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G.R. No.

79688

February 1, 1996

PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,


vs.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and
ELDRED JARDINICO,respondents.

After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The
parties tried to reach an amicable settlement, but failed.
On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter
remove all improvements and vacate Lot 9. When Kee refused to vacate Lot 9,
Jardinico filed with the Municipal Trial Court in Cities, Branch 3, Bacolod City
(MTCC), a complaint for ejectment with damages against Kee.

PANGANIBAN, J.:
Kee, in turn, filed a third-party complaint against petitioner and CTTEI.
Is a lot buyer who constructs improvements on the wrong property erroneously
delivered by the owner's agent, a builder in good faith? This is the main issue
resolved in this petition for review on certiorari to reverse the Decision1 of the
Court of Appeals2 in CA-G.R. No. 11040, promulgated on August 20, 1987.
By resolution dated November 13, 1995, the First Division of this Court resolved
to transfer this case (along with several others) to the Third Division. After due
deliberation and consultation, the Court assigned the writing of this Decision to
the undersigned ponente.
The facts, as found by respondent Court, are as follows:
Edith Robillo purchased from petitioner a parcel of land designated as Lot 9,
Phase II and located at Taculing Road, Pleasantville Subdivision, Bacolod City. In
1975, respondent Eldred Jardinico bought the rights to the lot from Robillo. At
that time, Lot 9 was vacant.
Upon completing all payments, Jardinico secured from the Register of Deeds of
Bacolod City on December 19, 1978 Transfer Certificate of Title No. 106367 in
his name. It was then that he discovered that improvements had been introduced
on Lot 9 by respondent Wilson Kee, who had taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same
subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate
agent of petitioner. Under the Contract to Sell on Installment, Kee could possess
the lot even before the completion of all installment payments. On January 20,
1975, Kee paid CTTEI the relocation fee of P50.00 and another P50.00 on
January 27, 1975, for the preparation of the lot plan. These amounts were paid
prior to Kee's taking actual possession of Lot 8. After the preparation of the lot
plan and a copy thereof given to Kee, CTTEI through its employee, Zenaida
Octaviano, accompanied Kee's wife, Donabelle Kee, to inspect Lot 8.
Unfortunately, the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee
proceeded to construct his residence, a store, an auto repair shop and other
improvements on the lot.

The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to
CTTEI. It further ruled that petitioner and CTTEI could not successfully invoke as
a defense the failure of Kee to give notice of his intention to begin construction
required under paragraph 22 of the Contract to Sell on Installment and his having
built a sari-sari store without the prior approval of petitioner required under
paragraph 26 of said contract, saying that the purpose of these requirements was
merely to regulate the type of improvements to be constructed on the Lot. 3
However, the MTCC found that petitioner had already rescinded its contract with
Kee over Lot 8 for the latter's failure to pay the installments due, and that Kee
had not contested the rescission. The rescission was effected in 1979, before the
complaint was instituted. The MTCC concluded that Kee no longer had any right
over the lot subject of the contract between him and petitioner. Consequently,
Kee must pay reasonable rentals for the use of Lot 9, and, furthermore, he
cannot claim reimbursement for the improvements he introduced on said lot.
The MTCC thus disposed:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as
follows:
1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9,
covered by TCT No. 106367 and to remove all structures and
improvements he introduced thereon;
2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the
rate of P15.00 a day computed from the time this suit was filed on March
12, 1981 until he actually vacates the premises. This amount shall bear
interests (sic) at the rate of 12 per cent (sic) per annum.
3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville
Subdivision are ordered to pay the plaintiff jointly and severally the sum
of P3,000.00 as attorney's fees and P700.00 as cost and litigation
expenses.4

On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that
petitioner and CTTEI were not at fault or were not negligent, there being no
preponderant evidence to show that they directly participated in the delivery of
Lot 9 to Kee5. It found Kee a builder in bad faith. It further ruled that even
assuming arguendo that Kee was acting in good faith, he was, nonetheless,
guilty of unlawfully usurping the possessory right of Jardinico over Lot 9 from the
time he was served with notice to vacate said lot, and thus was liable for rental.

