case, it appears more likely that there was never any investigation
or any verification made by the CENRO as to the actual status of the
land in suit at the time the application of plaintiffs for a free patent
was processed and before the free patent was approved and issued.
Otherwise, they would have known that defendants spouses have
constructed the bigger part of their house on Lot No. 20028. More
significantly, when Marcelino Alupay, the original survey claimant of
Lot No. 20028 in 1982, executed his Affidavit supporting the
application for free patent on March 24, 2004, he was immediately
dropped on the same day as survey claimant as shown in [the]
Order issued by the CENRO. If it is any indication, it was only on the
basis of the Affidavit of Marcelino Alupay stating that his name was
 erroneously declared as survey claimant to the property that the
dropping of his name as such was made and not by virtue of any
verification or investigation. 20 (Citations omitted)
The dispositive portion of the Regional Trial Court Decision read:
WHEREFORE, the instant complaint is DISMISSED and the
defendants spouses Oliver and Evelyn Gumallaoi are declared
owners of Lot No. 20028 of the Bangui Cadastre. Consequently, it
having been issued fraudulently and without legal and proper basis,
Katibayang [sic] ng Orighinal [sic] na Titulo Blg. P-78399 issued in
the name of Heirs of Cayetano Cascayan, represented by La Paz
Martinez, is hereby ordered cancelled. For want of basis, no
damages are awarded.
SO ORDERED. 21
The Cascayan Heirs filed a Motion for New Trial 22 dated February 19,
2010, citing mistake as a ground. They claimed that despite the agreement for
the trial court to consider only the Commissioner's Report to resolve the
case, 23 it also examined fraudulent affidavits. 24 Thus, the Cascayan Heirs
prayed that the Regional Trial Court Decision be set aside and a new trial be
conducted.
In an Order 25 dated March 21, 2011, the Regional Trial Court denied the
Motion for New Trial:
Mistake as a ground for new trial under Section 1, Rule 37 of
the Rules of Court must be a mistake of fact, not of law, which
relates to the case. Here, plaintiffs claim to have committed mistake
in perceiving that the case was submitted merely on the basis of the
Commissioner's Report is unavailing. The Commissioner's Report
containing the findings on the relocation survey was never meant to
be crucial in determining the issue in this case. As per Order of the
Court issued on July 10, 2008, the relocation survey was
commissioned upon agreement of the parties to determine in the
first place if the plaintiffs and the defendants refer to one and the
same identifiable property or if the lot being claimed by the plaintiff
is one and the same as or is included in the lot being claimed by the
defendants. It is therefore erroneous on the part of the plaintiffs to
now claim that they thought that the case was submitted for
resolution only [on] the basis of the results of the relocation survey,
particularly the finding in the Commissioner's Report which is
quoted as follows:
"From the datas [sic] of the verification survey that
was executed over the premises of the subject, it
appears that a two (2)[-]storey residential building
owned by the defendants was erected partly on Lot
20028 and partly on Lot 20029".
More significantly, it is clear on record contrary to the
supposed mistaken perception of the plaintiffs that in the Order
dated November 5, 2009, that parties, meaning with the
concurrence of both plaintiffs and defendants, agreed to submit the
case for resolution "on the basis of their position papers and the
evidence already on record" . . . This plaintiffs cannot deny. Lest
they have forgotten, their cause of action is reconveyance based on
their claim that they owned the property upon which defendants
had partly built their house. They are also too aware that if their
action is for reconveyance based on their claim of ownership, it is in
 the same vein that defendants lay claim to the property. They are
thus likewise aware that a resolution of the case cannot be made
merely on the basis of the Commissioner's Report but must be on
the basis of the whole evidence on record.
A party who moves for a new trial on the ground of "honest
mistake" must show that ordinary prudence could not have guarded
against it. A new trial is not a refuge for the obstinate. In this case,
plaintiffs' assertion that they thought that the case was submitted
for resolution only on the basis of the Commissioner's Report is but
a pretentious and unfounded mistake. Having been assisted by
counsel, such mistake could not have happened had ordinary
prudence been exercised. 26 (Citations omitted)
The Cascayan Heirs appealed the Regional Trial Court Decision to the
Court of Appeals. They argued that the Regional Trial Court could not order the
cancellation of the patent because they had already been issued a certificate of
title pursuant to a public land patent. 27 Furthermore, under the Public Land
Act, it is only the Solicitor General who could institute an action for reversion of
Lot No. 20028. 28 Petitioners also insisted that their Motion for New Trial
should have been granted because of their mistake in believing that the
position paper would be the basis of the Regional Trial Court's decision and
because respondents committed fraud in submitting irrelevant documents. 29
The Court of Appeals denied the petition and affirmed the Regional Trial
Court Decision. It held that the action was in the nature of an accion
reivindicatoria, wherein the plaintiffs claim ownership over a land and seek
recovery of full possession over it. 30 Thus, the main issue for resolution was
who had a better claim over Lot No. 20028, based on the parties'
evidence. 31 Consequently, pursuant to Article 434 of the Civil Code, the
plaintiffs had to prove the identity of the land claimed and their title to
it. 32 The Court of Appeals found that OCT No. P-78399 was not conclusive
proof of their title to Lot No. 20028 as titles secured by fraud and
misrepresentation are not indefeasible. Quoting the Regional Trial Court, the
Court of Appeals found that the evidence proved that the Cascayan Heirs
obtained their title through fraud and misrepresentation. Additionally, it ruled
that the Spouses Gumallaoi proved their title as well as the identity of the land
pursuant to Article 434 of the Civil Code.The dispositive portion of the decision
read:
WHEREFORE, the instant appeal is DENIED. The January 21,
2010 Decision of Regional Trial Court, Branch 19, Bangui, Ilocos
Norte in Civil Case No. 944-19 is hereby AFFIRMED. 33
In a Resolution 34 dated February 25, 2014, the Court of Appeals also
denied the Cascayan Heirs' motion for reconsideration for lack of merit.
On April 10, 2014, the Cascayan Heirs filed a petition before this Court
assailing the Court of Appeals Decision and Resolution. Petitioners argue that
regardless of any application for free patent that may have been filed, Lot No.
20028 had long been owned by Cayetano since 1925. 35 This is shown by
evidence submitted to the Regional Trial Court, namely, a Tax Declaration for
the year 1925 and the presence of the debris of his residence, still intact on
Lot No. 20028. 36 Moreover, petitioners insist that it has been proven that
they have possessed Lot No. 20028 since time immemorial. 37 They also claim
that none of the evidence shows that respondents own Lot No. 20028. They
point out that affidavits retracting the affidavits of waiver have been submitted
to the Court of Appeals, 38 explaining that the signatories of the affidavits of
waiver did not understand what they signed. 39
 On September 22, 2015, respondents manifested that in lieu of filing a
comment on the Petition, they are adopting the rulings of the Court of Appeals
and of the Regional Trial Court. 40
The sole issue for resolution is whether the Court of Appeals properly
appreciated the evidence presented by the parties.
The petition is denied.
Petitions for review on certiorari under Rule 45 shall pertain only to
questions of law. 41 In Pascal v. Burgos: 42
Review of appeals filed before this court is "not a matter of
right, but of sound judicial discretion[.]" This court's action is
discretionary. Petitions filed "will be granted only when there are
special and important reasons[.]" This is especially applicable in this
case, where the issues have been fully ventilated before the lower
courts in a number of related cases.
The Rules of Court require that only questions of law should be
raised in petitions filed under Rule 45. This court is not a trier of
facts. It will not entertain questions of fact as the factual findings of
the appellate courts are "final, binding[,] or conclusive on the
parties and upon this [c]ourt" when supported by substantial
evidence. Factual findings of the appellate courts will not be
reviewed nor disturbed on appeal to this court. 43 (Citations
omitted)
Thus, as a general rule, the factual findings of the Court of Appeals bind
this Court.
Quoting the Regional Trial Court, the Court of Appeals determined, based
on the evidence presented, that petitioners obtained their title to Lot No.
20028 through fraud and misrepresentation:
In this case, Spouses Gumallaoi presented sufficient evidence
to show that the Heirs of Cascayan obtained their title through fraud
and misrepresentation. We quote with approval the following
observations of the RTC, viz.:
At this juncture, it is noteworthy that Tax
Declaration No. 03-006-00652, series of 2003 in the
name of the Heirs of Cayetano Cascayan who obviously
secured the same for purposes (of) their application for
free patent, was not also earlier declared in the name of
either Marcelino Alupay or Cayetano Cascayan. A perusal
of the evidences [sic] of the defendants spouses . . .
show that the owner was unknown. In fact, as shown in
Tax Declaration No. 97-006-00654, it preceded Tax
Declaration No. 03-006-00652 which is the same tax
declaration issued to the plaintiffs in 2003 before they
applied for the free patent. It is thus clear that, the lot
being declared then to an unknown person, plaintiffs
took it upon themselves and claimed it, secured a tax
declaration in their name in 2003 and applied thereafter
for a free patent therefor the following year.
In other words, plaintiffs obviously applied for a
free patent without any basis. It is clear from their
evidence that they were never in possession of the
property in suit before they applied for the free patent.
While plaintiffs submitted affidavits to show that they
have occupied and cultivated Lot No. 20028 and that it
 was declared in the name of the heirs of Cayetano
Cascayan in support of their application for free patent, it
appears that such evidences (sic) have been
manipulated. It appears that while they were not in fact
cultivating the property and that it was declared in the
name of the heirs of Cayetano Cascayan only in 2003,
they were able to present false information about their
true status as claimants. In fact, Estrelita Balbag and
Jalibert Malapit, who then in the year 2004 attested in
support of plaintiffs' application for free patent that
plaintiffs and their predecessor have been in continuous
possession of Lot No. 20028 since 1944 or 1945, have
retracted their said Affidavits. Thus, in the subsequent
Affidavits they have executed on September 19, 2007
which defendants spouses submitted in support of their
claim, Estrelita Balbag on her part alleged that she has
no knowledge about the contents of her earlier affidavit
which was not explained to her and that she is not aware
of the matters concerning Lot No. 20028 while Jalibert
Malapit stated that his signature on the Affidavit is not
his real signature.
Likewise, Barangay Chairman Christopher Malapit
also retracted the Certification he issued on March 24,
2004 in support [of] the application of the plaintiffs for
free patent by stating in his subsequent Affidavit dated
September 19, 2007 also submitted by defendants
spouses that there was no posting made of the notice of
application for free patent and that when he was asked
to sign by Elsa Martinez, daughter of La Paz Martine[z],
he was not aware of the contents of the Certification and
that he was made to believe that it will be used for
another purpose than an application for free patent . . .
Also, Marcelino Alupay retracted the Affidavit which
he executed on March 24, 2004 in favor of the plaintiffs
in connection with their application for free patent stating
that there was mistake in placing his name as survey
claimant and that the lot applied for is in the actual
possession and cultivation of the heirs of Cayetano
Cascayan. Thus, in another Affidavit he executed on
September 19, 2007, he alleged that he had no
knowledge of the contents of what he signed and that it
was not explained to him. 44
However, petitioners ask that this Court reverse the Court of Appeals'
determination, insisting that regardless of any impropriety in the filing of an
application for a free patent, they have proven that they owned Lot No. 20028.
They assert that they have established that Lot No. 20028 had long been
owned by Cayetano since 1925 45 and that they have possessed it since time
immemorial, 46 whereas none of the evidence shows that respondents ever
owned it. Petitioners also insist that the affidavits of waiver should not have
been given weight by the Court of Appeals, considering that affidavits
retracting the affidavits of waiver have been submitted to it. 47
These issues require this Court to review the Court of Appeals'
appreciation of evidence. The Court of Appeals found that the evidence did not
sufficiently prove petitioners' claims of possession or ownership over Lot No.
20028:
 The records are also bereft of evidence showing that the Heirs
of Cascayan or their predecessor-in-interest had been in possession
of Lot No. 20028. There was not even an allegation on how
Cayetano took possession of the land and in what way he derived
his title thereto. Interestingly, the Heirs of Cascayan merely based
their claim of possession on a series of tax declarations purportedly
showing that Cayetano, their predecessor-in-interest, had been
religiously paying the taxes thereof and even built a residential
house thereon. However, and as aptly noted by the RTC, these tax
declarations are full of inconsistent entries that were never
explained and only cast doubt as to the identity of the land being
claimed by the Heirs of Cascayan. 48
The Court of Appeals noted that the only basis for the petitioners' claim
of possession was tax declarations, which the Court of Appeals scrutinized:
A careful perusal of the tax declarations bearing the name of
Cayetano and having similar boundaries reveal that TD No. 601683
(series of 1985) covered 1,940 sq. m. It cancelled TD No. 501883,
not TD No. 005179. On the other hand, TD No. 005179 (series of
1949), stating an area of 1,950 sq. m., cancelled TD No. 28278-B
(series of 1932) that has an area of 1,600 sq. m. TD No. 28278-B
cancelled TD No. 28278-A (series of 1926) which bore the same
dimension and had cancelled TD No. 28278. We emphasize that TD
No. 03-006-00652 (series of 2003) in the name of the Heirs of
Cascayan covers an area of 1,083 sq. m. and was not earlier
declared in the name of either Cayetano or even Marcelino who
allegedly applied, though erroneously, a patent for Lot No. 20028.
Obviously, its area is substantially different from that originally
declared in the name of Cayetano . . .
xxx xxx xxx
However, TD No. 97-006-00654 was declared to an unknown
owner in 1997 and it cancelled TD No. 94-006-00651 which was
likewise declared to an unknown owner in 1994, and both covered
an area of 1,803 sq. m. The Heirs of Cascayan never bothered to
explain why Lot No. 20028 was declared to an unknown owner
despite their claim that they had been in possession of the same
since 1942. It is also intriguing that despite the resurvey of the land
in 1982, which was used by the Heirs of Cascayan in their free
patent application, showing an area of 1,083 sq. m., the land was
allegedly declared in the name of Cayetano in 1985 but still bearing
an area of 1,940 sq. m. The 1985 tax declaration in the name of
Cayetano was likewise silent as to the lot number of the land being
declared for tax purposes and it appears therefrom that said lot was
bounded on the south and west by the land owned by Pedro and on
the east by the land owned by Bernardo Acido. In contrast thereto,
the survey conducted in 1982 showed that Lot No. 20028 is
bounded on the east by an alley and not by any private land. It is
quite plain from the foregoing observations, and as correctly
pointed out by the court a quo, that "there is clear and serious
disconnect in their claim that the parcel of land declared earlier in
the name of Cayetano, is the same as Lot No. 20028". 49
The Court of Appeals thoroughly examined the evidence submitted by
petitioners and found it lacking in probative value to prove petitioners'
ownership over Lot No. 20028. Rather than prove their ownership, it cast
doubt on the title over Lot No. 20028.
 Petitioners attempt to address the foregoing inconsistencies:
As to the discrepancy of the area, and which also bothered the
Honorable Court of Appeals, it must be noted that indeed the survey
was conducted in the year 1982 (November 2-25, 1982), but it was
only approved in October 12, 1984. There was as yet no ROAD
then, as it could be seen in the boundaries of the earlier issued Tax
Declarations, but it is still within the allowable area of relevance and
proximity. The present area could be properly explained with the
existence of a road therein as shown in the Survey Plan submitted
by the Commissioner of the case, but the debris of the
improvements — "House and Kitchen" having been put up by
Cayetano Cascayan in his lifetime, could not be denied, which
serves as a monument of ownership in fee simple. 50
The assertions that a road may explain the inconsistencies are mere
factual allegations, not well-substantiated or adequately discussed fact. They
are insufficient to compel this Court to review the Court of Appeals'
appreciation of the evidence as to the identity of the property covered by the
tax declarations in relation to Lot No. 20028.
The Court of Appeals also considered the waivers submitted in evidence
by the parties:
The Court cannot also close its eyes to the Waiver of Rights
executed by some of the Heirs of Cascayan, particularly Virginia
Abida, Irineo Tolentino, Nena Valiente Alupay, Orlino Valinete and
Eden Jacinto, recognizing Jose and Spouses Gumallaoi's ownership
over Lot No. 20028 and admitting that it was erroneous on their
part to apply for a free patent over the said lot. Also worthy of note
is the statement by the Heirs of Cascayan in their application
alleging that the land was public and that no person was claiming or
occupying the same notwithstanding that Spouses Gumallaoi's
house was already visibly erected therein even before the
application was filed in 2003. With these striking
misrepresentations, We uphold the court a quo's findings that the
application for free patent by the Heirs of Cascayan was not
supported by any valid basis warranting the cancellation of their
title over the subject property. 51
Petitioners insist that the Court of Appeals should have considered the
new affidavits submitted by petitioners, retracting the affidavits of waiver it
previously appreciated. 52 Again, this is a matter of appreciation of evidence,
not a question of law, and not a proper subject of review.
The Court of Appeals found that respondents, on the other hand,
sufficiently identified Lot No. 20028 and proved their title thereto:
In contrast, the right to possession of Spouses Gumallaoi of
the subject property is hinged on the "Recibo Ti Pinaglako Ti
Daga" (Receipt for the Sale of Land) dated January 3, 2002. The
boundaries stated in the said receipt are more in accord with TD
Nos. 97-006-00654 and 94-006-00651 as well as with the resurvey
of the lot as it appears in the description stated in OCT No. P-
78399. Also bolstering Spouses Gumallaoi's claim of ownership over
the subject property pursuant to the said sale are the waiver of
rights and the acknowledgment of Spouses Gumallaoi's ownership
by the grandchildren of Cayetano earlier mentioned, and the
Affidavit of Barangay Chairman Christopher stating that Spouses
Gumallaoi's predecessor-in-interest, Raymundo, was the actual
 possessor and occupant of Lot No. 20028 since 1940 up to the time
that Jose questioned the legality of his possession. The Heirs of
Cascayan did not bother to rebut these allegations and during the
March 8, 2008 hearing, their lawyer brought to the attention of the
RTC Raymundo's possession of the subject lot, thus:
The Court:
   That's why the Court is asking the plaintiffs to submit the complete
records of the application for registration and for the defendants
to show documents of ownership of their predecessors-in-
interest, meaning Jose Corpuz and Pedro Corpuz.
Atty. Guillermo (Counsel for the Heirs of Cascayan):
   Yes[,] your honor. And this controversy arisen (sic) when Mr.
Raymundo Garcia left for Hawaii and the son-in-law came in
and possessed the property in 1997 and a residential . . .
The Court:
   Raymundo Garcia?
Atty. Guillermo:
   Yes[,] your Honor, Raymundo Garcia.
The Court:
   The father of Evelyn Garcia?
Atty. Guillermo:
   Yes[,] your Honor, and it was only in 2002 that they got married
with said Gumallaoi and that was the starting point of this
controversy . . .
Atty. Garvida:
   We would like to manifest[,] your Honor[,] that Raymundo Garcia
is the tenant of Jose Corpuz[.]
The Court:
   Tenant?
Atty. Garvida:
   Yes[,] your Honor. And he is already tilling a portion of said lot, the
subject of this case since Jose Corpuz . . . It's been a long
time[,] your [H]onor[,] that he has been tilling the said parcel
of land. So he knows very well that it belongs to Jose Corpuz.
xxx xxx xxx
Hence, considering the foregoing, it behooves Us to concur
with the declaration of the court a quo that Spouses Gumallaoi are
the lawful owners of the subject property. 53 (Citations omitted)
The Court of Appeals' appreciation of the evidence on the possession of
Lot No. 20028 and the weight to be given to the parties' Tax Declarations and
affidavits, which is consistent with the Regional Trial Court findings, is binding
on this Court and there is no cogent reason to review it.
Although not raised as an issue before this Court, it nonetheless bears
emphasizing that when a complaint for recovery of possession is filed against a
person in possession of a parcel of land under claim of ownership, he or she
may validly raise nullity of title as a defense and, by way of counterclaim, seek
its cancellation. In Heirs of Santiago v. Heirs of Santiago: 54
 A certificate of title issued under an administrative proceeding
pursuant to a homestead patent covering a disposable public land
within the contemplation of the Public Land Law or Commonwealth
Act No. 141 is as indefeasible as a certificate of title issued under a
judicial registration proceeding. Under the Land Registration Act,
title to the property covered by a Torrens certificate becomes
indefeasible after the expiration of one year from the entry of the
decree of registration. Such decree of registration is incontrovertible
and becomes binding on all persons whether or not they were
notified of, or participated in, the in rem registration process. There
is no specific provision in the Public Land Law or the Land
Registration Act (Act 496), now Presidential Decree 1529, fixing a
similar one-year period within which a public land patent can be
considered open to review on the ground of actual fraud (such as
that provided for in Section 38 of the Land Registration Act, and
now Section 32 of Presidential Decree 1529), and clothing a public
land patent certificate of title with indefeasibility. Nevertheless, this
Court has repeatedly applied Section 32 of Presidential Decree 1529
to a patent issued by the Director of Lands, approved by the
Secretary of Natural Resources, under the signature of the President
of the Philippines. The date of the issuance of the patent
corresponds to the date of the issuance of the decree in ordinary
cases. Just as the decree finally awards the land applied for
registration to the party entitled to it, the patent issued by the
Director of Lands equally and finally grants and conveys the land
applied for to the applicant.
The one-year prescriptive period, however, does not apply
when the person seeking annulment of title or reconveyance is in
possession of the lot. This is because the action partakes of a suit to
quiet title which is imprescriptible. In David v. Malay, we held that a
person in actual possession of a piece of land under claim of
ownership may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, and his
undisturbed possession gives him the continuing right to seek the
aid of a court of equity to ascertain and determine the nature of the
adverse claim of a third party and its effect on his title.
xxx xxx xxx
In the case at bar, inasmuch as respondents are in possession
of the disputed portions of Lot 2344, their action to annul Original
Certificate of Title No. P-10878, being in the nature of an action to
quiet title, is therefore not barred by prescription.
Section 48 of P.D. 1529, the Property Registration Decree,
provides that a certificate of title shall not be subject to collateral
attack and [cannot] be altered, modified, or canceled except in a
direct proceeding. An action is an attack on a title when the object
of the action is to nullify the title, and thus challenge the judgment
or proceeding pursuant to which the title was decreed. The attack is
direct when the object of an action is to annul or set aside such
judgment, or enjoin its enforcement. On the other hand, the attack
is indirect or collateral when, in an action to obtain a different relief,
an attack on the judgment or proceeding is nevertheless made as
an incident thereof.
In this case, while the original complaint filed by the
petitioners was for recovery of possession, or accion publiciana, and
the nullity of the title was raised merely as respondents' defense,
we can rule on the validity of the free patent and OCT No. P-10878
because of the counterclaim filed by respondents. A counterclaim
can be considered a direct attack on the title. In Development Bank
of the Philippines v. Court of Appeals, we ruled on the validity of a
certificate of title despite the fact that the nullity thereof was raised
only as a counterclaim. It was held that a counterclaim is
considered a complaint, only this time, it is the original defendant
who becomes the plaintiff. It stands on the same footing and is to
be tested by the same rules as if it were an independent action.
Moreover, since all the facts necessary in the determination of the
title's validity are now before the Court, it would be in the best
interest of justice to settle this issue which has already dragged on
for 19 years. 55 (Emphasis in the original, citations omitted)
In Firaza, Sr. v. Spouses Ugay,  56 this Court explained:
In Arangote v. Maglunob, the Court, after distinguishing
between direct and collateral attack, classified a counterclaim under
former, viz.:
The attack is considered direct when the object of
an action is to annul or set aside such proceeding, or
enjoin its enforcement. Conversely, an attack is indirect
or collateral when, in an action to obtain a different
relief, an attack on the proceeding is nevertheless made
as an incident thereof. Such action to attack a
certificate of title may be an original action or a
counterclaim, in which a certificate of title is
assailed as void.
In the recent case of Sampaco v. Lantud, the Court applied
the foregoing distinction and held that a counterclaim, specifically
one for annulment of title and reconveyance based on fraud, is a
direct attack on the Torrens title upon which the complaint for
quieting of title is premised. Earlier in, Development Bank of the
Philippines v. CA, the Court ruled similarly and explained thus:
Nor is there any obstacle to the determination of
the validity of TCT No. 10101. It is true that the
indefeasibility of torrens title cannot be collaterally
attacked. In the instant case, the original complaint is for
recovery of possession filed by petitioner against private
respondent, not an original action filed by the latter to
question the validity of TCT No. 10101 on which
petitioner bases its right. To rule on the issue of validity
in a case for recovery of possession is tantamount to a
collateral attack. However, it should not [b]e overlooked
that private respondent filed a counterclaim against
petitioner, claiming ownership over the land and seeking
damages. Hence, we could rule on the question of the
validity of TCT No. 10101 for the counterclaim can be
considered a direct attack on the same[.]
The above pronouncements were based on the well-settled
principle that a counterclaim is essentially a complaint filed by the
defendant against the plaintiff and stands on the same footing as an
independent action. 57 (Emphasis in the original and supplied,
citations omitted)
 Thus, this Court reiterated Heirs of Santiago 58 in the case of Sampaco
v. Hadji Serad Mingca Lantud: 59
Further, petitioner contends that the Court of Appeals erred in
ruling that petitioner's counterclaim is time-barred, since the one-
year prescriptive period does not apply when the person seeking
annulment of title or reconveyance is in possession of the lot,
citing Heirs of Simplicio Santiago v. Heirs of Mariano E.
Santiago. Petitioner also contends that the Court of Appeals erred
in ruling that the counterclaim in this case is a collateral attack on
respondent's title, citing Cimafranca v. Intermediate Appellate
Court. Petitioner cites the case of Heirs of Simplicio Santiago v.
Heirs of Mariano E. Santiago, which held that a counterclaim can
be considered a direct attack on the title.
The Court notes that the case of Cimafranca v.
Intermediate Appellate Court, cited by the Court of Appeals to
support its ruling that the prayer for the cancellation of
respondent's title through a counterclaim included in petitioner's
Answer is a collateral attack on the said title, is inapplicable to this
case. In Cimafranca, petitioners therein filed a complaint for
Partition and Damages, and respondents therein indirectly attacked
the validity of the title involved in their counterclaim. Hence, the
Court ruled that a Torrens title cannot be attacked collaterally, and
the issue on its validity can be raised only in an action expressly
instituted for that purpose.
Here, the case cited by petitioner, Heirs of Simplicio
Santiago v. Heirs of Mariano E. Santiago, declared that the one-
year prescriptive period does not apply when the party seeking
annulment of title or reconveyance is in possession of the lot, as
well as distinguished a collateral attack under Section 48 of PD No.
1529 from a direct attack, and held that a counterclaim may be
considered as a complaint or an independent action and can be
considered a direct attack on the title, thus:
The one-year prescriptive period, however,
does not apply when the person seeking
annulment of title or reconveyance is in possession
of the lot. This is because the action partakes of a suit
to quiet title which is imprescriptible. In David v. Malay,
we held that a person in actual possession of a piece of
land under claim of ownership may wait until his
possession is disturbed or his title is attacked before
taking steps to vindicate his right, and his undisturbed
possession gives him the continuing right to seek the aid
of a court of equity to ascertain and determine the
nature of the adverse claim of a third party and its effect
on his title.
xxx xxx xxx
Section 48 of P.D. 1529, the Property Registration
Decree, provides that a certificate of title shall not be
subject to collateral attack and cannot be altered,
modified, or canceled except in a direct
proceeding. An action is an attack on a title when
the object of the action is to nullify the title, and
thus challenge the judgment or proceeding
pursuant to which the title was decreed. The attack
 is direct when the object of an action is to annul or
set aside such judgment, or enjoin its
enforcement. On the other hand, the attack is indirect
or collateral when, in an action to obtain a different
relief, an attack on the judgment or proceeding is
nevertheless made as an incident thereof.
A counterclaim can be considered a direct attack
on the title. In Development Bank of the Philippines v.
Court of Appeals, we ruled on the validity of a certificate
of title despite the fact that the nullity thereof was raised
only as a counterclaim. It was held that a
counterclaim is considered a complaint, only this
time, it is the original defendant who becomes the
plaintiff. It stands on the same footing and is to be
tested by the same rules as if it were an
independent action[.]
The above ruling of the court on the definition of collateral
attack under Section 48 of P.D. No. 1529 was reiterated in Leyson
v. Bontuyan, Heirs of Enrigrre Diaz v. Virata, Arangote v.
Maglunob, and Catores v. Afidchao.  60 (Emphasis in the
original, citations omitted)
Thus, the Court of Appeals did not commit an error of law in sustaining
the cancellation of OCT No. P-78399, pursuant to respondents' counterclaim,
and in its determination that petitioners obtained it fraudulently.
The presence of fraud is a factual question. It must be established
through clear and convincing evidence, though the circumstances showing
fraud may be varied: 61
We begin our resolution of this issue with the well-settled rule
that the party alleging fraud or mistake in a transaction bears the
burden of proof. The circumstances evidencing fraud are as varied
as the people who perpetrate it in each case. It may assume
different shapes and forms; it may be committed in as many
different ways. Thus, the law requires that it be established by clear
and convincing evidence. 62
In Republic v. Heirs of Alejaga, Sr., 63 this Court considered several
circumstances as evidence that a free patent had been obtained through fraud.
It noted the discrepancy between the date the application was filed and the
date the investigation and verification were done. Also, the verification and
investigation report supposedly conducted by the Land Inspector was not
signed. Finally, a special investigator testified that the Land Inspector admitted
to not actually conducting an investigation or an ocular inspection of the land,
and this testimony remained unrebutted. 64
Here, the Court of Appeals' and the Regional Trial Court's conclusion that
petitioners obtained the free patent fraudulently was based on several findings.
They determined that petitioners were never in possession of Lot No. 20028.
Even the documents submitted to support their application were flawed: the
tax declarations were inconsistent and the affidavits and Certifications were
subsequently retracted. Considering that the Regional Trial Court and the Court
of Appeals uniformly determined that fraud existed in the free patent
application based on the evidence presented, there is no reason for this Court
to delve into this issue.
 Thus, the Court of Appeals did not commit any error of law in affirming
the Regional Trial Court Decision, which declared respondents as the legal
owners of Lot No. 20028, and in cancelling petitioners' title to it.
WHEREFORE, the petition for review on certiorari dated April 10, 2014
is DENIED and the Court of Appeals Decision dated July 31, 2013 and
Resolution dated February 25, 2014 in CA-G.R. No. 96900 are AFFIRMED.
SO ORDERED.
|||  (Cascayan v. Spouses Gumallaoi, G.R. No. 211947 (Resolution), [July
3, 2017], 812 PHIL 108-133)
 [G.R. No. 204131. June 4, 2018.]

SPOUSES JAIME AND CATHERINE BASA, SPOUSES JUAN AND

ERLINDA OGALE represented by WINSTON OGALE, SPOUSES
ROGELIO AND LUCENA LAGASCA represented by LUCENA
LAGASCA, and SPOUSES CRESENCIO AND ELEADORA
APOSTOL, petitioners, vs. ANGELINE LOY VDA. DE SENLY LOY,
HEIRS OF ROBERT CARANTES, THE REGISTER OF DEEDS FOR
BAGUIO CITY, and THE CITY ASSESSOR'S OFFICE OF BAGUIO
CITY, respondents.

DECISION

DEL CASTILLO, J  p:

This Petition for Review on Certiorari 1 assails the May 31, 2012

Decision 2 of the Court of Appeals (CA) in CA-G.R. CV No. 95490 affirming the
January 22, 2010 Decision of the Regional Trial Court (RTC) of Baguio City,
Branch 7 in Civil Case No. 6280-R, and the CA's subsequent October 11, 2012
Resolution 3 denying herein petitioners' Motion for Reconsideration. 4 HTcADC
Factual Antecedents

This case revolves around a 496-square meter residential lot situated in

New Lucban, Baguio City covered by Transfer Certificate of Title No. T-30086
(subject property) in the name of the late Busa Carantes, who is the
predecessor-in-interest of Manuel Carantes and herein respondent Robert
Carantes.
The subject property was mortgaged to respondent Angeline Loy and her
husband in 1994. Thereafter, they foreclosed on the mortgage, and at the
auction sale, they emerged the highest bidder. On March 31, 2006, after
consolidating ownership over the subject property, Branch 6 of the Baguio RTC
— in LRC ADM Case No. 1546-R — issued in their favor a writ of possession.
On May 30, 2006, herein petitioners — spouses Jaime and Catherine
Basa, spouses Juan and Erlinda Ogale, spouses Rogelio and Lucena Lagasca,
and spouses Cresencio and Eleadora Apostol — filed before Branch 7 of the
Baguio RTC a petition for quieting of title with prayer for injunctive relief and
damages, docketed as Civil Case No. 6280-R, against respondents Angeline
Loy, Robert Carantes, the Registry of Deeds for Baguio City, and the Baguio
City Sheriff and Assessor's Office. They essentially claimed that in 1992 and
1993, portions of the subject property — totaling 351 square meters — have
already been sold to them by respondent Robert Carantes, by virtue of deeds
of sale executed in their favor, respectively; that they took possession of the
portions sold to them; and that the titles issued in favor of Angeline Loy
created a cloud upon their title and are prejudicial to their claim of ownership.
They thus prayed that the documents, instruments, and proceedings relative to
the sale of the subject property to respondent Angeline Loy be cancelled and
annulled, and that they be awarded damages and declared owners of the
respective portions sold to them.
In her answer with counterclaim, Angeline Loy alleged that she was
entitled to the subject property as a result of the foreclosure and consequent
award to her as the highest bidder during the foreclosure sale; that the subject
property was later divided by judicial partition, and new certificates of title
were issued in the name of Manuel and Robert Carantes, which titles were later
cancelled and new titles were issued in her name as co-owner of the subject
property together with Manuel Carantes; that she had no knowledge of the
supposed sales to petitioners by Robert Carantes as these transactions were
not annotated on the title of Busa Carantes; and that the sales to the
petitioners were either unnotarized or unconsummated for failure to pay the
price in full.
In his answer, Robert Carantes alleged that the sales to petitioners did
not materialize; that petitioners failed to fully pay the purchase price; that his
transactions with Angeline Loy and her husband were null and void; and that
he was the real owner of the subject property in issue.
Respondents Angeline Loy and Robert Carantes failed to appear during
the scheduled mediation. Petitioners were then allowed to present their
evidence ex parte.
Petitioners thereafter filed a Formal Offer of Evidence praying for
admission of the following documentary evidence:
1. Exhibit "A" — unnotarized 'Deed of Absolute Sale of a Portion of a
Registered Parcel of a Residential Land' between respondent
Robert Carantes and petitioners, spouses Jaime and Catherine
Basa covering 107 square meters;
2. Exhibit "B" — unnotarized 'Deed of Absolute Sale of a Portion of a
Parcel of Land' between Robert Carantes and petitioners,
spouses Juan and Erlinda Ogale, covering 84 square meters;
3. Exhibit "C" — 'Deed of Sale of Undivided Rights and Interests' in
favor of petitioners Rogelio and Lucena Lagasca, covering 80
square meters;
4. Exhibit "D" — 'Deed of Sale of Undivided Rights and Interests' in
favor of petitioners Cresencio and Eleadora Apostol, covering 80
square meters; and
5. Exhibit "E" — Affidavit of Robert Carantes. 5
On July 24, 2009, the trial court issued an Order denying admission of
Exhibits "A" to "D" on the ground that Exhibits "A" to "C" were mere
photocopies and were only previously provisionally marked, while there was no
such document marked Exhibit "D".
Ruling of the Regional Trial Court

On January 22, 2010, the trial court rendered its Decision in Civil Case
No. 6280-R, declaring thus: aScITE
At the outset, the Court would like to put emphasis on the
ruling of the Supreme Court in the case of Acabal vs. Acabal, 454
SCRA 555 that, 'It is a basic rule in evidence that the burden of
proof lies on the party who makes the allegations — el encumbit
probatio, qui dicit, non qui negat; cum per rerum natruam factum
negatis probatio nulla sit (the proof lies upon him who affirms, not
upon him who denies; since by nature of things, he who denies a
fact cannot produce any proof). If he claims a right granted by law,
he must prove it by competent evidence, relying on the strength of
his own evidence and not upon the weakness of that of his
opponent.'
In the present case, the petitioners Cresencio Apostol, Jaime
Basa, Lucena Lagasca and Erlinda Ogale was [sic] presented to
substantiate the allegations in their petition. All four gave similar
testimonies that respondent Robert Carantes sold to them certain
 portions of a parcel of land for different sums of money on different
occasions. However, although they identified photocopies of the
deeds covering the transactions which were provisionally marked,
they failed to submit the original copies thereof for which reason,
the Court denied admission of the said documents when they were
formally offered. The only other piece of documentary evidence the
petitioners presented to back up their claims was an Affidavit
purportedly executed by respondent Robert Carantes. However, the
said respondent was never presented to testify on his affidavit,
thus, the contents thereof could not be appreciated in favor of the
petitioners following the ruling in the case of People vs. Brioso, 37
SCRA 336, that, 'Affidavits are generally rejected in judicial
proceeding as hearsay, unless the affiants themselves are placed on
the witness stand to testify thereon.'
Considering that the petitioners failed to discharge their
burden of proving the truth of their claims even by preponderance
of evidence, the court is left with no recourse but to deny the reliefs
prayed for in their petition. 6
WHEREFORE, all the foregoing premises considered, the
petition is hereby DENIED and the above-entitled case is hereby
DISMISSED without pronouncement as to costs.
SO ORDERED. 7
Petitioners moved to reconsider, but the trial court — in a June 18, 2010
Order — would not reverse. It held —
The court finds no cogent reason to reconsider the decision.
In the case of Llemos vs. Llemos, 513 SCRA 128, the Supreme
Court had the occasion to rule that, 'Under Section 3, Rule
130, Rules of Court, the original document must be produced and
no evidence shall be admissible other than the original document
itself, except in the following cases: x x x a) When the original has
been lost or destroyed or cannot be produced in court, without bad
faith on the part of the offeror; b) When the original is in the
custody or under the control of the party against whom the
evidence is offered, and the latter fails to produce it after
reasonable notice; c) When the original consists of numerous
accounts or other documents which cannot be examined in court
without great loss of time and the fact sought to be established
from them is only the general result of the whole; and d) When the
original is a public record in the custody of a public officer or is
recorded in a public office.'
In the present case, there is no showing that the plaintiffs'
failure to produce the original documents was based on the
exceptions aforementioned. Moreover, the plaintiffs never
questioned the Court's resolution of their formal offer of evidence
contained in an Order dated July 24, 2009 admitting only Exhibit
"E". Thus, their assertion that they did not have to present the
originals there being no objection from the defendants who
incidentally have lost their standing in this case as early as January
22, 2008, all the more appears to be untenable. 8
Ruling of the Court of Appeals

Petitioners interposed their appeal before the CA which, on May 31, 2012,
rendered the assailed Decision containing the following pronouncement:
 Petitioners x x x argue that ownership over the portions they
occupied should be transferred to them because (i) they were able
to establish that the same were sold to them by respondent x x x
Robert Carantes and they had fully paid the purchase price thereof;
(ii) respondent x x x Angeline Loy was in bad faith 'in not making an
investigation before entering into mortgage with Robert Carantes';
and (iii) the trial court should have reconsidered its Decision dated
January 22, 2010 since petitioners x x x filed a 'motion for
reconsideration explaining the reason and simultaneously
submitting the original pieces of evidence.' HEITAD
It is a basic rule that in civil cases, the burden of proof is on
the plaintiff to establish his case by preponderance of evidence. x x
x
xxx xxx xxx
Thus, although the trial court allowed petitioners x x x to
present their evidence ex-parte for failure of respondents x x x to
appear in the mediation proceedings, petitioners x x x still had to
prove their allegations in their petition by preponderance of
evidence.
In Saguid vs. Court of Appeals, wherein respondent therein
was allowed to present her evidence ex-parte, the Supreme Court
stressed:
'As in other civil cases, the burden of proof rests
upon the party who, as determined by the pleadings or
the nature of the case, asserts an affirmative issue.
Contentions must be proved by competent evidence and
reliance must be had on the strength of the party's own
evidence and not upon the weakness of the opponent's
defense. This applies with more vigor where, as in the
instant case, the plaintiff was allowed to present
evidence ex parte. The plaintiff is not automatically
entitled to the relief prayed for. The law gives the
defendant some measure of protection as the plaintiff
must still prove the allegations in the complaint.
Favorable relief can be granted only after the court is
convinced that the facts proven by the plaintiff warrant
such relief. Indeed, the party alleging a fact has the
burden of proving it and a mere allegation is not
evidence.'
In support of their allegation that portions of Lot No. T-30086
were sold to them by respondent x x x Robert Carantes, petitioners
x x x presented during the ex-parte hearing two (2) sets of
documents, to wit: (i) four (4) photocopied deeds of sale, and (ii)
an original affidavit executed by respondent x x x Robert Carantes.
In its Decision dated January 22, 2010, the trial court did not
consider these pieces of evidence because (i) petitioners x x x did
not submit the original deeds of sale, and (ii) respondent x x x
Robert Carantes was not presented in Court to identify his affidavit.
The trial court cannot be faulted in so ruling. Neither can it be
faulted for not reconsidering its Decision dated January 22, 2010
despite the purported 'original' deeds of sale appended to petitions'
x x x motion for reconsideration. It must be considered that:
 Firstly, petitioners' x x x failure to append the original deeds of
sale cannot be excused on their alleged mistaken belief that
submission of the same was no longer necessary when respondents
x x x did not object to the presentation of photocopies during
the ex-parte hearing, as the trial court itself required the
submission of the original deeds of sale. Record bears that the
Branch Clerk of Court provisionally marked the photocopied deeds
of sale as Exhibits 'A' to 'D' subject to the submission of the original
thereof. In fact, petitioners x x x counsel manifested that they
reserved the right to present the original deeds of sale.
Secondly, while during the ex-parte hearing, two (2)
documents, both denominated as 'Deed of Sale of
Undevided [sic] Rights and Interests,' were presented to prove the
sale of portions of subject lot to petitioners x x x spouses Rogelio
and Lucena Lagasca and spouses Cresencio and Eleadora Apostol,
what was appended to petitioners' x x x motion for reconsideration
was a different document, a carbon copy of a document
denominated as 'Deed of Sale of Undivided Portions of Registered
Land,' between respondent x x x Robert Carantes and petitioners x
x x Rogelio Lagasca and Cresencio Apostol.
Thirdly, the 'Deed of Absolute Sale of a Portion of a Registered
Parcel of a Residential Land' between respondent x x x Robert
Carantes and petitioners x x x spouses Jaime and Catherine Basa
was a mere carbon copy.
The Court thus finds that the evidence adduced during the ex-
parte hearing was unsatisfactory and inconclusive. Moreover,
instead of substantiating respondent x x x Robert Carantes'
'Affidavit,' the testimonies of petitioners' x x x witnesses
contradicted said 'Affidavit' as regards the areas allegedly sold and
the price per square meter. In the Affidavit, respondent x x x
Robert Carantes stated that he sold to petitioners x x x spouses
Cresencio and Eleadora Apostol and spouses Rogelio and Lucena
Lagasca portions of the subject property measuring 80 square
meters each for P320,000.00 per portion. But during the ex-
parte hearing, petitioner x x x Cresencio Apostol testified that what
was actually sold by respondent x x x Robert Carantes for
P320,000.00 was 95 square meters. In petitioners' x x x motion for
reconsideration, it appeared that respondent x x x Robert Carantes
sold to petitioners x x x spouses Cresencio and Eleadora Apostol for
P100,000.00 a total of 95 square meters. On the other hand, the
testimony of petitioner x x x Lucena Lagasca did not indicate the
number of square meters sold for the purchase price of
P320,000.00, while the motion for reconsideration indicated that a
total of 99 square meters was sold by respondent x x x Robert
Carantes to petitioners x x x spouses Rogelio and Lucena Lagasca
for P100,000.00. ATICcS
In sum, the pieces of evidence presented by petitioners x x x
do not preponderate in their favor. The Court finds no cogent
reason to reverse the findings of the trial court. x x x
WHEREFORE, the appealed Decision dated January 22, 2010
and Order dated June 18, 2010 are AFFIRMED.
SO ORDERED. 9 (Citations omitted; emphasis and italics in
the original)
 Petitioners filed their motion for reconsideration, which was denied by the
CA via its October 11, 2012 Resolution. Hence, the instant Petition.