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville


Development Corporation are solidarily liable under the following
circumstances:
A.
If Eldred Jardinico decides to appropriate the
improvements and, thereafter, remove these structures, the
third-party defendants shall answer for all demolition expenses
and the value of the improvements thus destroyed or rendered
useless;

The RTC thus disposed:


WHEREFORE, the decision appealed from is affirmed with respect to
the order against the defendant to vacate the premises of Lot No. 9
covered by Transfer Certificate of Title No. T-106367 of the land records
of Bacolod City; the removal of all structures and improvements
introduced thereon at his expense and the payment to plaintiff (sic) the
sum of Fifteen (P15.00) Pesos a day as reasonable rental to be
computed from January 30, 1981, the date of the demand, and not from
the date of the filing of the complaint, until he had vacated (sic) the
premises, with interest thereon at 12% per annum. This Court further
renders judgment against the defendant to pay the plaintiff the sum of
Three Thousand (P3,000.00) Pesos as attorney's fees, plus costs of
litigation.
The third-party complaint against Third-Party Defendants Pleasantville
Development Corporation and C.T. Torres Enterprises, Inc. is dismissed.
The order against Third-Party Defendants to pay attorney's fees to
plaintiff and costs of litigation is reversed. 6
Following the denial of his motion for reconsideration on October 20, 1986, Kee
appealed directly to the Supreme Court, which referred the matter to the Court of
Appeals.
The appellate court ruled that Kee was a builder in good faith, as he was
unaware of the "mix-up" when he began construction of the improvements on Lot
8. It further ruled that the erroneous delivery was due to the negligence of CTTEI,
and that such wrong delivery was likewise imputable to its principal, petitioner
herein. The appellate court also ruled that the award of rentals was without basis.
Thus, the Court of Appeals disposed:
WHEREFORE, the petition is GRANTED, the appealed decision is
REVERSED, and judgment is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the
improvements he introduced on Lot 9, and is entitled to the rights
granted him under Articles 448, 546 and 548 of the New Civil Code.

b. If Jardinico prefers that Kee buy the land, the third-party


defendants shall answer for the amount representing the value
of Lot 9 that Kee should pay to Jardinico.
3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville
Development Corporation are ordered to pay in solidum the amount of
P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses.
4. The award of rentals to Jardinico is dispensed with.
Furthermore, the case is REMANDED to the court of origin for the
determination of the actual value of the improvements and the property
(Lot 9), as well as for further proceedings in conformity with Article 448
of the New Civil Code.7
Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.
The Issues
The petition submitted the following grounds to justify a review of the respondent
Court's Decision, as follows:
1. The Court of Appeals has decided the case in a way probably not in
accord with law or the the (sic) applicable decisions of the Supreme
Court on third-party complaints, by ordering third-party defendants to
pay the demolition expenses and/or price of the land;
2. The Court of Appeals has so far departed from the accepted course of
judicial proceedings, by granting to private respondent-Kee the rights of
a builder in good faith in excess of what the law provides, thus enriching
private respondent Kee at the expense of the petitioner;
3. In the light of the subsequent events or circumstances which changed
the rights of the parties, it becomes imperative to set aside or at least
modify the judgment of the Court of Appeals to harmonize with justice
and the facts;

4. Private respondent-Kee in accordance with the findings of facts of the


lower court is clearly a builder in bad faith, having violated several
provisions of the contract to sell on installments;
5. The decision of the Court of Appeals, holding the principal,
Pleasantville Development Corporation (liable) for the acts made by the
agent in excess of its authority is clearly in violation of the provision of
the law;
6. The award of attorney's fees is clearly without basis and is equivalent
to putting a premium in (sic) court litigation.
From these grounds, the issues could be re-stated as follows:
(1) Was Kee a builder in good faith?
(2) What is the liability, if any, of petitioner and its agent, C.T. Torres
Enterprises, Inc.? and
(3) Is the award of attorney's fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the RTC's ruling
that Kee was a builder in bad faith.
Petitioner fails to persuade this Court to abandon the findings and conclusions of
the Court of Appeals that Kee was a builder in good faith. We agree with the
following observation of the Court of Appeals:
The roots of the controversy can be traced directly to the errors
committed by CTTEI, when it pointed the wrong property to Wilson Kee
and his wife. It is highly improbable that a purchaser of a lot would
knowingly and willingly build his residence on a lot owned by another,
deliberately exposing himself and his family to the risk of being ejected
from the land and losing all improvements thereon, not to mention the
social humiliation that would follow.
Under the circumstances, Kee had acted in the manner of a prudent
man in ascertaining the identity of his property. Lot 8 is covered by
Transfer Certificate of Title No. T-69561, while Lot 9 is identified in
Transfer Certificate of Title No. T-106367. Hence, under the Torrens
system of land registration, Kee is presumed to have knowledge of the
metes and bounds of the property with which he is dealing. . . .