Issue

Petitioners submit the lone issue of whether they have proved, by

preponderant evidence, their case for quieting of title.

Petitioners' Arguments

Praying that the assailed CA dispositions be set aside and that they be
declared owners of the respective portions of the subject property which they
claim were bought from respondent Robert Carantes, petitioners argue that
they have adequately proved their ownership of the disputed property; that
the lower courts disregarded the fact that they were in possession of the
respective portions claimed, which otherwise constituted proof of delivery and,
thus, consummation of the sales in their favor; that while the trial court
dismissed their case for failure to present the originals of the deeds of sale in
their favor during trial, the same were nonetheless attached to their motion for
reconsideration — but the trial court just the same refused to consider them,
which is erroneous on account of the principle that substantive law and
considerations of justice should outweigh technicalities and rules of procedure;
that respondent Angeline Loy was a buyer in bad faith, knowing as she did that
they were in possession of the disputed property when she and her husband
acquired the same; and that between a prior unrecorded sale and a
subsequent mortgage by the seller, the former prevails on account of the
better right accorded to the buyer as against the subsequent mortgagee.
Private Respondents' Arguments

In her Comment, 10 respondent Angeline Loy maintains that the CA

committed no error in affirming the trial court; that petitioners' case was
frivolous and dilatory in that it was aimed at delaying or thwarting the
execution of the writ of possession issued in her favor in LRC ADM Case No.
1546-R; and that the petition raised issues of fact which were ably passed
upon by the courts below and were beyond review by this Court.
On the other hand, the surviving heirs of Robert Carantes — who passed
away during these proceedings — failed to comment on the instant petition.

Our Ruling

The Petition lacks merit.

In order that an action for quieting of title may prosper, it is
essential that the plaintiff must have legal or equitable title to, or
interest in, the property which is the subject-matter of the action.
Legal title denotes registered ownership, while equitable title means
beneficial ownership. In the absence of such legal or equitable title,
or interest, there is no cloud to be prevented or removed.
xxx xxx xxx
An action for quieting of title is essentially a common law
remedy grounded on equity. The competent court is tasked to
determine the respective rights of the complainant and other
claimants, not only to place things in their proper place, to make
the one who has no rights to said immovable respect and not
 disturb the other, but also for the benefit of both, so that he who
has the right would see every cloud of doubt over the property
dissipated, and he could afterwards without fear introduce the
improvements he may desire, to use, and even to abuse the
property as he deems best. But 'for an action to quiet title to
prosper, two indispensable requisites must concur, namely: (1) the
plaintiff or complainant has a legal or an equitable title to or interest
in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his title
must be shown to be in fact invalid or inoperative despite its prima
facie appearance of validity or legal efficacy.' 11
Petitioners' case for quieting of title was dismissed by the trial court for
the reason that they failed to present the originals of the purported deeds of
sale executed by respondent Robert Carantes in their favor. In other words,
short of saying that petitioners failed to prove the first element in a suit for
quieting of title — the existence of a legal or equitable title — the trial court
simply held that they failed to discharge the burden of proof required in such
case. Petitioners then attempted to obtain a reversal by attaching the
supposed originals of the deeds of sale to their motion for reconsideration, but
the trial court did not reconsider as they failed to show that the reason for
their failure to present the original copies of the deeds fell within the
exceptions under the best evidence rule, or Section 3, Rule 130 of the Rules of
Court. 12 TIADCc
The trial court cannot be faulted for ruling the way it did. By petitioners'
failure to present the original copies of the purported deeds of sale in their
favor, the case for quieting of title did not have a leg to stand on. Petitioners
were unable to show their claimed right or title to the disputed property, which
is an essential element in a suit for quieting of title. Their belated presentation
of the supposed originals of the deeds of sale by attaching the same to their
motion for reconsideration does not deserve consideration as well; the
documents hardly qualify as evidence.
The CA correctly found that petitioners' failure to append the original
copies of the deeds of sale was inexcusable; that the document that was
appended to their motion for reconsideration was different from what was
presented and marked during the ex-parte hearing; and that the testimonies of
petitioners contradicted the affidavit of Roberto Carantes, their supposed
seller, with regard to the price and lot area of the subject properties. 13
Moreover, the unnotarized "Deed of Absolute Sale of a Portion of a
Registered Parcel of a Residential Land" between respondent Robert Carantes
and petitioner-spouses Jaime and Catherine Basa cannot stand without the
corroboration or affirmation of Robert Carantes. On its own, the unnotarized
deed is self-serving. Since Robert Carantes's affidavit — Exhibit "E" — was
rendered inadmissible by his failure to appear and testify thereon, then the
supposed unnotarized deed of sale executed by him in favor of the Basa
spouses cannot sufficiently be proved.
To repeat, "for an action to quiet title to prosper, two (2) indispensable
requisites must concur, namely: (1) the plaintiff or complainant has a legal or
an equitable title to or interest in the real property subject of the action; and
(2) the deed, claim, encumbrance, or proceeding claimed to be casting cloud
on his title must be shown to be in fact invalid or inoperative despite its prima
facie appearance of validity or legal efficacy." 14 "Legal title denotes registered
ownership, while equitable title means beneficial ownership." 15
Even if petitioners are in possession of the disputed property, this does
not necessarily prove their supposed title. It may be that their possession of
the disputed property is by lease or any other agreement or arrangement with
the owner — or simply by mere tolerance. Without adequately proving their
title or right to the disputed portions of the property, their case for quieting of
title simply cannot prosper.
WHEREFORE, for the foregoing reasons, the Petition is DENIED. The
assailed dispositions of the Court of Appeals are AFFIRMED.
SO ORDERED.
|||  (Spouses Basa v. Loy Vda. De Senly Loy, G.R. No. 204131, [June 4,
2018])
[G.R. No. 227894. July 5, 2017.]

JOSE S. OCAMPO, petitioner, vs. RICARDO 1 S. OCAMPO,

SR., respondent.

DECISION

VELASCO, JR., J  p:

The Case
Pending before the Court is a Petition for Review on Certiorari filed under
Rule 45 of the Rules of Court, seeking to reverse and set aside the
Decision 2 dated June 28, 2016 and the Resolution 3 dated October 20, 2016
of the Court of Appeals (CA) in CA-G.R. CV No. 99908. The CA affirmed the
Decision 4 dated September 30, 2011 of the Regional Trial Court (RTC) of
Manila, Branch 55, in Civil Case No. 92-61716, which ordered the partition of
the subject property and the annulment and cancellation of petitioner's title
over the same. HTcADC
The Facts
Petitioner Jose S. Ocampo and respondent Ricardo S. Ocampo are full-
blooded brothers being sons of the late Basilio Ocampo and Juliana Sunglao. 5
The present case arose from a complaint filed by respondent against
petitioner for partition and annulment of Transfer Certificate of Title (TCT) No.
102822 ("Subject Property"). 6
In the complaint, respondent alleged that he and petitioner are co-
owners of the Subject Property, which was a conjugal property left by their
parents, consisting of a 150-square meter lot and the improvements thereon
located at 2227 Romblon Street, G. Tuazon, Sampaloc, Manila. The Subject
Property was originally registered in their parents' names under TCT No.
36869. 7
Respondent claimed that petitioner and his wife, Andrea Mejia Ocampo,
conspired in falsifying his signature on a notarized Extra-Judicial Settlement
with Waiver ("ESW") dated September 1970, and effecting the transfer of the
property in the name of petitioner under TCT No. 102822, which was issued on
November 24, 1970. Based on a finding by the National Bureau of
Investigation (NBI) that respondent's signature was forged, an Information
was filed against petitioner, the notary public, and two others. Respondent
requested for partition of the property, but petitioner refused to do so and
secretly mortgaged the property for P200,000.00. 8
 Petitioner and his wife moved for the dismissal of the complaint, but it
was denied by the trial court. Thereafter, they filed their Answer with Motion
for Preliminary Hearing on the Affirmative Defense of prescription. 9
Based on their Answer, petitioner and his wife claimed that their parents
executed a Deed of Donation Propter Nuptias of the Subject Property in their
favor as they were getting married, with a promise on their part to demolish
the old house and replace it with a new two-storey house, which they did. To
build the new house, they obtained a P10,000.00 loan from the Development
Bank of the Philippines (DBP), with petitioner and his parents as borrowers. 10
Petitioner further alleged that his parents gave respondent several
properties outside Metro Manila, which respondent eventually lost. Petitioner
and his wife then allowed respondent to stay at the second floor of the house.
Petitioner was able to pay the DBP loan through a loan secured from the Social
Security System (SSS) with the consent of his father. He claimed that on
September 30, 1970, their father executed the ESW and secured respondent's
signature. By virtue of the ESW, petitioner was able to have TCT No. 36869
cancelled and have TCT No. 102822 issued in favor of himself and his wife. 11
Finally, petitioner argued that TCT No. 102822 became indefeasible one
year after its issuance on November 24, 1971, and that the action to annul
TCT No. 102822 had prescribed since it was filed only on June 29, 1992, or 21
years and 7 months from the issuance of the title. He further claimed that the
action to annul the ESW is a collateral attack on the title, and the rule on non-
prescription against a co-owner does not apply since he and his wife had
become exclusive owners of the Subject Property. 12
In an Order dated January 21, 1994, the trial court dismissed the
complaint on the ground of prescription. Respondent filed a Motion for
Reconsideration and other supplemental pleadings, but they were denied by
the trial court. Respondent thus elevated the matter to the CA, which declared
the RTC's January 21, 1994 Order null and void. Petitioner filed a motion for
extension of time to file a petition for review on certiorari before this Court, but
the same was denied in a minute resolution. 13
Thereafter, respondent filed a motion for writ of execution before the
RTC. However, the motion was denied on the ground that there is nothing to
execute since the setting aside of the RTC Order dated January 21, 1994 calls
for the case to be tried on the merits. Thus, the RTC set the case for pre-
trial. 14
Meanwhile, petitioner filed a Motion for Leave to File Amended Answer
which was granted by the RTC. In the Amended Answer, petitioner alleged that
after their mother passed away in 1965, the P3,000.00 balance of the DBP
loan was paid through an SSS loan. Petitioner alleged that in consideration of
the loan, respondent and their father waived their rights to the property under
the ESW. Petitioner further claimed that on November 19, 1970, their father
executed a Deed of Absolute Sale, where he sold his interest in the Subject
Property for P9,000.00 in favor of petitioner. 15
Pre-trial ensued and the case was twice referred to mediation, but the
parties refused to mediate. Thus, trial proceeded. 16
Respondent presented three witnesses, as follows: 1) himself, 2) his wife,
Francisca Elera Ocampo, and 3) Rhoda B. Flores, the Officer-in-Charge of the
Questioned Documents Division of the NBI. 17 On the other hand, petitioner
presented himself as the only witness for the defense. 18 aScITE
Ruling of the Regional Trial Court
 In a Decision dated September 30, 2011, the RTC ruled in favor of
respondent, to wit:
WHEREFORE, premises considered, judgment is hereby
rendered IN FAVOR OF THE PLAINTIFF, RICARDO S. OCAMPO and
AGAINST the defendant JOSE S. OCAMPO, as follows:
1. ORDERING the property located at 2227 Romblon St. G.
Tuazon, Sampaloc, Manila, including the improvements
found therein to be partitioned between the plaintiff and
the defendant, each having a share of one-half in the
property;
2. ORDERING that TCT No. 102822 of the Registry of Deeds of
the City of Manila be ANNULLED;
3. ORDERING the Registry of Deeds of the City of Manila to
CANCEL Transfer Certificate of Title No. 102822, issued in
the name of defendant, the same being null and void;
4. ORDERING the defendant to pay the costs of the suit.
SO ORDERED. 19
Petitioner's motion for reconsideration was denied in an Order dated May
21, 2012. Thus, he filed a Notice of Appeal, which was granted in the Order
dated July 10, 2012. 20
Ruling of the Court of Appeals
In the assailed Decision dated June 20, 2016, the CA affirmed the
findings of the RTC, the dispositive portion of which reads:
WHEREFORE, the appeal is DENIED. The September 30,
2011 Decision of the Regional Trial Court, Branch 55, Manila in Civil
Case No. 92-61716 is AFFIRMED.
SO ORDERED. 21
In dismissing the petition, the CA found that respondent was able to
prove that his signature on the ESW is not genuine, based on his and his wife's
testimony, as well as the NBI report. According to the CA, this finding of
forgery was also supported by petitioner's own admission on cross-examination
that he was not present when the ESW was executed. Based on the evidence
presented, the preponderance of evidence weighed in favor of respondent and
against petitioner.
As to petitioner's argument that the action is a collateral and not a direct
attack on the title, the CA found it unmeritorious and ruled that the action
precisely assails the validity of petitioner's title on the ground that it is based
on a forged document, and it is also an action for reconveyance. Thus, the CA
ruled that the action to annul the ESW is imprescriptible since it is a void or
inexistent contract. With this, the CA affirmed the RTC Decision.
Petitioner filed a Motion for Reconsideration before the CA, but the same
was denied in the assailed Resolution 22 dated October 20, 2016.
Hence, this petition.
The Petition
Petitioner argues that the CA committed a reversible error in dismissing
the appeal and in affirming the RTC Decision. Petitioner claims that the ESW,
being a notarized document, enjoys a prima facie presumption of authenticity
and due execution. He claims that there was no clear and convincing evidence
to overcome this presumption.
 Even assuming that the ESW is void or inexistent, petitioner argues that
the action filed by respondent is barred by the doctrine of estoppel by laches.
The ESW was executed and notarized on September 30, 1970. However, it was
only on July 1, 1992 that respondent filed the present case for partition and
annulment of title, claiming that the ESW was forged. Thus, petitioner argues
that there was an unreasonable delay on respondent's part to assert his rights
and pursue his claims against petitioner.
In compliance with the Court's Resolution dated February 1, 2017,
respondent filed his Comment dated April 20, 2017. Respondent prayed for the
dismissal of the petition, arguing that the issues raised therein have already
been exhaustively and judiciously passed upon by the CA and the trial court.
He argues that the CA was correct in declaring that the action was not barred
by laches since the ESW is a void or inexistent contract which makes an action
declaring it imprescriptible.
The Issue
Petitioner raises the following grounds in support of his petition: HEITAD
1. The CA erred in finding that the preponderance of evidence lies in
favour of the view that the signature of the respondent is not
genuine.
2. The CA erred in sustaining that the ESW is a void or inexistent
contract.
3. The CA erred in ruling that the action to declare the nullity of the
ESW is not barred by laches.
Essentially, the principal issue in this case is whether or not the CA
committed reversible error in upholding the RTC's findings.
The Court's Ruling
The petition is without merit.
The petition raises questions of fact

It is well settled that questions of fact are not reviewable in petitions for
review on certiorari under Rule 45 of the Rules of Court. Only questions of law
distinctly set forth shall be raised in a petition and resolved. Moreover, the
factual findings of the lower courts, if supported by substantial evidence, are
accorded great respect and even finality by the courts. Except for a few
recognized exceptions, this Court will not disturb the factual findings of the
trial court. 23 This Court sees no reason to overturn the factual findings of the
trial court, as affirmed by the CA, as the records show that preponderant
evidence established the falsity of the ESW and the fraudulent registration of
the subject property in petitioner's name.
Prescription has not set in

We find it proper to delve into the more important issue to be resolved,

that is, whether the action for annulment of title and partition has already
prescribed. It must be pointed out that the issue of prescription had already
been raised by petitioner in his Motion to Dismiss 24 dated August 5, 1992.
This motion was granted by the trial court in its Order 25 dated January 21,
1994. However, respondent appealed this Order with the Court of Appeals in
CA-G.R. CV No. 45121. The CA then rendered a Decision 26 dated March 30,
2001, nullifying the order of dismissal of the trial court. The CA essentially
ruled that the case for partition and annulment of title did not prescribe. The
CA Decision was eventually affirmed by the Second Division of this Court in
G.R. No. 149287 by virtue of a minute Resolution 27 dated September 5,
2001, which became final and executory and was entered into the Book of
Entries of Judgments on October 16, 2001.
Accordingly, the resolution in G.R. No. 149287 should have
written finis to the issue of prescription. Nonetheless, to finally put to rest this
bothersome issue, it behooves this Court to further elucidate why the
respondent's action and right of partition is not barred by prescription. The CA
explained that prescription is inapplicable. While the appellate court's
observation is proper, it is inadequate as it fails to sufficiently explain why the
rule on the imprescriptibility and indefeasibility of Torrens titles do not apply.
In the recent case of Pontigon v. Sanchez, We explained thus:
Under the Torrens System as enshrined in P.D. No. 1529, the
decree of registration and the certificate of title issued become
incontrovertible upon the expiration of one (1) year from the date of
entry of the decree of registration, without prejudice to an action for
damages against the applicant or any person responsible for the
fraud. However, actions for reconveyance based on implied trusts
may be allowed beyond the one-year period. As elucidated
in Walstrom v. Mapa, Jr.:
[N]otwithstanding the irrevocability of the Torrens
title already issued in the name of another person, he
can still be compelled under the law to reconvey the
subject property to the rightful owner. The property
registered is deemed to be held in trust for the real
owner by the person in whose name it is registered. After
all, the Torrens system was not designed to shield and
protect one who had committed fraud or
misrepresentation and thus holds title in bad faith. In an
action for reconveyance, the decree of registration is
respected as incontrovertible. What is sought instead is
the transfer of the property, in this case the title thereof,
which has been wrongfully or erroneously registered in
another person's name, to its rightful and legal owner, or
to one with a better right. This is what reconveyance is
all about. Yet, the right to seek reconveyance based
on an implied or constructive trust is not absolute
nor is it imprescriptible. An action for reconveyance
based on an implied or constructive trust must perforce
prescribe in ten years from the issuance of the Torrens
title over the property. (Emphasis supplied) ATICcS
Thus, an action for reconveyance of a parcel of land based on
implied or constructive trust prescribes in ten (10) years, the point
of reference being the date of registration of the deed or the date of
the issuance of the certificate of title over the property.
By way of additional exception, the Court, in a catena of
cases, has permitted the filing of an action for reconveyance despite
the lapse of more than ten (10) years from the issuance of
title. The common denominator of these cases is that the
plaintiffs therein were in actual possession of the disputed
land, converting the action from reconveyance of property
into one for quieting of title. Imprescriptibility is accorded to
cases for quieting of title since the plaintiff has the right to wait
until his possession is disturbed or his title is questioned before
initiating an action to vindicate his right. 28 (Emphasis supplied;
citations omitted)
 Given the falsity of the ESW, it becomes apparent that petitioner
obtained the registration through fraud. This wrongful registration gives
occasion to the creation of an implied or constructive trust under Article 1456
of the New Civil Code. 29 An action for reconveyance based on an implied
trust generally prescribes in ten years. However, if the plaintiff remains in
possession of the property, the prescriptive period to recover title of
possession does not run against him. In such case, his action is deemed in the
nature of a quieting of title, an action that is imprescriptible. 30
In the case before us, the certificate of title over the subject property was
issued on November 24, 1970. Yet, the complaint for partition and annulment
of the title was only filed on July 1, 1992, more than twenty (20) years since
the assailed title was issued. Respondent's complaint before the RTC would
have been barred by prescription. However, based on respondent's submission
before the trial court, both petitioner and respondent were residing at the
subject property at the time the complaint was filed. The complaint 31 states:
1) That Plaintiff is of legal age, married, Filipino and presently
residing at 2227 Romblon St., G. Tuazon, Sampaloc, Manila;
while defendant is likewise of legal age, married, Filipino and
residing at 2227 Romblon St., G. Tuazon, Sampaloc, Manila,
where he may be served with summons and other processes of
this Honorable Court; 32
This was unqualifiedly admitted by petitioner in his Amended Answer and
no denial was interposed therefrom. 33 Petitioner's failure to refute
respondent's possession of the subject property may be deemed as a judicial
admission. A party may make judicial admissions in (a) the pleadings, (b)
during the trial, either by verbal or written manifestations or stipulations, or
(c) in other stages of the judicial proceeding. 34 A judicial admission
conclusively binds the party making it and he cannot thereafter take a position
contradictory to or inconsistent with his pleadings. Acts or facts admitted do
not require proof and cannot be contradicted, unless it is shown that the
admission was made through palpable mistake or that no such admission was
made. 35
Considering that respondent was in actual possession of the disputed
land at the time of the filing of the complaint, the present case may be treated
as an action for quieting of title.
Quieting of title is a common law remedy for the removal of any cloud,
doubt, or uncertainty affecting title to real property. 36 In Heirs of Delfin and
Maria Tappa v. Heirs of Jose Bacud, 37 this Court reiterated the requisites for
an action for quieting of title:
The action filed by Spouses Tappa was one for quieting of title
and recovery of possession. In Baricuatro, Jr. v. Court of Appeals,
an action for quieting of title is essentially a common law remedy
grounded on equity, to wit:
x x x Originating in equity jurisprudence, its
purpose is to secure ". . . an adjudication that a claim of
title to or an interest in property, adverse to that of the
complainant, is invalid, so that the complainant and
those claiming under him may be forever afterward free
from any danger of hostile claim." In an action for
quieting of title, the competent court is tasked to
determine the respective rights of the complainant and
other claimants, ". . . not only to place things in their
proper place, to make the one who has no rights to said
 immovable respect and not disturb the other, but also for
the benefit of both, so that he who has the right would
see every cloud of doubt over the property dissipated,
and he could afterwards without fear introduce the
improvements he may desire, to use, and even
to abuse the property as he deems best. x x x."
(Emphasis in the original.) TIADCc
In our jurisdiction, the remedy is governed by Articles 476 and
477 of the Civil Code, which state:
Art. 476. Whenever there is a cloud on title to real property or
any interest therein, by reason of any instrument, record, claim,
encumbrance or proceeding which is apparently valid or effective
but is in truth and in fact invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title, an action may
be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being
cast upon title to real property or any interest therein.
Art. 477. The plaintiff must have legal or equitable title to, or
interest in the real property which is the subject-matter of the
action. He need not be in possession of said property.
From the foregoing provisions, we reiterate the rule that for an
action to quiet title to prosper, two indispensable requisites must
concur, namely: (1) the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance or proceeding
claimed to be casting cloud on his title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity
or legal efficacy.
xxx xxx xxx
A cloud on a title exists when (1) there is an instrument
(deed, or contract) or record or claim or encumbrance or
proceeding; (2) which is apparently valid or effective; (3) but is, in
truth and in fact, invalid, ineffective, voidable, or unenforceable or
extinguished (or terminated) or barred by extinctive prescription;
and (4) and may be prejudicial to the title.
Since it was already established that respondent's signature on the ESW,
which was the basis of petitioner's title over the property, was forged, then it is
only necessary for the cloud on respondent's title to be removed. Thus, the
trial court's order to cancel TCT No. 102822 and uphold the parties' co-
ownership was proper.
The present action is not barred by
laches

We also find no merit in petitioner's argument that the case is barred by

laches.
Jurisprudence has defined laches as the failure or neglect, for an
unreasonable and unexplained length of time, to do that which — by the
exercise of due diligence — could or should have been done earlier. It is the
negligence or omission to assert a right within a reasonable period, warranting
the presumption that the party entitled to assert it has either abandoned or
declined to assert it. 38
 Based on the facts presented before us, it appears that respondent did
not sleep on his rights, as claimed by petitioner. It is undeniable that
respondent had filed several cases to assert his rights over the property. Aside
from the present complaint, respondent also filed, on separate occasions, three
criminal complaints for: 1) falsification of public document, 2) estafa through
falsification of public documents, and 3) forgery, all against herein petitioner.
To Our mind, the filing of these cases at different times negates the claim of
laches. Time and again, this Court has ruled that courts, under the principle of
equity, will not be guided or bound strictly by the statute of limitations or the
doctrine of laches when to do so, manifest wrong or injustice would result. 39
IN VIEW OF THE FOREGOING, the petition is DENIED. The Decision
dated September 30, 2011 of the Regional Trial Court, Branch 55, Manila in
Civil Case No. 92-61716, as affirmed by the Court of Appeals in its Decision
dated June 28, 2016 in CA-G.R. CV No. 99908, is hereby AFFIRMED.
The Regional Trial Court shall proceed with the partition of the subject lot
with dispatch. SO ORDERED. |||  (Ocampo v. Ocampo, Sr., G.R. No. 227894,
[July 5, 2017], 813 PHIL 390-405)

[G.R. No. 234533. June 27, 2018.]

SPOUSES JULIETA B. CARLOS and FERNANDO P.

CARLOS, petitioners, vs. JUAN CRUZ TOLENTINO, respondent.

DECISION

VELASCO, JR., J  p:

Nature of the Case

Before this Court is a petition for review on certiorari under Rule 45 of

the Rules of Court assailing the April 5, 2017 Decision 1 and the September
27, 2017 Resolution 2 of the Court of Appeals (CA) in CA-G.R. CV No. 106430.
The challenged rulings reversed and set aside the October 16, 2015
Decision 3 and the December 9, 2015 Order 4 of the Regional Trial Court
(RTC) of Quezon City, Branch 87 which dismissed respondent's complaint for
annulment of title against the petitioners.

The Facts

The instant case arose from a complaint for annulment of title with
damages filed by respondent Juan Cruz Tolentino (Juan) against his wife,
Mercedes Tolentino (Mercedes), his grandson, Kristoff M. Tolentino (Kristoff),
herein petitioners Spouses Julieta B. Carlos (Julieta) and Fernando P. Carlos
(Spouses Carlos), and the Register of Deeds of Quezon City.
The subject matter of the action is a parcel of land with an area of 1,000
square meters and all the improvements thereon located in
Novaliches, 5 Quezon City, covered by Transfer Certificate of Title (TCT) No.
RT-90746 (116229) issued on March 17, 1967 and registered in the name of
Juan C. Tolentino, married to Mercedes Tolentino (the subject property). 6
 Without Juan's knowledge and consent, Mercedes and Kristoff, who were
then residing in the subject property, allegedly forged a Deed of
Donation 7 dated February 15, 2011, thereby making it appear that Juan and
Mercedes donated the subject property to Kristoff. Thus, by virtue of the
alleged forged Deed of Donation, Kristoff caused the cancellation of TCT No.
RT-90764 (116229), and in lieu thereof, TCT No. 004-2011003320 8 was
issued in his name on March 9, 2011. 9
In April 2011, Kristoff offered the sale of the subject property to Julieta's
brother, Felix Bacal (Felix), who is also the administrator of the lot owned by
Julieta which is adjacent to the subject property. When Felix informed Julieta
of the availability of the subject property, Spouses Carlos then asked him to
negotiate for its purchase with Kristoff. Kristoff and Felix then arranged for the
ocular inspection of the subject property. Thereafter, Kristoff surrendered to
Felix copies of the title and tax declaration covering the said property. 10
After a series of negotiations, Kristoff and Julieta executed a
Memorandum of Agreement 11 (MOA) dated April 12, 2011 stating that
Kristoff is selling the subject property to Julieta in the amount of Two Million
Three Hundred Thousand Pesos (P2,300,000.00), payable in two (2)
installments. On May 28, 2011, Julieta made the first payment in the amount
of Two Million Pesos (P2,000,000.00) 12 while the second payment in the
amount of Three Hundred Thousand Pesos (P300,000.00) was made on June
30, 2011. 13 On the same day, a Deed of Absolute Sale 14 was executed
between Kristoff and Julieta.
Upon learning of the foregoing events, Juan executed an Affidavit of
Adverse Claim which was annotated on TCT No. 004-2011003320 on July 15,
2011, to wit:
NOTICE OF ADVERSE CLAIM: EXECUTED UNDER OATH BY JUAN C.
TOLENTINO, CLAIMING FOR THE RIGHTS, INTEREST AND
PARTICIPATION OVER THE PROPERTY, STATING AMONG OTHERS
THAT HE DISCOVERED ON JULY 14, 2011 THAT SAID PARCEL OF
LAND HAS BEEN DONATED TO KRISTOFF M. TOLENTINO BY VIRTUE
OF A DEED OF DONATION PU[R]PORTEDLY EXECUTED BY JUAN C.
TOLENTINO & MERCEDES SERRANO ON FEB. 15, 2011. THAT AS A
RESULT OF THE FORGED DEED OF DONATION, HIS TITLE WAS
CANCELLED. THAT HE DECLARE THAT HE HAVE NOT SIGNED ANY
DEED OF DONATION IN FAVOR OF SAID KRISTOFF M. TOLENTINO.
NEITHER DID HE SELL, TRANSFER NOR WAIVE HIS RIGHTS OF
OWNERSHIP OVER THE SAID PROPERTY. OTHER CONDITIONS SET
FORTH IN DOC. NO. 253, PAGE NO. 52, BOOK NO. V, SERIES OF
2011 OF NOTARY PUBLIC OF QC, MANNY GRAGASIN DATE
INSTRUMENT — JUNE 15, 2011 15
Juan also filed a criminal complaint for Falsification of Public Document
before the Office of the City Prosecutor of Quezon City against Kristoff. 16 A
Resolution for the filing of Information for Falsification of Public Document
against Kristoff was then issued on January 10, 2012. Accordingly, an
Information dated February 15, 2012 was filed against him. 17
Meanwhile, Kristoff and Julieta executed another Deed of Absolute
Sale 18 dated September 12, 2011 over the subject property and, by virtue
thereof, the Register of Deeds of Quezon City cancelled TCT No. 004-2011-
003320 and issued TCT No. 004-2011013502 19 on December 5, 2011 in
favor of Spouses Carlos. The affidavit of adverse claim executed by Juan was
duly carried over to the title of Spouses Carlos.
 On February 23, 2012, Juan filed a complaint for annulment of title with
damages against Mercedes, Kristoff, Spouses Carlos, and the Register of Deeds
of Quezon City before the RTC of Quezon City. The case was raffled to Branch
87 and docketed as Civil Case No. Q-12-70832.

RTC Ruling

In its October 16, 2015 Decision, the RTC found that Juan's signature in
the Deed of Donation dated February 15, 2011 was a forgery. 20 Despite such
finding, however, it dismissed Juan's complaint.
The RTC found that at the time Spouses Carlos fully paid the agreed price
in the MOA on June 30, 2011, which culminated in the execution of the Deed of
Absolute Sale on even date, Kristoff was the registered owner of the subject
property covered by TCT No. 004-2011003320. Further, when the MOA and
the Deed of Absolute Sale dated June 30, 2011 were executed, nothing was
annotated on the said title to indicate the adverse claim of Juan or any other
person. It was only on July 15, 2011 when Juan's adverse claim was annotated
on Kristoff's title. 21
The fact that a second Deed of Absolute Sale dated September 12, 2011
was executed is immaterial since the actual sale of the subject property took
place on June 30, 2011 when Spouses Carlos fully paid the purchase price.
Thus, relying on the face of Kristoff's title without any knowledge of irregularity
in the issuance thereof and having paid a fair and full price of the subject
property before they could be charged with knowledge of Juan's adverse claim,
the RTC upheld Spouses Carlos' right over the subject property. The dispositive
portion of the October 16, 2015 Decision states:
WHEREFORE, viewed in the light of the foregoing, the instant
complaint for Annulment of Title and Damages against the
defendant spouses Fernando and Julieta Carlos is hereby
DISMISSED for failure of the plaintiff to prove his cause of action.
This is without prejudice, however to any appropriate remedy the
plaintiff may take against Kristoff Tolentino and Mercedes Tolentino.
The defendant spouses' counterclaim is DISMISSED for lack of
merit.
SO ORDERED. 22
Juan moved for reconsideration of the said decision but was denied by
the RTC in its December 9, 2015 Order. Thus, he interposed an appeal before
the CA.

CA Ruling

On appeal, the CA found that Spouses Carlos were negligent in not taking
the necessary steps to determine the status of the subject property prior to
their purchase thereof. It stressed that Julieta failed to examine Kristoff's title
and other documents before the sale as she merely relied on her brother,
Felix. 23 Accordingly, the CA ruled that Juan has a better right over the
subject property. The fallo of the April 5, 2017 Decision reads:
WHEREFORE, the appeal is GRANTED. The appealed
Decision of the RTC of Quezon City dated October 16, 2015 is
hereby REVERSED and SET ASIDE. Accordingly, plaintiff-appellant
Juan Cruz Tolentino is recognized to have a better right over the
subject property. The Register of Deeds of Quezon City
 is ORDERED to reinstate TCT No. RT-90746 (116229) in the name
of Juan Cruz Tolentino and to cancel TCT No. 004-2011013502 in
the names of Spouses Julieta and Fernando Carlos, and the latter to
surrender possession of the subject property to Juan Cruz Tolentino.
SO ORDERED. 24
Spouses Carlos then filed a motion for reconsideration but the same was
denied by the CA in its September 27, 2017 Resolution.
Hence, the instant petition.

The Issue

Spouses Carlos anchor their plea for the reversal of the assailed Decision
on the following grounds: 25
The Court of Appeals acted injudiciously, and with grievous
abuse of discretion in the appreciation of facts and in disregard of
jurisprudence, when it granted respondent's appeal, and thereby
arbitrarily and despotically ratiocinated that —
I. Petitioners are not buyers in good faith of the litigated real
property, but who are otherwise devoid of notice let alone
knowledge of any flaw or infirmity in the title of the person selling
the property at the time of purchase.
II. Petitioners are not purchasers in good faith, on the basis of
the Memorandum of Agreement dated April 12, 2011 and the Deed
of Absolute Sale dated June 30, 2011.
III. Respondent Juan Cruz Tolentino was the previous
registered owner of the land in dispute, thereby acting on oblivion
to the fact that the real property is essentially conjugal in nature.
IV. In failing to rule and rationalize that at least one-half of
the subject real property should belong to petitioners.
V. The litigated property must be awarded and returned in
favour of respondent Juan Cruz Tolentino in its entirety.
At bottom, the crux of the controversy is who, between Juan and Spouses
Carlos, has the better to right to claim ownership over the subject property.

The Court's Ruling

The present controversy necessitates an inquiry into the facts. While, as

a general rule, factual issues are not within the province of this Court,
nonetheless, in light of the conflicting factual findings of the two courts below,
an examination of the facts obtaining in this case is in order. 26
Juan and Mercedes appear to have been married before the effectivity of
the Family Code on August 3, 1988. There being no indication that they have
adopted a different property regime, the presumption is that their property
relations is governed by the regime of conjugal partnership of gains. 27 Article
119 of the Civil Code thus provides:
Article 119. The future spouses may in the marriage
settlements agree upon absolute or relative community of property,
or upon complete separation of property, or upon any other regime.
In the absence of marriage settlements, or when the same are void,
the system of relative community or conjugal partnership of gains
 as established in this Code, shall govern the property relations
between husband and wife.
Likewise, the Family Code contains terms governing conjugal partnership
of gains that supersede the terms of the conjugal partnership of gains under
the Civil Code. Article 105 of the Family Code states:
Article 105. In case the future spouses agree in the marriage
settlements that the regime of conjugal partnership of gains shall
govern their property relations during marriage, the provisions in
this Chapter shall be of supplementary application.
The provisions of this Chapter shall also apply to conjugal
partnerships of gains already established between spouses before
the effectivity of this Code, without prejudice to vested rights
already acquired in accordance with the Civil Code or other laws, as
provided in Article 256.
Since the subject property was acquired on March 17, 1967 28 during
the marriage of Juan and Mercedes, it formed part of their conjugal
partnership. 29 It follows then that Juan and Mercedes are the absolute
owners of their undivided one-half interest, respectively, over the subject
property.
Meanwhile, as in any other property relations between husband and wife,
the conjugal partnership is terminated upon the death of either of the
spouses. 30 In respondent Juan's Comment filed before the Court, the
Verification which he executed on February 9, 2018 states that he is already a
widower. Hence, the Court takes due notice of the fact of Mercedes' death
which inevitably results in the dissolution of the conjugal partnership.
In retrospect, as absolute owners of the subject property then covered by
TCT No. RT-90746 (116229), Juan and Mercedes may validly exercise rights of
ownership by executing deeds which transfer title thereto such as, in this case,
the Deed of Donation dated February 15, 2011 in favor of their grandson,
Kristoff.
With regard to Juan's consent to the afore-stated donation, the RTC,
however, found that such was lacking since his signature therein was forged.
Notably, the CA did not overturn such finding, and in fact, no longer touched
upon the issue of forgery. On the other hand, it must be pointed out that the
signature of Mercedes in the Deed of Donation was never contested and is,
therefore, deemed admitted.
In Arrogante v. Deliarte, 31 We ruled that a deed of sale of the subject
lot therein executed by the Deliarte siblings in favor of their brother,
respondent Beethoven Deliarte (Beethoven), was void for being a conveyance
of future inheritance. Nonetheless, the provisions in the written agreement and
the Deliarte siblings' signature thereon are equivalent to an express waiver of
all their rights and interests. Thus, the Court upheld the quieting of title in
favor of respondent Beethoven after finding that the deed of sale, albeit void,
evidenced the consent and acquiescence of each Deliarte sibling to said
transaction.
In the present case, while it has been settled that the congruence of the
wills of the spouses is essential for the valid disposition of conjugal
property, 32 it cannot be ignored that Mercedes' consent to the disposition of
her one-half interest in the subject property remained undisputed. It is
apparent that Mercedes, during her lifetime, relinquished all her rights thereon
in favor of her grandson, Kristoff.
 Furthermore, Mercedes' knowledge of and acquiescence to the
subsequent sale of the subject property to Spouses Carlos is evidenced by her
signature appearing in the MOA 33 dated April 12, 2011 and the Deed of
Absolute Sale 34 dated September 12, 2011. We are also mindful of the fact
that Spouses Carlos had already paid a valuable consideration in the amount of
Two Million Three Hundred Thousand Pesos (P2,300,000.00) for the subject
property before Juan's adverse claim was annotated on Kristoff's title. The said
purchase and acquisition for valuable consideration deserves a certain degree
of legal protection.
Given the foregoing, the Court is disinclined to rule that the Deed of
Donation is wholly void ab initio and that the Spouses Carlos should be totally
stripped of their right over the subject property. In consonance with justice
and equity, We deem it proper to uphold the validity of the Deed of Donation
dated February 15, 2011 but only to the extent of Mercedes' one-half share in
the subject property. And rightly so, because why invalidate Mercedes'
disposition of her one-half portion of the conjugal property that will eventually
be her share after the termination of the conjugal partnership? It will
practically be absurd, especially in the instant case, since the conjugal
partnership had already been terminated upon Mercedes' death.
Accordingly, the right of Kristoff, as donee, is limited only to the one-half
undivided portion that Mercedes owned. The Deed of Donation insofar as it
covered the remaining one-half undivided portion of the subject property is
null and void, Juan not having consented to the donation of his undivided half.
Upon the foregoing perspective, Spouses Carlos' right, as vendees in the
subsequent sale of the subject property, is confined only to the one-half
undivided portion thereof. The other undivided half still belongs to Juan. As
owners pro indiviso of a portion of the lot in question, either Spouses Carlos or
Juan may ask for the partition of the lot and their property rights shall be
limited to the portion which may be allotted to them in the division upon the
termination of the co-ownership. 35 This disposition is in line with the well-
established principle that the binding force of a contract must be recognized as
far as it is legally possible to do so — quando res non valet ut ago, valeat
quantum valere potest. 36
Lastly, as a matter of fairness and in line with the principle that no
person should unjustly enrich himself at the expense of another, 37 Kristoff
should be liable to reimburse Spouses Carlos of the amount corresponding to
one-half of the purchase price of the subject property.
WHEREFORE, in view of the foregoing, the petition is PARTIALLY
GRANTED. The donation and subsequent sale of the subject property is
declared NULL and VOID with respect to the undivided 1/2 portion owned by
Juan Cruz Tolentino, but VALID with respect to the other undivided 1/2
portion belonging to Mercedes Tolentino. Accordingly, petitioners Spouses
Carlos and respondent Juan Cruz Tolentino are hereby declared as co-owners
of the subject property. The Register of Deeds of Quezon City is ordered to
cancel TCT No. 004-2011013502 and to issue a new transfer certificate of title
in the names of Julieta B. Carlos, married to Fernando P. Carlos, and Juan Cruz
Tolentino on a 50-50 undivided interest in the lot.
We order Kristoff M. Tolentino to pay Spouses Carlos the amount of One
Million One Hundred Fifty Thousand Pesos (P1,150,000.00) corresponding to
one-half of the amount paid by Spouses Carlos for the subject property, with
legal interest at the rate of 6% computed from the finality of this Decision. SO
ORDERED. ||| (Spouses Carlos v. Tolentino, G.R. No. 234533 , [June 27,
2018])
 [G.R. No. 224549. August 7, 2017.]

SPOUSES JANET URI FAHRENBACH and DIRK

FAHRENBACH, petitioners, vs. JOSEFINA R.
PANGILINAN, respondent.

DECISION

PERLAS-BERNABE,  J p:

Assailed in this petition for review on certiorari 1 are the Decision 2 dated

September 21, 2015 and the Resolution 3 dated April 14, 2016 of the Court of
Appeals (CA) in CA-G.R. SP No. 133552, which affirmed with modification the
Decision 4 dated August 30, 2013 of the Regional Trial Court of Palawan,
Branch 95 (RTC) in Civil Case No. 4924, ordering petitioners Spouses Janet Uri
Fahrenbach and Dirk Fahrenbach (petitioners) to vacate the parcel of land
claimed by respondent Josefina R. Pangilinan (respondent), but remanding the
case to the RTC for the determination of the proper amount of monthly rentals
petitioners should pay respondent. HTcADC
The Facts
On September 6, 1995, respondent acquired a parcel of unregistered land
(subject lot) from her aunt, Felomina Abid (Abid), through a Waiver of
Rights. 5 The said lot measured 5.78 hectares and was covered by Tax
Declaration No. 0056. 6 However, unknown to respondent, Abid also executed
a Deed of Sale 7 on July 15, 1995 in favor of Columbino Alvarez (Alvarez)
covering the same piece of land. 8 The Deed of Sale to Alvarez contained the
following description:
An area of 5.7800 hectares, unirrigated riceland, more or less,
under Tax Declaration No. 0056; Property Index No. 066-02-020-
07-002; Bounded on the North: Mindoro Strait; East: Ass. Lot No.
005, Sec. 06; South AL No. 003; West: AL No. 011; with an
assessed value of "P8,290.00." 9
On August 2, 2005, after purportedly learning that the description of the
property he bought under the Deed of Sale was erroneous, Alvarez executed a
handwritten letter stating that the subject lot, with an area of 5.78 hectares
and covered by Tax Declaration No. 0056, belonged to respondent. 10 Alvarez
also executed a Sinumpaang Salaysay on July 14, 2006, stating that the said
land is not the property he had intended to buy from Abid but the one with an
area of eight (8) hectares under Tax Declaration No. 019-0233-A. 11
In September 2005, respondent learned that petitioners were occupying
the 5.78-hectare subject lot she acquired from Abid and built structures
thereon without respondent's consent. 12 Despite demands, petitioners
refused to vacate the premises. 13 Thus, after the barangay conciliation
proceedings failed, respondent filed a complaint 14 for forcible entry against
petitioners before the Municipal Circuit Trial Court of Coron-Busuanga, Palawan
(MCTC), which was docketed as Civil Case No. 601. 15 Among others,
respondent prayed that petitioners be ordered to vacate the premises, pay a
monthly rent of P10,000.00 from September 2005 up to the termination of the
case, and pay P125,000.00 as attorney's fees and litigation expenses. 16
In their Answer, 17 petitioners maintained that the land they were
occupying is different from respondent's land which is covered by Tax
Declaration No. 0056. According to petitioners, the area they were occupying is
the eight (8)-hectare property covered by Tax Declaration No. 0052, which
they allegedly acquired from Alvarez in 2005 by virtue of a Deed of Sale.
Petitioners further averred that Alvarez had been in possession of the same
parcel of land since 1974 after Abid allowed him to cultivate it. On the other
hand, respondent neither physically possessed the said property nor
introduced improvements thereon. 18
The MCTC Ruling
In a Decision 19 dated November 6, 2012, the MCTC dismissed
respondent's complaint and upheld petitioners' possession. The MCTC observed
that while the parties claim to have bought different properties, i.e., the 5.78-
hectare property for the respondent and the eight (8)-hectare property for the
petitioners, it was found and agreed that they were in fact claiming one and
the same lot. 20 In resolving the issue of prior possession, the MCTC took
judicial notice of the written report 21 issued by the City Environment and
Natural Resources Office (CENRO) of Coron, Palawan, as well as the
report 22 of the Office of the Municipal Assessor which conducted the ocular
inspection and public hearing relative to respondent's and Alvarez's conflicting
claims back in 2005 and 2006. 23 The MCTC noted that their findings clearly
state that petitioners' predecessor-in-interest, Alvarez, was the actual
occupant of the area being claimed by respondent. 24
Anent the casual visits to the property respondent allegedly made, the
MCTC ruled that the same was not sufficient to constitute actual possession
contemplated by law in ejectment cases. The MCTC observed that since
respondent's alleged acquisition of the property in 1995, she has not hired a
caretaker nor fenced the same as an overt manifestation of her claim of
ownership. Thus, respondent's action for forcible entry cannot prevail over
petitioners whose possession can be traced to their predecessor-in-interest. 25
Aggrieved, respondent appealed to the RTC. 26
The RTC Ruling
In a Decision 27 dated August 30, 2013, the RTC reversed the ruling of
the MCTC and ordered petitioners to vacate the subject lot. 28 The RTC
pointed out that before one can be adjudged to have a better right of
possession over another, it is necessary to first ascertain the actual premises
of the property subject of actual and prior possession. 29 In this case, the RTC
observed that the identity of the property petitioners were actually occupying
was not clear. 30
In this regard, the RTC observed that based on the Deed of Sale, it would
appear that petitioners purchased an eight (8)-hectare lot bounded by the
seashore on the east; however, the relevant tax declaration, i.e., Tax
Declaration No. 0052, did not include "seashore" as a boundary. 31 This,
according to the RTC, was the cause of the confusion anent the identity of the
property in dispute, considering that Alvarez held another eight (8)-hectare
property bounded by the seashore and covered by Tax Declaration No. 019-
0233-A: 32 aScITE
Tax Declaration No. Tax Declaration No. 019-
0052 0233-A
North: ASS LOT #005 North: Seashore
South: ASS LOT #007 South: AL# 017
East: ASS LOT #007 East: AL# 003, 016
West: ASS LOT #011, West: AL# 001 33
Sec. 07

Thus, since the word "seashore" was somehow inserted in the Deed of
Sale, it would appear that what the property petitioners bought and were
occupying was the lot that was previously occupied by Alvarez and covered by
Tax Declaration No. 019-0233-A. However, in truth, the RTC found out that
petitioners were actually occupying respondent's property covered by Tax
Declaration No. 0056. 34 Notably, the lot covered by Tax Declaration No.
0056 35 was also bounded by the seashore as the Mindoro Strait lies on its
northern side: 36
Tax Declaration No. 0056
North: Mindoro Strait
South: Ass. Lot No. 003
East: AL# 005, Sec. 6
West: Ass. Lot No. 011 37

In view of the foregoing, the RTC concluded that petitioners acted in bad
faith and, accordingly, ordered them to vacate the property and pay
respondent: (a) rent in the amount of P5,000.00 per month from September
2005, plus legal interest of six percent (6%) per annum until respondent is
restored to its possession; and (b) attorney's fees and litigation expenses
amounting to P125,010.00. 38
 Dissatisfied, petitioners moved for reconsideration, 39 which was,
however, denied in an Order 40 dated November 18, 2013, prompting them to
elevate the case to the CA through a petition for certiorari. 41
The CA Ruling
In a Decision 42 dated September 21, 2015, the CA affirmed the RTC's
findings insofar as it held that respondent was the prior possessor of the
subject lot, but remanded the case to the RTC for the determination of the
proper amount of monthly rentals payable to respondent. 43
The CA noted that the parties in this case are claiming one and the same
property, i.e., the lot covered by Tax Declaration No. 0056, 44 and that
respondent's prior possession de facto thereof has been proven as she
occasionally visited the same, paid realty taxes, and even requested for a
survey authority thereon. 45 Thus, since a person need not have his/her feet
on every square meter of the ground before it can be said that he/she is in
possession of the land, the CA ruled that respondent did not lose her
possession of the subject lot, although she resided somewhere else and only
occasionally visited the same. 46
Meanwhile, the CA rejected petitioners' argument that their possession of
the subject lot from the time they purchased the same in August 2005 should
be tacked to Alvarez's possession. According to the CA, the concept of tacking
refers to legal possession and does not apply to physical possession, which is
the issue in suits for forcible entry such as this case. 47 The CA also echoed
the RTC's observation that petitioners' documentary evidence are replete with
inconsistencies, such as the boundary description of the property they acquired
from Alvarez, as stated in the Deed of Sale vis-à-vis Tax Declaration Nos. 0052
and 019-0233-A. 48
Anent the award of monthly rent to the respondent, the CA noted that
the RTC did not cite any document showing realty assessment of the land,
justify the award of P5,000.00 monthly rental in favor of respondent. 49 In
this regard, the CA remanded the case to the RTC for the determination of the
monthly rentals due respondent. 50
Dissatisfied, petitioners moved for reconsideration, 51 which was,
however, denied by the CA in a Resolution 52 dated April 14, 2016; hence, the
present petition.
The Issue Before the Court
The sole issue for the Court's resolution is whether or not the CA erred in
holding that respondent was in prior possession of the subject lot.
The Court's Ruling
The petition is denied.
At the outset, it must be emphasized that as a rule, the Court is not a
trier of facts 53 and does not normally embark in the evaluation of evidence
adduced during trial. 54 This rule, however, allows exceptions, such as
instances when the findings of fact of the trial court are conflicting or
contradictory with those of the CA, 55 as in this case where the conflicting
findings of facts of the MCTC on one hand, and the RTC and the CA on the
other, warrant a second look for the proper dispensation of justice.
After a thorough study of this case, the Court agrees with the findings of
the CA and the RTC that respondent was the prior possessor of the subject lot.
The present controversy involves two (2) properties which are separate
and distinct from each other. The first property is the 5.78-hectare lot covered
by Tax Declaration No. 0056, while the second is the eight (8)-hectare parcel
of land under Tax Declaration No. 0052 (now under Tax Declaration No. 019-
0233-A). Petitioners contend that they are in possession of the second lot, as
the same was purportedly acquired by them from Alvarez through a Deed of
Sale. However, it was uncovered that due to the anent the identity of the
property sold, petitioners were actually occupying the first subject lot and,
hence, were erroneously claiming the same. 56 In truth, the subject lot was
not the property sold to petitioners by Alvarez, but was the one which
respondent acquired from Abid in September 1995 by virtue of a Waiver of
Rights. 57 In fact, this first lot was the subject of Alvarez's handwritten
letter 58 dated August 2, 2005 and Sinumpaang Salaysay 59 dated July 14,
2006, acknowledging respondent's ownership over it. With the true identity of
the subject lot having been established, it must nonetheless be determined
whether or not respondent had prior de facto possession over the same,
considering that this case stemmed from a forcible entry complaint. HEITAD
It is well-settled that the only question that the courts must resolve in
forcible entry or unlawful detainer cases is who between the parties is entitled
to the physical or material possession of the property in dispute. 60 The main
issue is possession de facto, independently of any claim of ownership or
possession de jure that either party may set forth in his pleading. The principal
issue must be possession de facto, or actual possession, and ownership is
merely ancillary to such issue. 61 In forcible entry, the plaintiff must prove
that it was in prior physical possession of the premises until it was deprived
thereof by the defendant.
In this case, respondent had sufficiently proven her prior possession de
facto of the subject lot. Records disclose that respondent occasionally visited
the subject lot since she acquired the same from Abid in September 1995. She
even paid the lot's realty taxes, as well as requested for a survey authority
thereon. 62 In fact, she submitted old photographs 63 showing herself on the
subject lot, the identity of which petitioners did not contend. Notably,
jurisprudence states that the law does not require a person to have his feet on
every square meter of the ground before it can be said that he is in possession
thereof. 64 In Bunyi v. Factor, 65 the Court held that "visiting the property on
weekends and holidays is evidence of actual or physical possession. The fact of
her residence somewhere else, by itself, does not result in loss of possession of
the subject property." 66 In contrast, petitioners themselves claim that they
began occupying the subject lot only in August 2005, after Alvarez executed
the corresponding Deed of Sale in their favor. 67 Hence, in light of the
foregoing, there is no doubt that respondent had prior de facto possession.
At this juncture, the Court finds it proper to dispel petitioners' mistaken
notion that their possession should be tacked onto that of Alvarez who
allegedly occupied the property since 1974. In Nenita Quality Foods
Corporation v. Galabo, 68 the Court clarified that tacking of possession only
applies to possession de jure, or that possession which has for its purpose the
claim of ownership, viz.:
True, the law allows a present possessor to tack his possession to
that of his predecessor-in-interest to be deemed in possession of
the property for the period required by law. Possession in this
regard, however, pertains to possession de jure and the
tacking is made for the purpose of completing the time
required for acquiring or losing ownership through
prescription. We reiterate — possession in forcible entry suits
refers to nothing more than physical possession, not legal
possession. 69 (Emphases supplied)
 As earlier stated, possession de jure is irrelevant because the only
question in forcible entry — as it is here — is prior physical possession or
possession de facto.
Finally, the Court clarifies that the written report issued by the CENRO of
Coron, Palawan, 70 as well as the report of the Office of the Municipal
Assessor 71 which conducted the ocular inspection and public hearing relative
to respondent's and Alvarez's conflicting claims back in 2005 and 2006, 72 are
of no consequence to this case. As the records show, the MCTC took judicial
notice of the foregoing documents in rendering a ruling favorable to
petitioners. Nevertheless, the MCTC itself stated that the said reports deal with
the conflict between Alvarez and respondent — not between petitioners and
respondent. In fact, the report of the Office of the Municipal Assessor states:
DATE: August 30, 2006
FOR: Hon. Mario T. Reyes, Jr., Municipal Mayor
THRU: Hon. Eliseo B. Buenaflor, Municipal Vice[-]Mayor
FROM: Mr. Reynario R. Labrador, Municipal Assessor
SUBJECT: BACK TO OFFICE REPORT RE: TRAVEL TO BARANGAY
SAN JOSE THIS MUNICIPALITY TO ATTEND PUBLIC
HEARING REGARDING CONFLICT OF OWNERSHIP OF A
PARCEL OF LAND BETWEEN JOSEFINA REYES PANGILINAN
AND COLUMBINO ALVAREZ. 73 (Emphasis supplied)
Meanwhile, the report of the CENRO of Coron, Palawan 74 states:
With sufficient documents to prove the claim of [Alvarez] and
our findings that the area is actually occupied and cultivated by his
family, [Janet Uri Fahrenbach][,] with her desire to purchase the
land, had it surveyed to be sure of the total area of the land[,]
considering that it is covered by Tax Declaration, [and if it is]
smaller or bigger than the declared area. Hence, a Survey Authority
was issued on July 25, 2005.
xxx xxx xxx
The inspection was done with positive results that
[respondent] and [Alvarez], right then and there[,] agreed
that her claim is 5.78 [hectares] covered by Tax Declaration
No. 0056. A copy of the handwritten document dated August
2, 2005 is herewith attached.
Based on the certification of the Municipal Assessor[,]
the Tax Declaration for [the] 5.78 [-hectare lot] was
transferred to [respondent] by virtue of a Waiver of Rights
dated September 6, 1995[;] [the same lot] was also
conveyed by [Abid] to [Alvarez] by virtue of a Deed of Sale
dated July 15, 1995, almost two months ahead of the Waiver
of Rights.
xxx xxx xxx 75 (Emphases supplied)
Thus, these reports clearly relate to the conflict between Alvarez and
respondent regarding the ownership of the lot covered by Tax Declaration No.
0056, and not with respect to the possession between petitioners and
respondent. In this light, the Court cannot therefore subscribe to the MCTC's
conclusion that these reports established petitioners' prior possession of the
subject lot. In fact, this conclusion cannot be inferred from the subject reports,
which only state that Alvarez was the actual occupant of the area being
claimed by respondent. 76 As already explained, Alvarez's possession is
irrelevant, considering that petitioners' alleged possession over the subject lot
cannot be tacked onto that of Alvarez in suits for forcible entry, as in this case.
With regard to the rent due respondent, the CA correctly held that since
petitioners disturbed respondent's possession of the subject lot, rent is due
respondent from the time petitioners intruded upon her possession. Under
Section 17, Rule 70 of the Rules of Court,the judgment in cases for forcible
entry shall include the sum justly due as arrears of rent or as reasonable
compensation for the use and occupation of the premises. However, in Badillo
v. Tayag, 77 the Court clarified that reasonable amount of rent in suits for
forcible entry must be determined not by mere judicial notice, but by
supporting evidence. 78 Here, since the RTC indeed failed to cite any
document showing the assessment of the subject lot, any increase in the realty
taxes, and the prevailing rental rate in the area, the CA correctly remanded
this aspect to the RTC for proper determination. ATICcS
Anent the award of attorney's fees, the Court finds the same in order,
considering that petitioners' intrusion on respondent's property has compelled
the latter to incur expenses to protect her interests. 79
WHEREFORE, the petition is DENIED. The Decision dated September
21, 2015 and the Resolution dated April 14, 2016 of the Court of Appeals in
CA-G.R. SP No. 133552 are hereby AFFIRMED.
SO ORDERED.
|||  (Spouses Fahrenbach v. Pangilinan, G.R. No. 224549, [August 7,
2017])

[G.R. No. 204663. September 27, 2017.]

MUNICIPAL RURAL BANK OF LIBMANAN, CAMARINES

SUR, petitioner, vs. VIRGINIA ORDOÑEZ, respondent.

DECISION

PERALTA, ** J p:

Assailed in the instant petition for review on certiorari are the

Decision 1 and Resolution 2 of the Court of Appeals (CA), dated March 30,
2012 and October 17, 2012, respectively, in CA-G.R. CV No. 94947.
The pertinent factual and procedural antecedents of the case are as
follows:
On June 20, 2000, herein respondent filed with the Regional Trial
Court (RTC) of Libmanan, Camarines Sur a Complaint 3 for Quieting of Title
against herein petitioner bank. Subsequently, on September 2, 2002, the
Complaint was amended 4 where respondent alleged that: she is the owner of
a 2,174 square meter parcel of land in Fundado, Libmanan, Camarines Sur;
she acquired the property through inheritance; she and her predecessors-in-
interest had been in open, peaceful, adverse, uninterrupted possession of the
subject land in the concept of an owner since time immemorial; and
petitioner's claim of ownership is unfounded, unmeritorious invalid and based
upon an instrument which is null and void or, otherwise, unenforceable.
Respondent prayed that she be declared the absolute owner and, thus, entitled
to the lawful possession of the subject property. She also asked the trial court
to order petitioner to pay attorney's fees and monthly rentals.
In its Answer with Counterclaim, 5 herein petitioner denied the material
allegations of respondent's Amended Complaint contending that it is, in fact,
the true and absolute owner of the subject land; and the property was
previously owned by one Roberto Hermita (Roberto) who mortgaged the said
land to petitioner but subsequently failed to satisfy his obligation causing
petitioner to foreclose the mortgage and subsequently acquire the property
and transfer title over it in its name. In its Counterclaim, petitioner prayed for
the payment of moral damages and attorney's fees.
After the issues were joined, trial on the merits ensued.
On January 19, 2010, the RTC rendered its Decision 6 dismissing
respondent's Amended Complaint as well as petitioner's Counterclaim.
The RTC ruled that, before entering into the contract of mortgage with
Roberto Hermita, petitioner, through its manager, did its best to ascertain
Roberto's claim of ownership and possession by conducting the requisite
investigation. The RTC concluded that the weight of evidence preponderates in
favor of herein petitioner.
Aggrieved, respondent filed an appeal with the CA.
On March 30, 2012, the CA promulgated its assailed Decision by ruling in
respondent's favor and disposing as follows:
WHEREFORE, premises considered, the appealed decision is
hereby REVERSED and SET ASIDE. The real estate mortgage
contract dated March 23, 1995, covering the disputed property is
hereby declared NULL and VOID and the plaintiff-appellant is
declared owner thereof.
SO ORDERED. 7
The CA held that: (1) respondent was able to prove that her
predecessors-in-interest had possession of the subject land prior to that of
petitioner's predecessor-in-interest; (2) they declared the property for tax
purposes as early as 1949, as compared to petitioner's predecessor-in-interest
who paid taxes thereon beginning only in 1970; and (3) contrary to the
findings of the RTC, the evidence preponderates in favor of herein respondent.
Thus, the CA declared respondent as owner of the subject lot and nullified the
real estate mortgage executed between petitioner and Roberto.
Petitioner filed a Motion for Reconsideration, but the CA denied it in its
Resolution dated October 17, 2012.
Hence, the present petition for review on certiorari with the following
Assignment of Errors:
a) The Honorable Court of Appeals gravely erred when it held that
respondent has prior possession over the property through her
caretaker Roman Zamudio.
b) The Honorable Court of Appeals gravely erred when it ruled that
acquisitive prescription cannot be made to apply to the possession
of Roberto Hermita.
 c) The Honorable Court of Appeals seriously erred when it
pronounced that petitioner Municipal Rural Bank of Libmanan,
Camarines Sur was utterly remiss in its duty to establish who the
true owners and possessors of the subject property were. 8
The petition is unmeritorious.
Before delving into the merits of the instant petition, the Court finds it
apropos to restate the nature of an action for quieting of title. Citing the case
of Baricuatro, Jr v. Court of Appeals, 9 this Court, in Herminio M. De Guzman,
for himself and as Attorney-in-fact of: Nilo M. De Guzman, et al. v. Tabangao
Realty, Inc., 10 held, thus: aScITE
Regarding the nature of the action filed before the trial court,
quieting of title is a common law remedy for the removal of any
cloud upon or doubt or uncertainty with respect to title to real
property. Originating in equity jurisprudence, its purpose is to
secure "x x x an adjudication that a claim of title to or an interest in
property, adverse to that of the complainant, is invalid, so that the
complainant and those claiming under him may be forever
afterward free from any danger of hostile claim." In an action for
quieting of title, the competent court is tasked to determine the
respective rights of the complainant and other claimants, "x x x not
only to place things in their proper place, to make the one who has
no rights to said immovable respect and not disturb the other, but
also for the benefit of both, so that he who has the right would see
every cloud of doubt over the property dissipated, and he could
afterwards without fear introduce the improvements he may desire,
to use, and even to abuse the property as he deems best x x
x." (Citation omitted.)" 11
The Court, then, went on to discuss that:
Under the Civil Code, the remedy may be availed of under the
following circumstances:
Art. 476. Whenever there is a cloud on title to real
property or any interest therein, by reason of any
instrument, record, claim, encumbrance or proceeding
which is apparently valid or effective but is in truth and
in fact invalid, ineffective, voidable, or unenforceable,
and may be prejudicial to said title, an action may be
brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud
from being cast upon title to real property or any interest
therein.
Art. 478. There may also be an action to quiet title
or remove a cloud therefrom when the contract,
instrument or other obligation has been extinguished or
has terminated, or has been barred by extinctive
prescription.
Article 477 of the Civil Code further provides that the plaintiff
in an action to quiet title must have legal or equitable title to or
interest in the real property, which is the subject matter of the
action, but need not be in possession of said property.
For an action to quiet title to prosper, two indispensable
requisites must concur: (1) the plaintiff or complainant has a legal
or equitable title or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance, or proceeding
 claimed to be casting a cloud on his title must be shown to be in
fact invalid or inoperative despite its prima facie appearance of
validity or legal efficacy. 12
In Spouses Ragasa v. Spouses Roa, 13 this Court has, likewise, ruled
that:
[I]t is an established rule of American jurisprudence (made
applicable in this jurisdiction by Art. 480 of the New Civil Code) that
actions to quiet title to property in the possession of the plaintiff are
imprescriptible.
The prevailing rule is that the right of a plaintiff to have his
title to land quieted, as against one who is asserting some adverse
claim or lien thereon, is not barred while the plaintiff or his grantors
remain in actual possession of the land, claiming to be owners
thereof, the reason for this rule being that while the owner in fee
continues liable to an action, proceeding, or suit upon the adverse
claim, he has a continuing right to the aid of a court of equity to
ascertain and determine the nature of such claim and its effect on
his title, or to assert any superior equity in his favor. He may wait
until his possession is disturbed or his title is attacked before taking
steps to vindicate his right. But the rule that the statute of
limitations is not available as a defense to an action to remove a
cloud from title can only be invoked by a complain[ant] when he is
in possession. One who claims property which is in the possession
of another must, it seems, invoke his remedy within the statutory
period. 14
In the instant case, for reasons to be discussed hereunder, the Court
agrees with the CA that herein respondent was able to prove by preponderance
of evidence that she has a legal or equitable title or interest in the real
property subject of the action and that the deed, claim, encumbrance, or
proceeding claimed to be casting a cloud on her title is, in fact, invalid or
inoperative, despite its prima facie appearance of validity or legal efficacy.
In its first assigned error, petitioner argues that the CA erred in holding
that: (1) respondent's predecessors-in-interest designated a certain Roman
Zamudio (Zamudio) as caretaker of the subject lot; and (2) respondent has
prior possession over the said property through Zamudio.
The Court does not agree.
First, the Court finds no cogent reason to depart from the conclusion of
the CA that the testimony of respondent's witness Perpetuo
Parafina (Parafina), who is the owner of the land adjacent to the disputed
property, is clear that Zamudio was indeed the person assigned by
respondent's mother as caretaker of the questioned land. 15 In fact, the RTC,
in its Decision dated January 19, 2010, likewise made a positive finding that
Zamudio was, in fact, respondent's caretaker. Moreover, Parafina testified that,
since 1960, he knows the property as owned by respondent's mother. 16
The question that follows is whether Zamudio's occupation of the subject
property as caretaker may be considered as proof of respondent's and her
predecessors-in-interest's prior possession of the said land.
The Court rules in the affirmative.
For one to be considered in possession, one need not have actual or
physical occupation of every square inch of the property at all
times. 17 Possession can be acquired not only by material occupation, but also
by the fact that a thing is subject to the action of one's will or by the proper
acts and legal formalities established for acquiring such right. 18 Possession
can be acquired by juridical acts. 19 These are acts to which the law gives the
force of acts of possession. 20 In one case, 21 this Court has considered a
claimant's act of assigning a caretaker over the disputed land, who cultivated
the same and built a hut thereon, as evidence of the claimant's possession of
the said land.
In the present case, it has been established that respondent and her
predecessors-in-interest authorized Zamudio as caretaker of the subject land.
Thus, Zamudio's occupation of the disputed land, as respondent's caretaker, as
early as 1975, is considered as evidence of the latter's occupation of the said
property. Petitioner's argument that respondent's possession must not be a
mere fiction but must, in fact, be actual is unavailing as this requirement is
applicable only in proceedings for land registration under Presidential Decree
1529, otherwise known as the  Land Registration Decree, which is not the case
here. On the other hand, it was only in 1986 that petitioner's predecessor-in-
interest started occupying the same property.
Moreover, respondent and her predecessors-in-interest declared the
disputed property for tax purposes and paid the realty taxes thereon, as early
as 1949. Settled is the rule that although tax declarations or realty tax
payment of property are not conclusive evidence of ownership, nevertheless,
they are good indicia of possession in the concept of owner for no one in his
right mind would be paying taxes for a property that is not in his actual or at
least constructive possession. 22 On the other hand, it was only in 1970 that
Roberto's father declared the subject property for taxation purposes.
As to petitioner's contention, in its second assignment of error, that
Roberto acquired ownership of the subject property through prescription, the
Court finds no cogent reason to depart from the ruling of the CA on this matter
and, thus, quotes the same with approval, to wit:
x x x Besides, Article 1134 of the Civil Code x x x states that "x x x
(o)rdinary acquisitive prescription of things requires possession in
good faith and with just title for the time fixed by law." In this case,
however, it cannot be said that the possession of Roberto Hermita
was in good faith. This is clear from the testimony of Roberto
Hermita that, prior to mortgaging the subject property to the
defendant-appellee bank, the mother of the plaintiff-appellant
approached him and claimed ownership over the subject land as
well. x x x HEITAD
xxx xxx xxx
Neither can the Court agree with the trial court that
extraordinary acquisitive prescription under Article 1137 of the Civil
Code can be appreciated in favor of Sofronio Hermita, predecessor-
in-interest of Roberto Hermita. As previously discussed, no
evidence, testimonial or documentary, was ever presented by the
defendant-appellee that Sofronio Hermita was ever in possession of
the subject land. The trial court's conclusion that the uninterrupted
possession of Sofronio Hermita since 1970 already ripened into a
title by prescription, is therefore without any evidentiary basis.
Hence, since it has not been shown that Sofronio Hermita acquired
ownership over the subject property, it follows that he did not have
the power to transfer the ownership of the subject property to his
son Roberto Hermita when the latter allegedly bought the same.
 In fine, it cannot be said that Roberto Hermita had already
acquired ownership over the subject land when he mortgaged the
same to the defendant-appellee bank. 23
Indeed, aside from tax declarations, petitioner failed to present evidence
to prove that, prior to selling the subject lot to Roberto, his father exercised
acts of ownership over the said property.
As to the third assigned error, it is settled that a banking institution is
expected to exercise due diligence before entering into a mortgage
contract. 24 The ascertainment of the status or condition of a property offered
to it as security for a loan must be a standard and indispensable part of its
operations. 25
This Court has never failed to stress the remarkable significance of a
banking institution to commercial transactions, in particular, and to the
country's economy in general. 26 The banking system is an indispensable
institution in the modern world and plays a vital role in the economic life of
every civilized nation. 27 Whether as mere passive entities for the safekeeping
and saving of money or as active instruments of business and commerce,
banks have become an ubiquitous presence among the people, who have come
to regard them with respect and even gratitude and, most of all,
confidence. 28 Consequently, the highest degree of diligence is expected, and
high standards of integrity and performance are even required of it. 29
In the instant case, contrary to the findings of the RTC that petitioner's
manager did his best to ascertain Roberto's claim of ownership over the
disputed land, the Court agrees with the findings of the CA that petitioner was,
in fact, remiss in exercising the required degree of diligence, prudence, and
care before it entered into a mortgage contract with Roberto. With more
reason should petitioner have practiced caution and mindfulness, considering
that the questioned lot is not titled. Thus, the Court agrees with the CA that a
simple check with the proper authorities would have shown that the same
property has been previously declared as owned by respondent's predecessors-
in-interest and that realty taxes had been paid thereon as early as 1949.
Petitioner alleges in its present petition that its bank manager consulted the
local assessor's office as to the existence of any other tax declaration covering
the subject lot but a careful reading of the testimony of petitioner's manager
shows that nothing therein would prove such allegation. Moreover, if
petitioner's manager had indeed made an ocular inspection of the said
property to determine its actual condition and verify the identity of the true
owner and possessor thereof, he should have easily discovered that
respondent's caretaker was also in possession of the said property and is
actually occupying a portion of the same.
As to whether or not petitioner was in good faith, the issue of good faith
or bad faith of a buyer is relevant only where the subject of the sale is a
registered land but not where the property is an unregistered land. 30 One
who purchases an unregistered land does so at his peril. 31 His claim of having
bought the land in good faith, i.e., without notice that some other person has a
right to, or interest in, the property, would not protect him if it turns out that
the seller does not actually own the property. 32 In the instant case, there is
no dispute that at the time that petitioner entered into a contract of mortgage
with Roberto and in subsequently buying the subject lot during the auction
sale, the same was still an unregistered land. Thus, petitioner may not claim
good faith and due diligence in dealing with Roberto. As a consequence, the CA
did not commit error in nullifying the real estate mortgage contract between
petitioner and Roberto and in declaring respondent as the owner of the
disputed lot.
 WHEREFORE, the Court AFFIRMS the Decision of the Court of Appeals,
promulgated on March 30, 2012, and its Resolution dated October 17, 2012, in
CA-G.R. CV No. 94947.
SO ORDERED.
|||  (Municipal Rural Bank of Libmanan, Camarines Sur v. Ordoñez, G.R.
No. 204663, [September 27, 2017])

[G.R. No. 211845. August 9, 2017.]

PEN DEVELOPMENT CORPORATION and LAS BRISAS RESORT

CORPORATION, petitioners, vs. MARTINEZ LEYBA,
INC., respondent.

DECISION

DEL CASTILLO, J  p:

Assailed in this Petition for Review on Certiorari 1 are the July 17, 2013
Decision 2 of the Court of Appeals (CA) in CA-G.R. CV No. 97478 which
affirmed with modification the January 20, 2009 Decision 3 of the Regional
Trial Court of Antipolo City, Branch 71 (RTC) in Civil Case No. 97-4386, and
the CA's March 28, 2014 Resolution 4 denying herein petitioners' Motion for
Reconsideration. 5
Factual Antecedents

As found by the CA, the facts are as follows:

Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a
corporation organized and existing under Philippine laws and the
registered owner of three (3) contiguous parcels of land situated in
Antipolo, Rizal, surveyed and identified as Lot Nos. 29, 30 and 31,
Block 3, (LRC) Pcs-7305 and registered under Transfer Certificate of
Title Nos. 250242, 250244 and 250243, respectively, with the
Register of Deeds of Rizal.
Defendants-Appellants Pen Development Corporation and Las
Brisas Resorts Corporation are also domestic corporations duly
organized and existing under Philippine laws. Appellants, thereafter,
merged into one corporate entity under the name Las Brisas Resorts
Corporation (hereafter Las Brisas). Las Brisas is the registered
owner of a parcel of land under TCT No. 153101 which is situated
adjacent to the lands owned by Martinez. Las Brisas occupied the
said land in 1967 and fenced the same.
In 1968, Martinez noticed that the construction of Las Brisas'
fence seemed to encroach on its land. Upon verification by
surveyors, Martinez was informed that the fence of Las Brisas
overlaps its property. On 11 March 1968, Martinez sent a Letter
informing Las Brisas that the fence it constructed
encroaches [sic] on Martinez's land and requested Las Brisas to
refrain from further intruding on the same. Las Brisas did not
respond to Martinez's letter and continued developing its land.
Martinez sent two (2) more Letters dated 31 March 1970 and
3 November 1970 to Las Brisas informing the latter of the
encroachment of its structures and improvements over Martinez's
titled land.
On 31 July 1971, Las Brisas, through a certain Paul Naidas,
sent a letter to Martinez, claiming that it 'can not [sic] trace the
origin of these titles' (pertaining to Martinez's land).
Martinez sent two (2) Letters to Las Brisas reiterating its
ownership over the land that Las Brisas' improvements have
encroached upon. Despite the notices, Las Brisas continued
developing its property.
Martinez sought the services of a licensed geodetic engineer to
survey the boundaries of its land. The verification survey plan Vs-
04-00034, which was approved by the Regional Technical Director
for Lands of the Department of Environment and Natural Resources
(DENR), revealed that the building and improvements constructed
by Las Brisas occupied portions of Martinez's lands: 567 square
meters of Lot No. 29, Block 3, (LRC) Pcs. 7305; a portion of 1,389
square meters of Lot No. 30, Block 3, (LRC) Pcs. 7305 covered
under TCT Nos. 250242, 250244 and 250243, respectively.
On 24 November 1994, Martinez sent a letter to Las Brisas
demanding the latter to cease and desist from unlawfully holding
portions of Martinez's land occupied by Las Brisas structures and
improvements. Despite the said demand, no action was taken by
Las Brisas.
 On 24 March 1997, Martinez filed a Complaint for Quieting of
Title, Cancellation of Title and Recovery of Ownership with
Damages against Las Brisas before the Regional Trial Court of
Antipolo City, docketed as Civil Case No. 97-4386. The case was
raffled to, and heard by, Branch 71 thereof x x x.
In its Answer, Las Brisas denied that it encroached on
Martinez's land and that it constructed the Las Brisas Resort
Complex within the land covered by TCT No. 153101. 6
In its Complaint, 7 Martinez added that Transfer Certificate of Title (TCT)
Nos. 250242, 250244 and 250243 (or the Martinez titles — totaling 9,796
square meters) 8 emanated from Decree No. 1921 issued by the General Land
Registration Office pursuant to Land Registration Case No. 3296, which was
transcribed as Original Certificate of Title (OCT) No. 756 by the Register of
Deeds of Rizal on August 14, 1915; that Las Brisas "constructed a riprapping
on the northern portion of Lot No. 29, a building straddling Lots 30 and 31,
and are now constructing a new building on Lot No. 31," 9 which acts
constitute an encroachment on lands covered by the Martinez titles; that Las
Brisas's title, TCT 153101 10 (TCT 153101), was originally registered on
September 14, 1973, under OCT 9311 pursuant to Decree No. N-147380, LRC
Case No. N-7993, Rec. No. N-43097; that the encroachment is confirmed per
verification survey conducted by a geodetic engineer and approved by the
Regional Technical Director for Lands of the Department of Environment and
Natural Resources (DENR); and that TCT 153101 thus casts a cloud on the
Martinez titles, which must be removed in order to quiet title to the latter.
Las Brisas countered in its Answer 11 that it bought the land covered by
TCT 153101 (consisting of 3,606 square meters) on May 18, 1967 from
Republic Bank; that it took possession thereof in good faith that very same
year; and that it is actually Martinez that was encroaching upon its land.
Ruling of the Regional Trial Court