But as Kee is a layman not versed in the technical description of his


property, he had to find a way to ascertain that what was described in
TCT No. 69561 matched Lot 8. Thus, he went to the subdivision
developer's agent and applied and paid for the relocation of the lot, as
well as for the production of a lot plan by CTTEI's geodetic engineer.
Upon Kee's receipt of the map, his wife went to the subdivision site
accompanied by CTTEI's employee, Octaviano, who authoritatively
declared that the land she was pointing to was indeed Lot 8. Having full
faith and confidence in the reputation of CTTEI, and because of the
company's positive identification of the property, Kee saw no reason to
suspect that there had been a misdelivery. The steps Kee had taken to
protect his interests were reasonable. There was no need for him to
have acted ex-abundantia cautela, such as being present during the
geodetic engineer's relocation survey or hiring an independent geodetic
engineer to countercheck for errors, for the final delivery of subdivision
lots to their owners is part of the regular course of everyday business of
CTTEI. Because of CTTEI's blunder, what Kee had hoped to forestall did
in fact transpire. Kee's efforts all went to naught. 8
Good faith consists in the belief of the builder that the land he is building on is his
and his ignorance of any defect or flaw in his title 9. And as good faith is
presumed, petitioner has the burden of proving bad faith on the part of Kee 10.
At the time he built improvements on Lot 8, Kee believed that said lot was what
he bought from petitioner. He was not aware that the lot delivered to him was not
Lot 8. Thus, Kee's good faith. Petitioner failed to prove otherwise.
To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs
22 and 26 of the Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on whether Kee was a
builder in good faith, that is, on his state of mind at the time he built the
improvements on Lot 9. These alleged violations may give rise to petitioner's
cause of action against Kee under the said contract (contractual breach), but
may not be bases to negate the presumption that Kee was a builder in good faith.
Petitioner also points out that, as found by the trial court, the Contract of Sale on
Installment covering Lot 8 between it and Kee was rescinded long before the
present action was instituted. This has no relevance on the liability of petitioner,
as such fact does not negate the negligence of its agent in pointing out the wrong
lot. to Kee. Such circumstance is relevant only as it gives Jardinico a cause of
action for unlawful detainer against Kee.
Petitioner next contends that Kee cannot "claim that another lot was erroneously
pointed out to him" because the latter agreed to the following provision in the
Contract of Sale on installment, to wit:

13. The Vendee hereby declares that prior to the execution of his
contract he/she has personally examined or inspected the property
made subject-matter hereof, as to its location, contours, as well as the
natural condition of the lots and from the date hereof whatever
consequential change therein made due to erosion, the said Vendee
shall bear the expenses of the necessary fillings, when the same is so
desired by him/her.11
The subject matter of this provision of the contract is the change of the location,
contour and condition of the lot due to erosion. It merely provides that the
vendee, having examined the property prior to the execution of the contract,
agrees to shoulder the expenses resulting from such change.
We do not agree with the interpretation of petitioner that Kee contracted away his
right to recover damages resulting from petitioner's negligence. Such waiver
would be contrary to public policy and cannot be allowed. "Rights may be waived,
unless the waiver is contrary to law, public order, public policy, morals, or good
customs, or prejudicial to a third person with a right recognized by law." 12
The Second Issue: Petitioner's Liability
Kee filed a third-party complaint against petitioner and CTTEI, which was
dismissed by the RTC after ruling that there was no evidence from which fault or
negligence on the part of petitioner and CTTEI can be inferred. The Court of
Appeals disagreed and found CTTEI negligent for the erroneous delivery of the
lot by Octaviano, its employee.
Petitioner does not dispute the fact that CTTEI was its agent. But it contends that
the erroneous delivery of Lot 9 to Kee was an act which was clearly outside the
scope of its authority, and consequently, CTTEI I alone should be liable. It asserts
that "while [CTTEI] was authorized to sell the lot belonging to the herein
petitioner, it was never authorized to deliver the wrong lot to Kee" 13.
Petitioner's contention is without merit.
The rule is that the principal is responsible for the acts of the agent, done within
the scope of his authority, and should bear the damage caused to third
persons 14. On the other hand, the agent who exceeds his authority is personally
liable for the damage 15
CTTEI was acting within its authority as the sole real estate representative of
petitioner when it made the delivery to Kee. In acting within its scope of authority,
it was, however, negligent. It is this negligence that is the basis of petitioner's
liability, as principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.