After trial, the RTC issued its Decision dated January 20, 2009, containing
the following pronouncement:
To clarify matters, the plaintiff 12 engaged the services of
Ricardo S. Cruz, a licensed Geodetic Engineer, to plot and verify the
plans and technical descriptions to determine the relative
geographic positions of the land covered by the titles of plaintiff and
defendant. 13 This verification survey was approved by the
Regional Technical Director of Lands on May 23, 1996, under plan
VS-04-000394. (Exh. T-1, T-2, T-3, T-4, T-5). This plan revealed
that Psu-234002, in relation to T.C.T. No. 153101 of the defendant
overlapped thus:
a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC)
Pcs-7305, covered by plaintiffs T.C.T. No. 250242. This is
the portion where the defendant built a riprapping.
b. A portion of 1,389 square meters of Lot No. 30, Block 3,
(LRC) Pcs-7305, covered by plaintiff's T.C.T. No. 250243.
This is the portion where the defendant had constructed
an old building.
c. A portion of 1,498 square meters of Lot No. 31, Block 3,
(LRC) Pcs-7305, covered by plaintiff's T.C.T. No. 250244.
This is the portion where the defendant constructed a new
multi-story edifice.
xxx xxx xxx
 The issues sought to be resolved x x x can be read in the
respective memorandum [sic] submitted by the parties.
For the plaintiff, the statement of issues are as follows:
1. Whether x x x the Certificate of Title of the defendant
overlapped and thus created a cloud on plaintiff T.C.T.
Nos. 250242, 250243, 250244, covering lots nos. 29, 30,
and 31, block 3 (LRC) PCS-7305, which should be
removed under Article 476 of the Civil Code of the
Philippines;
2. Whether x x x defendant's T.C.T. No. 153101 should be
cancelled insofar as it overlapped Lots 29, 30 and 31,
Block 3, (LRC) PCS-7305;
3. Whether x x x the defendant is a builder in bad faith and is
liable for the consequence of his acts;
4. Whether x x x the plaintiff is entitled to collect actual or
compensatory and moral damages in the amount of
P5,000,000.00, exemplary damage in the amount of
P1,000,000.00, nominal damage in the amount of
P1,000,000.00, and attorney's fees in the amount of
P300,000.00, exclusive of appearance fee of P3,000.00
per hearing or unferome [sic] attended.
For defendants, the issues presented are:
1. Whether x x x defendant's title over the property is valid and
effective;
2. Whether x x x defendant is an innocent purchaser for value;
3. Whether x x x defendant is entitled to reimbursement for
expenses in developing the property.
For its evidence in chief, plaintiff presented Nestor Quesada
(direct, June 7, 2001; cross July 26, 2001) rested its case on
October 4, 2001. Its Formal Offer of Evidence as filed with the Court
on November 15, 2001 wherein Court Order dated January 15,
2002, Exhibits A to U, inclusive of their submarkings were admitted
over the objections of defendant.
The defendant presented Eufracia Naidas (direct/cross on July
11, 2004), then rested its case on May 11, 2005, the Formal Offer
of Evidence was filed in Court on June 10, 2005 wherein the Court
Order dated June 27, 2005, Exhibits 1 to 7 inclusive of submarkings
were all admitted over plaintiff's objections.
xxx xxx xxx
Considering that the defendant has raised the defense of the
validity of T.C.T. No. N-21871 of the Registry of Deeds, Marikina
(Exhibit 1), and subsequently cancelled by T.C.T. No. 153101 as
transferred to the Pen Development Corp. (Exh. 2) and introduced
substantial improvements thereon which from the facts established
and evidence presented during the hearings of the case it cannot be
denied that said title over the property in question is genuine and
valid. Moreover, the defendant obtained the property as innocent
purchasers for value, having no knowledge of any irregularity,
defect, or duplication in the title.
Defendant further argued that there is no proof to plaintiff's
claim that it had sent notices and claims to defendant. Assuming
that notices were sent to defendant as early as 1968, it took
plaintiff almost thirty (30) years to file the action to quiet its title.
Therefore, by the principle of laches it should suffer the
consequence of its failure to do so within a reasonable period of
time. x x x
Defendant, having introduced substantial improvements on
the property, if on the ground or assumption that the case will be
decided in favor of the plaintiff, that defendant should be, by law,
entitled to be reimbursed for the expenses incurred in purchasing
and developing the property, the construction cost of the building
alone estimated to be Fifty-Five Million Pesos (P55,000,000.00) x x
x.
Defendant also cited Articles 544, 546, 548 of the New Civil
Code of the Philippines in further support of its defense.
It is incumbent upon the plaintiff to adduce evidence in
support of his complaint x x x. Likewise, the trial shall be limited to
the issues stated in the pre-trial order.
As earlier stated, the Court shall rule on whether x x x plaintiff
has discharged its obligation to do so in compliance with the Rules
of Court. Having closely examined, evaluated and passed upon the
evidence presented by both the plaintiff and defendant the Court is
convinced that the plaintiff has successfully discharged said
obligation and is inclined to grant the reliefs prayed for.
Clearly this is a valid complaint for quieting of title specifically
defined under Article 476 of the Civil Code and as cited in the cases
of Vda. De Angeles v. CA, G.R. No. 95748, November 21, 1996;
Tan vs. Valdehuesa, 66 SCRA 61 (1975).
As claimed by the plaintiff, defendant's T.C.T. No. 153101 is
an instrument, record or claim which constitutes or casts a cloud
upon its T.C.T. Nos. 250242, 250243, and 250244. Sufficient and
competent evidence has been introduced by the plaintiff that upon
plotting verification of the technical description of both parcels of
land conducted by Geodetic Engineer Ricardo Cruz, duly approved
by the Regional Technical Director of Lands of the DENR that Psu-
234002, covered by defendant's T.C.T. No. 153101 overlapped a
portion of 567 square meters of Lot No. 29 x x x, a portion of 1,389
square meters of Lot No. 30 x x x covered by plaintiff's T.C.T. Nos.
250242, 250243 and 250244, respectively. Surprisingly, defendant
has not disputed nor has it adduced evidence to disprove these
findings.
It was likewise established that plaintiff's T.C.T. No[s].
250242, 250243 and 250244 emanated from O.C.T. No. 756, which
was originally registered on August 14, 1915, whereas, from
defendant's own evidence, its T.C.T. No. 153101 was derived from
O.C.T. No. 9311, which was originally registered on September 14,
1973, pursuant to Decree No. D-147380, in LRC Case No. N-7993,
Rec. No. 43097.
Plaintiff's mother title was registered 58 years ahead of
defendant's mother title. Thus, while defendant's T.C.T. No. 153101
and its mother title are apparently valid and effective in the sense
that they were issued in consequence of a land registration
proceeding, they are in truth and in fact invalid, ineffective,
voidable, and unforceable [sic] insofar as it overlaps plaintiff's prior
and subsisting titles.
xxx xxx xxx
In the cases of Chan vs. CA, 298 SCRA 713, de Villa vs.
Trinidad, 20 SCRA 1167, Gotian vs. Gaffud, 27 SCRA 706, again the
Supreme Court held:
'When two certificates of title are issued to different
persons covering the same land, in whole or in part, the
earlier in date must prevail and in cases of successive
registrations where more than one certificate of title is
issued over the same land, the person holding a prior
certificate is entitled to the land as against a person who
relies on a subsequent certificate.'
xxx xxx xxx
Article 526 of the Civil Code defines a possession in good faith
as 'one who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it, and a possession in bad
faith as one who possesses in any case contrary to the foregoing.'
xxx xxx xxx
In the case of Ortiz vs. Fuentebella, 27 Phil. 537, the Supreme
Court held:
'Thus, where defendant received a letter from the
daughter of the plaintiff, advising defendant to desist
from planting coconut on a land in possession of
defendant, and which letter the defendant answered by
saying she did not intend to plant coconuts on the land
belonging to plaintiff, it was held that the possession [in]
bad faith began from the receipt of such letter.'
A close similarity exists in Fuentebella above cited with the
facts obtaining in this case. The pieces evidence [sic] show that
while defendant was in good faith when it bought the land from the
Republic Bank as a foreclosed property, the plaintiff in a letter dated
as early as March 11, 1968 x x x had advised the defendant that
the land it was trying to fence is within plaintiff's property and that
the defendant should refrain from occupying and building
improvements thereon and from doing any act in derogation of
plaintiff's property rights. Six other letters followed suit x x x. The
records show that defendant received these letters but chose to
ignore them and the only communication in writing from the
defendant thru Paul Naidas was a letter dated July 31, 1971, stating
that he (Naidas) was all the more confused about plaintiff's claim to
the land. The defendant cannot dispute the letters sent because it
sent a response dated July 31, 1970. It is very clear that while
defendant may have been [in] good faith when it purchased the
land from Republic Bank on December 6, 1977, such good faith
ceased upon being informed in writing about plaintiff's title or claim
over the same land, and, worse, it acted with evident bad faith
when it proceed [sic] to build the structures on the land despite
such notice.
Consequently, the rule on the matter can be found in Articles
449, 450 of the Civil Code of the Philippines which provide:
 'Article 449. — He who builds, plants, or sows in
bad faith on the land of another, loses what is built,
planted or sown without right to indemnity.'
'Article 450.  — The owner of the land on which
anything has been built, planted or sown in bad faith
may demand the demolition of the work, or that the
planting or sowing be removed, in order to replace
things in their former condition at the expense of the
person who built, planted or sowed, or he may compel
the builder or planter to pay the price of the land, and
the sower the proper rent.'
In the case of Tan Queto vs. CA, 122 SCRA 206, the Supreme
Court held:
'A builder in bad faith loses the building he builds on another's
property without right of refund, ' x x x
xxx xxx xxx
As to defendant's claim that they had obtained title to the
property as innocent purchasers for value, lack of knowledge of any
irregularity, effect or duplication of title, they could have discovered
the overlapping had they only bothered to engage a licensed
geodetic engineer to check the accuracy of their plan Psu-234002.
To that extent, defendant has failed to exercise the diligence to be
entitled to the status as an innocent purchaser for value. It was
clearly established that defendant's certificate of title emanated
from a mother title that partially overlapped the plaintiff's prior and
subsisting title. Hence, defendant's certificate of title is void
abinittio [sic] insofar as the overlapped areas are concerned.
Defendant's claim of lack of notice on the claim of the plaintiff
on the overlapped properties is belied by the evidence presented by
plaintiff which consisted by [sic] a letter dated as early as March 11,
1968 (Exh. N, N-1, N-2) advising defendant that the land it was
trying to fence of [sic] is within plaintiff's property, and at the same
time asking the defendant to refrain from occupying and building
improvements thereon and from doing any act in derogation of
plaintiff's property rights. Five (5) succeeding letters addressed to
defendant followed suit and the evidence clearly show that the
same were received by defendant and no less than Paul Naidas
wrote a reply letter to plaintiff's counsel, Alfonso Roldan on July 31,
1971 which conclusively affirm the fact that defendant is well aware
of plaintiff's claim to the portion of the land encroached. Thus, the
defendant's claim that it is a builder in good faith finds no factual
nor legal basis. On the contrary, the defendant's continued
construction and introduction of improvements on the questioned
portion of plaintiff's property clearly negates good faith.
The claim for damages prayed for by plaintiff as a result of
defendant's obstinate refusal to recognize [the] plaintiff's title to the
land insofar as the encroachments were made and to turn over the
possession thereof entitles the plaintiff to the award of moral,
exemplary damages and attorney's fees. However, since no
sufficient evidence was presented that the plaintiff suffered actual
damages, the Court cannot award any pursuant to [Article] 2199 of
the New Civil Code of the Philippines.
 WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant as follows:
1. Quieting its T.C.T. Nos. 250242, 240243 and 250[2]44, and
removing the clouds thereon created by the issuance of
T.C.T. No. 153101 insofar as the said titles are overlapped
by the T.C.T. No. 153101;
2. Ordering the cancellation or annulment of portions of T.C.T.
No. 153101 insofar as it overlaps plaintiff's T.C.T. No.
250242, to Lot 29, Block 3, (LRC) Pcs-7305; plaintiff's
T.C.T. No. 250243 to Lot 30, Block 3 (LRC) Pcs-7305; and
plaintiff's [TCT] No. 250244 to Lot 31, Block 3, (LRC) Pcs-
7305;
3. Ordering the defendant to vacate and turn over the
possession of said portions in favor of the plaintiff, and to
remove the building or structures it has constructed
thereon at its own expense without right to indemnity
[therefor]; to allow the plaintiff to appropriate what the
defendant has built or to compel the defendant to pay for
the value of the land encroached upon;
4. Ordering the defendant to pay moral damages to the plaintiff
in the amount of P1,000,000.00; exemplary damages in
the amount of P1,000,000.00 and attorney's fees in the
amount of P100,000.00.
5. Ordering the defendant to pay for the cost of suit.
SO ORDERED. 14
Petitioners filed a joint Motion for Reconsideration. 15 However, in an
August 7, 2009 Order, 16 the RTC held its ground.
Ruling of the Court of Appeals

Petitioners interposed an appeal before the CA, docketed as CA-G.R. CV

No. 97478. They argued that the trial court erred in giving probative value to
respondent's documentary evidence despite its hearsay character; that the
trial court erred in declaring them builders in bad faith; that the respondent is
guilty of laches; and that the lower court erred in awarding damages to
respondent.
On July 17, 2013, the CA rendered the assailed Decision declaring as
follows:
The appeal fails.
Good faith is an intangible and abstract quality with no
technical meaning or statutory definition, and it encompasses,
among other things, an honest belief, the absence of malice and the
absence of design to defraud or to seek an unconscionable
advantage. An individual's personal good faith is a concept of his
own mind and, therefore, may not conclusively be determined by
his protestations alone. It implies honesty of intention, and freedom
from knowledge of circumstances which ought to put the holder
upon inquiry. The essence of good faith lies in an honest belief in
the validity of one's right, ignorance of a superior claim, and
absence of intention to overreach another.
Article 528 of the New Civil Code provides that possession
acquired in good faith does not lose this character, except in a case
and from the moment facts exist which show that the possessor is
not unaware that he possesses the thing improperly or wrongfully.
Possession in good faith ceases from the moment defects in the title
are made known to the possessors, by extraneous evidence or by
suit for recovery of the property by the true owner. Whatever may
be the cause or the fact from which it can be deduced that the
possessor has knowledge of the defects of his title or mode of
acquisition, it must be considered sufficient to show bad faith.
In the instant case, as early as 1968, Martinez sent several
letters to Las Brisas informing the latter of Martinez's ownership
over the land covered by TCT Nos. 250242, 250243 and 250244
and that the buildings and improvements Las Brisas made have
encroached on the said property. In the Letter dated 11 March
1968, Martinez informed Las Brisas that the latter's fence had
overlapped into the former's land and requested that Las Brisas
refrain from entering Martinez's property. However, Las Brisas did
not heed Martinez's demand and continued developing its property.
Martinez sent six (6) more letters to Las Brisas reiterating that the
latter's structures and improvements encroached on Martinez's
land. Records show that Las Brisas received these notices and in
fact, made a reply to one of Martinez's letters. Clearly, Las Brisas
was informed on several occasions about Martinez's titles x x x over
its land and, despite such notices, Las Brisas chose to ignore
Martinez's demand and continued constructing other buildings and
improvements that intruded into Martinez's property. Hence, Las
Brisas cannot claim that it had no knowledge of the defects of its
title and, consequently, cannot be considered in good faith.
Neither did Las Brisas bother to have its property surveyed in
order to discover, for its own benefit, the actual boundaries of its
land (TCT No. 153101). It is doctrinal in land registration law that
possession of titled property adverse to the registered owner is
necessarily tainted with bad faith. Thus, proceeding with the
construction works on the overlapped portions of TCT Nos. 250242,
250243 and 250244 despite knowledge of Martinez's ownership
thereof puts Las Brisas in bad faith.
Las Brisas further argues that Martinez is guilty of laches as it
failed to assert its right over the encroached portions of TCT Nos.
250242, 250243 and 250244 within reasonable time.
We disagree.
xxx xxx xxx
Furthermore, Martinez is the registered owner of TCT Nos.
250242, 250243 and 250244 and, as such, its right to demand to
recover the portions thereof encroached by Las Brisas is never
barred by laches. In the case of Arroyo vs. Bocaga Inland Dev't
Corp., the Supreme Court held:
'As registered owners of the lots in question, the
private respondents have a right to eject any person
illegally occupying their property. This right is
imprescriptible. Even if it be supposed that they were
aware of the petitioners' occupation of the property, and
regardless of the length of that possession, the lawful
owners have a right to demand the return of their
property at any time as long as the possession was
 unauthorized or merely tolerated, if at all. This right is
never barred by laches.'
Las Brisas argues that the court a quo erred in admitting
Martinez's Relocation Survey of Lot Nos. 28, 29 and 30 and the
Verification Plan Vs-04-00394 as they constitute hearsay evidence
and as such are inadmissible.
We are not persuaded.
It bears noting that this issue of hearsay evidence was raised
for the first time on appeal. It is a fundamental rule that no
question will be entertained on appeal unless it has been raised
below. Stated differently, issues of fact and arguments not
adequately brought to the attention of the lower courts will not be
considered by the reviewing courts as they cannot be raised for the
first time on appeal. An issue, which was neither averred in the
complaint nor raised during the trial in the lower courts, cannot be
raised for the first time on appeal because it would be offensive to
the basic rule of fair play and justice, and would be violative of the
constitutional right to due process of the other party. In fact, the
determination of issues at the pre-trial bars consideration of other
issues or questions on appeal.
In this case, Las Brisas failed to raise this argument during
pre-trial and in the trial proper. Las Brisas even failed to [raise] its
objection during Martinez's formal offer of evidence. Clearly, Las
Brisas waived its right to object on [sic] the admissibility of
Martinez's evidence. Thus, We cannot bend backwards to examine
this issue raised by Las Brisas at this late stage of the proceedings
as it would violate Martinez's right to due process and should thus
be disregarded.
Anent the award of moral damages of Php1,000,000.00 and
exemplary damages of Php1,000,000.00, We find the same without
factual or legal basis.
A juridical person is generally not entitled to moral damages
because, unlike a natural person, it cannot experience physical
suffering, or such sentiments as wounded feelings, serious anxiety,
mental anguish or moral shock. While the courts may allow the
grant of moral damages to corporations in exceptional situations, it
is not automatically granted because there must still be proof of the
existence of the factual basis of the damage and its causal relation
to the defendant's acts. Moral damages, though incapable of
pecuniary estimation, are in the category of an award designed to
compensate the claimant for actual injury suffered and not to
impose a penalty on the wrongdoer. In this case, We find no
evidence that Martinez suffered besmirched reputation on account
of the Las Brisas encroachment on Martinez's land. Hence, the
award of moral damages should be deleted.
Neither is Martinez entitled to exemplary damages. Exemplary
damages may only be awarded if it has been shown that the
wrongful act was accompanied by bad faith or done in a wanton,
fraudulent and reckless or malevolent manner. Exemplary damages
are allowed only in addition to moral damages such that no
exemplary damage can be awarded unless the claimant first
establishes his clear right to moral damages. As the moral damages
 are improper in the instant case, so is the award of exemplary
damages.
Nevertheless, an award of nominal damages of Php100,000.00
is warranted since Las Brisas violated the property rights of
Martinez. The New Civil Code provides:
Art. 2221. Nominal damages are adjudicated in
order that a right of the plaintiff, which has been violated
or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages
in every obligation arising from any source enumerated
in Article 1157, or in every case where any property right
has been invaded.
The award of damages is also in accordance with Article 451 of
the New Civil Code which states that the landowner is entitled to
damages from the builder in bad faith.
WHEREFORE, the Decision dated 20 January 2009 of the
Regional Trial Court of Antipolo City, Branch 71, in Civil Case No.
97-4386 is AFFIRMED with MODIFICATION, as follows:
1.) deleting the award of moral damages and exemplary
damages to Martinez Leyba, Inc.; and
2.) ordering Las Brisas Resort Corporation to pay Martinez
Leyba, Inc., Php100,000.00, as nominal damages.
SO ORDERED. 17 (Citations omitted)
Petitioners sought to reconsider, but were rebuffed. Hence, the present
Petition.
Issues
In a June 15, 2015 Resolution, 18 this Court resolved to give due course
to the Petition, which contains the following assignment of errors:
A. THE HONORALBE COURT OF APPEALS SERIOUSLY ERRED IN
RULING THAT PETITIONER IS A POSSESSOR/BUILDER IN BAD
FAITH.
B. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
FAILING TO RULE THAT THE RESPONDENT INCURRED LACHES
IN ENFORCING ITS PUTATIVE RIGHTS.
C. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN
RULING THAT THE ISSUE ON HEARSAY CANNOT BE RAISED
FOR THE FIRST TIME ON APPEAL. 19
Petitioners' Arguments

In praying that the assailed CA and trial court dispositions be set aside
and that Civil Case No. 97-4386 be dismissed instead, petitioners argue in
their Petition and Reply 20 that they are not builders in bad faith; that in
constructing the improvements subject of the instant case, they merely relied
on the validity and indefeasibility of their title, TCT 153101; that until their title
is nullified and invalidated, the same subsists; that as builders in good faith,
they are entitled either to a) a refund and reimbursement of the necessary
expenses, and full retention of the land until they are paid by respondent, or b)
removal of the improvements without damage to respondent's property; that
contrary to the CA's pronouncement, respondent may be held accountable for
laches in filing a case only after the lapse of thirty years; and that the Survey
Plan of Lots 29, 30 and 31 and the Verification Survey Plan Vs-04-000394 are
inadmissible in evidence for being hearsay, as they were not authenticated in
court.
Respondent's Arguments

Respondent, on the other hand, counters in its Comment 21 that the CA

is correct in declaring that petitioners are possessors and builders in bad faith;
that while petitioners may have been innocent purchasers for value, they were
not possessors and builders in good faith because despite having been
regularly informed in writing that they encroached on respondent's land and
are building illegal structures thereon, they continued with their illegal
occupation and construction; that under the Civil Code, petitioners are not
entitled to retention or reimbursement for being builders in bad faith; that the
principle of laches does not apply against owners of land registered under the
Torrens system of land registration; and that petitioners cannot be allowed to
argue for the first time on appeal that the pieces of documentary evidence it
presented before the trial court are hearsay.
Our Ruling
The Court denies the Petition.
Under the Manual on Land Survey Procedures of the Philippines, on
Verification Surveys, particularly, it is provided, thus:
Section 146. The Regional Technical Director for Lands may
issue order to conduct a verification survey whenever any approved
survey is reported to be erroneous, or when titled lands are
reported to overlap or where occupancy is reported to encroach
another property. x x x
xxx xxx xxx
Section 149. All survey work undertaken for verification
purposes shall be subject of verification and approval in the DENR-
LMS Regional Office concerned and shall be designated as
Verification Surveys (Vs). x x x
Pursuant to these provisions, respondent caused its property to be
surveyed, and on May 23, 1996, the Regional Technical Director of Lands
approved the verification survey under Verification Survey Plan Vs-04-
000394. 22 This Verification Survey Plan revealed that petitioners encroached
on respondent's land to the following extent:
a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-
7305, covered by respondent's TCT 250242. This is the portion
where the petitioners built a riprapping.
b. A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC)
Pcs-7305, covered by respondent's TCT 250243. This is the
portion where the petitioners had constructed an old building.
c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC)
Pcs-7305, covered by respondent's TCT 250244. This is the
portion where the petitioners constructed a new multi-story
edifice.
On this basis, respondent filed Civil Case No. 97-4386. Respondent's main
evidence is the said Verification Survey Plan Vs-04-000394, which is a public
document. As a public document, it is admissible in evidence even without
further proof of its due execution and genuineness, 23 and had in its favor the
presumption of regularity. To contradict the same, there must be evidence that
is clear, convincing and more than merely preponderant, otherwise the
document should be upheld. 24 The certification and approval by the Regional
Technical Director of Lands signifies the "technical correctness of the survey
plotted in the said plan." 25

On the other hand, petitioners' evidence consists mainly of the claim that
their TCT 153101 is a valid title and that they purchased the land covered by it
in good faith and for value. They did not present evidence to contradict
respondent's Verification Survey Plan VS-04-000394; in other words, no
evidence was presented to disprove respondent's claim of overlapping. Their
evidence only goes so far as proving that they acquired the land covered by
TCT 153101 in good faith. However, while it may be true that they acquired
TCT 153101 in good faith and for value, this does not prove that they did not
encroach upon respondent's lands.
In effect, respondent's Verification Survey Plan Vs-04-000394 remains
unrefuted. Petitioners' sole objection to this piece of evidence that it was not
authenticated during trial is of no significance considering that the said
documentary evidence is a public document.
Although "[i]n overlapping of titles disputes, it has always been the
practice for the [trial] court to appoint a surveyor from the government land
agencies [such as] the Land Registration Authority or the DENR to act as
commissioner," 26 this is not mandatory procedure; the trial court may rely on
the parties' respective evidence to resolve the case. 27 In this case,
respondent presented the results of a verification survey conducted on its
lands. On the other hand, petitioners did not present proof like the results of a
survey conducted upon their initiative to contradict respondent's evidence; nor
did they move for the appointment by the trial court of government or private
surveyors to act as commissioners. Their sole defense is that they acquired
their land in good faith and for value; but this does not squarely address
respondent's claim of overlapping.
For the RTC and CA, respondent's undisputed evidence proved its claim
of overlapping. This Court agrees. As a public document containing the
certification and approval by the Regional Technical Director of Lands,
Verification Survey Plan Vs-04-000394 can be relied upon as proof of the
encroachment over respondent's lands. More so when petitioners could not
present contradictory proof.
On the issue of being a builder in bad faith, there is no question that
petitioners should be held liable to respondent for their obstinate refusal to
abide by the latter's repeated demands to cease and desist from continuing
their construction upon the encroached area. Petitioners' sole defense is that
they purchased their property in good faith and for value; but this does not
squarely address the issue of encroachment or overlapping. To repeat, while
petitioners may have been innocent purchasers for value with respect to their
land, this does not prove that they are equally innocent of the claim of
encroachment upon respondent's lands. The evidence suggests otherwise:
despite being apprised of the encroachment, petitioners turned a blind eye and
deaf ear and continued to construct on the disputed area. They did not bother
to conduct their own survey to put the issue to rest, and to avoid the
possibility of being adjudged as builders in bad faith upon land that did not
belong to them.
Under the Civil Code,
Art. 449. He who builds, plants or sows in bad faith on the
land of another, loses what is built, planted or sown without right to
indemnity.
 Art. 450. The owner of the land on which anything has been
built, planted or sown in bad faith may demand the demolition of
the work, or that the planting or sowing be removed, in order to
replace things in their former condition at the expense of the person
who built, planted or sowed; or he may compel the builder or
planter to pay the price of the land, and the sower the proper rent.
Art. 451. In the cases of the two preceding articles, the
landowner is entitled to damages from the builder, planter or sower.
Moreover, it has been declared that
The right of the owner of the land to recover damages from a
builder in bad faith is clearly provided for in Article 451 of the Civil
Code.Although said Article 451 does not elaborate on the basis for
damages, the Court perceives that it should reasonably correspond
with the value of the properties lost or destroyed as a result of the
occupation in bad faith, as well as the fruits (natural, industrial or
civil) from those properties that the owner of the land reasonably
expected to obtain. x x x 28
For their part, petitioners are not entitled to reimbursement for necessary
expenses. Indeed, under Article 452 of the Civil Code, 29 the builder, planter
or sower in bad faith is entitled to reimbursement for the necessary expenses
of preservation of the land. However, in this case, respondent's lands were not
preserved: petitioners' construction and use thereof in fact caused damage,
which must be undone or simply endured by respondent by force of law and
circumstance. Respondent did not in any way benefit from petitioners'
occupation of its lands.
Finally, on the question of laches, the CA correctly held that as owners of
the subject property, respondent has the imprescriptible right to recover
possession thereof from any person illegally occupying its lands. Even if
petitioners have been occupying these lands for a significant period of time,
respondent as the registered and lawful owner has the right to demand the
return thereof at any time.
Jurisprudence consistently holds that 'prescription and laches
cannot apply to registered land covered by the Torrens system'
because 'under the Property Registration Decree, no title to
registered land in derogation to that of the registered owner shall
be acquired by prescription or adverse possession.' 30
Under Section 47 of the Property Registration Decree, or Presidential
Decree No. 1529, "(n)o title to registered land in derogation of the title of the
registered owner shall be acquired by prescription or adverse possession."
WHEREFORE, the Petition is DENIED. The July 17, 2013 Decision and
March 28, 2014 Resolution of the Court of Appeals in CA-G.R. CV No. 97478
are AFFIRMED in toto. SO ORDERED.
|||  (Pen Development Corp. v. Martinez Leyba, Inc., G.R. No. 211845,
[August 9, 2017])
[G.R. No. 230399. June 20, 2018.]

DEPARTMENT OF EDUCATION, CULTURE AND SPORTS, (now

DEPARTMENT of EDUCATION), represented by its REGIONAL
DIRECTOR, TERESITA DOMALANTA, petitioner, vs. HEIRS OF
REGINO BANGUILAN, namely: BENIGNA GUMABAY, FILOMENA
BANGUILAN, ESTER KUMMER, AIDA BANGUILAN, and ELISA
MALLILLIN, respondents.
 DECISION

REYES JR.,  J p:

Nature of the Petition
Before the Court is a Petition for Review on Certiorari 1 filed by the
Department of Education, Culture and Sports, now Department of Education
(DepEd) through its Regional Director Teresita Domalanta, assailing the
Decision 2 dated February 24, 2017 of the Court of Appeals (CA) in CA-G.R. CV
No. 100288. The assailed Decision granted the appeal of the heirs of Regino
Banguilan (Regino), namely, Benigna Gumabay, Filomena Banguilan, Ester
Kummer, Aida Banguilan, and Elisa Mallillin and declared them as the lawful
possessors of the contested property.
The Antecedent Facts
On October 24, 2001, the heirs of Regino Banguilan (respondents)
instituted a Complaint 3 for recovery of possession against the Department of
Education (petitioner) with the Regional Trial Court (RTC) of Tuguegarao City,
Cagayan. Respondents claim that as the heirs of Regino, the original registered
owner, and by virtue of the Extra-Judicial Settlement and Partition executed by
and among themselves upon the latter's death, they are the absolute owners
of the subject parcel of land situated in Caritan Norte, Tuguegarao City covered
by Original Certificate of Title (OCT) No. 10728. 4 They alleged that sometime
before the Second World War, the petitioner, through the officials of Caritan
Norte Elementary School (CNES), sought permission from Regino to build
temporary structures in the contested land to be used as classrooms for
students. Since Regino did not have any immediate need of the land, he
consented to the construction of said temporary structures and allowed the
conduct of classes in the premises. 5
Over time, the temporary structures were gradually improved to concrete
ones until the permanent building of CNES was established. After Regino's
death in 1961, respondents alleged that their predecessors-in-interest
demanded from the school officials that they be paid reasonable rent for the
use of their property and for the petitioner to purchase the same if it so
desired. Respondents claim that the officials of CNES assured them that they
would pay reasonable rent for occupying the subject lot and that they would
eventually purchase it. However, no purchase or payments were ever made.
Respondents now claim that the petitioner's non-adherence to the agreement
prejudiced them because they were deprived of the use and enjoyment of the
subject property since 1950. 6
Accordingly, the respondents prayed for the following: (1) to declare the
school's possession of the property illegal or unlawful; (2) to order DepEd, its
assigns and those acting in its behalf, to vacate the property presently
occupied by CNES and to surrender peaceful possession thereof to the
respondents; (3) to demand from DepEd for payment of reasonable rent for
the use of the property at a rate of P500.00 per month since 1950, litigation
expense of P30,000.00 and P50,000.00 as attorney's fees. 7
In its Answer, 8 the petitioner admitted that sometime before the war, it
had established CNES on land located in Caritan Norte, Tuguegarao City and
constructed school buildings on the said school site. However, it denied
respondents' claim of ownership and demands for payment of reasonable rent
since the school's occupation and possession over the property was in the
concept of an owner for more than fifty (50) years until 2001. 9
 Furthermore, the petitioner contended that respondents' complaint did
not state a cause of action since there was no proof that the lot being claimed
by the latter formed part of the school site of CNES. Even assuming but
without admitting that there was a cause of action, the petitioner argues that
the same had already been barred by prescription and/or laches because they
had been occupying and using the subject lot adversely, peacefully,
continuously, and in the concept of an owner for more than fifty (50) years
without question. 10 aDSIHc
In a Decision 11 dated September 11, 2012, the trial court declared
Regino as the undisputed owner of the contested property where CNES was
built as evidenced by OCT No. 10728. However, despite recognition of
ownership, the trial court was convinced that laches and prescription had
already set in, barring respondents from assailing the petitioner's right over
subject property. The fallo of the decision reads:
WHEREFORE, premises considered, the Court ORDERS the
dismissal of the complaint for lack of merit without prejudice to
their filing of an action for payment of just compensation against
the Republic of the Philippines.
SO ORDERED. 12
On appeal to the CA, respondents argued that the court a quo erred when
it found that they were barred by laches from recovering possession of the
subject property. They further contended that the petitioner's possession of
the property was by mere tolerance; hence laches could not prevent them
from asserting their right of possession over the subject property. 13
In its Decision 14 dated February 24, 2017, the CA reversed and set
aside the decision of the court a quo ruling that prescription and laches could
not work in favor of petitioner since the subject lot was registered under the
Torren's System and because their possession was merely by tolerance. In
resolving the issue, the CA applied the principles laid down in the case
of Department of Education vs. Tuliao, 15 that mere material possession of
land cannot be considered as adverse unless such possession is accompanied
with intent to possess as an owner.
In keeping with the ruling in Tuliao, 16 the CA further ruled that
respondents may either appropriate the structures or oblige the defendant to
pay for the price of the land or enter into a forced lease. Additionally, the CA
awarded attorney's fees and ordered payment of an amount of P500.00 per
month as reasonable compensation for the occupancy of the property from the
time of the filing of the complaint until full delivery of the property with
reimbursement of the incurred expenses as enumerated in Article 448 of
the New Civil Code or upon payment of the purchase price in case of
compulsory sale. 17 In view of the foregoing, it was held that:
WHEREFORE, the appeal is GRANTED. The decision issued by
the Regional Trial Court of Tuguegarao City, Cagayan Br. 2 dated
September 11, 2012 in Civil Case No. 5897 is REVERSED and SET
ASIDE. A new decision is entered declaring as follows:
1.  Plaintiffs-Appellants Benigna Gumabay, Filomena
Banguilan, Ester Kummer, Aida Banguilan and Elisa Mallillin are the
lawful possessors of the property registered under the Original
Certificate Title No. R.O. 62 (10728);
2.  Plaintiffs-Appellants are directed to exercise their option
under Article 448 of the New Civil Code of the Philippines whether to
appropriate the structures built on the subject property as their own
by paying to the defendant-appellee Department of Education,
 Culture and Sports (now the Department of Education) the amount
of the expenses spent for the structures or to oblige the defendant-
appellee to pay the price of the land, and said option must be
exercised and relayed to this court formally within thirty (30) days
from receipt of this decision and a copy of such notice must be
furnished to the defendant.
a.  If in case the plaintiffs-appellants exercise the
option to appropriate the structures built on the lot in
suit, the defendant-appellee is hereby directed to submit
to this court the amount of the expenses spent for the
structures within 15 days from receipt of the notice of
the plaintiff of his desired option.
b.  If the plaintiffs-appellants decide to oblige the
defendant-appellee to pay the price of the land, the
current market value of the land including its
improvements as determined by the City Assessor's
Office shall be the basis for the price thereof.
c.  In case the plaintiffs-appellants exercise the
option to oblige the defendant-appellee to pay the price
of the land but the latter rejects such purchase because
the value of the land is considerably more than that of
the structures, the parties shall agree upon the terms of
a forced lease, and give the court a formal written notice
of such agreement and its provisos.
d.  If no formal agreement shall be entered into
within a reasonable period, the court shall fix the terms
of the forced lease.
3.  Defendant-appellee is directed to pay the plaintiffs-
appellants the amount of five hundred pesos (P500.00) per month
as reasonable compensation for the occupancy of the subject
property from the time the complaint was filed until such time the
possession of the property is delivered to the plaintiffs-appellants
subject to the reimbursement of the aforesaid expenses in favor of
the defendant-appellee or until such time the payment of the
purchase price of the lot be made by the defendant appellee in
favor of the plaintiffs-appellants in case the latter opts for the
compulsory sale of the same;
4.  Defendant-appellee is directed to pay the plaintiffs-
appellants the amount of P20,000.00 as attorney's fees and to pay
the costs of the suit.
SO ORDERED. 18
Aggrieved, DepEd filed the instant Petition for Review on Certiorari under
Rule 45 of the Rules of Court arguing that respondent's right over the subject
property, if any, is barred by laches due to their inaction for more than fifty
(50) years.
The Issue
The issue before this Court is whether or not the CA erred in ruling that
respondent's cause of action against petitioner was not yet barred by
laches. 19
Ruling of the Court
The petition is bereft of merit. ETHIDa
 The principle of laches or "stale demands" is the failure or neglect, for an
unreasonable and unexplained length of time, to do that which by exercising
due diligence could or should have been done earlier. 20 It is based on the
grounds of public policy in order to maintain peace in the society and equity in
order to avoid recognizing a right when to do so would result in a clearly unfair
situation. 21
Nevertheless, the Court has held that there is no fast and hard rule as to
what constitutes laches or staleness of demand; the determination of which is
addressed to the sound discretion of the court. To conclude a sound judgment,
courts are guided that laches, being an equitable doctrine, is controlled by
equitable considerations in accordance with the particular circumstances of
each case. It cannot be used to defeat justice or perpetrate fraud. Ultimately,
pursuant to the principle of equity, courts are not bound strictly by the statute
of limitations or the doctrine of laches when to be so, a manifest wrong or
injustice would result. 22
As prescribed in the ruling of Phil-Air Conditioning Center vs. RCJ
Lines, 23 the following elements must all be present in order to constitute
laches:
(1)  Conduct on the part of the defendant, or of one under whom he
claims, giving rise to the situation of which complaint is made for
which the complaint seeks a remedy;
(2)  Delay in asserting the complainant's rights, the complainant
having had knowledge or notice, of the defendant's conduct and
having been afforded an opportunity to institute a suit;
(3)  Lack of knowledge or notice on the part of the defendant that
the complainant would assert the right on which he bases his suit;
and
(4)  Injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held to be barred. 24
In the instant case, a close scrutiny of the records reveals that petitioner
failed to establish the concurrence of the above-mentioned elements for the
reason that CNES' possession over the subject property was merely being
tolerated by respondents and their predecessor-in-interest.
Petitioner contends that the government, through CNES, was in
possession of the subject property in the concept of an owner since the
1940's. 25 However, as found by the court a quo and the CA, the subject
property was registered in the name of Regino Banguilan under OCT. No.
10728 as early as 1929. 26 The court a quo explicitly stated, "In the case at
bar, it was undisputed that the property registered under OCT. No. 10728 was
owned by Regino Banguilan, which later redounded to his heirs." 27 Therefore,
CNES knew from the very beginning that the property was titled in someone
else's name and that their possession was not in the concept of an owner.
In the case of Heirs of Jose Maligaso vs. Spouses Encinas, 28 the Court
explained that possession over the property by anyone other than the
registered owner gives rise to the presumption that said possession is only by
mere tolerance. Likewise, when faced with unsubstantiated self-serving claims
as opposed to a duly registered Torrens title, the latter must prevail. The Court
elucidated on this point, to wit:
The respondents' title over such area is evidence of their
ownership thereof. That a certificate of title serves as evidence of
an indefeasible and incontrovertible title to the property in favor of
the person whose name appears therein and that a person who has
 a Torrens title over a land is entitled to the possession thereof are
fundamental principles observed in this jurisdiction. Alternatively
put, the respondents' title and that of their predecessors-in-
interest give rise to the reasonable presumption that the
petitioners have no right over the subject area and that their
stay therein was merely tolerated. 29 (Citations omitted and
emphasis supplied)
Notably, petitioner failed to adduce any evidence to substantiate its claim
that it acquired the subject property and possessed it in the concept of an
owner. Moreover, petitioner was unable to support its claim that the subject
land was sold to the municipality of Tuguegarao by Elena Banguilan, Regino's
sister. 30 Clearly, petitioner was unable to overturn the presumption that its
occupation over the lot was by mere tolerance of the respondents.
On the other hand, the respondents have proffered the following to prove
their claim of ownership over the subject lot: (1) OCT No. 10728 registered
under the name of Regino Banguilan; 31 (2) tax declarations covering the
subject land in the name of Regino; 32 and (3) a sketch plan of Lot 3950
surveyed in the name of Aida Banguilan, one of the herein
respondents. 33 Thus, as between the petitioner's unsubstantiated self-serving
claims and respondent's evidence, the latter must prevail. As such, the Court
finds no reason to disturb the CA's factual finding that CNES' possession of the
subject property was, and continues to be, by mere tolerance of the
respondents.
Considering that CNES' possession was merely being tolerated,
respondents cannot be said to have delayed in asserting their rights over the
subject property. As explained in the recent case of Department of Education
vs. Casibang, et al., 34 a registered owner who is merely tolerating another's
possession of his land is not required to perform any act in order to recover it.
This is because the occupation of the latter is only through the continuing
permission of the former. Consequently, once said permission ceases, the
party whose possession is merely being tolerated is bound to vacate the
subject property. Hence, until the registered owner communicates the
cessation of said permission, there is no need to do anything to recover the
subject property. Similarly, as aptly pointed out by the court a quo, Regino and
his successor-in-interests repeatedly asserted their rights over the subject
property by demanding from CNES the payment of rentals or for the latter to
purchase the same. 35 However, once it became clear that petitioner was not
going to pay rent, purchase the lot, or vacate the premises, respondents
instituted an action for recovery of possession. 36 There was no prolonged
inaction on the part of the respondents which could bar them from prosecuting
their claims. cSEDTC
Likewise, since CNES' occupation of Lot No. 3950 was merely being
tolerated by Regino and his successors-in-interest, petitioner cannot now claim
that they lacked any knowledge or notice that the former would assert their
rights over said property. Even assuming arguendo that there was no
agreement between CNES and Regino, the school is necessarily bound by an
implied promise to vacate the subject property upon the registered owner's
demand. 37
Notwithstanding the petitioner's failure to prove the concurrence of all the
elements of laches, jurisprudence is also replete with cases which hold that the
doctrine of prescription or laches is inapplicable to registered lands covered by
the Torrens System. 38 The Court has consistently held that laches cannot
apply to registered land covered by a Torrens Title because under the Property
Registration Decree, no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession. 39
In Casibang, 40 the Court ruled in favor of a registered owner and upheld
the indefeasibility and incontrovertibility of a registered title as against the
school's possession by mere tolerance. In said case, the registered owner
therein allowed the construction and operation of a school on a portion of his
property because he had no use of it at the time. However, when his
successors-in-interest sought to recover possession of the lot, the DepEd
refused alleging that its possession was in the concept of an owner because it
had purchased it from the original registered owner. The Court ruled against
the DepEd because it failed to produce any competent proof of transfer of
ownership. Hence, their possession of the subject property was only by mere
tolerance and not in the concept of an owner. The Court held:
It is undisputed that the subject property is covered by OCT
No. O-627, registered in the name of the Juan Cepeda. A
fundamental principle in land registration under the Torrens system
is that a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose
name appears therein. Thus, the certificate of title becomes the
best proof of ownership of a parcel of land.
As registered owners of the lots in question, the
respondents have a right to eject any person illegally
occupying their property. This right is imprescriptible. Even if
it be supposed that they were aware of the petitioner's occupation
of the property, and regardless of the length of that possession, the
lawful owners have a right to demand the return of their property at
any time as long as the possession was unauthorized or merely
tolerated, if at all. This right is never barred by laches.
Case law teaches that those who occupy the land of
another at the latter's tolerance or permission, without any
contract between them, are necessarily bound by an implied
promise that the occupants will vacate the property upon
demand. 41 (Citations omitted and emphasis supplied)
On the same note, the Court concurs with the CA in its application of the
case of Tuliao 42 to the herein controversy with regard to the issue of laches.
In said case, the Court unequivocally stated that laches can only apply to one
whose possession of the property was open, continuous, exclusive, adverse,
notorious, and in the concept of an owner for a prolonged period of time.
Additionally, physical possession must be coupled with intent to possess as an
owner in order for it to be considered as adverse. The Court explained this, to
wit:
As regards the DepEd's defense of laches, it has no merit
either. It avers that its possession of the subject land was open,
continuous, exclusive, adverse, notorious and in the concept of
an owner for at least thirty-two (32) years already at the time
Tuliao filed the complaint. It must be noted, however, that Tuliao's
claim that the DepEd's possession of a portion of his land to be used
as a passageway for the students was mere tolerance was not
refuted. Thus, the same is deemed admitted. This means that the
DepEd's possession was not truly adverse.
The Court once ruled that mere material possession of
the land was not adverse as against the owner and was
insufficient to vest title, unless such possession was
 accompanied by the intent to possess as an
owner. 43 (Citation omitted and emphasis supplied)
As earlier discussed, petitioner, through CNES, was only occupying the
subject lot through the permission and here tolerance of Regino and eventually
his successors-in-interest, herein respondents. Therefore, the petitioner's claim
that their possession of the subject lot was adverse and in the concept of an
owner, must fail.
Being the owners of the subject property, respondents have the right to
recover possession from the petitioner because such right is imprescriptible.
Even if the Department of Education has been occupying the subject property
for a considerable length of time, respondents, as lawful owners, have the
right to demand the return of their property at any time as long as the
possession was only through mere tolerance. 44 The same precept holds true
even if the tolerance resulted from a promise that the possessor will pay for
the reasonable value of the land. 45
As correctly ruled by the Court of Appeals, respondents may exercise
their rights under Article 448, 46 in relation to Article 546 47 of the New Civil
Code. Said provision provides them with the option of either: (1) appropriating
the improvements, after payment of indemnity representing the value of the
improvements introduced and the necessary and useful expenses defrayed on
the subject lots; or (2) obliging the petitioner to pay the price of the land.
However, petitioner cannot be obliged to buy the land if its value is
considerably more than that of the improvements and buildings it built. In such
a scenario, the petitioner may instead enter into a lease agreement with
respondent heirs and pay them reasonable rent. In case of disagreement, the
Court shall fix the terms thereof.
Nonetheless, considering that the subject lot is now being used as school
premises by the Caritan Norte Elementary School and permanent structures
have already been erected thereon, respondent's exercise of their rights under
Article 448 and payment of indemnity pursuant to Article 546 would
undoubtedly hinder the Department of Education's prerogative of providing
basic education to said locality. In consonance with previous rulings by the
Court, 48 the petitioner's remedy to address such inconvenience is to file an
action for expropriation over said land.
WHEREFORE, given the foregoing disquisition, the Petition for Review
on Certiorari, dated April 26, 2017 of the Department of Education,
represented by its Regional Director, is hereby DENIED. Accordingly, the
Decision dated February 24, 2017 of the Court of Appeals in CA-G.R. CV No.
100288, reversing and setting aside the Decision dated September 11, 2012 of
the Regional Trial Court of Tuguegarao City, Cagayan, Branch 2 is
hereby AFFIRMED in toto. SDAaTC
SO ORDERED.
|||  (Department of Education, Culture and Sports v. Heirs of Banguilan,
G.R. No. 230399, [June 20, 2018])

[G.R. No. 202342. July 19, 2017.]

 AMA LAND, INC., petitioner, vs. WACK WACK RESIDENTS'
ASSOCIATION, INC., respondent.

DECISION

CAGUIOA,  J p:

Before the Court is a petition 1 for review on certiorari under Rule 45 of

the Rules of Court assailing the Decision 2 dated June 14, 2012 (Decision) of
the Court of Appeals 3 (CA) in CA-G.R. SP No. 118994, granting the petition
filed by respondent Wack Wack Residents' Association, Inc. (WWRAI),
reversing and setting aside the October 28, 2010 and February 23, 2011
Orders 4 of the Regional Trial Court of Pasig City assigned in San Juan
(Metropolitan Manila), Branch 264 (RTC) in Civil Case No. 65668, ordering the
RTC to issue the injunctive relief prayed for by WWRAI pending the
determination of the petition for the declaration of permanent easement of
right of way, and directing WWRAI to amend the title and the averments in the
petition before the CA by disclosing the names of its principals and bringing the
action in a representative capacity.
The Facts and Antecedent Proceedings
The CA Decision summarized the facts as follows:
A commercial and residential building project located at
Epifanio Delos Santos Avenue corner Fordham Street in Wack Wack
Village, Mandaluyong City, was proposed by x x x AMA Land, Inc.
(AMALI x x x) in [the] mid-1990s. As the latter proceeded to secure
the needed licenses and permits for the construction of the project,
the following were issued: Building Location Permit; Certificate of
Locational Viability; Locational Clearance; Excavation and Ground
Preparation Permit; Building Permit; Environmental Compliance
Certificate; HLURB Certificate of Registration; and HLURB License to
Sell.
On March 18, 1996, AMALI notified [WWRAI] — a registered
homeowners' association of Wack Wack Village — of its intention to
use Fordham Street as an access road and staging area of the
project. As AMALI received no response from [WWRAI], the former
temporarily enclosed the job site and set up a field office along
Fordham Street. [WWRAI] claimed, however, that AMALI already
converted part of the said street as barrack site and staging area
even before March 18, 1996. All subsequent attempts of [WWRAI]
to remove the said field office proved futile.
[On May 8, 1996,] AMALI then filed a petition before the
[RTC], [wherein it seeks the temporary use of Fordham Street
belonging to WWRAI as an access road to AMALI's construction site
of its AMA Tower project pursuant to Article 656 5 of the Civil Code,
and to establish a permanent easement of right of way in its favor
over a portion of Fordham Street pursuant to Article 649 6 of
the Civil Code.Aside from its prayer for the declaration of temporary
and permanent easement of right of way in its favor over a portion
of Fordham Street, AMALI is also] praying for: (a) a temporary
restraining order (TRO) to immediately enjoin [WWRAI] from
demolishing and removing the temporary field office, constructing a
fence isolating Fordham Street, and preventing AMALI from gaining
access to the construction site; (b) a writ of preliminary mandatory
injunction directing [WWRAI] to allow AMALI to use Fordham Street
as an access road and staging area; (c) an order making the TRO
and the aforesaid writ permanent; and (d) an order declaring a
permanent right of way in favor of AMALI.
In its answer, [WWRAI] contends that the project of AMALI
violates the applicable zoning ordinances; that the licenses and
permits issued in favor of AMALI were irregular and unlawful; that
the project is a nuisance, and; that Epifanio Delos Santos Avenue
can be utilized as the staging area of the project.
On July 24, 1997, the [RTC] granted the writ of preliminary
mandatory injunction "directing [WWRAI] to allow [AMALI] to use
Fordham Street through a temporary easement of right of way."
In 1998, due to financial crisis, the construction of the project
was put on hold and AMALI was constrained to finish merely the
basement. Although AMALI asserted that "it continued to pay
[WWRAI] for the use of Fordham Street," [WWRAI] claimed
otherwise.
In 2002, before the Regional Trial Court of Muntinlupa, Branch
256, AMALI filed a petition for corporate rehabilitation which was
later on approved. Also, the said rehabilitation court in Muntinlupa
directed the Office of the Building Official and/or Office of the City
Engineer of Mandaluyong City to issue an Amended Building Permit
in favor of AMALI. As a consequence, Building Permit No. 08-2011-
0048 was issued.
As AMALI resume[d] the project, [WWRAI] filed in January
2010, an "Urgent Motion to Set for Hearing" its application for
temporary restraining order and/or writ of preliminary injunction.
The [RTC] heard the application and received the evidence
presented by [WWRAI]. AMALI, on the other hand, failed to attend
the proceedings. On October 28, 2010, the [RTC] ruled against the
motion. Thus, it ordered the following:
WHEREFORE, [WWRAI]'s application for the
issuance of temporary restraining order and/or writ of
preliminary injunction is DENIED for lack of merit.
[AMALI] is directed to make representations with
the Building Officials of Mandaluyong City on its
application for permit to construct the building.
Attention of the Building Officials of
Mandaluying (sic) City is invited to the pending
controversy of [the] parties involved, hence,
his (sic) prompt final decision is suggested. x x x
A motion for reconsideration of the above order was filed but
was denied on February 23, 2011. Hence, the x x x petition
[for certiorari under Rule 65 before the CA].
On June 10, 2011, after a [clarificatory] hearing, [the CA]
granted [WWRAI]'s application for a temporary restraining order[,
and, accordingly, AMALI was commanded to cease and desist from
further committing the act complained of, which is the construction
of the commercial and residential condominium project located
along EDSA corner Fordham Street in Wack Wack Village.] 7 Then,
on July 28, 2011, the application of [WWRAI] for the issuance of a
 writ of preliminary injunction was granted as well pending resolution
of the x x x petition for certiorari [before the CA]. 8
The CA Ruling

The CA rendered its Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the petition
is GRANTED. The October 28, 2010 and February 23, 2011 Orders
of the Regional Trial Court of Pasig City assigned in San Juan
(Metropolitan Manila), Branch 264, in Civil Case No. 65668
is REVERSED and SET ASIDE. The latter court is hereby ordered
to issue the injunctive relief prayed for by the petitioner Wack Wack
Residents Association, Inc. pending determination of the petition for
the declaration of PERMANENT easement of right of way.
Also, the petitioner is DIRECTED to AMEND the following: (a)
the TITLE; and (b) the AVERMENTS, in the present petition by
disclosing the names of its principals and bringing the action in a
representative capacity.
SO ORDERED. 9
Without filing a motion for reconsideration, AMALI filed the instant Rule
45 petition for review on certiorari.
Issues
AMALI raised the following issues in its Petition:
(1) whether WWRAI is guilty of forum shopping;
(2) whether WWRAI is entitled to a temporary restraining order and/or a
writ of preliminary injunction;
(3) whether the CA Decision amounts to a prejudgment of the merits of
Civil Case No. 65668 (original petition for easement of right of
way);
(4) whether the CA Decision disturbed the status quo prevailing before
the filing of the WWRAI petition; and
(5) whether WWRAI is the real party in interest in this case. 10
The Court's Ruling
AMALI's petition is meritorious.
The five issues raised by AMALI have, as core issue, the question of
whether or not WWRAI is entitled to enjoin the construction of the AMA Tower
pending determination of the original petition for the declaration of temporary
and permanent easements of right of way over a portion of Fordham Street.
The Court in Lukang v. Pagbilao Development Corporation  11 reiterated
the purpose and grounds for the issuance of a writ of preliminary
injunction, viz.:
A writ of preliminary injunction is a provisional remedy which
is adjunct to a main suit, as well as a preservative remedy issued to
maintain the status quo of the things subject of the action or the
relations between the parties during the pendency of the suit. The
purpose of injunction is to prevent threatened or continuous
irremediable injury to the parties before their claims can be
thoroughly studied and educated. Its sole aim is to preserve
the status quo until the merits of the case are fully heard. Under
Section 3, Rule 58 of the Rules of Court, an application for a writ of
 preliminary injunction may be granted if the following grounds are
established:
(a) That the applicant is entitled to the relief demanded, and
the whole or part of such relief consists in restraining the
commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either
for a limited period or perpetually;
(b) That the commission, continuance or non-performance of
the act or acts complained of during the litigation would
probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing,
threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in
violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render
the judgment ineffectual. 12
Thus, to be entitled to the injunctive writ, the petitioner must show that:
(1) there exists a clear and unmistakable right to be protected; (2) this right is
directly threatened by the act sought to be enjoined; (3) the invasion of the
right is material and substantial; and (4) there is an urgent and paramount
necessity for the writ to prevent serious and irreparable damage. 13
The grant or denial of the injunctive relief rests on the sound discretion of
the court taking cognizance of the case, since the assessment and evaluation
of evidence towards that end involves findings of fact left to the conclusive
determination by such court; and the exercise of judicial discretion by such
court will not be interfered with, except upon a finding of grave abuse of
discretion. 14
In the issuance of the injunctive writ, grave abuse of discretion implies a
capricious and whimsical exercise of judgment equivalent to lack of
jurisdiction; or the exercise of power in an arbitrary or despotic manner by
reason of passion, prejudice or personal aversion amounting to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all
in contemplation of law. 15
Guided by the foregoing principles, the CA erred in finding that the RTC
committed grave abuse of discretion in issuing its October 28, 2010 and
February 23, 2011 Orders, denying WWRAI's application for the issuance of a
temporary restraining order and writ of preliminary injunction.
The Court agrees with the RTC that:
[WWRAI]'s allegation that [its members'] 16 right to live in a
peaceful, quiet and safe environment will be violated in the event
that the condominium project of [AMALI] will be erected is
untenable. The alleged noise and dust that may be caused by the
construction is the natural consequence thereof. However, this
annoyance that may be brought by the construction is not
permanent in nature but is merely temporary and once the building
is completed, [said members'] right to live in a peaceful, quiet and
safe environment will be restored without noise and dust.
As to the allegations that [said members'] privacy may be
invaded for the reason that they may be photographed or
videotaped without their knowledge, these fears are merely
speculative and cannot be taken into consideration.
 As admitted by [WWRAI's] witness, the construction activity is
suspended, hence, there is nothing to restrain x x x. There is no
urgent and paramount necessity for the writ to prevent serious
damage. 17
Indeed, WWRAI was unable to convincingly demonstrate a clear and
unmistakable right that must be protected by the injunctive writ. The
apprehensions of its members are, as correctly ruled by the RTC, speculative
and insufficient to substantiate the element of serious and irreparable damage.
As to the issue of the legality of the construction of AMA Tower, the
Resolution 18 in NBCDO NO. 12-11-93 MAND CITY dated March 29, 2012
issued by the Office of the Secretary of the Department of Public Works and
Highways (DPWH), finding "the issuance of Amended Building Permit No. 08-
2011-0048 for [AMALI's] proposed thirty-four (34) storey with seven (7)
basement level AMA Tower Residences project is in accordance with the
provisions of the National Building Code of the Philippines (P.D. 1096) and
its IRR x x x" 19 carries the presumption of regularity as having been issued
pursuant to official duty. 20 The authority to administer and enforce the
provisions of the National Building Code, and the power to appoint Building
Officials throughout the country, including Metro Manila, pertain to the
Secretary of Public Works and Highways. 21 Until sufficiently rebutted, the
determination of the Secretary of DPWH stands. Besides, the determination of
the "special and affirmative defense" that the construction of the AMA Tower is
illegal, which WWRAI raised in its Answer, 22 will be finally settled after the
parties have adduced their evidence in chief. The same holds true with respect
to the assertion of WWRAI that the construction of the AMA Tower is a
nuisance. This issue can only be resolved after trial on the merits. The RTC
also noted that no less than the Department of Environment and Natural
Resources issued an Environmental Compliance Certificate in favor of AMALI
and "it is clear that no question remains on the legality of [AMALI's]
construction." 23
However, the denial of WWRAI's application for a writ of preliminary
injunction against the construction of the AMA Tower does not necessarily
translate to AMALI's entitlement to a temporary easement of right of way over
a portion of Fordham Street belonging to WWRAI for use as an access road and
staging area of its AMA Tower project before the resolution of its petition for
declaration of easement of right of way (original petition) by the RTC. Stated
differently, WWRAI cannot be compelled at this stage of the proceedings to
grant AMALI a temporary legal easement of right of way over a portion of
Fordham Street.
In its original petition, AMALI alleges two distinct causes of action,
namely:
3.0
FIRST CAUSE OF ACTION
(DECLARATION OF TEMPORARY EASEMENT OF RIGHT OF WAY)
xxx xxx xxx
3.2 [AMALI]'s use of Fordham Street belonging to [WWRAI] as
an access road to [AMALI]'s construction site is
indispensable to the construction of AMA TOWER Project.
3.3 [AMALI]'s property is so situated that the temporary site
construction office and the temporary ingress and egress
for the construction workers can only be created with least
prejudice in Fordham Street. The Dolmar property on the
right side of [AMALI]'s property is an existing commercial
 structure while the Sta. Cruz's at the back is a residential
property. The front portion of [AMALI]'s property is facing
a main thorough fare[, Epifanio de los Santos Avenue
(EDSA),] and will be a part of the construction itself.
3.4 [AMALI] is ready, willing and able to pay the proper
indemnity.
3.5 Article 656 of the New Civil Code provides that:
"Art. 656. If it be indispensable for the
construction, repair, improvement, alteration or
beautification of a building, to carry materials through
the estate of another, or to raise thereon scaffolding or
other objects necessary for the work, the owner of such
estate shall be obliged to permit the act, after receiving
payment of the proper indemnity for the damage caused
him. (5691)"
4.0
SECOND CAUSE OF ACTION
(DECLARATION OF PERMANENT EASEMENT OF RIGHT OF WAY)
xxx xxx xxx
4.2 The property of [AMALI] where the site of AMA TOWER is
situated is surrounded by estates of others. A commercial
building of Dolmar is on the right side of [AMALI]'s
property and a residential property of Sta. Cruz is at the
back. The front portion of [AMALI]'s property is facing a
main thorough fare.
4.3 The property of [AMALI] has no adequate outlet to a public
highway. The front portion of the property facing EDSA is
a difficult and dangerous outlet not only for [AMALI] but
for the public as well.
4.4 The use of small portion of Fordham Street near EDSA is a
point least prejudicial to [WWRAI].
4.5 [AMALI] is ready, willing and able to pay the proper
indemnity.
4.6 Article 649 of the New Civil Code provides that:
"Art. 649. The owner, or any person who by virtue
of a real right may cultivate or use any immovable,
which is surrounded by other immovables pertaining to
other persons and without adequate outlet to a public
highway, is entitled to demand a right of way through
the neighboring estates, after payment of the proper
indemnity.
xxx xxx xxx" 24
First of all, the CA Decision categorically found that WWRAI is the owner
of the subject Fordham Street as this was expressly admitted by AMALI and
pursuant to the RTC's pre-trial order. 25 Thus, inasmuch as AMALI prays for
the grant of both temporary and permanent easements of right of way over a
portion of Fordham Street against WWRAI in the original petition, WWRAI
should be deemed to be the owner of the servient estate. Simply stated,
WWRAI, and not its members, is the real party in interest in this case. To be
sure, even AMALI itself filed the original petition against WWRAI and not
against the latter's members.
 Secondly, the question of whether or not AMALI, as owner of the
dominant estate, may validly claim against WWRAI a compulsory permanent
right of way under Articles 649 and 650 26 of the Civil Code, will depend on a
finding that AMALI has established the existence of the following requisites,
namely: (1) the dominant estate is surrounded by other immovables; (2) it is
without adequate outlet to a public highway; (3) after the proper indemnity
has been paid; (4) the isolation was not due to the proprietor of the dominant
estate's own acts; and (5) the right of way claimed is at a point least
prejudicial to the servient estate. 27 A sixth requisite is that the right of way
must be absolutely necessary for the normal enjoyment of the dominant estate
by its owner. 28 There must be a real, not fictitious or artificial, necessity for
the right of way, 29 and the right cannot be claimed merely for the
convenience of the owner of the enclosed estate. 30 The burden of proving the
existence of the foregoing requisites lies on AMALI, being the owner of the
dominant estate. 31 This issue has been correctly recognized by the CA
as still pending determination by the Regional Trial Court of Pasig City
assigned in San Juan (Metropolitan Manila) Branch 264, in Civil Case
No. 65668.
In turn, as regards the question of whether AMALI is entitled to a
temporary easement of right of way, Article 656 of the Civil Code provides that
this can be granted only after the payment of the proper indemnity by AMALI,
the owner of the dominant estate; and only if AMALI has established that the
easement is indispensable for the construction of its AMA Tower Project.
The Court is aware that the RTC had previously granted on July 24, 1997,
a writ of preliminary mandatory injunction "directing [WWRAI] to allow
[AMALI] [to] use Fordham Street x x x through a temporary easement right of
way [and set the] compensation for the use of Fordham Street x x x to Fifty
Thousand Pesos (P50,000.00) per month of use." 32
As to how the RTC arrived at the P50,000.00 monthly compensation and
the conclusion that the use of Fordham Street is indispensable in the
construction of the AMA Tower, the Court is perplexed given the admission in
the July 24, 1997 Order of the RTC that "the parties waived presentation of
witnesses and submitted the incident [prayer for issuance of a writ of
preliminary mandatory injunction] for resolution based on their respective
pleadings." 33 Unlike the RTC Order dated October 28, 2010 which denied
WWRAI's application for a temporary restraining order and writ of preliminary
injunction where the judicial affidavits executed by four members of WWRAI
were summarized, the RTC Order dated July 24, 1997 which granted a
temporary easement of right of way in favor of AMALI simply concluded that:
Article 656 of the New Civil Code provides:
"If it be indispensable for the construction, repair,
improvement, alteration or beautification of a building, to
carry materials through the estate of another, or to raise
thereon scaffolding or other objects necessary for the
work, the owner of such estate shall be obliged to permit
the act, after receiving payment of the proper indemnity
for the damage caused him."
[WWRAI's] obligation is undoubtedly established by the above
provision.
From a map of the area in question (Annex "G" of [AMALI's]
Reply), it is unmistakable that Fordham Street in Wack Wack
Village, which is owned by [WWRAI], is the only road which [AMALI]
 is able to use with respect to the necessary preparations relative to
the construction project. 34
The RTC did not even factor in its Order the fact that the front portion of
AMALI's property where the proposed AMA Tower project is situated is facing
EDSA, which AMALI describes as a main thoroughfare. The said Order also fails
to identify the specific portion of Fordham Street that would be subject to the
temporary easement of right of way.

Not only is the July 24, 1997 Order granting the temporary easement of
right of way short in factual basis, it is a virtual prejudgment of AMALI's "FIRST
CAUSE OF ACTION (DECLARATION OF TEMPORARY EASEMENT OF RIGHT OF
WAY)."
The Court reiterated in Searth Commodities Corp. v. Court of
Appeals 35 that:
The prevailing rule is that courts should avoid issuing a writ of
preliminary injunction which would in effect dispose of the main
case without trial. x x x There would in effect be a prejudgment of
the main case and a reversal of the rule on the burden of proof
since it would assume the proposition which the petitioners are
inceptively bound to prove. 36
The RTC erred and/or gravely abused its discretion when it granted
AMALI's application for preliminary mandatory injunction because, in so doing,
it prematurely decided disputed facts and disposed of the merits of the case
without the benefit of a full-blown trial wherein testimonial and documentary
evidence could be fully and exhaustively presented, heard and refuted by the
parties. 37 As such, the RTC Order dated July 24, 1997 insofar as it granted a
temporary easement of right of way over Fordham Street in favor of AMALI is
concerned is declared void and of no force and effect. 38 The RTC lacked
jurisdiction to declare a temporary easement of right of way arising from
Article 656 of the Civil Code without a full-blown trial.
Article 656 requires proof of indispensability and receipt of payment of
the proper indemnity for the damage caused by the owner of the dominant
estate before the owner of the servient estate can be compelled to grant a
temporary easement of right of way. It appears from the rollo that AMALI
presented no witnesses to establish these prerequisites. Being preconditions,
they are akin to suspensive conditions that must be fulfilled before the
obligation on the part of WWRAI to allow the easements can arise. Until the
preconditions are met, AMALI has no legal basis to use a portion of Fordham
Street as an access road and staging area of its AMA Tower project. To allow
AMALI to do so would be in contravention of the legal provisions on the
establishment and grant of the legal easement of right of way under the Civil
Code.
The issue of forum shopping becomes irrelevant in the light of the Court's
ruling that the CA erred in finding that the RTC acted with grave abuse of
discretion in issuing its Orders dated October 28, 2010 and February 23, 2011.
This issue is also immaterial in the determination of AMALI's temporary use of
a portion of Fordham Street as an access road and staging area of its AMA
Tower project. Even on the assumption that the Court finds WWRAI guilty of
forum shopping, the burden of AMALI to establish the preconditions discussed
above so as to entitle it to a temporary legal easement subsists.
Furthermore, the Court finds no compelling need to resolve the issue of
prejudgment of the main case or the original petition in view of the granting of
the present petition and the declaration as void the granting of a writ of
preliminary mandatory injunction on the temporary easement of right of way
under RTC Order dated July 24, 1997.
To stress, the temporary easement of right of way under Article 656 of
the Civil Code, similar to the permanent easement of right of way pursuant to
its Articles 649 and 650, can only be granted after proof of compliance with
the prerequisites set forth in the articles duly adduced during a full-blown trial.
Lastly, the status quo prevailing before the filing of the WWRAI petition
before the CA is not the status quo ante that must be preserved. The object of
a writ of preliminary injunction is to preserve the status quo, which is the last
peaceable uncontested status that preceded the pending controversy. 39 Thus,
the proper understanding of the status quo ante should refer to the situation
prior to AMALI's unauthorized use of a portion of Fordham Street as an access
road and staging area of its AMA Tower project.
WHEREFORE, premises considered, the petition for review
on certiorari in G.R. No. 202342 is hereby GRANTED, and the Court of
Appeals' Decision dated June 14, 2012 in CA-G.R. SP No. 118994 is
hereby REVERSED and SET ASIDE. The October 28, 2010 and February 23,
2011 Orders of the Regional Trial Court of Pasig City assigned in San Juan
(Metropolitan Manila), Branch 264 in Civil Case No. 65668 are REINSTATED,
and its Order dated July 24, 1997 insofar as it granted a temporary easement
of right of way over Fordham Street in favor of petitioner AMA Land, Inc. is
concerned is declared VOID and of NO EFFECT. The said Regional Trial Court
is DIRECTED to proceed with the trial of the case with dispatch.
SO ORDERED.
|||  (AMA Land, Inc. v. Wack Wack Residents' Association, Inc., G.R. No.
202342 , [July 19, 2017], 813 PHIL 932-949)
 [G.R. No. 225929. January 24, 2018.]

JOSE V. GAMBITO, petitioner, vs. ADRIAN OSCAR Z.

BACENA, respondent.

RESOLUTION

REYES, JR.,  J p:

This is a Petition for Review on Certiorari 1 under Rule 45 of the Rules of

Court, assailing the Decision 2 dated April 8, 2016 and Resolution 3 dated July
19, 2016 of the Court of Appeals (CA) in CA-G.R. SP No. 140980.

The Antecedents

The records show that before the Municipal Trial Court (MTC) of
Bayombong, Nueva Vizcaya, Jose V. Gambito (Gambito) filed a complaint for
quieting of title, declaration of nullity of title, specific performance and
damages over a parcel of land located in La Torre South, Bayombong, Nueva
Vizcaya, against Adrian Oscar Z. Bacena (Bacena), one of the defendants
therein. SDAaTC
Gambito alleged before the MTC that he is the true and registered owner
of a certain parcel of land located in La Torre South, Bayombong, Nueva
Vizcaya containing an area of 8,601 square meters, more or less, under
Transfer Certificate of Title (TCT) No. T-149954. The said parcel of land was
acquired by him through a Deed of Donation executed on July 9, 2008 by his
mother, Luz V. Gambito (Luz), who held said property under TCT No. 92232.
Her mother, Luz, acquired the same property from Dominga Pascual (Pascual)
and her co-owner, Rosalina Covita (Covita), through a Deed of Sale dated
December 16, 1994 which finds its origin from Original Certificate of Title
(OCT) No. R-578 issued on March 30, 1916. 4
Gambito claimed that through his efforts, he discovered that Bacena
surreptitiously secured before the Community Environment and Natural
Resources Office (CENRO), a patent title, Katibayan ng Orihinal na Titulo
Bilang P-21362 covering 4,259 sq m, more or less, which was a part and
portion of the same lot registered in Gambito's name under TCT No. T-149954.
Gambito further alleged that he is aware his parents filed a protest before the
CENRO, Bayombong, Nueva Vizcaya on August 31, 2007 against Bacena but
the same was later withdrawn by his parents upon realization that said office is
not the proper forum and that the order of dismissal was issued on April 8,
2009 and thus there is a need to clear up the cloud cast by the title of Bacena
over his ancient title.
 Bacena, in his defense, alleged that the folder of Petronila Castriciones
(Castriciones), survey claimant of Lot No. 1331, Cad 45, La Torre, Bayombong,
Nueva Vizcaya, is supported by the records of the CENRO, Bayombong, Nueva
Vizcaya. The title OCT No. P-21362 was regularly issued and was based on
authentic documents. 5 On the other hand, the title of Gambito's predecessor-
in-interest is evidently null and void ab initio because it was derived from a
Deed of Sale, dated December 16, 1994 which supposedly signed by vendor
Pascual although she was already dead, having died on August 25, 1988 or
after a period of seven years. Moreover, the signatory-vendor, Covita denied
that she ever signed the Deed of Sale which is supposedly that of her husband,
Mariano G. Mateo, supposedly signifying his conformity to the sale, is likewise
a fake signature of her husband because he was already dead at the time of
the execution of the document having died on June 14, 1980. 6
By way of counterclaim, Bacena prayed, among others, that Gambito's
Title (TCT No. T-149954) and that of his predecessor-in-interest, Luz, TCT No.
T-92232 and the Deed of Sale, basis of TCT No. T-92232 as null and void; and
to declare that title of Bacena, OCT No. P-21262, valid and effective and be
cleared/quieted of any cloud thereto. 7

Ruling of the MTC

After the parties' presentation of evidence, the MTC rendered a

Decision 8 dated March 11, 2014 in favor of Gambito. The MTC considered the
defense's position as a collateral attack on Gambito's title. 9 The MTC ruled
that the issue on the validity of title, whether or not fraudulently issued, can
only be raised in action expressly instituted for that purpose.
Moreover, the MTC ruled that in successive registrations, where more
than one certificate is issued in respect of a particular estate or interest in
land, the person claiming under the prior certificate is entitled to the estate or
interest, and here, the origin of Gambito's title was issued in 1916 and while
Bacena's title was only issued on February 25, 1999. 10

Ruling of the Regional Trial Court

Aggrieved, Bacena appealed before the Regional Trial Court (RTC) of

Bayombong, Nueva Vizcaya, Branch 27, which granted the appeal in a
Decision 11 rendered on November 21, 2014.
In its ruling, the RTC laid that in an action for quieting of title, it is an
indispensable requisite that the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the action, which is
however wanting at the time Gambito filed his verified Complaint. 12
The RTC also noted that Gambito's title was derived through a certificate
of title which was based on a falsified Deed of Sale which was made to appear
to have been signed by the parties who were long dead at the time of its
execution. 13
Moreover, the RTC found that Bacena's title has become indefeasible and
incontrovertible as it has been possessed by Bacena and his predecessors-in-
interest and never been occupied by Gambito and his mother.
Contrary to the MTC's ruling, the RTC held that Bacena's counterclaim
partakes of a direct attack on Gambito's title.
The RTC likewise found that the title in the name of Bacena was regularly
issued as he and his predecessors have been in undisturbed possession,
occupation and utilization of Lot No. 1331 as early as October 1, 1913 when it
was cadastrally surveyed and even before it; has always been declared for
taxation purposes with taxes thereof duly paid yearly; and that as private
property, it is not within the jurisdiction of the Bureau of Lands to grant it to
public land application. 14
The RTC awarded damages in favor of Bacena.

Ruling of the CA

On appeal, the CA, in its Decision 15 dated April 8, 2016, affirmed the

RTC's Decision dated November 21, 2014. The CA agreed with the findings and
ruling of the RTC.
Undaunted, Gambito filed a Motion for Reconsideration of the said
decision of the CA which was however denied in its Resolution 16 dated July
19, 2016.
Hence, this petition for review on certiorari.
In support of the petition, Gambito assails the decision of the CA claiming
that it is not in consonance with law and jurisprudence. The underlying issues
presented by Gambito for resolution are as follows, viz.:
1. The decision did not properly address the important issue on laches;
2. The decision misapplied the concept of transferee in good faith; and
3. The decision misappreciated the objection on the award for damages.

Ruling of the Court

The petition is denied.

The decision of the CA is in consonance with law and jurisprudence
On the issue of laches, the decision of the CA properly addressed the
important issue thereon and the CA correctly held that it should be Bacena and
not the Gambito who should invoke laches. acEHCD
Laches is defined as the failure or neglect for an unreasonable and
unexplained length of time to do that which, by exercising due diligence, could
or should have been done earlier; it is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. 17
It should be noted that the CA found that Bacena has no reason to doubt
his own ownership and possession of Lot No. 1331, as established in this case
obtained through the right of Castriciones. Moreover, it was Gambito who
disturbed that open, continuous, peaceful, adverse and notorious possession of
Bacena and his predecessors-in-interest. Thus, Bacena is not expected to
assert his right for having possession and title to the land in dispute and the
CA is correct when it found that Bacena has no reason to doubt his own
ownership and possession of Lot No. 1331. Hence, the Court is in accord with
the CA when it held that laches cannot apply and it should be Bacena and not
Gambito who should invoke laches.
Private ownership of land — as when there is prima facie proof of
ownership like a duly registered possessory information or a clear showing of
open continuous, exclusive, and notorious possession, by present or previous
occupants — is not affected by the issuance of a free patent over the same
land. 18
While Gambito assails both the RTC and CA on the principle of laches on
the uninterrupted existence of OCT No. R-578 of 98 years, it should be noted
that the CA found, it was certain that when the cadastral survey was
conducted in 1913 to 1914, there were already two survey claimants, one of
which is Castriciones. Thus, OCT No. R-578 should not have included Lot No.
1331, as there was already a supervening event that transpired from the time
it was applied for until the title was issued. Moreover, here it established that
Castriciones is the previous occupant with open continuous, exclusive, and
notorious possession as above contemplated. Hence, OCT No. R-578 issued as
a free patent, by application, cannot affect Castriciones' previous occupation
with open continuous, exclusive, and notorious possession.
On the issue of transferee in good faith, the decision of the CA did not
misapply the concept of transferee in good faith.
While Gambito argues that the CA misapplied the concept of transferee in
good faith for the reason that bad faith has died when Pascual, inherited the
property from Venancio Pascual, We disagree.
Under Section 53 of Presidential Decree No. 1529, known as the Property
Registration Decree, in all cases of registration procured by fraud, the owner
may pursue all his legal and equitable remedies against the parties to such
fraud without prejudice, however, to the rights of any innocent holder for value
of a certificate of title. After the entry of the decree of registration on the
original petition or application, any subsequent registration procured by the
presentation of a forged duplicate certificate of title, or a forged deed or other
instrument, shall be null and void.
In this case, Gambito is not an innocent holder for value for the reason
that he is a donee acquiring the property gratuitously by a Deed of Donation
and not by purchase. Hence, the concept of an innocent purchaser for value
cannot apply to him.
Moreover, in Ingusan v. Heirs of Aureliano I. Reyes, 19 the Court
happened to pass upon falsified documents involving properties, thus:
There is no doubt that the deed of donation of titled property,
cancellation of affidavit of loss and agreement of subdivision with
sale, being falsified documents, were null and void. It follows that
TCT Nos. NT-241155, NT-241156, NT-239747 and NT-239748
which were issued by virtue of these spurious documents were
likewise null and void. 20
In this case, it is an established fact that the fraud referred to by the CA
is the fraud on the transfer of the property from Pascual and Covita to Luz on
the basis of fake signatures considering that the vendor signatories therein are
all dead. As such, by applicability of the foregoing jurisprudence, the deed is
considered a forged deed and hence null and void. Thus, Luz's title is null and
void which transferred nothing by Deed of Donation to her son Gambito, the
petitioner herein. Hence, the CA did not misapply the concept of transferee in
good faith by considering the fraud in the transfer of the property to Luz
consequently ending up with Gambito.
On the issue that the CA decision misappreciated the objection on the
award for damages, Gambito's argument that he cannot be in bad faith
deserves scant consideration. SDHTEC
 Good faith is ordinarily used to describe that state of mind denoting
"honesty of intention, and freedom from knowledge of circumstances which
ought to put the holder upon inquiry; 21 an honest intention to abstain from
taking any unconscientious advantage of another, even through technicalities
of law, together with absence of all information, notice, or benefit or belief of
facts which render the transaction unconscientious." 22
The CA in its resolve as to the award of damages referred to the RTC's
basis of the awards. As can be gleaned from the CA's Resolution dated July 19,
2016, viz.:
The trial court discussed the basis of the awards, yet
petitioner, aside from his self-serving claim that there was no bad
faith, failed to discuss the lack of sufficient basis for the grant of
awards. 23
In this connection, the RTC in its Decision 24 dated November 21, 2014,
laid down its basis in concluding the award for damages finding absence of
good faith on the part of Gambito by taking a second hard look into the facts
and circumstances obtaining on the manner by which the appellee, who was
the notary public who notarized the Last Will and Testament and who as
expected fully knew the rights of the appellant over the lot in
question. 25 Thus, it is evident that Gambito's state of mind had no honesty of
intention and had no freedom from knowledge of circumstances which ought to
put him upon inquiry. Hence, Gambito's claim that the CA decision
misappreciated the objection on the award for damages is incorrect.
In sum, the Court finds that the decision of the CA is in consonance with
law and jurisprudence.
WHEREFORE, in light of the foregoing, the petition is hereby DENIED.
The Decision dated April 8, 2016 issued by the Court of Appeals in CA-G.R. SP
No. 140980 is AFFIRMED. SO ORDERED. |||  (Gambito v. Bacena, G.R. No.
225929 (Resolution), [January 24, 2018])
 [G.R. No. 197743. March 12, 2018.]

HEIRS OF JOSE MARIANO and HELEN S. MARIANO,

represented by DANILO DAVID S. MARIANO, MARY THERESE
IRENE S. MARIANO, MA. CATALINA SOPHIA S. MARIANO, JOSE
MARIO S. MARIANO, MA. LENOR S. MARIANO, MACARIO S.
MARIANO and HEIRS OF ERLINDA MARIANO-VILLANUEVA,
represented in this act by IRENE LOURDES M. VILLANUEVA
through her ATTORNEY-IN-FACT EDITHA S. SANTUYO and
BENJAMIN B. SANTUYO, petitioners, vs. CITY OF
NAGA, respondent.

DECISION

TIJAM, J  p:

This is a Petition for Review on Certiorari, filed under Rule 45 of the Rules

of Court, assailing the July 20, 2011 Amended Decision 1 rendered by the
Court of Appeals (CA) in CA-G.R. SP No. 90547 which reconsidered its March
7, 2011 Decision, 2 annulling the June 20, 2005 Decision 3 of the Regional
Trial Court (RTC), Branch 26 of Naga City in Civil Case No. RTC 2005-0030,
and reinstating the February 14, 2005 Decision 4 of the Municipal Trial Court
(MTC), Branch 1 of Naga City in Civil Case No. 12334 dismissing the ejectment
case instituted by petitioners.

The Facts

As culled by the CA from the records, the facts of the case are as follows:
On July 3, 1954, Eusebio M. Lopez, Sr., Soledad L. Dolor, Jose A.
Gimenez and Eusebio Lopez, Jr. (Lopez Jr.), as the President, Secretary,
Treasurer and General Manager of the City Heights Subdivision (Subdivision),
respectively, wrote to the mayor of the City of Naga (City), offering to
construct the Naga City Hall within the premises of the Subdivision. Their letter
indicated that the City Hall would be built on an area of not less than two
hectares within the Subdivision, which would be designated as the open space
reserved for a public purpose. The letter, which also indicated the terms of the
construction contract, provided that the City would be free to accept another
party's offer to construct the City Hall if it found the same to be more
favorable. 5
 The City's Municipal Board subsequently passed Resolution No. 75, dated
July 12, 1954, asking the Subdivision for a bigger area on which the City Hall
would stand. Consequently, on July 30, 1954, the Subdivision amended its
offer and agreed to donate five hectares to the City. The area is a portion of
the land registered in the names of Macario Mariano (Macario) and Jose A.
Gimenez (Gimenez) under Transfer Certificate of Title (TCT) No. 671 of the
Registry of Deeds for Naga City, measuring a total of 22.9301 hectares. Along
with its amended offer to construct the City Hall, the Subdivision specified the
terms of its proposal to finance the construction. 6
The amended offer was signed by Macario and Gimenez to indicate their
"(c)onforme," and by their respective spouses, Irene P. Mariano (Irene) and
Rose Fitzgerald De Gimenez (through one Josie A. Gimenez), to indicate their
marital consent. 7
On August 11, 1954, the Municipal Board adopted Resolution No. 89
accepting the Subdivision's offer of donation and its proposed contract. The
Resolution also authorized the City Mayor to execute the deed of donation on
the City's behalf. 8 CAIHTE
The parties submitted divergent accounts on what happened after
Resolution No. 89 was passed.
According to the City, the City Mayor of Naga, Monico Imperial (Mayor
Imperial), and the registered landowners, Macario and Gimenez, executed a
Deed of Donation 9 on August 16, 1954, whereby the latter donated five
hectares of land (subject property), two hectares of which to be used as the
City Hall site, another two hectares for the public plaza, and the remaining
hectare for the public market. By virtue of said Deed, the City entered the
property and began construction of the government center. It also declared the
five-hectare property in its name for tax purposes. 10 Thereafter, the Land
Transportation Office (LTO), the National Bureau of Investigation (NBI), the
Department of Labor and Employment (DOLE), the Philippine Postal
Corporation (PPC), the Fire Department and other government agencies and
instrumentalities entered the same property and built their offices thereon. 11
In contrast, petitioners averred that the landowners' plan to donate five
hectares to the City did not materialize as the contract to build the City Hall
was not awarded to the Subdivision. As early as August 23, 1954, Lopez Jr.,
the Subdivision's General Manager, supposedly wrote to Macario telling him to
suspend the signing of the deed of donation as the Municipal Board could not
agree on the specific site where the City Hall would be built. Petitioners alleged
that the construction contract was eventually awarded by the Bureau of Public
Works (BPW) to a local contractor, Francisco O. Sabaria (Sabaria), who won in
a public bidding. Mayor Imperial opposed the award, arguing that he and not
the BPW had the authority to initiate the public bidding for the project. The
BPW, however, asserted its authority to bid out and award the contract on the
ground that national funds would be used for the project. Mayor Imperial and
Sabaria litigated the issue, with the former losing before the trial court and
subsequently withdrawing his appeal before the CA. Afterwards, the Municipal
Board adopted Resolution No. 11 dated January 20, 1959 authorizing the City
Mayor to enter into a contract with Sabaria for the construction of the City
Hall. 12
Petitioners claimed that on February 5, 1959, Macario and officers of the
Subdivision met with Mayor Imperial to demand the return of the five-hectare
lot as the condition for the donation was not complied with. Mayor Imperial
purportedly assured them that the City would buy the property from them. The
purchase, however, did not materialize. Petitioners alleged that ten years later,
or on May 14, 1968, Macario wrote to Lopez Jr., instructing him to make a
follow-up on the City's payment for the subject lot. On December 2, 1971,
Macario died without receiving payment from the City. 13
In 1976, a certain Tirso Mariano filed an action for partition of Macario's
estate. The action was opposed by Macario's widow, Irene, and their adopted
children, Jose (Jose) and Erlinda (Erlinda) Mariano. As an offshoot of this
action, a petition to annul Jose and Erlinda's adoption was instituted. 14
Irene died in 1988. Jose died the following year which was also when his
and Erlinda's adoption was declared valid and legal by the appellate court. In
1994, Irene's marriage to one Rolando Reluccio (Reluccio) was declared
bigamous and void ab initio. And after a protracted litigation, Jose, then
represented by his heirs, and Erlinda were declared as Irene's heirs to the
exclusion of Reluccio who was also declared to be without right to represent
Irene in Macario's estate. 15
On March 11, 1997, the probate court issued letters of administration to
one of the petitioners herein, Danilo David S. Mariano (Danilo), for the
administration of Irene's estate. In September 2003, Danilo demanded upon
then City Mayor of Naga, Jesse M. Robredo, to vacate and return the subject
property. When the City did not comply, petitioners, as heirs of Jose and
Erlinda, filed a Complaint 16 for unlawful detainer against the City, docketed
as Civil Case No. 12334. 17