Pending resolution of the case before the Court of Appeals, Jardinico and Kee on
July 24, 1987 entered into a deed of sale, wherein the former sold Lot 9 to Kee.
Jardinico and Kee did not inform the Court of Appeals of such deal.
The deed of sale contained the following provision:
1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now
pending appeal with the Court of Appeals, regardless of the outcome of
the decision shall be mutually disregarded and shall not be pursued by
the parties herein and shall be considered dismissed and without effect
whatso-ever; 16
Kee asserts though that the "terms and conditions in said deed of sale are strictly
for the parties thereto" and that "(t)here is no waiver made by either of the parties
in said deed of whatever favorable judgment or award the honorable respondent
Court of Appeals may make in their favor against herein petitioner Pleasantville
Development Corporation and/or private respondent C.T. Torres Enterprises;
Inc." 17
Obviously, the deed of sale can have no effect on the liability of petitioner. As we
have earlier stated, petitioner's liability is grounded on the negligence of its agent.
On the other hand, what the deed of sale regulates are the reciprocal rights of
Kee and Jardinico; it stressed that they had reached an agreement independent
of the outcome of the case.
Petitioner further assails the following holding of the Court of Appeals:
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville
Development Corporation are solidarily liable under the following
circumstances:
a. If Eldred Jardinico decides to appropriate the improvements
and, thereafter, remove these structures, the third-party
defendants shall answer for all demolition expenses and the
value of the improvements thus destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party
defendants shall answer for the amount representing the value
of Lot 9 that Kee should pay to Jardinico. 18
Petitioner contends that if the above holding would be carried out, Kee would be
unjustly enriched at its expense. In other words, Kee would be able to own the
lot, as buyer, without having to pay anything on it, because the aforequoted
portion of respondent Court's Decision would require petitioner and CTTEI jointly
and solidarily to "answer" or reimburse Kee therefor.

We agree with petitioner.

(1) Wilson Kee is declared a builder in good faith;

Petitioner' s liability lies in the negligence of its agent CTTEI. For such
negligence, the petitioner should be held liable for damages. Now, the extent
and/or amount of damages to be awarded is a factual issue which should be
determined after evidence is adduced. However, there is no showing that such
evidence was actually presented in the trial court; hence no damages could flow
be awarded.

(2) Petitioner Pleasantville Development Corporation and respondent


C.T. Torres Enterprises, Inc. are declared solidarily liable for damages
due to negligence; however, since the amount and/or extent of such
damages was not proven during the trial, the same cannot now be
quantified and awarded;

The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and
owner in good faith, respectively, are regulated by law ( i.e., Arts. 448, 546 and
548 of the Civil Code). It was error for the Court of Appeals to make a "slight
modification" in the application of such law, on the ground of "equity". At any rate,
as it stands now, Kee and Jardinico have amicably settled through their deed of
sale their rights and obligations with regards to Lot 9. Thus, we delete items 2 (a)
and (b) of the dispositive portion of the Court of Appeals' Decision [as reproduced
above] holding petitioner and CTTEI solidarily liable.
The Third Issue: Attorney's Fees
The MTCC awarded Jardinico attorney's fees and costs in the amount of
P3,000.00 and P700.00, respectively, as prayed for in his complaint. The RTC
deleted the award, consistent with its ruling that petitioner was without fault or
negligence. The Court of Appeals, however, reinstated the award of attorney's
fees after ruling that petitioner was liable for its agent's negligence.

The award of attorney's fees lies within the discretion of the court and depends
upon the circumstances of each case 19. We shall not interfere with the discretion
of the Court of Appeals. Jardinico was compelled to litigate for the protection of
his interests and for the recovery of damages sustained as a result of the
negligence of petitioner's agent 20.
In sum, we rule that Kee is a builder in good faith. The disposition of the Court of
Appeals that Kee "is entitled to the rights granted him under Articles 448, 546 and
548 of the New Civil Code" is deleted, in view of the deed of sale entered into by
Kee and Jardinico, which deed now governs the rights of Jardinico and Kee as to
each other. There is also no further need, as ruled by the appellate Court, to
remand the case to the court of origin "for determination of the actual value of the
improvements and the property (Lot 9), as well as for further proceedings in
conformity with Article 448 of the New Civil Code."
WHEREFORE , the petition is partially GRANTED. The Decision of the Court of
Appeals is hereby MODIFIED as follows:

(3) Petitioner Pleasantville Development Corporation and respondent


C.T. Torres Enterprises, Inc. are ordered to pay in solidum the amount of
P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses;
and
(4) The award of rentals to Jardinico is dispensed with.
SO ORDERED.
G.R. No. 141463