The Unlawful Detainer Case

In their Complaint, filed on February 12, 2004, 18 petitioners asked the

MTC to order the City and all agencies, instrumentalities or offices claiming
rights under it, including the LTO, NBI, DOLE, PPC and the Fire Department, to
vacate the subject property, shown in the Sketch Plan as Blocks 25 and 26
(LRC) Psd-9674, and to return possession thereof to them. In addition to
attorney's fees, they asked the City to pay them a monthly rental of P2.5
million from the date it received the demand to vacate until it surrendered
possession, as reasonable compensation for the use of the property. 19
Arguing that the issue involved is one of ownership, the City moved to
dismiss the complaint for lack of jurisdiction. 20 After the MTC denied the
motion on March 22, 2004, 21 the City filed its Answer. 22 The parties
subsequently submitted their respective Position Papers 23 and evidence. 24
Petitioners averred that there was no donation of the subject property to
the City as the obligation to donate on the part of Macario and Gimenez,
conditioned on the Subdivision undertaking the construction of the City Hall
therein, was abrogated when the City eventually awarded the construction
contract to Sabaria. Petitioners further alleged that Macario thereafter
demanded the return of the property but was assured by Mayor Imperial that
the City would buy the same. The purchase, however, never materialized
despite Macario's supposed reminder to Mayor Imperial of his assurance.
Petitioners, thus, argued that the City's possession of the subject property was
by mere tolerance which ceased when they required its return. 25
The City countered that the donation actually took place, as evidenced by
a Deed of Donation dated August 16, 1954, making the City the owner and
lawful possessor of the subject property. This was supposedly why the subject
property had long been declared in the City's name for tax purposes. Granting
there was no donation, the City stressed that ownership of the premises
automatically vested in it when they were designated as open spaces of the
subdivision project, donation thereof being a mere formality. The City also
argued that since the property was already occupied by several government
offices for about 50 years, recovery thereof was no longer feasible and the
landowners may simply demand just compensation from the City. The City
further contended that the complaint was dismissible on the grounds of laches
and prescription. In any case, the City averred that it could not be ejected
from the premises as it possessed the rights of a builder in good faith. 26
Petitioners in turn denied that laches had set in because Macario
supposedly made a demand for the City to return the property, and
subsequently, to abide by Mayor Imperial's commitment to purchase the same.
Furthermore, as heirs of Macario and Irene, they themselves sought to recover
the subject property after learning of their rights thereto through Danilo who
collated Irene's properties following his appointment as administrator of her
estate. 27
Petitioners also argued that title to the property, which remained
registered in the names of Macario and Gimenez, was indefeasible and could
not be lost by prescription or be defeated by tax declarations. They further
asserted that the requirement of open space in the subdivision for public use
was already satisfied with the landowners' donation of road lots, measuring
120,280 square meters, to the City as annotated on TCT No. 671. They posited
that Presidential Decree (PD) No. 957, 28 enacted in 1976, as amended by PD
No. 1216, 29 which defined "open space," should not be applied because it
was not yet in effect when the subdivision plan was approved in 1962. 30
Petitioners contended that the City was a builder in bad faith because it
continued to construct the City Hall and allowed other government agencies to
build their offices on the subject property, knowing that the donation had been
aborted when the condition therefor was not fulfilled and that its avowed
purchase of the property was not forthcoming. 31

The MTC's Ruling

In its February 15, 2005 Decision, the MTC gave weight to the Deed of
Donation. 32 Nonetheless, it dismissed the complaint on the ground of lack of
jurisdiction. It reasoned that the City's defense, which involved a claim of
ownership, removed the issue from the case of unlawful detainer. 33

The RTC's Ruling

On the City's appeal, the RTC set aside the MTC's dismissal. The
dispositive portion of the RTC's June 20, 2005 Decision reads as follows:
WHEREFORE, premises considered [petitioners] having proved
and convinced this Court by preponderance of evidence that the
lower court committed a serious and reversible error in rendering
the herein assailed decision, accordingly, the DECISION dated
February 14, 2005 of the Court a quo is hereby REVERSED and SET
ASIDE. Consequently, decision is hereby rendered in favor of
[petitioners] and against [respondent] ORDERING the latter of the
following: DETACa
(1) For the [respondent] City Government of Naga, including
all other government instrumentalities, agencies and offices
claiming right of possession through and under it which are but not
limited to Land Transportation Office, National Bureau of
Investigation, Department of Labor and Employment, Philippine
Postal Corporation, Fire Department and all other offices and
buildings which are all claiming rights under [respondent] to
 immediately vacate the subject properties, Blocks 25 and 26 (LRC)
Psd-9674 forming part of TCT No. 671 in the name of Macario A.
Mariano and Jose A. Gimenez, and to peacefully surrender and
deliver its physical possession to the [petitioners], including all the
improvements and structures erected thereon which were built in
bad faith as they are now forfeited in favor of plaintiffs-appellants;
(2) For the [respondent] to pay [petitioners] the amount of
P2,500,000.00 per month by way of reasonable compensation for
the use and occupancy of the property in question reckoned from
November 30, 2003 until such time that the [respondent] shall have
actually vacated the subject property;
(3) For the [respondent] to pay [petitioners] Attorney's fees in
the amount of P587,159.60; and
(4) For the [respondent] to pay the cost of the suit.
SO ORDERED. 34
The RTC held that the MTC could have resolved the issue of ownership if
only to resolve the issue of possession. It ruled against the existence of the
Deed of Donation, purportedly acknowledged before a notary public for Manila,
finding that the award of the construction contract to Sabaria released Macario
and Gimenez from the obligation to execute said deed. Furthermore, the fact
that the subject property remained registered in Macario and Gimenez's names
and no annotation of the purported donation was ever inscribed on the title
proved that the City recognized that its possession was by mere tolerance of
the landowners. This, finding, said the RTC, was bolstered by the
Certification 35 issued on August 27, 2003 by the Records Management
Archive Office of the National Archives that it had no record of such Deed, and
a similar Certification 36 from the Office of the Clerk of Court of the Manila
RTC as repository of notarial reports of notaries public for Manila. The RTC also
noted that the purported Deed of Donation was unsigned by the donors and
indicated merely the letters "SGD" opposite their names. 37
The RTC explained that since the subject land was titled under the
Torrens system in the name of Macario and Gimenez, the tax declaration in the
City's name could not prevail, and the property could not be subject of
acquisitive prescription. It also held that petitioners were not guilty of laches,
noting the several cases they had to file to establish their right to inherit from,
and to recover or preserve the estate of, Macario and Irene, as well as Danilo's
discovery of the subject property as part of the latter's estate following the
issuance to him of letters of administration over Irene's estate in 1997. Finally,
the RTC agreed with petitioners that the road lots donated to the City in 1963
satisfied the requirement of open space in the subdivision at that time, and
that the City was a builder in bad faith. 38
The City moved for the Presiding Judge's inhibition on the ground of bias.
Subsequently, it also filed a motion for reconsideration of the June 20, 2005
Decision with a motion for new trial based on newly discovered
evidence 39 consisting of additional documents purportedly showing that the
subject property was already donated to the City. 40 On July 15, 2005, the
RTC issued an Order denying said motions. 41

The CA's March 7, 2011 Decision

Partly granting the City's appeal, the CA inter alia directed the City to pay
only half of the monthly rental, which it reduced to P500,000, because the
subject property was co-owned by Macario and Gimenez. The dispositive
portion of the CA's Decision reads:
IN VIEW OF ALL THE FOREGOING, the instant petition for
review is PARTIALLY GRANTED.
The assailed Decision dated June 20, 2005 rendered by the
Regional Trial Court (RTC) of Naga City (Branch 26), in Civil Case
No. RTC 2005-0030 (For: Ejectment) is hereby MODIFIED in that:
(1) The City of Naga is hereby ORDERED to pay to the
respondents as heirs of Don Macario Mariano half of the adjudged
monthly rental for the use and enjoyment of the questioned
property, or in the amount of Two Hundred Fifty Thousand Pesos
(Php250,000.00), for the period November 3, 2003 until the City of
Naga finally vacates that portion it has been occupying, or until
such time when the City expropriates the same private property;
(2) The portion of the assailed Decision where all the other
government instrumentalities and agencies, including but not
limited to the Land Transportation Office, National Bureau of
Investigation, Department of Labor and Employment, Philippine
Postal Corporation, Fire Department, Municipal Trial Court, Regional
Trial Court, which office buildings are standing on the lot in
question, are ordered to immediately vacate therefrom as well as to
deliver the physical possession of the improvements and structures
they have introduced thereat to the Heirs of Don Macario Mariano,
is DELETED because these other government instrumentalities and
agencies are not parties to the case in the court below; and
(3) The award of attorney's fees in favor of the Heirs of Don
Macario Mariano is reduced to Two Hundred Thousand Pesos
(Php200,000.00) on equitable grounds.
All other aspects of the assailed Decision dated June 20, 2005
and Order dated July 15, 2005 are hereby affirmed.
SO ORDERED. 42
In reaching this decision, the CA ratiocinated that:
[T]here could be no donation of the subject five (5) hectares of land
by the landowners, DON MACARIO and Jose Gimenez (or GIMENEZ)
to the City of Naga because the donee failed to present the original
deed of donation before the trial court, and did not give a
satisfactory explanation of the loss of the same. As against the
Letter dated May 14, 1968 written by DON MACARIO instructing
Eusebio Lopez, Sr., then City Heights Subdivision President, to do a
follow-up of the City's proposal to buy the five (5) hectare-lot, We
held the latter document to be a conclusive proof that the donation
that DON MACARIO and the City of Naga intended was not
consummated. 43 aDSIHc

The CA's July 20, 2011 Amended Decision

Both parties moved for reconsideration of the CA's March 7, 2011

Decision. 44 After a re-examination of the case records and the evidence
adduced by the parties, the CA, on July 20, 2011, rendered an Amended
Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the Motion for
Reconsideration filed by the City of Naga is GRANTED.
 Our Decision promulgated on March 7, 2011
is RECONSIDERED. Accordingly, the Decision dated June 20, 2005
of the Regional Trial Court (RTC) of Naga City (Branch 26), in Civil
Case No. RTC 2005-0030 (For: Ejectment), is ANNULLED and SET
ASIDE, and the Decision dated February 14, 2005 rendered by the
Municipal Trial Court (MTC) of Naga City (Branch 1), in Civil Case
No. 12334, is hereby REINSTATED without prejudice to the filing
by either party of an action regarding the ownership of the property
involved.
On the other hand, the Motion for Reconsideration filed by the
Heirs of Don Macario Mariano of Our Decision dated March 7, 2011
is DENIED.
SO ORDERED. 45
In so ruling, the CA held that pursuant to the best evidence rule under
Section 3, Rule 130 of the Rules of Court, the photocopy of the letter dated
May 14, 1968 was inadmissible and without probative value in the absence of a
clear showing that the original writing was lost or destroyed. As an exception
to the best evidence rule, the CA excused the City's failure to present the
original Deed of Donation on the basis of the June 11, 2004 Certification issued
by the Office of the Clerk of Court of the RTC-Manila that the Deed could not
be found in its records as the Notarial Reports of Atty. Vicente M. Magpoc,
before whom the instrument was acknowledged, for the period January 12,
1953 to December 31, 1954, could not be located and must have been
destroyed by water spillage during the fire that razed their office on November
18, 1981. According to the CA, secondary evidence of the Deed could be
admitted because it had been satisfactorily shown, through the Certification,
that the Deed was lost due to force majeure, thus, without bad faith on the
part of the offeror.
The CA further held that "the following secondary documents on record
sufficiently confirmed the existence, execution and contents of the subject
deed of donation," to wit:
(a) Letter dated July 3, 1954 of the President, Secretary,
Treasurer and General Manager of the City Heights Subdivision (in
the persons of Eusebio M. Lopez, Sr., Soledad L. Dolor, Jose A.
Gimenez and Eusebio Lopez, Jr.) to the mayor of Naga expressing
their offer to construct the Naga City Hall within the premises of not
less than two (2) hectares of the Subdivision (Exhibit "1");
(b) Resolution No. 75 dated July 12, 1954 issued by the
Municipal Board of Naga (then a municipality) requesting for a
bigger area of land where the City Hall would stand, from the
Subdivision (Exhibit "2");
(c) Letter dated July 30, 1954 of the Subdivision to the City
amending its original offer and agreeing to donate a portion of five
(5) hectares. Also, in this Letter, the Subdivision elaborated on its
offer to finance the construction of the same building and specified
the terms of such financing contract (Exhibit "3");
(d) Resolution No. 89 dated August 11, 1954 where the then
Municipal Board resolved to accept the Subdivision's offer of
donation and of the financing contract to construct the government
center, and at the same time, to authorize the Mayor to enter into a
final deed of donation in behalf of the then municipality (Exhibit
"4");
 (e) Letter dated November 26, 1955 of the then City Mayor of
Naga, Hon. Monico Imperial, to the Naga City Planning Board
indicating the fact of donation of the same parcel of land by the
Subdivision to the City (Exhibit "30");
(f) Letter dated March 6, 1968 of DON MACARIO referring to
the open spaces of the Subdivision having been donated to the City
of Naga (Exhibit "18");
(g) Letter dated September 6, 1970 of Hon. Virginia F. Perez,
Vice-Mayor and Presiding Officer, indicating the existence of a Deed
of Donation and the fact of Donation (Exhibit "6"). 46
The CA thus concluded that the existence and due execution of the Deed
of Donation had been duly established, warranting the dismissal of the
ejectment case. The CA also found that petitioners' claim was barred by
laches, noting that the City had been in open, public and adverse possession of
the subject property for 49 years at the time the ejectment case was filed.
The appellate court, however, emphasized that the case being one for
unlawful detainer, its judgment was conclusive only as to possession, and its
disquisition on the claim of ownership was merely provisional and without
prejudice to a separate and independent action respecting title to the land.
Dissatisfied with the CA's Amended Decision, petitioners filed the instant
petition for review.
Petitioners pray for the reinstatement of the RTC's Decision, asserting
that in admitting secondary evidence of the Deed of Donation, the CA
misapplied Section 5, Rule 130 and Section 19, Rule 132 of the Rules, Article
749 of the Civil Code, and Sections 245, 246 and 247 of the Notarial Law.
Petitioners fault the CA for allegedly disregarding their evidence which received
no objection from the City. Finally, petitioners impugn the CA's finding that
they were guilty of laches, insisting that the City's possession was by mere
tolerance. 47 ETHIDa

The Court's Ruling

Petitions for review under Rule 45 should cover only questions of

law 48 as this Court is not a trier of facts. 49 However, the incongruent factual
conclusions of the MTC and the CA on the one hand, and the RTC on the other,
compel us to revisit the factual circumstances of the case for the proper
dispensation of justice. 50
The sole issue for resolution in an unlawful detainer case is physical or
material possession of the property involved, independent of any claim of
ownership by any of the parties — possession de facto and not possession de
jure. 51 When the defendant, however, raises the defense of ownership in his
pleadings and the question of possession cannot be resolved without deciding
the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession, 52 or more particularly, to determine who
between the parties has the better right to possess the
property. 53 Nonetheless, the adjudication is merely provisional and would not
bar or prejudice an action between the same parties involving title to the
property. 54
In this case, the City, as the defendant in the unlawful detainer case,
asserted ownership over the subject property by virtue of an alleged donation
made in 1954 by the landowners in its favor. In support of this claim, the City
proffered a copy of a Deed of Donation dated August 16, 1954.
Purported donation lacked
the formalities required
for validity

Generally, contracts are obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present.
However, when the law requires that a contract be in some form to be valid,
such requirement is absolute and indispensable; its non-observance renders
the contract void and of no effect. 55 One such law is Article 749 of the Civil
Code of the Philippines which requires that:
Art. 749. In order that the donation of an immovable
may be valid, it must be made in a public document,
specifying therein the property donated and the value of the
charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or
in a separate public document, but it shall not take effect unless it is
done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor
shall be notified thereof in an authentic form, and this step shall be
noted in both instruments. (Emphasis ours)
Thus, donation of real property, which is a solemn contract, is void
without the formalities specified in the foregoing provision. 56
Article 749 of the Civil Code requires that donation of real property must
be made in a public instrument to be valid. In Department of Education,
Culture and Sports (DECS) v. Del Rosario, 57 We stated:
A deed of donation acknowledged before a notary public
is a public document. The notary public shall certify that he
knows the person acknowledging the instrument and that
such person is the same person who executed the
instrument, acknowledging that the instrument is his free
act and deed. The acceptance may be made in the same deed of
donation or in a separate instrument. An acceptance made in a
separate instrument must also be in a public document. If the
acceptance is in a separate public instrument, the donor shall be
notified in writing of such fact. Both instruments must state the fact
of such notification. 58 (Emphasis ours)
The purported Deed of Donation submitted by the City cannot be
considered a public document. While it contains an Acknowledgment before a
notary public, the same is manifestly defective as it was made neither by the
alleged donors (Macario and Gimenez) and their respective spouses, or by the
donee (the City, through Mayor Imperial), but only by Eusebio M. Lopez,
Faustino Dolor, Soledad Lirio Dolor and Lopez, Jr., as the Subdivision's
President, Vice President, Secretary and General Manager, respectively. The
Acknowledgment thus reads: TIADCc
REPUBLIC OF THE PHILIPPINES)
IN THE CITY OF MANILA ) s.s.
BEFORE ME, this 16th day of August, 1954, in the City of
Manila, Philippines, personally appeared EUSEBIO M. LOPEZ, with
Res. Cert. No. A-0232064, issued at Manila, on Feb. 24,
1954; FAUSTINO DOLOR, with Res. Cert. No. A-0295133, issued
at Manila on Feb. 7, 1954; SOLEDAD LIRIO DOLOR, with Res.
Cert. No. A-4782271, issued at Pasay City on July 27, 1954;
and EUSEBIO LOPEZ, JR., with Res. Cert. No. A-476353, issued at
 Naga City on July 8, 1954, all known to me and to me known to be
the same persons who executed the foregoing instrument and they
acknowledged to me that the same is their free act and voluntary
deed.
This instrument relating to a Deed of Donation consist two
pages only, including this page on which this acknowledgement is
written and have been signed by the parties on each and every
page thereof.
WITNESS MY HAND AND SEAL, the day, year, and place first
above written.

Doc. No. 201; Page (SGD) VICENTE M.

No. 70; MAGPOC

Book No. VI; Series Notary Public

of 1954

  Until December 31,

1954 58

  (Emphasis ours)

Said Deed also shows that Mayor Imperial affixed his signature thereon
on August 21, 1954, or four days after it was notarized, thus he could not have
acknowledged the same before the notary public on August 16, 1954. Verily,
the notary public could not have certified to knowing the parties to the
donation, or to their execution of the instrument, or to the voluntariness of
their act. This glaring defect is fatal to the validity of the alleged donation. It is
settled that a defective notarization will strip the document of its public
character and reduce it to a private instrument. 59
Not being a public document, the purported Deed of Donation is
void. 60 A void or inexistent contract has no force and effect from the very
beginning, 61 as if it had never been entered into. 62 It is equivalent to
nothing and is absolutely wanting in civil effects. It cannot be validated either
by ratification or prescription. 63
Void contracts may not be invoked as a valid action or defense in any
court proceeding, including an ejectment suit. 64 Thus:
In Spouses Alcantara v. Nido, which involves an action for unlawful
detainer, the petitioners therein raised a defense that the subject
land was already sold to them by the agent of the owner. The Court
rejected their defense and held that the contract of sale was void
because the agent did not have the written authority of the owner
to sell the subject land.
Similarly, in Roberts v. Papio, a case of unlawful detainer, the
Court declared that the defense of ownership by the respondent
therein was untenable. The contract of sale invoked by the latter
was void because the agent did not have the written authority of
the owner. A void contract produces no effect either against or in
favor of anyone.
In Ballesteros v. Abion, which also involves an action for
unlawful detainer, the Court disallowed the defense of ownership of
the respondent therein because the seller in their contract of sale
was not the owner of the subject property. For lacking an object,
the said contract of sale was void ab initio. 65
 Since void contracts cannot be the source of rights, the City has no
possessory right over the subject property. 66 In this light, to resolve whether
to admit the copy of the purported Deed of Donation as secondary evidence
will be futile as the instrument in any case produces no legal effect.
Circumstances controverting the City's right of possession based on
the alleged donation

Other cogent facts and circumstances of substance engender veritable

doubts as to whether the City has a better right of possession over the subject
property than petitioners, as heirs of Mariano and Irene, based on the
purported Deed of Donation. 67
The City has, for more than 50 years since the donation supposedly took
place on August 16, 1954, failed to secure title over the subject property in its
name. If the City had acquired ownership of the premises, it is incredible that
it would fail to register the donation and have the property titled in its name.
That it would remain passive for such length of time is confounding and does
not serve to bolster its proprietary or possessory claim to the property. 68
At the very least, the City should have caused the annotation of the
alleged Deed on TCT No. 671 immediately after August 16, 1954 or shortly
thereafter. Such inscription would have been binding on petitioners, as Macario
and Irene's successors-in-interest, as well as on third parties. 69
Petitioners, as heirs of a registered owner of the subject property,
have the preferred or better right of possession

Indeed, title to the subject property remains registered in the names of

Macario and Gimenez. The alleged Deed of Donation does not appear to have
been registered and TCT No. 671 does not bear any inscription of said Deed.
The Court has consistently upheld the registered owners' superior right to
possess the property in unlawful detainer cases. 70 A fundamental principle in
land registration is that the certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the person
whose name appears therein. It is conclusive evidence as regards ownership of
the land therein described, and the titleholder is entitled to all the attributes of
ownership of the property, including possession. 71 Thus, the Court has time
and again reiterated the age-old rule that the person who has a Torrens title
over a parcel of land is entitled to possession thereof. 72
It has likewise been constantly emphasized that when the property is
registered under the Torrens system, the registered owner's title to the
property is presumed legal and cannot be collaterally attacked, especially in a
mere action for unlawful detainer. 73 It has even been held that it does not
even matter if the party's title to the property is questionable. 74
Furthermore, it has been held that a certificate of title has a superior
probative value as against that of an unregistered deed of conveyance in
ejectment cases. 75 Spouses Pascual v. Spouses Coronel, 76 involving an
unlawful detainer case, is on point; it instructs:
In any case, [W]e sustain the appellate court's finding that the
respondents have the better right to possess the subject property.
As opposed to the unregistered deeds of sale, the certificate of title
certainly deserves more probative value. Indeed, a Torrens
Certificate is evidence of indefeasible title of property in favor of the
person in whose name appears therein — such holder is entitled to
the possession of the property until his title is nullified.
xxx xxx xxx
 Even if [W]e sustain the petitioners' arguments and rule that
the deeds of sale are valid contracts, it would still not bolster the
petitioners' case. In a number of cases, the Court had upheld the
registered owners' superior right to possess the property. In Co v.
Militar, the Court was confronted with a similar issue of which
between the certificate of title and an unregistered deed of sale
should be given more probative weight in resolving the issue of who
has the better right to possess. There, the Court held that the
court a quo correctly relied on the transfer certificate of title in the
name of petitioner, as opposed to the unregistered deeds of sale of
the respondents. The Court stressed therein that the Torrens
System was adopted in this country because it was believed to be
the most effective measure to guarantee the integrity of land titles
and to protect their indefeasibility once the claim of ownership is
established and recognized.
Likewise, in the recent case of Umpoc v. Mercado, the Court
declared that the trial court did not err in giving more
probative weight to the TCT in the name of the decedent vis-
à-vis the contested unregistered Deed of Sale. Later
in Arambulo v. Gungab, the Court held that the registered owner
is preferred to possess the property subject of the unlawful
detainer case. The age-old rule is that the person who has a
Torrens Title over a land is entitled to possession
thereof. 78 (Emphasis ours and citations omitted.)
Accordingly, as against the City's unregistered claim, the Torrens title in
the name of Macario and Gimenez must prevail, conferring upon the registered
owners the better right of possession. This superior or preferred right of
possession applies to petitioners as Macario's hereditary successors 79 who
have stepped into said decedent's shoes by operation of law. 80 AIDSTE
No automatic acquisition of
ownership of open space in
the subdivision

On the strength of the Court's ruling in White Plains Association, Inc. v.

Judge Legaspi, 81 the City asserted that because the subject property had
been designated as the open space of the City Heights Subdivision, intended
for public use, ownership thereof automatically vested in the City, its donation
being a mere formality. It disputed petitioners' claim that the road lots already
donated to the City satisfied the open space requirement for subdivisions prior
to the enactment of PD 957 dated July 12, 1976, as amended by PD
1216 dated October 14, 1977. It argued that the Subdivision Regulations then
in effect expressly required a public open space of at least five percent (5%) of
the gross area of the subdivision.
Several reasons impel us to reject the City's stance.
We start with the 1948 Subdivision Regulations 81 invoked by the City.
As amended, 82 it required:
Sec. 14. Areas for Community Use. —
a. Public open space
Subdivisions of one hectare or more shall be provided with
suitable areas for parks, playgrounds, playlots and/or other
recreational purposes to be dedicated for public use which
area or areas shall comprise at least 5 per cent of the gross area of
the subdivision. Open spaces so dedicated for public use shall be
 consolidated as much as possible for maximum utility and not
broken into small or odd-shaped parcels of land. 83 (Emphasis
ours)
The Subdivision Regulations required a public open space in the
subdivision, suitable for parks, playgrounds, playlots and/or other recreational
purposes. The term "open space" necessarily signifies the absence of buildings
or edifices. The enumeration of parks, playgrounds and playlots as the
specified usage for such space buttresses the view that the area should be
non-buildable. The phrase "other recreational purposes" should be read in
conjunction with this enumeration and should thus be construed as usage akin
to parks, playgrounds and playlots which have clear and open space as their
common feature. This is consistent with the principle of ejusdem generis which
provides that "where a general word or phrase follows an enumeration of
particular or specific words of the same class or where the latter follow the
former, the general word or phrase is to be construed to include, or to be
restricted to persons, things or cases akin to, resembling, or of the same kind
or class as those specifically mentioned." 84 The requirement under Section 14
(a) of the Subdivision Regulations, therefore, is an open, non-buildable space.
Notably, this construction is consistent with the restriction under Section 2
of PD 1216 which requires that areas in a subdivision reserved for "parks,
playgrounds and recreational use" shall be "non-buildable." The only exception,
as provided in Section 14 (b) of the same Regulations, is the use of the open
space as a school site in the absence of barrio, central or elementary schools in
the vicinity of a proposed residential subdivision.
It appears from the records, however, that the subject property — Blocks
25 and 26 in the Subdivision Plan — had been designated not as an open
space, but as the sites for the City Hall and market, respectively. Thus, TCT
No. 671 contains the following inscription:
Entry 3296 — ORDER
Existence of approved subdivision Plan LRC Psd-9671 with
technical descriptions for Block 4 with 19 lots, Block 10 with 28 lots;
Block 11 with 40 lots; Block 12 with 19 lots; Block 13 with 3 lots;
Block 14 with 3 lots; Block 15 with 5 lots; Block 16 with 25 lots;
Block 17 with 18 lots; Block 18 with 38 lots; Block 19 with 44 lots;
Block 20 with 45 lots; Block 21 with 11 lots; Block 22 with 9 lots;
Block 23 with 18 lots; Block 24 with 17 lots; Block 25 City Hall
Site and Block 26 Market Site; Road lots No. 10 to 30 cannot be
disposed without prior approval of the court. Date of order Aug. 23,
1962. Inscribed September 13, 1962 10:35 a.m.
(Sgd.) ROLANDO G. ALBERTO
Reg. of Deeds, Naga City 85
(Emphasis ours)
The City had represented to the CA that the Subdivision Plan had been
approved by the National Planning Commission and the then Court of First
Instance. 86 No evidence has been adduced to show that as so approved, the
Subdivision Plan indicated areas within Blocks 25 and 26 for use as parks,
playgrounds or other recreational purposes.
There is likewise no debate that the subject property is in fact used as
the site of the City Hall and other government offices. During the pre-trial
conference, the parties stipulated that four hectares of the subject property are
occupied by the City Hall and other government agencies. 87 While one
hectare of the subject property is admittedly occupied by the Naga Civic
Center, 88 it has not been established that it comprises public open space as
contemplated in the Subdivision Regulations.
In any event, the City cannot successfully invoke the Subdivision
Regulations as basis to demand vested proprietary rights over the subject
property. Contrary to its position that roads as well as open space in
subdivisions instantly belong to the government without need of compensation
or any overt act of donation, the Subdivision Regulations indicate that local
governments did not automatically become the owner of roads and open space
in subdivisions within their jurisdiction and a positive act of conveyance or
dedication was necessary to vest ownership in the city or municipality, thus:
Sec. 17. Improvements. —
xxx xxx xxx
h. Utilities in general. — Unless street areas are conveyed
to the city or municipality, the approval of a subdivision plan
binds the subdivider and his successors to permit all public utilities
to use the streets for furnishing services to the subdivision, in
accordance with existing municipal or city regulations. 90
Sec. 19. Approval. —
xxx xxx xxx
h. Dedication of streets, highways and ways. — The approval
of the Final Plan by the Commission shall not be deemed to
constitute or effect an acceptance by the government of the
dedication of any street, or other proposed public way or
space shown on the Plat. The subdivider may, if he so desires,
offer to dedicate all streets, highways, and other ways shown in
the approved Final Plat for public use, but the government may, at
its discretion, or upon the recommendation of the National Urban
Planning Commission, accept only such streets, highways and
other ways as it deems necessary for public purposes. It shall
be the duty of the subdivider to improve, repair and maintain all
streets, highways and other ways in the subdivision until their
dedication to public use is accepted by the
government. 91 (Emphasis ours)
Parenthetically, even under PD 957, specifically Section 31, 92 it was
optional on the part of the owner or developer of the subdivision to donate the
roads and open space found therein. Furthermore, under PD 1216, "(t)he
transfer of ownership from the subdivision owner-developer to the local
government is not automatic but requires a positive act from the owner-
developer before the city or municipality can acquire dominion over the
subdivision roads," such that "until and unless the roads are donated,
ownership remains with the owner-developer." 93
The City's reliance on the 1991 White Plains case is misplaced. The case
involved Road Lot 1 in the White Plains Subdivision, which had been set aside
for the proposed Highway 38 of Quezon City. The Court held therein that said
road was thus withdrawn from the commerce of man as the open space
required by law to be devoted for public use, and its ownership was
automatically vested in the Quezon City Government and/or the Republic of
the Philippines without need of compensating the developer, the donation
thereof being a mere formality. However, as explained by this Court in Albon
v. Mayor Fernando: 94
The ruling in the 1991 White Plains Association decision relied
on by both the trial and appellate courts was modified by this Court
 in 1998 in White Plains Association v. Court of Appeals.
Citing Young v. City of Manila, this Court held in its 1998 decision
that subdivision streets belonged to the owner until donated to the
government or until expropriated upon payment of just
compensation. 95
Furthermore, in Woodridge School, Inc. v. ARB Construction Co.,
Inc., 96 where the 1991 White Plains case was similarly applied by the trial
court in holding that a subdivision road automatically belonged to the
government, the Court ruled:
In the case of Abellana, Sr. v. Court of Appeals, the Court held
that the road lots in a private subdivision are private property,
hence, the local government should first acquire them by donation,
purchase, or expropriation, if they are to be utilized as a public
road. Otherwise, they remain to be private properties of the owner-
developer.
Contrary to the position of petitioners, the use of the
subdivision roads by the general public does not strip it of its
private character. The road is not converted into public property by
mere tolerance of the subdivision owner of the public's passage
through it. To repeat, the local government should first acquire
them by donation, purchase, or expropriation, if they are to be
utilized as a public road. 97
Petitioners cannot simply demand just compensation in lieu of
recovering possession as there was no expropriation

Invoking the case of Alfonso v. Pasay City, 97 as cited in Republic v.

Court of Appeals, 98 the City argued that recovering possession of the subject
property is no longer feasible because it is now occupied and used by the City
Hall and other government offices, so that petitioners' remedy is merely to
demand payment of just compensation. AaCTcI
The Court's exact pronouncement in Alfonso states:
As registered owner, (Alfonso) could bring an action to recover
possession at any time because possession is one of the attributes
of ownership of land. However, said restoration of possession by the
City of Pasay is neither convenient nor feasible because it is now
and has been used for road purposes. So, the only relief available is
for the City of Pasay to make due compensation, which it could and
should have done years ago since 1925. 99
It will be noted, however, that in the cases thus invoked, and in other
cases where the Court made a similar ruling, 100 the government took the
property in the exercise of its power of eminent domain. This case clearly
involves a different factual milieu as the subject property was not expropriated
by the government. It had been offered by its owners-developers, under
certain terms, for donation to the City as the City Hall and market sites within
the subdivision, which offer the City clearly had the option to refuse. In fact,
the Subdivision's General Manager, Lopez Jr., appeared to have written to
Macario essentially asking him to defer the donation because while the
Municipal Board accepted their offer, they had considered "other and better
alternative sites near the National Highway." 101
The "power of eminent domain" has been defined thus:
The right of eminent domain is "the ultimate right of
the sovereign power to appropriate, not only the public but the
 private property of all citizens within the territorial sovereignty, to
public purpose." 102 (Emphasis ours)
[E]minent domain, also often referred to as expropriation and, with
less frequency, as condemnation, is, like police power and
taxation, an inherent power of sovereignty. It need not be clothed
with any constitutional gear to exist; instead, provisions in our
Constitution on the subject are meant more to regulate, rather than
to grant, the exercise of the power. Eminent domain is generally so
described as "the highest and most exact idea of property
remaining in the government" that may be acquired for some public
purpose through a method in the nature of a forced purchase by
the State. 103 (Emphasis ours)
In the instant case, there was no such appropriation or condemnation or
forced purchase to speak of. The City was not propelled by an imperative need
to take the subject property for a public purpose. The City, in taking
possession of the subject property, was not exercising a sovereign function as
expropriator. In this light, the Alfonso ruling cannot be applied to petitioners.
The City is not entitled to the
rights of a builder in good faith

By law, one is considered in good faith if he is not aware that there exists
in his title or mode of acquisition any flaw which invalidates it. 104 The
essence of good faith lies in an honest belief in the validity of one's right,
ignorance of a superior claim, and absence of intention to overreach
another. 105
By these standards, the City cannot be deemed a builder in good faith.
The evidence shows that the contract for the construction of the City Hall
by the Subdivision was an integral component of the latter's offer of donation,
constituting an essential condition for the intended conveyance. Thus, by their
July 30, 1954 letter 106 to the Naga City Mayor, the Subdivision and the
registered owners of the subject property submitted their "amended offer to
construct the City Hall for Naga City within the premises of the subdivision."
The letter stated that the City Hall would be erected on not less than two
hectares of the five-hectare land to be donated by Macario and Gimenez to the
City. It also proposed a financing scheme for the construction of the City Hall,
the construction cost not to exceed P150,000. It is, thus, readily apparent that
the construction contract was the impetus for the offer of donation, and that
such offer was made to persuade the City to award the contract to the
Subdivision.
On August 11, 1954, the Municipal Board adopted Resolution No.
89 107 accepting the Subdivision's July 30, 1954 offer as amended by Lopez
Jr.'s oral representations in the Board's open session as regards the financing
aspect of the transaction. Consequently, Macario and Gimenez delivered
possession of the subject property to the City government of Naga. 108
However, on January 20, 1959, the Municipal Board issued Resolution No.
11 109 authorizing the City Mayor to enter into a contract with Sabaria for the
construction of the City Hall.
That the Subdivision would, by its July 30, 1954 proposal, undertake the
construction is evident from Lopez Jr.'s letter 110 of August 23, 1954
informing Macario that he would defer the "making of the plans of the building
until the location of the City Hall was settled. That the construction contract
was the condition for the proposed donation finds support in Macario's
September 17, 1959 letter 111 to Mayor Imperial and May 14,
1968 112 letter to Lopez Jr. which indicated that in February 1959, or the
month after the construction contract was awarded to Sabaria, Mayor Imperial
proposed for the Naga City government to "buy instead" the subject property.
Macario's September 17, 1959 letter to Mayor Imperial reads:
Joe and I would like to know from you the status of your
proposal you have intimated to us during our meeting last February
at my residence regarding your offer for the city government of
Naga to buy instead the parcels of land which we contemplated to
donate to the city as city hall and market site.
It has been long since then our last conversation regarding
your proposal and have not heard any positive development from
you.
Please advice [sic] us soonest and hope this be given
preferential action by your Office. 113
His May 14, 1968 letter to Lopez Jr. in turn reads:
Please be advised to disregard all my previous letters and
instructions to you regarding the donation of the city hall and
market sites to the City of Naga. Kindly make immediate
representation to the City Mayor and insist on the previous proposal
made by Mayor Monico Imperial for the city to buy the land we
offered to them.
Considering the lapse of time and until now, no clear actions
have been made by the city, I suggest you take whatever
appropriate actions on this matter the soonest possible time. 114
The foregoing circumstances ineluctably show that the City knew of a
substantial flaw in its claim over the subject property. The proposed donation
was conditioned on the award of the construction contract to the Subdivision.
By its Resolution No. 89, the City accepted the proposal with all its conditions.
Thus, the City could not have been unaware that by awarding the same
construction contract to Sabaria, it no longer had any cause to continue
occupying the subject property as the condition for the proposed donation had
not been satisfied. Accordingly, it should have vacated the subject property.
However, it stayed on and allowed Sabaria to undertake the construction.
Furthermore, Macario's September 17, 1959 and May 14, 1968 letters
showed that Mayor Imperial had proposed that the Naga City government
would just buy the subject property from him and Gimenez. Said letters also
indicated that Macario had long been waiting for the City to act on this
proposal but the latter had not taken any action. The City, in the meantime,
continued to enjoy possession of the subject property and subsequently
allowed other government agencies to build their offices in the premises. The
proposal, however, was never brought to fruition by the City.
It cannot, thus, be said that the City was of an honest belief that it had a
valid right to the subject property or that its actions had not overreached the
landowners. Accordingly, it cannot be considered to have acted in good faith.
Articles 449 and 450 of the Civil Code provide:
Art. 449. He who builds, plants or sows in bad faith on the
land of another, loses what is built, planted or sown without right of
indemnity.
Art. 450. The owner of the land on which anything has been
built, planted or sown in bad faith may demand the demolition of
the work, or that the planting or sowing be removed, in order to
 replace things in their former condition at the expense of the person
who built, planted or sowed; or he may compel the builder or
planter to pay the price of the land, and the sower the proper rent.
Thus, petitioners, as hereditary successors of the registered owners of
the subject property, have the right to appropriate what has been built on the
property, without any obligation to pay indemnity therefor, and the City has no
right to a refund of any improvement built therein. 116
The CA ruled that Macario's May 14, 1968 letter was a mere photocopy
and could not thus be received as secondary evidence absent a clear showing
that its original had been lost or destroyed. The Court notes, however, that
this letter, along with Macario's September 17, 1959 missive, were offered by
petitioners and admitted by the MTC 117 without any objection from the City
either as to their admissibility or the purposes for which they were submitted.
It is well-settled that evidence not objected to is deemed admitted and
may be validly considered by the court in arriving at its judgment. 118 This is
true even if by its nature the evidence is inadmissible and would have surely
been rejected if it had been challenged at the proper time. 119 Once admitted
without objection, even though not admissible under an objection, We are not
inclined now to reject it. 120 Consequently, the evidence that was not
objected to became property of the case, and all parties to the case are
considered amenable to any favorable or unfavorable effects resulting from the
said evidence. 121
Neither laches nor prescription had set in

It is settled that:
Laches is the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due
diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting the
presumption that the party entitled to assert it either has
abandoned or declined to assert it. There is no absolute rule as to
what constitutes laches or staleness of demand; each case is to be
determined according to its particular circumstances, with the
question of laches addressed to the sound discretion of the court.
Because laches is an equitable doctrine, its application is controlled
by equitable considerations and should not be used to defeat justice
or to perpetuate fraud or injustice. 122
By his September 17, 1959 and May 14, 1968 letters, Macario has been
shown to have taken steps to have the City act on Mayor Imperial's proposal to
"buy instead" the subject property. His efforts were overtaken by his death
three years later in 1971. Furthermore, as the RTC found, petitioners had been
engaged in litigation to establish their right to inherit from Macario and Irene,
and it was Danilo's discovery of the subject property, following the issuance to
him of letters of administration over Irene's estate in 1997, that prompted
them to issue a demand for the City to vacate the premises.
Given these circumstances, the Court is not disposed to conclude that
there was an unreasonable or unexplained delay that will render petitioners'
claim stale. EcTCAD
In contrast, the City, despite its claim of having acquired the subject
property by donation in 1954, has itself failed to have the same transferred in
its name for a long period of time. Indeed, the subject property remains
registered in the name of petitioners' predecessor-in-interest as co-owner.
 The rule is that an action to recover possession of a registered land never
prescribes in view of the provision of Section 44 of Act No. 496 to the effect
that no title to registered land in derogation of that of a registered owner shall
be acquired by prescription or adverse possession. It follows that a registered
owner's action to recover a real property registered under the Torrens System
does not prescribe. 122
Thus, it has been consistently held that registered owners have the right
to evict any person unlawfully occupying their property, and this right is
imprescriptible and can never be barred by laches. 123 Even if it be supposed
that they were aware of the occupant's possession of the property, and
regardless of the length of that possession, the lawful owners have a right to
demand the return of their property at any time as long as the possession was
unauthorized or merely tolerated, if at all. 124
Moreover, it is well settled that the rule on imprescriptibility of registered
lands not only applies to the registered owner but extends to the heirs of the
registered owner as well. As explained in Mateo v. Diaz, 125 prescription is
unavailing not only against the registered owner, but also against his
hereditary successors because the latter step into the shoes of the decedent by
operation of law and are the continuation of the personality of their
predecessor-in-interest. 126 Consequently, petitioners, as heirs of registered
landowner Macario, cannot be barred by prescription from claiming possession
of the property.

Restitution of premises, reasonable rent and attorney's fees

Section 17, Rule 70 of the Rules of Court provides:

Sec. 17. Judgment. — If after trial the court finds that the
allegations of the complaint are true, it shall render judgment in
favor of the plaintiff for the restitution of the premises, the sum
justly due as arrears of rent or as reasonable compensation for the
use and occupation of the premises, attorney's fees and costs. x x x
Thus, the rightful possessor in an unlawful detainer case is entitled to the
return of the property and to recover damages, which refer to "rents" or "the
reasonable compensation for the use and occupation of the premises," or the
"fair rental value of the property" and attorney's fees and costs. More
specifically, recoverable damages are "those which the plaintiff could have
sustained as a mere possessor, or those caused by the loss of the use and
occupation of the property." 127
The RTC granted petitioners' prayer for a monthly rental of P2.5 million
(or P50.00 per square meter) as reasonable compensation for the City's use
and occupation of the subject property from November 30, 2003 until the
premises are actually vacated. However, in its March 7, 2011 Decision, the CA
reduced the monthly rental to P500,000.00 (or P10.00 per square meter),
holding that:
The very reason why the monthly rental of the premises
surrounding the City Hall is as high as that pegged by the lower
appellate court (at Php50.00 per square meter or Php2,500,000.00
for the 50,000 square meters), is the presence of the local
government at the site. It should not, therefore, be burdened too
much in the computation of the monthly rental when it has
contributed in a major way in making the area an upscale one.
Thus, the Court submits that the monthly rental of Php500,000.00
is just equitable under the circumstances. 128
 There is logic in the CA's ratiocination that the presence of the local
government in the subject property enhanced the value of real estate in its
vicinity. The Court, however, cannot lose sight of the fact that the City's
occupation of the subject property has been blighted by bad faith. The benefit
to the real estate values had been at the expense of the rights of Macario and
Gimenez and their successors-in-interest.
Furthermore, it has been held that the reasonable compensation
contemplated in Section 17, Rule 70 "partakes of the nature of actual
damages." While the court may fix the reasonable amount of rent, it must base
its action on the evidence adduced by the parties. The Court has defined "fair
rental value" as the amount at which a willing lessee would pay and a willing
lessor would receive for the use of a certain property, neither being under
compulsion and both parties having a reasonable knowledge of all facts, such
as the extent, character and utility of the property, sales and holding prices of
similar land and the highest and best use of the property. 129
Petitioners based their prayer for a P50.00 rental rate on the P110.00
monthly rent per square meter under a 2004 lease contract over another
property situated near the subject premises. 130 The burden of proof to show
that the rental demanded is unconscionable or exorbitant rests upon the
City. 131 The City, however, has not adduced controverting evidence as to the
fair rental value of the premises. 132 All things considered, the Court finds
petitioners' prayer for compensation at less than half the rate indicated in said
lease contract to be reasonable. 133
The fair rental value is to be reckoned from the time of the demand to
vacate. 134 The City received two demand letters from petitioners; the second
"extend(ed)" its stay in the subject property for another two months from the
30th day of the month when it received the initial demand letter on September
10, 2003. 135 Thus, the reasonable rent was due not from November 3, 2003
as the CA declared in its March 7, 2011 Decision, but from November 30,
2003, and should be paid until the subject property is vacated.
The Court agrees with the CA's holding in its March 7, 2011 Decision that
the amount due to petitioners shall only be half of the reasonable rent as the
subject property was co-owned by Macario with Gimenez. Absent proof to the
contrary, the portions belonging to the co-owners in the co-ownership shall be
presumed equal. 136
As regards attorney's fees, the RTC awarded the same in the amount of
P587,159.60 or 10% of the property's market value based on the tax
declarations. In its March 7, 2011 Decision, the CA reduced the award to
P200,000.00 on equitable grounds, considering the extent of legal services
rendered by petitioners' counsel. 137
The Court finds either award to be excessive. Indubitably, petitioners
were constrained to litigate to protect their interest. 138 However, considering
the circumstances of the case, including the summary 139 nature of an
unlawful detainer proceeding, the Court holds that an award of P75,000.00 as
attorney's fees is fair and reasonable.
Decision is binding on privies or parties deriving possession from the
City

In its March 7, 2011 Decision, the CA held that the government offices
occupying the subject property, other than the City government of Naga, could
not be ordered to vacate the same because they were not parties to the case.
Jurisprudence, however, instructs that:
 A judgment directing a party to deliver possession of a
property to another is in personam. x x x Any judgment therein is
binding only upon the parties properly impleaded and duly heard or
given an opportunity to be heard. However, this rule admits of
the exception, such that even a non-party may be bound by
the judgment in an ejectment suit where he is any of the
following: (a) trespasser, squatter or agent of the defendant
fraudulently occupying the property to frustrate the judgment; (b)
guest or occupant of the premises with the permission of the
defendant; (c) transferee pendente lite; (d) sublessee; (e) co-
lessee; or (f) member of the family, relative or privy of the
defendant. 140 (Emphasis ours)
Exceptions (b) and (f) are clearly applicable. There is no dispute that the
government offices were allowed by the City to occupy the subject property.
Deriving their possession from the City, they are unmistakably the City's
privies in the occupation of the premises. 141 Thus, they too are bound by the
judgment in this case.
Determination of ownership is not conclusive

It must be stressed that the ruling in this case is limited only to the
determination of who between the parties has a better right to possession. This
adjudication is not a final determination on the issue of ownership and, thus,
will not bar or prejudice an action between the same parties involving title to
the property, if and when such action is brought seasonably before the proper
forum. 143
WHEREFORE, the petition is GRANTED. The Court of Appeals' Amended
Decision dated July 20, 2011 is SET ASIDE. The Decision dated June 20, 2005
of the Regional Trial Court, Branch 26 of Naga City in Civil Case No. RTC 2005-
0030 is REINSTATED with MODIFICATION in that: (a) petitioners shall be
paid only half of the adjudged monthly rental of P2,500,000; and (b) the
award of attorney's fees is reduced to P75,000. HSAcaE
SO ORDERED.
|||  (Heirs of Mariano v. City of Naga, G.R. No. 197743, [March 12,
2018])
 [G.R. No. 173120. July 26, 2017.]

SPOUSES YU HWA PING and MARY GAW, petitioners, vs. AYALA

LAND, INC., respondent.

[G.R. No. 173141. July 26, 2017.]

HEIRS OF SPOUSES ANDRES DIAZ and JOSEFA

MIA, petitioners, vs. AYALA LAND, INC., respondent.

DECISION

MENDOZA,  J p:

These petitions for review on certiorari seek to reverse and set aside the
June 19, 2006 Decision 1 of the Court of Appeals (CA) in CA-G.R. CV Nos.
61593 and 70622, which reversed and set aside its February 8, 2005 Amended
Decision 2 and reinstated its February 28, 2003 Decision, 3 in a case for
annulment of title and surveys, recovery of possession and judicial
confirmation of title.
The Antecedents
On March 17, 1921, petitioners Spouses Andres Diaz and Josefa
Mia (Spouses Diaz) submitted to the General Land Registration Office for
approval of the Director of Lands a survey plan designated as Psu-25909,
which covered a parcel of land located at Sitio of Kay Monica, Barrio Pugad
Lawin, Las Piñas, Rizal, with an aggregate area of 460,626 square meters
covered by Lot 1. On May 26, 1921, the Director of Lands approved survey
plan Psu-25909.
 On October 21, 1925, another survey plan was done covering Lot 3 of
the same parcel of land designated as Psu-47035 for a certain Dominador
Mayuga. The said survey, however, stated that the lot was situated at Sitio
May Kokek, Barrio Almanza, Las Piñas, Rizal. Then, on July 28, 1930, another
survey was undertaken designated as Psu-80886 for a certain Eduardo C.
Guico (Guico). Again, the survey indicated a different address that the lots
were situated in Barrio Tindig na Mangga, Las Piñas, Rizal. Finally, on March
6, 1931, an additional survey plan was executed over the similar parcel of
land designated as Psu-80886/SWO-20609 for a certain Alberto
Yaptinchay (Yaptinchay). Psu-80886 and Psu-80886/SWO-20609 covered Lot
2, with 158,494 square meters, and Lot 3, with 171,309 square meters, of the
same land.
On May 9, 1950, Original Certificate of Title (OCT) No. 242 was
issued in favor of Yaptinchay covering Lots 2 and 3 pursuant to Psu-
80886/SWO-20609. On May 11, 1950, OCT No. 244 was also issued to
Yaptinchay. On May 21, 1958, OCT No. 1609 covering Lot 3 pursuant to
Psu-47035 was issued in favor of Dominador Mayuga. On May 18, 1967, some
of properties were sold to CPJ Corporation resulting in the issuance of Transfer
Certificate Title (TCT) No. 190713 in its name.
On February 16, 1968, petitioner Andres Diaz filed a petition for original
registration before the Court of First Instance (CFI) of Pasay for Lot No. 1 of
Psu-25909. On October 19, 1969, judgment was rendered by the CFI of
Pasay for the original registration of Psu-25909 in favor of Andres Diaz. On
May 19, 1970, OCT No. 8510 was issued in the name of Spouses Diaz.
On May 21, 1970, the Spouses Diaz subdivided their 460,626 square meter
property covered by OCT No. 8510 into ten (10) lots, described as Lots No.
1-A to 1-J and conveyed to different third parties.
On May 17, 1971, CPJ Corporation, then owner of the land covered by
TCT No. 190713, which originated from OCT No. 242, filed Land Registration
Case No. N-24-M before the Regional Trial Court (RTC) of Pasig City, Branch
166, against Spouses Diaz and other named respondents (Diaz Case). It
sought to review OCT No. 8510 in the names of Spouses Diaz on the ground
that the interested persons were not notified of the application.
On August 30, 1976 and December 4, 1976, Andres Diaz sold to
Librado Cabautan (Cabautan) the following parcels of land, which originated
from OCT No. 8510 under Psu-25909, to wit:
1. Lot 1-I, with an area of 190,000 square meters covered by the new
TCT No. 287416;
2. Lot 1-B, with an area of 135,000 square meters covered by the new
TCT No. 287411;
3. Lot 1-A with an area of 125,626 square meters covered by the new
TCT No. 287412; and
4. Lot 1-D, with an area of 10,000 square meters also covered by the
new TCT No. 287412. 4
On March 12, 1993, petitioner Spouses Yu Hwa Ping and Mary
Gaw (Spouses Yu) acquired ownership over 67,813 square meters
representing the undivided half-portion of Lot 1-A originating from
OCT No. 8510 of Spouses Diaz. The said property was co-owned by Spouses
Diaz with Spouses Librado and Susana Cabautan resulting from a civil case
decided by the RTC of Makati on March 29, 1986.
On January 27, 1994, Spouses Yu acquired ownership over Lot 1-B
originating from OCT No. 8510 of Spouses Diaz with an area of 135,000 square
meters. Pursuant to the transfers of land to Spouses Yu, TCT Nos. 39408 and
64549 were issued in their names.
On the other hand, on May 4, 1980, CPJ Corporation transferred their
interest in the subject properties to third persons. Later, in 1988, Ayala
Corporation obtained the subject properties from Goldenrod, Inc. and PESALA.
In 1992, pursuant to the merger of respondent Ayala Land, Inc. (ALI) and Las
Piñas Ventures, Inc., ALI acquired all the subject properties, as follows:
1. Lot 3 which originated from OCT No. 1609 under Psu-47035 and
covered by a new TCT No. 41325;
2. Lot 2 which originated from OCT No. 242 under Psu-80886/SWO-
20609 and covered by a new TCT No. 41263;
3. Lot 3 which originated from OCT No. 242 under Psu-80886/SWO-
20609 and covered by a new TCT No. 41262; and
4. Lot 6 which originated from OCT No. 242 under Psu-80886/SWO-
20609 and covered by a new TCT No. 41261. 5
First RTC Ruling
Returning to the Diaz case, on December 13, 1995, the RTC of Pasig City
rendered a Decision 6 against Spouses Diaz. It held that OCT No. 8510 and all
the transfer certificates issued thereunder must be cancelled. The RTC of Pasig
City opined that Spouses Diaz committed fraud when they filed their
application for original registration of land without informing the interested
parties therein in violation of Sections 31 and 32 of Act No. 496. It also held
that Spouses Diaz knew that CPJ Corporation had an appropriate interest over
the subject properties.
Aggrieved, Spouses Diaz elevated an appeal before the CA docketed as
CA-G.R. CV No. 61593.
Meanwhile, sometime in August 1995, Spouses Yu visited their lots. To
their surprise, they discovered that ALI had already clandestinely fenced the
area and posted guards thereat and they were prevented from entering and
occupying the same. 7 They also discovered that the transfer of certificates of
titles covering parcels of land overlapping their claim were in the name of ALI
under TCT Nos. 41325, 41263, 41262, and 41261.
On December 4, 1996, Spouses Yu filed a complaint before the RTC of
Las Piñas City, Branch 255, against ALI for declaration of nullity of the TCTs
issued in the name of the latter (Yu case). They also sought the recovery of
possession of the property covered by ALI's title which overlapped their land
alleging that Spouses Diaz, their predecessors had open, uninterrupted and
adverse possession of the same from 1921 until it was transferred to Cabautan
in 1976. Spouses Yu averred that Cabautan possessed the said land until it
was sold to them in 1994. 8 They likewise sought the judicial confirmation of
the validity of their titles.
Spouses Yu principally alleged that the titles of ALI originated from OCT
Nos. 242, 244, and 1609, which were covered by Psu-80886 and Psu-47035.
The said surveys were merely copied from Psu-25909, which was prepared at
an earlier date, and the Director of Lands had no authority to approve one or
more surveys by different claimants over the same parcel of land. 9 They
asserted that OCT No. 8510 and its transfer certificates, which covered the
Psu-25909, must be declared valid against the titles of ALI.
The RTC of Las Piñas ordered the conduct of a verification survey to help
in the just and proper disposition of the case. Engr. Veronica Ardina-Remolar
from the Bureau of Lands, the court-appointed commissioner, supervised the
verification survey, and the parties sent their respective surveyors. After the
verification survey was completed and the parties presented all their pieces of
evidence, the case was submitted for resolution.
Second RTC Ruling
In its May 7, 2001 Decision, 10 the RTC of Las Piñas ruled in favor of
Spouses Yu. It held that based on the verification survey and the
testimonies of the parties' witnesses, OCT Nos. 242, 244, and
1609 overlapped OCT No. 8510. The RTC of Las Piñas also pointed out, and
extensively discussed, that Psu-80886 and Psu-47035, which were the bases of
OCT Nos. 242, 244, and 1609, were marred with numerous and blatant errors.
It opined that ALI did not offer any satisfactory explanation regarding the
glaring discrepancies of Psu-80886 and Psu-47035. On the other hand, it
observed that Psu-25909, the basis of OCT No. 8510, had no irregularity in its
preparation. Thus, the RTC of Las Piñas concluded that the titles of ALI were
void ab initio because their original titles were secured through fraudulent
surveys. The fallo reads:
WHEREFORE, judgment is rendered in favor of the plaintiffs in
that the three transfer certificates issued in the name of Ayala Land,
Inc. by the Register of Deeds in the City of Las Piñas, namely,
Transfer Certificate of Title Nos. 41325, 41263 and 41262 all
covering Lots Nos. 1, 2 and 6 of survey plans PSU-47035, PSU-
80886, Psu-80886/SWO-20609, the original survey under PSU-
47035 and decree of registration no. N-63394, and Original
Certificate of Title No. 1609 issue in favor of Dominador Mayuga,
including all other titles, survey and decrees pertaining thereto and
from or upon which the aforesaid titles emanate, are hereby
declared spurious and void ab initio. In the same vein, the Court
upholds the validity of Transfer Certificates of Title Nos. TCT Nos. T-
64549 covering Lot 1-A in the name of Mary Gaw, spouse of Yu Hwa
Ping, and T-39408 covering Lot 1-B in the name of Yu Hwa Ping
(both originating from Original Certificate of Title No. 8510)
pursuant to plan PSU-25909 undertaken on March 17, 1921. The
defendant is also ordered to pay the plaintiffs temperate damages
in the amount of One Million Pesos (PHP1,000,000.00) exemplary
damages in the amount of Five Hundred Thousand Pesos
(PHP500,000.00), and to pay the costs.
SO ORDERED. 11
Unconvinced, ALI appealed to the CA, where the case was docketed as
CA-G.R. CV No. 70622. Eventually, said appeal was consolidated with the
earlier appeal of Spouses Diaz in CA-G.R. CV No. 61593.
The CA Rulings
In its decision, dated June 19, 2003, the CA ruled in favor of ALI. It held
that in the Diaz case, the RTC of Pasig properly cancelled OCT No. 8510
because Spouses Diaz committed fraud. It opined that Spouses Diaz knew of
CPJ Corporation's interest over the subject land but failed to inform it of their
application.
With respect to the Yu case, the CA ruled that Spouses Yu could no
longer assert that the titles of ALI were invalid because the one-year period to
contest the title had prescribed. Hence, ALI's titles were incontestable. The CA
underscored that the errors cited by the RTC of Las Piñas in Psu-80886 and
Psu-47035, upon which the titles of ALI were based, were innocuous or already
explained. It also stressed that OCT Nos. 242, 244, and 1609, from which the
titles of ALI originated, were issued in 1950 and 1958; while the OCT No.
8510, from which the titles of Spouses Yu originated, was only issued in 1970.
As the original titles of ALI predated that of Spouses Yu, the CA concluded that
the former titles were superior.
Undaunted, Spouses Yu and Spouses Diaz filed their motions for
reconsideration.
In its decision, dated February 8, 2005, the CA granted Spouses Yu and
Spouses Diaz' motions for reconsideration. It opined that the numerous errors
in Psu-80886 and Psu-47035 were serious and these affected the validity of
the original titles upon which the surveys were based. In contrast, the CA
noted that Psu-25909, upon which the original titles of Spouses Yu and
Spouses Diaz were based, bore all the hallmarks of verity.
The CA also emphasized that in Guico v. San Pedro, 12 the Court
already recognized the defects surrounding Psu-80886. In that case, the
Court noted that the applicant-predecessor of Psu-80886 was not able to
submit the corresponding measurements of the land and he failed to prove
that he had occupied and cultivated the land continuously since the filing of
their application. The CA likewise cited (1) the certification from the
Department of Environment and Natural Resources-Land Management
Bureau (DENR-LMB) that Psu-80886 was included in the list of restricted plans
because of the doubtful signature of the surveyor, and (2) the memorandum,
dated August 3, 2000, from the Assistant Regional Director for Operations of
the DENR directing all personnel of the Land Survey Division not to issue
copies or technical descriptions of Psu-80886 and Psu-47035.
The CA further wrote that the slavish adherence to the issue of
prescription and laches by ALI should not be countenanced. It declared that
the doctrine that registration done fraudulently is no registration at all prevails
over the rules on equity. With respect to the Diaz case, the CA held that
Spouses Diaz had no obligation to inform CPJ Corporation and its successors
about their registration because the original titles of the latter, from which
their transferred titles were derived, were based on fraudulent surveys.
Undeterred, ALI filed a second motion for reconsideration.
In its assailed June 19, 2006 decision, the CA granted the second motion
for reconsideration in favor of ALI. It reversed and set aside its February 8,
2005 decision and reinstated its February 28, 2003 decision. The CA held
that Guico v. San Pedro did not categorically declare that Psu-80886 was
invalid and it even awarded some of the lots to the applicant; and that the
certification of DENR-LMB and the memorandum of the Assistant Director of
the DENR could not be considered by the courts because these were not
properly presented in evidence.
The CA reiterated its ruling that Spouses Yu could no longer question the
validity of the registrations of OCT Nos. 242, 244, and 1609 because the one-
year reglementary period from the time of registration had already expired and
these titles were entitled to the presumption of regularity. Thus, once a decree
of registration was made under the Torrens system, and the reglementary
period had lapsed, the title was perfected and could not be collaterally
attacked. The CA also stressed that the noted discrepancies in Psu-80886 and
Psu-47035 were immaterial to assail the validity of OCT Nos. 242, 244 and
1609, which were registered earlier than OCT No. 8510.
Hence, these petitions, anchored on the following:
ISSUES
I
 WHETHER THE COMPLAINT OF SPOUSES YU IS BARRED BY
PRESCRIPTION
II
WHETHER THE VALIDITY OF THE SURVEYS OF OCT NOS. 242,
244 AND 1609 AS AGAINST OCT NO. 8510 CAN BE ASSAILED
IN THE PRESENT CASE
III
WHETHER THE CASE OF GUICO V. SAN PEDRO IS
APPLICABLE IN THE PRESENT CASE
IV
WHETHER THE ALLEGED ERRORS IN PSU-80886 AND PSU-
47035 ARE OF SUCH DEGREE SO AS TO INVALIDATE OCT
NOS. 242, 244 AND 1609 AND ITS TRANSFER CERTIFICATES
OF TITLES
In their Memorandum, 13 the petitioners chiefly argue that the complaint
filed by Spouses Yu is not barred by the one-year prescriptive period under Act
No. 496 because an action to annul the fraudulent registration of land is
imprescriptible; that there are several and conspicuous irregularities in Psu-
80886 and Psu-47035 which cast doubt on the validity of OCT Nos. 242, 244,
and 1609; that Guico v. San Pedro did not categorically award Lots No. 2 and 3
covered by Psu-80886 to the applicant therein because he was still required to
submit an amended plan duly approved by the Director of Lands; that the
applicant in Guico v. San Pedro never submitted any amended plan, hence, no
lot was awarded under Psu-80886 and its irregularity was affirmed by the
Supreme Court; that the registration of OCT Nos. 242, 244, and 1609 on a
date earlier than OCT No. 8510 did not render them as the superior titles; that
in case of two conflicting titles, the court must look into the source of the
titles; that the sources of the titles, Psu-80886 and Psu-47035, had numerous
errors that could not be satisfactorily explained by ALI; and that Psu-25909
had the hallmark of regularity and it was approved by the Director of Lands at
an earlier date.
In its Memorandum, 14 ALI essentially countered that in the June 19,
2006 decision, the CA properly disregarded the certification of DENR-LMB and
the memorandum of the Assistant Director of the DENR because these were
not presented in evidence; that Guico v. San Pedro recognized the
registrability of Lots No. 2 and 3 under Psu-80886; that the RTC of Las Piñas
did not have jurisdiction to look beyond the details of the decrees of
registration; that the registration of a land under the Torrens system carries
with it a presumption of regularity; that in case of conflict between two
certificates of title, the senior and superior title must be given full effect and
validity; and that the alleged errors in the Psu-80886 and Psu-47035 were
sufficiently explained.
The Court's Ruling
The Court finds the petitions meritorious.
The present case essentially involves the issue: between the registered
titles of the petitioners and ALI, which is more superior? Before the said issue
can be discussed thoroughly, the Court must first settle whether the actions
instituted by the petitioners were filed within the reglementary periods.
The actions were filed
within their respective
prescriptive periods
 The Diaz case was a petition for review before the RTC of Pasig. It
assailed OCT No. 8510 in the names of Spouses Diaz on the ground that the
said title was issued through fraud because the interested persons were not
informed of their application for registration. Under Section 38 of Act No. 496,
"any person deprived of land or of any estate or interest therein by decree of
registration obtained by fraud [may] file in the competent Court of First
Instance a petition for review within one year after entry of the decree
provided no innocent purchaser for value has acquired an interest." 15
Here, OCT No. 8510 was issued in the name of Spouses Diaz on May 21,
1970. On the other hand, the petition for review of CPJ Corporation was filed
on May 17, 1971. Thus, the said petition was timely filed and the RTC of Pasig
could tackle the issues raised therein. When the RTC of Pasig ruled in favor of
CPJ Corporation, Spouses Diaz appealed to the CA. In the same manner, when
they received an unfavorable judgment from the CA, Spouses Diaz filed a
petition for review on certiorari before the Court. Accordingly, the appeal of
Spouses Diaz is proper and it can be adjudicated on the merits.
On the other hand, the Yu case began when they filed a complaint before
the RTC of Las Piñas against ALI for declaration of nullity of the TCTs issued in
the name of the latter because of the spurious, manipulated and void surveys
of OCT Nos. 242, 244 and 1609. They also sought the recovery of possession
of the property covered by ALI's title that overlapped their land alleging that
their predecessors, Spouses Diaz, had open, uninterrupted and adverse
possession of the same from 1921 until it was transferred to Cabautan in
1976. Spouses Yu also alleged that Cabautan possessed the said land until it
was sold to them in 1994. 16 It was only in August 1995 that they discovered
that ALI clandestinely fenced their property and prevented them from
occupying the same. They also sought the judicial confirmation of the validity
of their titles.
ALI argues that the complaint of Yu is barred by prescription because it
was filed beyond the one-year period under Section 38 of Act No. 496. On the
other hand, Spouses Yu assert that their action was imprescriptible because
they sought to set aside the titles that were obtained through void surveys and
they assert that the principle of indefeasibility of a Torrens title does not apply
where fraud attended the issuance of the title.
The Court finds that the complaint of Spouses Yu is not barred by
prescription. While Section 38 of Act No. 496 states that the petition for review
to question a decree of registration must be filed within one (1) year after
entry of the decree, such provision is not the only remedy of an aggrieved
party who was deprived of land by fraudulent means. The remedy of the
landowner whose property has been wrongfully or erroneously registered in
another's name is, after one year from the date of the decree, not to set aside
the decree, as was done in this case, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in
the ordinary court of justice for reconveyance or, if the property has passed
into the hands of an innocent purchaser for value, for damages. 17
Uy v. Court of Appeals 18 remarkably explained the prescriptive periods
of an action for reconveyance depending on the ground relied upon, to wit:
The law creates the obligation of the trustee to reconvey the
property and its title in favor of the true owner. Correlating Section
53, paragraph 3 of PD No. 1529 and Article 1456 of the Civil
Code with Article 1144 (2) of the Civil Code, the prescriptive period
for the reconveyance of fraudulently registered real property is ten
(10) years reckoned from the date of the issuance of the certificate
of title. This ten-year prescriptive period begins to run from the
 date the adverse party repudiates the implied trust, which
repudiation takes place when the adverse party registers the land.
An exception to this rule is when the party seeking reconveyance
based on implied or constructive trust is in actual, continuous and
peaceful possession of the property involved. Prescription does not
commence to run against him because the action would be in the
nature of a suit for quieting of title, an action that is imprescriptible.
The foregoing cases on the prescriptibility of actions for
reconveyance apply when the action is based on fraud, or when the
contract used as basis for the action is voidable. Under Article 1390
of the Civil Code, a contract is voidable when the consent of one of
the contracting parties is vitiated by mistake, violence, intimidation,
undue influence or fraud. When the consent is totally absent and
not merely vitiated, the contract is void. An action for reconveyance
may also be based on a void contract. When the action for
reconveyance is based on a void contract, as when there was no
consent on the part of the alleged vendor, the action is
imprescriptible. The property may be reconveyed to the true owner,
notwithstanding the TCTs already issued in another's name. The
issuance of a certificate of title in the latter's favor could not vest
upon him or her ownership of the property; neither could it validate
the purchase thereof which is null and void. Registration does not
vest title; it is merely the evidence of such title. Our land
registration laws do not give the holder any better title than what
he actually has. Being null and void, the sale produces no legal
effects whatsoever.
Whether an action for reconveyance prescribes or not is
therefore determined by the nature of the action, that is, whether it
is founded on a claim of the existence of an implied or constructive
trust, or one based on the existence of a void or inexistent contract.
x x x 19
As discussed-above, when the action for reconveyance is based on an
implied or constructive trust, the prescriptive period is ten (10) years, or it
is imprescriptible if the movant is in the actual, continuous and peaceful
possession of the property involved. On the other hand, when the action for
reconveyance is based on a void deed or contract the action is imprescriptible
under Article 1410 of the New Civil Code. 20 As long as the land wrongfully
registered under the Torrens system is still in the name of the person who
caused such registration, an action in personam will lie to compel him to
reconvey the property to the real owner. 21
In Hortizuela v. Tagufa, 22 the complainant therein filed an action for
reconveyance and recovery of possession with damages for a parcel of land
which was wrongfully granted a patent or decree issued in a registration
proceedings in the name of a third person. The CA and the Municipal Circuit
Trial Court initially dismissed the complaint because it allegedly questioned the
validity of the Torrens title in a collateral proceeding and it had prescribed.
When the case reached the Court, it ruled that the instituted complaint had not
prescribed because "in a complaint for reconveyance, the decree of
registration is respected as incontrovertible and is not being questioned. What
is being sought is the transfer of the property wrongfully or erroneously
registered in another's name to its rightful owner or to the one with a better
right. If the registration of the land is fraudulent, the person in whose name
the land is registered holds it as a mere trustee, and the real owner is entitled
to file an action for reconveyance of the property." 23 It was eventually ruled
therein that the action for reconveyance was proper and the possession was
recovered.
In this case, Spouses Yu sought to reconvey to them once and for all the
titles over the subject properties. To prove that they had a superior right, they
questioned the validity of the surveys which were the bases of OCT Nos. 242,
244 and 1609, the origin of ALI's TCTs. Moreover, they also sought to recover
the possession that was clandestinely taken away from them. Thus, as the
subject matter of this case is the ownership and possession of the subject
properties, Spouses Yu's complaint is an action for reconveyance, which is not
prohibited by Section 38 of Act No. 496.
Moreover, a reading of Spouses Yu's complaint reveals that they are
seeking to declare void ab initio the titles of ALI and their predecessors-in-
interest as these were based on spurious, manipulated and void surveys. 24 If
successful, the original titles of ALI's predecessors-in-interest shall be declared
void and, hence, they had no valid object to convey. It would result to a void
contract or deed because the subject properties did not belong to the said
predecessors-in-interest. Accordingly, the Yu case involves an action for
reconveyance based on a void deed or contract which is imprescriptible under
Article 1410 of the New Civil Code.
Further, the Court agrees with the observation of the CA in its February
8, 2005 Amended Decision, to wit:
9. In light of the circumstances, we feel that a slavish
adherence to the doctrine being invoked by ALI with respect to
alleged prescription and laches, should not be countenanced. The
said axioms do not possess talismanic powers, the mere invocation
of which will successfully defeat any and all attempts by those who
claim to be the real owners of property, to set aright what had been
done through fraud and imposition. Consistent with the doctrine
that registration done fraudulently is no registration at all, then this
court must not allow itself to be swayed by appeals to a strict
interpretation of what are, after all, principles based on equity. To
rule otherwise would be to reward deception and duplicity and place
a premium on procedural niceties at the expense of substantial
justice. 25
Neither can ALI be considered an innocent purchaser for value of the
subject properties. As discussed by the RTC of Las Piñas, when ALI purchased
the subject lots from their predecessors-in-interest in 1988, the titles bore
notices of the pending cases and adverse claims sufficient to place it on
guard. In the TCTs of ALI, the notices of lis pendens indicated therein were
sufficient notice that the ownership of the properties were being disputed. The
trial court added that even the certified true copy of Psu-80886 had markings
that it had been used in some other cases as early as March 7,
1959. 26 Accordingly, ALI is covered by the present action for reconveyance.
As both the Diaz and Yu cases were properly filed and are not barred by
prescription, these can be adjudicated by the Court on the merits.
The Rule — that between two (2) conflicting titles, the title registered
earlier prevails — is Not Absolute
The June 19, 2006 and February 28, 2003 decisions of the CA essentially
ruled that ALI's titles were superior to those of the petitioners because OCT
Nos. 242, 244 and 1609 were registered earlier than OCT No. 8510. The CA
emphasized that the general rule was that in case of two certificates of title
purporting to include the same land, the earlier date prevails. This general rule
was first discussed in Legarda v. Saleeby, 27 as follows:
 The question, who is the owner of land registered in the name
of two different persons, has been presented to the courts in other
jurisdictions. In some jurisdictions, where the "torrens" system has
been adopted, the difficulty has been settled by express statutory
provision. In others it has been settled by the courts. Hogg, in his
excellent discussion of the "Australian Torrens System," at page
823, says: "The general rule is that in the case of two certificates of
title, purporting to include the same land, the earlier in date
prevails, whether the land comprised in the latter certificate be
wholly, or only in part, comprised in the earlier certificate. x x x In
successive registrations, where more than one certificate is issued
in respect of a particular estate or interest in land, the person
claiming under the prior certificate is entitled to the estate or
interest; and that person is deemed to hold under the prior
certificate who is the holder of, or whose claim is derived directly or
indirectly from the person who was the holder of the earliest
certificate issued in respect thereof x x x. 28
The said general rule has been repeated by the Court in its subsequent
decisions in Garcia v. Court of Appeals, 29 MWSS v. Court of
Appeals, 30 Spouses Carpo v. Ayala Land, Inc., 31 and recently in Jose Yulo
Agricultural Corp. v. Spouses Davis. 32 Nevertheless, the rule on superiority
is not absolute. The same case of Legarda v. Saleeby explains the exception
to the rule, viz.:
Hogg adds however that, "if it can be clearly ascertained by
the ordinary rules of construction relating to written documents,
that the inclusion of the land in the certificate of title of prior
date is a mistake, the mistake may be rectified by holding the
latter of the two certificates of title to be
conclusive." 33 [Emphasis supplied]
Accordingly, if the inclusion of the land in the earlier registered title was a
result of a mistake, then the latter registered title will prevail. The ratio
decidendi of this exception is to prevent a title that was earlier registered,
which erroneously contained a parcel of land that should not have been
included, from defeating a title that was later registered but is legitimately
entitled to the said land. It reinforced the doctrine that "[r]egistering a piece of
land under the Torrens System does not create or vest title because
registration is not a mode of acquiring ownership. A certificate of title is merely
an evidence of ownership or title over the particular property described
therein." 34
In his book, Land Registration and Related Proceedings, 35 Atty. Amado
D. Aquino further explained that the principle of according superiority to a
certificate of title earlier in date cannot, however, apply if it was procured
through fraud or was otherwise jurisdictionally flawed. Thus, if there is a
compelling and genuine reason to set aside the rule on the superiority of
earlier registered title, the Court may look into the validity of the title bearing
the latter date of registration, taking into consideration the evidence presented
by the parties.
In Golloy v. Court of Appeals, 36 there were two conflicting titles with
overlapping boundaries. The first title was registered on March 1, 1918, while
the second title was registered on August 15, 1919. Despite having been
registered at a prior date, the Court did not allow the earlier registered title of
the respondents to prevail because of the continuing possession of the
petitioners therein and the laches committed by the respondents. Hence, the
holder of an earlier registered title does not, in all instances, absolutely
triumph over a holder of a latter registered title.
In this case, the petitioners assail the numerous and serious defects in
the surveys of OCT Nos. 242, 244 and 1609, which cast doubt on the inclusion
of the subject lands in ALI's titles. Accordingly, the Court must delve into the
merits of their contentions to determine whether the subject properties are
truly and genuinely included in ALI's title. Merely relying on the date of
registration of the original titles is insufficient because it is the surveys therein
that are being assailed. It is only through a judicious scrutiny of the evidence
presented may the Court determine whether to apply the general rule or the
exception in the superiority of titles with an earlier registration date.

The survey of the registered land may be scrutinized by the courts

when compelling reasons exist
In its June 19, 2006 decision, the CA emphasized that OCT Nos. 242,
244, and 1609 carry with it the presumption of regularity and that the surveys
therein were presumably undertaken by qualified surveyors before the
issuance of the titles. In effect, the appellate court declares that the surveys of
these titles should no longer be inspected.
The Court does not agree.
Although a certificate of title serves as evidence of an indefeasible and
incontrovertible title to the property in favor of the person whose name
appears therein, 37 it is not a conclusive proof of ownership. It is a well-
settled rule that ownership is different from a certificate of title. The fact that a
person was able to secure a title in his name does not operate to vest
ownership upon him of the subject land. Registration of a piece of land under
the Torrens System does not create or vest title, because it is not a mode of
acquiring ownership. A certificate of title is merely an evidence of ownership or
title over the particular property described therein. It cannot be used to protect
a usurper from the true owner; nor can it be used as a shield for the
commission of fraud; neither does it permit one to enrich himself at the
expense of others. Its issuance in favor of a particular person does not
foreclose the possibility that the real property may be co-owned with persons
not named in the certificate, or that it may be held in trust for another person
by the registered owner. 38
Hence, the Court may inquire into the validity of the ownership of a
property by scrutinizing the movant's evidence of title and the basis of such
title. When there is compelling proof that there is doubt on the validity of the
sources or basis of such title, then an examination is proper. Thus, the surveys
of the certificates of title are not immune from judicial scrutiny, in light of the
genuine and legitimate reasons for its analysis.
In Dizon v. Rodriguez 39 and Republic v. Ayala y Cia, 40 the Court
confronted the validity of the surveys conducted on the lands to determine
whether the title was properly subdivided. It was ruled therein that subdivision
plan Psd-27941 was erroneous because it was "prepared not in accordance
with the technical descriptions in TCT No. T-722 but in disregard of it, support
the conclusion reached by both the lower court and the Court of Appeals that
Lots 49 and 1 are actually part of the territorial waters and belong to the
State." 41 Accordingly, the sole method for the Court to determine the validity
of the title was to dissect the survey upon which it was sourced. As a result, it
was discovered that the registered titles therein contained areas which belong
to the sea and foreshore lands.
 Here, only a direct review of the surveys of OCT Nos. 242, 244, and
1609, as well as OCT No. 8510 can resolve the issue on the validity of these
titles. The findings of the RTC of Las Piñas and the CA differ with respect to the
cited errors in the surveys. The Court is convinced that through a rigorous
study of the affected surveys, the valid owners of the subject properties are
can be finally adjudicated.
Finally, after resolving the various preliminary issues, the Court can now
tackle the crux of these petitions — the validity of Psu-25909, Psu-47035, Psu-
80886, and Psu-80886/SWO-20609. The resolution of this issue will decisively
determine the true and rightful owner of the subject properties.
Psu-47035, Psu-80886 and Psu-80886/SWO-20609 contain numerous
and serious irregularities which cast doubt on the validity of OCT Nos.
242, 244 and 1609
At the onset, the present case poses an issue on the validity of registered
and overlapping titles based on their surveys. The Court must commend the
RTC of Las Piñas for taking the correct procedure in resolving such issue.
In Cambridge Realty and Resources Corp. v. Eridanus Development,
Inc., 42 it was ruled that a case of overlapping of boundaries or encroachment
depends on a reliable, if not accurate, verification survey; barring one, no
overlapping or encroachment may be proved successfully, for obvious reasons.
The first step in the resolution of such cases is for the court to direct the
proper government agency concerned to conduct a verification or relocation
survey and submit a report to the court, or constitute a panel of
commissioners for the purpose. In that case, the Court lamented that the trial
court therein did not order the conduct of a verification survey and the
appointment of geodetic engineers as commissioners, to wit:
This is precisely the reason why the trial court should have
officially appointed a commissioner or panel of commissioners and
not leave the initiative to secure one to the parties: so that a
thorough investigation, study and analysis of the parties' titles could
be made in order to provide, in a comprehensive report, the
necessary information that will guide it in resolving the case
completely, and not merely leave the determination of the case to a
consideration of the parties' more often than not self-serving
evidence. 43
Similarly, in Chua v. B.E. San Diego, Inc., 44 the Court ruled that in
overlapping boundary disputes, the verification survey must be actually
conducted on the very land itself. In that case, the verification survey
conducted it was merely based on the technical description of the defective
titles. The opinion of the surveyor lacked authoritativeness because his
verification survey was not made on the land itself.
In this case, the RTC of Las Piñas issued an Order, 45 dated December 5,
1997, which directed the parties to conduct a verification survey pursuant to
the prescribed rules. Engr. Veronica Ardina-Remolar (Remolar) from the
Bureau of Lands of the DENR was the court-appointed commissioner who
supervised and coordinated the verification survey. Engrs. Rolando Nathaniel
Pada (Pada) and Alexander Ocampo (Ocampo) were the geodetic engineers for
Spouses Yu; while Engr. Lucal Francisco (Francisco) was the geodetic engineer
for ALI. They conducted actual verification survey on April 5, 6, 7 and 16, 1998
and June 8, 1998. Afterwards, Engr. Remolar submitted her Report, 46 dated
November 4, 1998, to the trial court which stated that there were overlapping
areas in the contested surveys. Likewise, Engrs. Pada and Francisco submitted
their Verification Reports and Survey Plans, 47 which were approved by the
DENR. Then, the parties presented their respective witnesses.
The RTC of Las Piñas had a technical and accurate understanding and
appreciation of the overlapping surveys of Psu-25909, Psu-47035, Psu-80886,
and Psu-80886/SWO-20609. In its decision, dated May 7, 2001, it ruled in
favor of Spouses Yu and it discussed extensively its observations and findings
regarding the overlapping areas, to wit:
From the evidence on record, it appears that the following
plans were made on the dates and by the surveyor specified herein:
Survey No. PSU-25909 March 17, 1921 A.N. Feliciano
Survey No. PSU-47035 October 21, 1925 A.N. Feliciano
Survey No. PSU-80886 July 28, 1930 A.N. Feliciano
Survey No. SWO-20609 March 6, 1931 A.N. Feliciano

Plan PSU-25909 (Exhibit "F") invoked by the plaintiffs and

authenticity of which is certified by appropriate government
custodians including Engineer Remolar, the court-designated
commissioner, appears to have been prepared on March 17, 1921
for one Andres Diaz and recites the following entries:
"THE ORIGINAL FIELD NOTES, COMPUTATIONS
AND PLAN OF THIS SURVEY EXECUTED BY A.M.
FELICIANO HAVE BEEN CHECKED AND VERIFIED IN THIS
OFFICE IN ACCORDANCE WITH SECTIONS 1858 TO
1865, ACT 2711 AND ARE HEREBY APPROVED MAY 26,
1921."
-and-
"This is to certify that this is a true and correct plan
of Psu-25909 as traced from the mounted paper of plan
Psu-25909 which is on file at T.R.S. Lands Management
Sector, N.C.R.
"This true copy of the plan is requested by the
Chief, Technical Records Section as contained in a letter
dated February 15, 1989.
TEODORICO C. CALISTERIO
Chief, Topographic 7 Special Maps Section
   
Traced by: F. SUMAGUE
Checked by: A.O. VENZON (Sgd.) 4/28/89

Thus, the Court holds that plan PSU-25909 (Exhibit "F")

is a true copy of an official document on file with the Bureau
of Lands and is, therefore, entitled to great weight and
appreciation, there being no irregularity demonstrated in the
preparation thereof.
On the other hand, an examination of Plan PSU-47035 (Exhibit
"G") invites suspicion thereto. As observed by Engineer Pada in
his verification survey report, the photocopy of plan PSU-47035
submitted by the defendant shows that the plan appears to have
done for one Estanislao Mayuga, while in the certified true copy of
the pertinent decree (Exhibit "HH"/Exhibit 20), it appears that the
same was done for a certain Dominador Mayuga. Viewing this
discrepancy in the light of the fact that the plan for PSU-47035 was
undertaken on October 21, 1925 or more than four years after the
survey for plan PSU-25909 was done, the same discrepancy leads
the Court to conclude that PSU-47035 is spurious and void.
The third plan enumerated above, plan PSU-80886 (Exhibit
"II"/Exhibit 29), prepared on July 28, 1930 or more than five years
since plan PSU-25909 was done for Andres Diaz, also invites
suspicion. An examination of the same reveals that the lower right
hand corner of the plan, which bears the serial number PSU-80886,
is manifestly different from the main document in terms of the
intensity of its contrast, and that the change in the intensity of the
shading is abrupt as one examines the document starting from the
lower right hand corner to anywhere else in the same document.
Also, it is worth observing that the main document, minus the lower
right hand corner mentioned, does not indicate anything to even
suggest that it pertains to plan PSU-80886. For these reasons, the
contention of the plaintiffs that this lower right hand corner of the
plan appears to be a spurious attachment to the main document to
make the main document it look like it is actually plan PSU-80886,
has merit.
Another discrepancy invites further suspicion under the
circumstances. The main document bears what appears to be the
actual signature of the surveyor, Mr. A.N. Feliciano while the lower
right hand corner of the plan mentions only the name "Serafin P.
Hidalgo — Director of Lands" with the prefix "Sgd." But without any
actual signature. An interesting query arises: Why would the
document bear an actual signature of the surveyor without bearing
the signature of the Director of Lands which in essence is the more
important signature for authentication purposes?
Still another discrepancy is with respect to a monument
appearing in PSU-80886 (Exhibit "II"). At the upper off-right portion
thereof are entries referring to a monument more specifically
described as B.L.L.M. No. 4. According to Engineer Pada, citing a
certified document taken from the Land Management Bureau of the
Department of Environment and Natural Resources,
this monument was established  only on November 27, 1937 (TSN,
March 24, 2000, pp. 18-20) which is more than seven years after
PSU-80886 was undertaken. How a monument which was
established only in November 1937 can actually exist in a plan
made on July 28, 1930 is absolutely incredible.
In view of the foregoing, the Court finds good reason to
consider PSU-80886 (Exhibit "II" and 29), relied upon by the
defendant, spurious and void as well.
The fourth and last plan mentioned is SWO-20609, done on
March 6, 1931.
It is admitted by the geodetic engineer of the defendant that a
specific work order (SWO) co-exists with a survey plan, and that in
particular, SWO-20609 was undertaken in view of alleged errors in
plan PSU-80886 (TSN, February 16, 2001, pp. 31-32). Therefore,
SWO-20609 must be evaluated in relation to plan PSU-80886. From
this perspective, the Court also notes that SWO-20609 is attended
with discrepancies thus rendering it devoid of any credence.
 For the record, in PSU-80886 (Exhibit "II"/Exhibits 29 and 30),
the land concerned appears to have been surveyed for one Eduardo
C. Guico while in PSU-80886/SWO-20609 (Exhibit "H"/Exhibit 35),
the same land appears to have been surveyed for one
Alberto Yaptinchay. In addition, it is evident in PSU-80886 (Exhibits
29 and 30) that vital entries regarding the total area of the property
covered by the document bear many erasures, particularly two
erasures as to the total area in terms of number and one erasure as
to that total area in terms of unit of measurement.
The Court likewise notes with suspicion the fact that all four
survey plans were purportedly undertaken by one and the same
surveyor, a Mr. A.N. Feliciano. It seems extremely unusual why the
same A.N. Feliciano, who surveyed the same property for Andres
Diaz in 1921, would do so again in 1925 with different results,
and again in 1930 once more with different results, and still one
more time in 1931 with still different results. The only reasonable
and logical conclusion under these telling circumstances is that the
second, third and last surveys corresponding to PSU-47035, PSU-
80886 and PSU-80886/SWO-20609 are all spurious and void, too.
The Court went through the record of the case and no
satisfactory explanation has been offered by the defendant
regarding these discrepancies. Even the documentary evidence
presented by the defendant offers no plausible reason for the Court
to reject the contentions of the plaintiffs. This all the more
strengthens the view of the Court to effect that PSU-47035, PSU-
80886 and PSU-80886/SWO-20609 are spurious and void ab initio.
This view is also strengthened by the credentials of Engineer Pada
whom the Court considers as a very credible witness.
All in all, the Court is convinced that the title of the plaintiffs
to the properties in dispute is superior over those invoked by the
defendant. 48 [Emphases supplied]
The findings of the RTC of Las Piñas were affirmed by the CA in its
February 8, 2005 decision. It agreed that there are indeed glaring errors in the
surveys relied upon by ALI. These errors could not be merely disregarded as
they affect the authenticity and validity of OCT Nos. 242, 244 and 1609.
Conclusion
After a judicious study of the case, the Court agrees with the findings of
the RTC of Las Piñas and the CA in its February 8, 2005 decision.
First, Psu-25909 was conducted by a certain A.N. Feliciano in favor of
Andres Diaz and was approved on May 26, 1921. Curiously, the subsequent
surveys of Psu-47035 for a certain Dominador Mayuga, Psu-80886 for a certain
Guico and Psu-80886/SWO-20609 for a certain Yaptinchay were also
conducted by A.N. Feliciano. It is dubious how the same surveyor or
agrimensor conducted Psu-47035, Psu-80886 and Psu-80886/SWO-20609
even though an earlier survey on Psu-25909, which the surveyor should
obviously be aware, was already conducted on the same parcel of land. Engr.
Pada, witness of Spouses Yu, also observed this irregularity and stated that
this practice is not the standard norm in conducting surveys.
Second, even though a single entity conducted the surveys, the lands
therein were described to be located in different places. Psu-25909, the
earliest dated survey, indicated its location at Sitio of Kay Monica, Barrio Pugad
Lawin, Las Piñas, Rizal, while Psu-47035 and Psu-80886 stated their locations
at Sitio May Kokek, Barrio Almanza, Las Piñas, Rizal, and Barrio Tindig na
Mangga, Las Piñas, Rizal, respectively. Again, Engr. Pada observed this
peculiarity and pointed out that the subject properties should have had the
same address. ALI did not provide an explanation to the discrepancies in the
stated addresses. Thus, it led the CA to believe that the same surveyor
indicated different locations to prevent the discovery of the questionable
surveys over the same parcel of land.
Third, there is a discrepancy as to who requested the survey of Psu-
47035. The photocopy of Psu-47035 as submitted by ALI shows that it was
done for a certain Estanislao Mayuga. On the other hand, the certified true
copy of Psu-47035 depicts that it was made for Dominador Mayuga. Once
more, Engr. Pada noticed this discrepancy on the said survey. ALI, however,
did not give any justification on the diverging detail, which raises question as
to the authenticity and genuineness of Psu-47035.
Fourth, Psu-80886 does not contain the signature of then Director of
Lands, Serafin P. Hidalgo; rather, the prefix "Sgd." was simply indicated
therein. As properly observed by the CA in its February 8, 2005 decision, any
person can place the said prefix and it does not show that the Director of
Lands actually signed and gave his imprimatur to Psu-80886. The absence of
the approval of the Director of Lands on Psu-80886 added doubt to its
legitimacy. The excuse proffered by ALI — that Psu-80886 is regular and valid
simply because land registration proceedings were undertaken — is insufficient
to cure the crucial defect in the survey.
In University of the Philippines v. Rosario, 49 it was held that "[n]o plan
or survey may be admitted in land registration proceedings until approved by
the Director of Lands. The submission of the plan is a statutory requirement of
mandatory character. Unless a plan and its technical description are duly
approved by the Director of Lands, the same are of no value." Hence, the lack
of approval by the Director of Lands of Psu-80886 casts doubt on its legality. It
also affects the jurisdictional facts before the land registration courts which
relied on Psu-80886 for registration.
Fifth, Psu-80886 was issued on July 28, 1930 but it referred to a specific
monument described as B.L.L.M No. 4. According to the LMB-DENR, the said
monument was only established on November 27, 1937, more than seven
years after Psu-80886 was issued. 50 This discrepancy was duly noted in the
findings of the verification report and it was affirmed by the testimony of Engr.
Pada. Thus, both the RTC of Las Piñas and the CA in its February 8, 2005
decision properly observed that it was highly irregular for Psu-80886 to refer to
B.L.L.M No. 4 because the said monument existed seven years later.
Sixth, ALI attempted to explain this anomaly by stating that Psu-80886
was amended by Psu-80886/SWO-20609, a Special Work Order, in view of the
discrepancies of the former. While Psu-80886/SWO-20609 is dated March 6,
1931, ALI insists that it was actually conducted in 1937 and approved in 1940.
However, in its February 8, 2005 decision, the CA noted that said testimony
crumbled under cross-examination as ALI's witness, Engr. Felino
Cortez (Cortez), could not reaffirm the said justification for Psu-80886's
manifest error of including a latter dated monument. Also, the Court observed
that ALI's other witness, Engr. Percival Bacani, testified that he does not know
why B.L.L.M No. 4 was used in preparing Psu-80886 even though the said
monument appears on all the titles. 51 Moreover, the alleged explanation
provided by ALI to justify the existence of B.L.L.M No. 4 in Psu-80886 was not
indicated at all in the verification report and survey plan they submitted before
the RTC of Las Piñas. Accordingly, ALI did not resolve the uncertainty
surrounding the reference to B.L.L.M No. 4 by Psu-80886 and it seriously
damages the validity of the said survey.
 Seventh, ALI explained that Psu-80886/SWO-20609 was undertaken to
correct a discrepancy in Psu-80886. Its witness, Engr. Cortez, confirmed that
Psu-80886/SWO-20609 was commenced to resolve the mistake in the
timeline. He added that the timeline published in the notice of initial hearing in
the Official Gazette for Psu-80886 was different from the approved plan in Psu-
80886/SWO-20609. He also noted some difference in the area of Psu-80886
compared to Psu-80886/SWO-20609. 52 These admissions show that Psu-
80886 was flawed from the very beginning. Yaptinchay merely requested the
conduct of Psu-80886/SWO-20609 in order to resurrect or salvage the
erroneous Psu-80886 and to wrongfully acquire OCT No. 242. It does not,
however, erase the fact that Psu-80886, from which ALI's titles originated, is
marred with irregularities. This is a badge of fraud that further runs counter to
the legitimacy of the surveys that ALI relied upon.
Eight, the RTC of Las Piñas continuously observed the irregularities in
Psu-80886. It stated that "the total area of the property covered by the
document bear many erasures, particularly two erasures as to the total area in
terms of number and one erasure as to that total area in terms of unit of
measurement." 53 Manifestly, no explanation was provided why it was
necessary to make erasures of the crucial data in the survey regarding the
total area.
Ninth, the RTC of Las Piñas continued its observations regarding Psu-
80886's anomalies. It added that "[a]n examination of the same reveals that
the lower right hand corner of the plan, which bears the serial number PSU-
80886, is manifestly different from the main document in terms of the
intensity of its contrast, and that the change in the intensity of the shading is
abrupt as one examines the document starting from the lower right hand
corner to anywhere else in the same document. Also, it is worth observing that
the main document, minus the lower right hand corner mentioned, does not
indicate anything to even suggest that it pertains to plan PSU-80886. For these
reasons, the contention of the plaintiffs that this lower right hand corner of the
plan appears to be a spurious attachment to the main document to make the
main document it look like it is actually plan PSU-80886, has merit." 54 These
observations were based on the first-hand examination of the surveys,
verification reports, and witnesses by the RTC of Las Piñas.
Tenth, as correctly emphasized by the CA in its February 8, 2005
decision, the Supreme Court had previously noted the defects surrounding Psu-
80886 in the case of Guico v. San Pedro. The said case involved the application
of registration of Guico of a tract of land covered by Psu-80886, subdivided
into eleven (11) lots, filed on November 4, 1930 before the Court of First
Instance of Rizal (CFI). The said land originated from Pedro Lopez de Leon,
covered by Psu-16400. It was transferred to his son, Mariano Lopez de Leon,
and then one-third portion thereof was conveyed to Guico. Several oppositors
appeared therein to assail Guico's application. On August 19, 1935, the CFI
ruled that only Lot Nos. 1, 2, 3, 6, 7 and 10 may be registered in the name of
Guico.
On appeal, the CA disposed the case in this wise:
Adjudicamos a Eduardo C. Guico los lotes 2 y 3 de su plano y
las porciones que quedan de las adjudicadas a el por el Juzgado
inferior y que no estan comprendidos en los terrenos reclamados
por Valeriano Miranda, Nicasio San Pedro, Jose Dollenton, Gregorio
Arciaga, Donato Navarro, Leon Navarro, Dionisio Dollenton, Basilio
Navarro, Bernardo Mellama y Lorenzo Dollenton, debiendo al efecto
presentar un plano enmendado debidamente aprobado por el
 Director de Terrenos, confirmado asi la decision apelada en lo que
estuvira conforme, y revocandola en lo que no estuviera. 55
When translated, the text reads:
We adjudicate to Eduardo C. Guico Lots 2 and 3 of his plant
and the portions that remain adjudicated to him by the lower court
and that are not included in the lands claimed by Valeriano Miranda,
Nicasio San Pedro, Jose Dollenton, Gregorio Arciaga, Donato
Navarro, Leon Navarro, Dionisio Dollenton, Basilio Navarro,
Bernardo Mellama, and Lorenzo Dollenton, under the obligation
to present an amended properly approved plan to the
Director of Lands, confirming therefore the appealed
decision what is consistent with this and revoking it on what
is not. 56 [Emphasis and underscoring supplied]
Undeterred, Guico filed an appeal before the Supreme Court alleging that
the CA erred in declaring that there was no imperfect title in favor of Pedro
Lopez de Leon, his predecessor-in-interest.
In its decision, dated June 20, 1941, the Court dismissed the appeal of
Guico and affirmed the CA ruling. It was held that "la solicitud de Pedro Lopez
de Leon composicion con el Estado no fue aprobada porque no pudo hacerse la
medicion correspondiente." Its translation stated that the application of Pedro
Lopez de Leon regarding the composition of the estate was not approved
because he was not able to submit the corresponding measurements, referring
to Psu-16400, from which Psu-80886 was derived.
In addition, the Supreme Court noted that "while abundant proof is
offered concerning the filing of the application for composition title by the
original possessor, the records nowhere exhibits compliance with the operative
requirement of said section 45 (a) of Act No. 2874, that such applicants or
grantees and their heirs have occupied and cultivated said lands continuously
since the filing of their applications." 57
Consequently, the Court observed two major irregularities in the
application of Guico under Psu-80886, (1) his predecessor-in-interest did not
submit any valid measurement of the estate from which Psu-80886 was
derived; and (2) that the applicant or his grantees failed to occupy or cultivate
the subject land continuously. These findings are substantial and significant as
these affect the validity of Psu-80886.
ALI insisted that Guico v. San Pedro should actually be construed in their
favor because the Court affirmed the ruling of the CA which awarded Lot Nos.
2 and 3 to Guico, hence, Psu-80886 was valid.
The Court is not persuaded.
A reading of the dispositive portion of the CA decision in Guico v. San
Pedro does not categorically state that Lot Nos. 2 and 3 were absolutely and
completely awarded to Guico. The award of the said lots was subject to the
vital and primordial condition or obligation to present to the court an amended,
properly approved, plan to the Director of Lands. Evidently, the Court was not
satisfied with Psu-80886 because it lacked the requisites for a valid survey.
Thus, it required Guico to secure an amended and correctly approved plan,
signed by the Director of Lands. The purpose of this new plan was to confirm
that the appealed decision was consistent with the facts established therein.
The records, however, did not show that Guico indeed secured an amended
and properly approved plan. Psu-80886/SWO-20609 obviously was not the
required amended order because a special work order is different from an
amended survey. 58 Moreover, the said special work order was initiated by
Yaptinchay, and not Guico. The insufficiency of Psu-80886 is evident in this
decision.
Thus, as Guico did not subject Psu-80886 to a valid amended approved
plan, he was not awarded Lot Nos. 2 and 3 for registration. It can be seen from
the OCT Nos. 242, 244, and 1609; that Guico never secured their registration
because the Court discovered the anomalous Psu-80886. The Court's
pronouncement in Guico v. San Pedro, although promulgated more than half a
century ago, must be respected in accordance with the rule on judicial
adherence.
Lastly, the Court also agrees with the finding of the CA in its February 8,
2005 decision that Psu-25909 bears all the hallmarks of verity. It was
established that Andres Diaz was the very first claimant of the subject property
and was the proponent of Psu-25909. The said survey clearly contained the
signature of the surveyor and the Director of Lands, as can be seen on its face.
In stark contrast with Psu-80886, which contained alterations and erasures,
Psu-25909 has none. The original of Psu-25909 was likewise on file with the
Bureau of Lands and a microfilm reproduction was readily obtained from the
file of the said office, unlike in Psu-80886 and Psu-47909.
The RTC of Las Piñas shared this examination. It ruled that Psu-25909
was a true copy of an official document on file with the Bureau of Lands. It also
gave great weight and appreciation to the said survey because no
irregularity was demonstrated in the preparation thereof. The trial court added
that Engr. Remolar, as the appropriate government custodian and court-
appointed commissioner, certified the authenticity of Psu-25909.
In fine, the Court finds that there are numerous defects in Psu-47909,
Psu-80886 and Psu-80886/SWO-20609, which are all hallmarks of fraud, viz.:
1. That A.N. Feliciano conducted all the surveys even though he should
have known that the earlier dated survey Psu-25909, already
covered the same parcel of land;
2. That Psu-47909, Psu-80886 and Psu-25909 covered the same parcel
of land and were conducted by the same surveyor but each survey
stated a different location;
3. That the photocopy of Psu-47035, as submitted by ALI, shows that it
was done for a certain Estanislao Mayuga but the certified true copy
of Psu-47035 depicted that it was made for Dominador Mayuga;
4. That Psu-80886 did not contain the signature of then Director of
Lands, Serafin P. Hidalgo, and it is well-settled rule that no plan or
survey may be admitted in land registration proceedings until
approved by the Director of Lands;
5. That Psu-80886 was issued on July 28, 1930 but it referred to a
specific monument described as B.L.L.M No. 4, which was only
established on November 27, 1937;
6. That ALI attempted to explain this anomaly by stating that Psu-80886
was amended by Psu-80886/SWO-20609, which was done in 1937.
On cross-examination, however, the witness of ALI was unable to
reaffirm that the special work order was rightly performed in 1937
and the said explanation was not reflected in the verification report
and survey plan of ALI;
7. That Psu-80886/SWO-20609 was undertaken to correct a discrepancy
in Psu-80886, which was an admission that the latter survey, from
which the titles of ALI originated, was defective;
 8. That the total area of the property covered by Psu-80886 contained
many erasures, which were not satisfactorily explained;
9. That there was a difference in the intensity of the lower right portion of
Psu-80886 which showed that it may simply have been an
attachment to the main document; and
10. That in Guico v. San Pedro, the Court found that irregularities
surround Psu-80886 because its predecessor-in-interest did not
submit the corresponding measurement of his survey and the
applicant or his grantees failed to occupy and cultivate the subject
land continuously. Further, Lot Nos. 2 and 3 of Psu-80886 were not
awarded to Guico because the records do not show that he
submitted the required amended properly approved plan by the
Director of Lands.
In contrast, Psu-25909 bore all the hallmarks of verity because it
contains the signatures of the surveyor and the Director of Lands, and
it did not contain any erasure or alterations thereon. Likewise, a duly
authenticated copy of Psu-25909 is readily available in the Bureau of
Lands.
The foregoing anomalies surrounding Psu-47909, Psu-80886, and Psu-
80886/SWO-20609 were similarly observed by the RTC of Las Piñas. The trial
court was able to establish its findings based on the verification survey it
ordered, under the supervision of the court-appointed commissioner. Hence,
the trial court had the direct access to the evidence presented by the parties as
well as the verification reports and survey plans submitted by the parties. It is
a fundamental rule that the conclusion and findings of fact by the trial court
are entitled to great weight on appeal and should not be disturbed except for
strong and cogent reasons, because the trial court is in a better position to
examine real evidence, as well as to observe the demeanor of the witnesses
while testifying in the case. 59
Even without considering (1) the certification from the DENR-LMB that
Psu-80886 is included in the list of restricted plans because of the doubtful
signature of the surveyor, and (2) the memorandum, dated August 3, 2000,
from the Assistant Regional Director of the DENR directing all personnel of the
Land Survey Division not to issue copies or technical descriptions of Psu-80886
and Psu-47035, there were numerous defects on the surveys that affected
their validity. The exclusion of these documents did not alter the finding of the
Court that the surveys were spurious and must be set aside.
Further, the Court cannot subscribe to the finding of the CA in its June
19, 2006 decision that the numerous defects in Psu-47909, Psu-80886 and
Psu-80886/SWO-20609 are "not enough to deprive the assailed decree of
registration of its conclusive effect, neither are they sufficient to arrive at the
conclusion that the survey was definitely, certainly, conclusively
spurious." 60 The Court cannot close its eyes to the blatant defects on the
surveys upon which the original titles of ALI were derived simply because its
titles were registered. To allow these certificates of title in the registration
books, even though these were sourced from invalid surveys, would tarnish
and damage the Torrens system of registration, rather than uphold its
integrity.
It is an enshrined principle in this jurisdiction that registration is not a
mode of acquiring ownership. A certificate of title merely confirms or records
title already existing and vested. The indefeasibility of a Torrens title should
not be used as a means to perpetrate fraud against the rightful owner of real
property. Good faith must concur with registration because, otherwise,
registration would be an exercise in futility. A Torrens title does not furnish a
shield for fraud, notwithstanding the long-standing rule that registration is a
constructive notice of title binding upon the whole world. The legal principle is
that if the registration of the land is fraudulent, the person in whose name the
land is registered holds it as a mere trustee. 61
When a land registration decree is marred by severe irregularity that
discredits the integrity of the Torrens system, the Court will not think twice in
striking down such illegal title in order to protect the public against
unscrupulous and illicit land ownership. Thus, due to the numerous, blatant
and unjustifiable errors in Psu-47909, Psu-80886, and Psu-80886/SWO-20609,
these must be declared void. Likewise, OCT Nos. 242, 244, and 1609, their
transfer certificates, and instruments of conveyances that relied on the
anomalous surveys, must be absolutely declared void ab initio.
With respect to the Diaz case, the Court agrees with the CA in its
February 8, 2005 decision that Spouses Diaz did not commit fraud. As Psu-
47909, Psu-80886 and Psu-80886/SWO-20609 are void, then OCT Nos. 242,
244 and 1609 are also void ab initio. The transfer certificates in the hands of
third parties, including CPJ Corporation and ALI, are likewise void. Accordingly,
Spouses Diaz had no obligation to inform CPJ Corporation of their application
for registration and they could not be held guilty of fraud.
WHEREFORE, the petitions are GRANTED. The June 19, 2006 Decision
of the Court of Appeals in CA-G.R. CV Nos. 61593 & 70622 is
hereby REVERSED and SET ASIDE. The February 8, 2005 Amended Decision
of the Court of Appeals is hereby REINSTATED.
SO ORDERED.
|||  (Spouses Yu Hwa Ping v. Ayala Land, Inc., G.R. Nos. 173120 &
173141, [July 26, 2017], 814 PHIL 468-507)

[G.R. No. 213716. October 10, 2017.]

JOSE S. RAMISCAL, JR., petitioner, vs. COMMISSION ON

AUDIT, respondent.

DECISION
JARDELEZA, J  p:

This is a petition for review on certiorari 1 under Rule 64, in relation to

Rule 65, of the Rules of Court, assailing the Decision 2 dated September 13,
2012 and Resolution 3 dated May 6, 2014 of the Commission on Audit (COA)
in COA Decision No. 2012-139. The Decision denied petitioner Jose S.
Ramiscal's appeal for exclusion from liability in Notice of Disallowance (ND) No.
2010-07-084-(1996) and Notice of Charge (NC) No. 2010-07-001-(1996),
while the Resolution denied petitioner's motion for reconsideration for lack of
merit. TAIaHE
During the 11th Congress (1998 to 2001), the Senate's Committees on
Accountability of Public Officers and Investigations (Blue Ribbon) and National
Defense and Security held hearings to investigate the alleged anomalous
acquisitions of land by the Armed Forces of the Philippines Retirement and
Separation Benefits System (AFP-RSBS) in Calamba, Laguna and Tanauan,
Batangas. Prompted by a series of resolutions by the Senate, the Deputy
Ombudsman for the Military and other Law Enforcement Offices sent to the
COA a request dated April 29, 2004 for the conduct of audit on past and
present transactions of the AFP-RSBS. Thus, the COA constituted a special
audit team (SAT) 4 to conduct the special audit/investigation. 5
The SAT found, among others, that the AFP-RSBS, represented by
petitioner, purchased from Concord Resources, Inc. 6 four parcels of land with
a total area of 227,562 square meters in Calamba, Laguna (collectively, the
Calamba properties). These lands were intended to serve as right-of-way to
the 600-hectare property of the AFP-RSBS called the Calamba Land Banking
project. 7 The SAT discovered that two deeds of sale containing different
considerations were executed to cover the purchase. The deed of sale recorded
with the Registry of Deeds of Calamba, Laguna disclosed that the total
purchase price was P91,024,800. On the other hand, the records obtained by
the audit team from the AFP-RSBS management revealed that another deed of
sale was executed by Concord Resources, Inc. alone and has a purchase price
of P341,343,000. The AFP-RSBS paid Concord Resources, Inc. this
consideration as was recorded in its books of account. 8
The SAT concluded that the deed of sale filed before the Registry of
Deeds was the true deed of sale, considering that it was signed by both
parties. It followed then that the true purchase price was P91,024,800 and as
such, the government lost P250,318,200 when it allegedly paid Concord
Resources, Inc. P341,343,000. 9
The SAT also concluded that the execution of two deeds of sale covering
the same parcels of land resulted in the underpayment of capital gains and
documentary stamp taxes in the amount of P16,270,683. Based on the amount
paid by the AFP-RSBS to Concord Resources, Inc., the total taxes that should
have been paid was P22,187,295 and not P5,916,612. 10
On October 10, 2005, the SAT issued Audit Observation Memorandum
No. 2005-01 (AOM) to then AFP-RSBS President, Cesar Jaime for comment. 11
On July 28, 2010, the SAT issued ND No. 2010-07-084-(1996) 12 and
NC No. 2010-07-001-(1996). 13 The ND directed petitioner, Elizabeth Liang,
Jesus Garcia, and Rosemarie Ragasa 14 to immediately settle the amount of
P250,318,200 representing excess payment for the Calamba properties. The
NC, on the other hand, directed petitioner, Oscar Martinez, 15 and Alma
Paraiso 16 to immediately settle the amount of P16,270,683 representing the
deficiency for capital gains and documentary stamp taxes.
Petitioner appealed the ND and the NC before the Commission Proper,
but the same was denied for lack of merit.
 Hence, this petition which raises the following issues:
1. Whether the action of the COA in issuing the ND and NC had
already prescribed;
2. Whether the COA had already lost its jurisdiction over the case
and on the person of petitioner when a criminal case, involving the
same set of facts and circumstances, had already been filed with
the Sandiganbayan;
3. Whether the COA is authorized to issue an NC involving the
payment of capital gains and documentary stamp taxes which are
national internal revenue taxes; and
4. Whether the COA has authority to institute an administrative
complaint or proceedings against petitioner who had already
resigned.
On March 27, 2017, petitioner also filed an Urgent Motion for Issuance of
Temporary Restraining Order, praying that the COA be enjoined to suspend or
recall its Order of Execution No. 2017-012 on the NC.
We partially grant the petition.
The Constitution and the Rules of Court limit the permissible scope of
inquiry in petitions under Rules 64 and 65 to errors of jurisdiction or grave
abuse of discretion. 17 There is grave abuse of discretion when there is an
evasion of a positive duty or a virtual refusal to perform a duty enjoined by law
or to act in contemplation of law as when the judgment rendered is not based
on law and evidence but on caprice, whim and despotism. 18 Hence, unless
tainted with grave abuse of discretion, the COA's simple errors of judgment
cannot be reviewed even by this Court. 19 Rather, the general policy has been
to accord weight and respect to the decisions of the COA. The limitation of the
Court's power of review over the COA's rulings merely complements its nature
as an independent constitutional body that is tasked to safeguard the proper
use of government (and, ultimately, the people's) property by vesting it with
the power to: (1) determine whether government entities comply with the law
and the rules in disbursing public funds; and (2) disallow illegal disbursements
of these funds. 20 The deference is also based on the doctrine of separation of
powers and the COA's presumed expertise in the laws it is entrusted to
enforce. 21 cDHAES
Bearing the foregoing principles in mind, we now proceed to determine
whether the COA gravely abused its discretion in affirming the ND and NC
issued against petitioner.

Petitioner argues that the ND and NC have already prescribed pursuant to

Articles 1149 and 1153 of the Civil Code. Article 1149 provides that all other
actions whose periods are not fixed in the Civil Code or in other laws must be
brought within five (5) years from the time the right of action accrues. Article
1153, on the other hand, provides that the period for prescription of actions to
demand accounting runs from the day the persons who should render the
same cease in their functions. Petitioner explains that the transaction subject
of the ND and NC occurred in 1997, a year before he resigned in 1998. He
concluded that in accordance with Articles 1149 and 1153, the COA has until
2003 within which to issue an ND or NC. As it happened, however, it was only
in 2004 when the audit investigation transpired. Consequently, the ND and NC
issued against him in 2010 have already prescribed.
 Petitioner is mistaken. The right of the State, through the COA, to
recover public funds that have been established to be irregularly and illegally
disbursed does not prescribe.
Article 1108 (4) of the Civil Code expressly provides that prescription
does not run against the State and its subdivisions. This rule has been
consistently adhered to in a long line of cases involving reversion of public
lands, where it is often repeated that when the government is the real party in
interest, and it is proceeding mainly to assert its own right to recover its own
property, there can, as a rule, be no defense grounded on laches or
prescription. 22 We find that this rule applies, regardless of the nature of the
government property. Article 1108 (4) does not distinguish between real or
personal properties of the State. There is also no reason why the logic behind
the rule's application to reversion cases should not equally apply to the
recovery of any form of government property. In fact, in an early case
involving a collection suit for unpaid loans between the Republic and a private
party, the Court, citing Article 1108 (4) of the Civil Code, held that the case
was brought by the Republic in the exercise of its sovereign functions to
protect the interests of the State over a public property. 23
Moreover, the SAT was created by authority of COA Legal and
Adjudication Office Order No. 2004-125. SATs may be created by the Legal and
Adjudication Office of the COA based on complaints or audit findings indicating
existence of fraud as contained in audit reports or audit observation
memoranda. 24 This flows from the investigative and inquisitorial powers of
the COA under Section 40 of Presidential Decree (PD) No. 1445, otherwise
known as the Government Auditing Code of the Philippines. n 25 Thus, while
ordinarily, under Section 52 of PD 1445, a settled account may only be
reopened or reviewed within three years after the original settlement on the
grounds that it is tainted with fraud, collusion, or error calculation, or when
new and material evidence is discovered, a SAT is not constrained by this time
limit. It may still reopen and review accounts that have already been post-
audited and/or settled pursuant to Section 52. An Office Order directing the
special audit is deemed sufficient authority to reopen the accounts. 26 As
applied here, however, there is as yet no settled account to speak of because it
was only in 2003 when the nature of the AFP-RSBS as a government or public
entity was decided with finality in People v. Sandiganbayan, Jose S. Ramiscal,
Jr., et al. 27
Even if we follow petitioner's argument that Articles 1149 and 1153 of
the Civil Code apply here, the action of the COA is still not barred by the
statute of limitations. Indeed, petitioner's actions occurred in 1997, after the
consummated sale of the Calamba properties and its supposed inclusion in the
account of the AFP-RSBS. However, the COA's cause of action would accrue
later, for it was only in 2004 when it was informed of a possible irregularity of
the sale when the Ombudsman requested it to conduct an audit of prior
transactions of the AFP-RSBS.
A cause of action arises when that which should have been done is not
done, or that which should not have been done is done. A party's right of
action accrues only when the confluence of the following elements is
established: (a) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (b) an obligation on the part of defendant
to respect such right; and (c) an act or omission on the part of such defendant
violative of the right of the plaintiff. It is only when the last element occurs or
takes place can it be said in law that a cause of action has arisen. More, the
aggrieved party must have either actual or presumptive knowledge of the
violation by the guilty party of his rights either by an act or
omission. 28 ASEcHI
To recall, the Ombudsman requested the COA to conduct an audit in view
of People v. Sandiganbayan, Jose Ramiscal, Jr., et al., where the Court ruled
that the AFP is a government entity whose funds are public in nature.
Petitioner argued in that case that the AFP-RSBS is a private entity. He, in fact,
admitted in his Appeal Memorandum before the COA that prior to People v.
Sandiganbayan, Jose Ramiscal, Jr., et al., the AFP-RSBS has been operating as
a private entity since its creation in 1973. 29 Thus, the special audit in 2004
was the first audit ever conducted over its funds.
The COA immediately created the SAT in 2004 upon the request of
Ombudsman. In 2005, the SAT had issued its AOM against the AFP-RSBS. At
this point, however, an AOM is merely an initial step in the conduct of an
investigative audit to determine the propriety of the disbursements
made. 30 The AOM issued to the AFP-RSBS, in particular, merely requested it
to explain: (1) why the AFP-RSBS paid Concord Resources, Inc. P341,343,000
based on a unilateral deed of sale instead of P91,024,800 pursuant to a
bilateral deed of sale executed by the parties; (2) why the AFP-RSBS
acquiesced on the execution of two (2) deeds of sale covering the same
parcels of land that resulted in the underpayment of taxes; (3) which of the
two (2) deeds of sale is genuine; and (4) why the AFP-RSBS paid a
consideration which is 328% higher than the property's zonal valuation
per Department of Finance Order No. 16-97 dated December 16, 1996. 31
After the issuance of an AOM, there are still several steps to be
conducted before a final conclusion can be made or before the proper action
can be had against the auditee. 32 As we have elaborated in Corales v.
Republic:
A perusal of COA Memorandum No. 2002-053, particularly Roman
Numeral III, Letter A, paragraphs 1 to 5 and 9, reveals that any
finding or observation by the Auditor stated in the AOM is not yet
conclusive, as the comment/justification of the head of office or his
duly authorized representative is still necessary before the Auditor
can make any conclusion. The Auditor may give due course or find
the comment/justification to be without merit but in either case, the
Auditor shall clearly state the reason for the conclusion reached and
recommendation made. Subsequent thereto, the Auditor shall
transmit the AOM, together with the comment or justification of the
Auditee and the former's recommendation to the Director, Legal and
Adjudication Office (DLAO), for the sector concerned in Metro Manila
and/or the Regional Legal and Adjudication Cluster Director
(RLACD) in the case of regions. The transmittal shall be coursed
through the Cluster Director concerned and the Regional Cluster
Director, as the case may be, for their own comment and
recommendation. The DLAO for the sector concerned in the Central
Office and the RLACD shall make the necessary evaluation of the
records transmitted with the AOM. When, on the basis thereof, he
finds that the transaction should be suspended or disallowed, he will
then issue the corresponding Notice of Suspension (NS), Notice of
Disallowance (ND) or Notice of Charge (NC), as the case may be,
furnishing a copy thereof to the Cluster Director. Otherwise, the
Director may dispatch a team to conduct further investigation work
to justify the contemplated action. If after in-depth investigation,
the DLAO for each sector in Metro Manila and the RLACD for the
regions find that the issuance of the NS, ND, and NC is warranted,
 he shall issue the same and transmit such NS, ND or NC, as the
case may be, to the agency head and other persons found liable
therefor. 33
From the foregoing, it would be from the issuance of an AOM in 2005 that
the COA's right of action against petitioner, or its right to disallow or charge
AFP-RSBS' accounts, would have only accrued. It was only then that the COA
would have had actual or presumptive knowledge of any illegal or irregular
disbursement of public funds. Hence, the COA would have had until 2010
within which to issue a notice of disallowance or charge, which is considered as
an audit decision, recommendation or disposition. 34

II

Petitioner argues that the audit proceedings may no longer proceed

against him because of his prior retirement and the pendency of a criminal
case involving the same facts before the Sandiganbayan. We disagree.
The "threefold liability rule" holds that the wrongful acts or omissions of a
public officer may give rise to civil, criminal and administrative liability. 35 This
simply means that a public officer may be held civilly, criminally, and
administratively liable for a wrongful doing. Thus, if such violation or wrongful
act results in damages to an individual, the public officer may be held civilly
liable to reimburse the injured party. If the law violated attaches a penal
sanction, the erring officer may also be punished criminally. Finally, such
violation may also lead to suspension, removal from office, or other
administrative sanctions. 36
The action that may result for each liability under the "threefold liability
rule" may proceed independently of one another, as in fact, the quantum of
evidence required in each case is different. 37 Thus, in Reyna v. Commission
on Audit, 38 we held that a criminal case filed before the Office of the
Ombudsman is distinct and separate from the proceedings on the disallowance
before the COA.
Furthermore, the right of the government to exercise administrative
supervision over erring public officials is lost when they cease their functions in
office. Consequently, the government must commence an administrative case
while they are in office; otherwise, the disciplining body would no longer have
any jurisdiction over them. The same is not true with civil and criminal cases.
We have ruled in the past that even if an administrative case may no longer be
filed against public officials who have already resigned or retired, criminal and
civil cases may still be filed against them. 39 The administrative case
contemplated under the threefold liability rule is one that goes into the conduct
of the public official and is intended to be disciplinary. ITAaHc
This is not the nature of the present case against petitioner. The audit
proceedings before the COA may be characterized as administrative, but only
in the sense that the COA is an administrative body. Essentially, though, the
conduct of the audit was not an exercise of the government's administrative
supervision over petitioner where he may be meted out with a penalty of
suspension or dismissal from office, with an order of restitution a mere
accessory penalty. What was being determined through the COA audit
proceedings was his civil liability and accountability over the excess in the
disbursement of public funds and the underpaid taxes. 40 The audit
proceedings not being an administrative case against him, petitioner's
resignation in 1998 does not serve to bar the present case.
 III

Petitioner maintains that the COA has no jurisdiction to issue the NC

involving the payment of capital gains and documentary stamp taxes because
these are national revenue taxes, the assessment and collection of which fall
within the jurisdiction of the Bureau of Internal Revenue (BIR).
Petitioner's argument is partially correct.
The COA has authority to ascertain whether a government agency has
paid the correct taxes. Section 2, Article IX-D of the Constitution gives the
Commission the broad power, authority, and duty to examine, audit, and settle
all accounts pertaining to the revenue and receipts of, and expenditures or
uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or instrumentalities. This
constitutional mandate is echoed in various provisions of PD No. 1445. Section
26, in part, specifically provides that the general jurisdiction of the Commission
includes the examination, audit, and settlement of all debts and claims of any
sort due from or owing to the Government or any of its subdivisions, agencies
and instrumentalities. Additionally, paragraph 2, Section 25 of PD No.
1445 provides that, as a primary objective, the Commission shall develop and
implement a comprehensive audit program that shall encompass an
examination of financial transactions, accounts, and reports, including
evaluation of compliance with applicable laws and regulations.
The authority of the Commission over national revenue taxes, however,
appears to be limited. Section 28 of PD 1445 gives the Commission the
authority to examine books, papers, and documents filed by individuals and
corporations with, and which are in the custody of, government offices in
connection with government revenue collection operations, for the sole
purpose of ascertaining that all funds determined by the appropriate
agencies as collectible and due the government have actually been collected,
except as otherwise provided in the Internal Revenue Code. This authority, in
turn, is consistent with the duty of the Commission to establish that all
obligations of the agency have been accurately recorded, 41 and with its
power, under such regulations as it may prescribe, to authorize and enforce
the settlement of accounts subsisting between agencies of the
government. 42 This limited duty to ascertain under Section 28 expressly
gives way to the Internal Revenue Code. It does not carry the concomitant
duty to collect taxes. As it is, the BIR is the government agency vested with
the power and duty to both assess and collect national internal revenue taxes.
We disagree with the argument of the COA that it was merely performing
its duty to ensure that all government revenues are collected when it issued
the NC. Again, Section 28 of PD 1445 is clear that the only purpose of the
examination is to ascertain. Even under Section 35 of PD 1445, which COA
cited in its assailed Decision, its authority to assist in the collection and
enforcement of all debts and claims due the government shall be
done through proper channels. 43 The COA's duty to collect or settle taxes,
it appears, is done only in a facilitative manner.
It is a different matter, however, if the government agency or unit being
examined and audited by the COA is one that has the authority or function to
collect taxes, such as the BIR itself or a local government unit. In such cases,
the audit would not only cover the disbursements made, but also the revenues,
receipts, and other incomes of the agency or unit. Should there be any
deficiencies because of under-appraisal, under-assessment or under-collection,
the COA shall issue a notice of charge. 44
 This is not the case here. The underpaid capital gains and documentary
stamp taxes did not come from the account of the AFP-RSBS and did not form
part of its revenues, receipts or other incomes. The COA therefore erred in
issuing the NC against petitioner for the collection of these taxes. It is, in a
sense, barking up the wrong tree. Quite tellingly, the SAT Report did not
recommend that the AFP-RSBS be held accountable for the deficient taxes.
Instead, it merely recommended the enforcement by the BIR for the collection
of the deficiency on capital gains and documentary stamp taxes. 45 CHTAIc
Moreover, the deed of sale between the AFP-RSBS and Concord
Resources, Inc. specifically provided that all taxes such as withholding tax,
documentary stamp tax and other costs and expenses covering transfer tax,
documentation and notarial and registration fees, shall be for the sole and
exclusive account of Concord Resources, Inc. 46 In fact, both the SAT Report
and the AOM noted that the Certificate Authorizing Registration No. 615456
dated August 27, 1996 issued by the Revenue District Officer of Calamba,
Laguna disclosed that it was Concord Resources, Inc. which paid the capital
gains and documentary stamp taxes. 47
Finally, we find it incongruent to disallow the difference of P250,318,200
but, at the same time, charge P16,270,683 against petitioner for the alleged
underpaid taxes. Considering that the amount of P91,024,800 is being held as
the correct purchase price of the sale, the correct taxes in the amount of
P5,916,612 have already been settled. To demand more on the ground that all
income from whatever sources is taxable would unjustly enrich the
government.
WHEREFORE, the instant petition is hereby PARTIALLY GRANTED.
COA Decision No. 2012-139 dated September 13, 2012 and Resolution dated
May 6, 2014 are hereby AFFIRMED with the MODIFICATION that petitioner
is NOT LIABLE under Notice of Charge No. 2010-07-001-(1996).
SO ORDERED.
|||  (Ramiscal v. Commission on Audit, G.R. No. 213716, [October 10,
2017])