August 6, 2002

VICTOR ORQUIOLA and HONORATA ORQUIOLA, petitioners,


vs.
HON. COURT OF APPEALS, HON. VIVENCIO S. BACLIG, Presiding Judge,
Regional Trial Court, Branch 77, Quezon City, THE SHERIFF OF QUEZON
CITY and HIS/HER DEPUTIES and PURA KALAW LEDESMA, substituted by
TANDANG SORA DEVELOPMENT CORPORATION, respondents.
QUISUMBING, J.:
This petition for review seeks the reversal of the decision 1 of the Court of Appeals
dated January 28, 1999 in CA-G.R. SP No. 47422, which dismissed the petition
to prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City,
Branch 77, from issuing a writ of demolition against petitioners, and the sheriff
and deputy sheriff of the same court from implementing an alias writ of execution.
Also assailed is the resolution2 of the Court of Appeals dated December 29, 1999
which denied petitioners motion for reconsideration.
The facts are as follows:
Pura Kalaw Ledesma was the registered owner of Lot 689, covered by TCT Nos.
111267 and 111266, in Tandang Sora, Quezon City. This parcel of land was
adjacent to certain portions of Lot 707 of the Piedad Estates, namely, Lot 707-A
and 707-B, registered in the name of Herminigilda Pedro under TCT Nos. 16951
and 16952, respectively. On October 29, 1964, Herminigilda sold Lot 707-A and

707-B to Mariano Lising who then registered both lots and Lot 707-C in the name
of M.B. Lising Realty and subdivided them into smaller lots.1wphi1.nt

On April 2, 1998, petitioners received a Special Order dated March 30, 1998,
from the trial court stating as follows:

Certain portions of the subdivided lots were sold to third persons including herein
petitioners, spouses Victor and Honorata Orquiola, who purchased a portion of
Lot 707-A-2, Lot 5, Block 1 of the subdivision plan (LRC), Psd-42965. The parcel
is now #33 Doa Regina St., Regina Village, Tandang Sora, Quezon City. The
other portions were registered in the name of the heirs of Pedro, heirs of Lising,
and other third persons.

Before the Court for resolution is the "Ex-Parte Motion For The Issuance
of A Writ of Demolition," filed by plaintiff, through counsel, praying for the
issuance of an Order directing the Deputy Sheriff to cause the removal
and/or demolition of the structures on the plaintiffs property constructed
by defendants and/or the present occupants. The defendants-heirs of
Herminigilda Pedro filed their comment on the said Motion.

Sometime in 1969, Pura Kalaw Ledesma filed a complaint, docketed as Civil


Case No. Q-12918, with the Regional Trial Court of Quezon City against
Herminigilda Pedro and Mariano Lising for allegedly encroaching upon Lot 689.
During the pendency of the action, Tandang Sora Development Corporation
replaced Pura Kalaw Ledesma as plaintiff by virtue of an assignment of Lot 689
made by Ledesma in favor of said corporation. Trial continued for three decades.

Considering that the decision rendered in the instant case had become
final and executory, the Court, in its Order of November 14, 1997,
directed the issuance of an alias writ of execution for the enforcement of
the said decision. However, despite the service of the said writ to all the
defendants and the present occupants of the subject property, they
failed to comply therewith, as per the Partial Sheriffs Return, dated
February 9, 1998, issued by the Deputy Sheriff of this branch of the
Court. Thus, there is now a need to demolish the structures in order to
implement the said decision.

On August 21, 1991, the trial court finally adjudged defendants Pedro and Lising
jointly and severally liable for encroaching on plaintiffs land and ordered them:
(a) to solidarily pay the plaintiff Tandang Sora Dev. Corp. actual
damages in the amount of P20,000 with interest from date of filing of the
complaint;
(b) to remove all construction, including barbed wires and fences,
illegally constructed by defendants on plaintiffs property at defendants
expense;
(c) to replace the removed concrete monuments removed by
defendants, at their own expense;
(d) to pay attorneys fees in the amount of FIVE THOUSAND PESOS
(P5,000.00) with interest computed from the date of filing of the
complaint;
(e) to relocate the boundaries to conform with the Commissioners
Report, particularly, Annexes "A" and "B" thereof, at the expense of the
defendants.3
As a result, in February 1998, the Deputy Sheriff of Quezon City directed
petitioners, through an alias writ of execution, to remove the house they
constructed on the land they were occupying.

WHEREFORE, the defendants are hereby directed to remove, at their


expense, all constructions, including barbed wires and fences, which
defendants constructed on plaintiffs property, within fifteen (15) days
from notice of this Order; otherwise, this Court will issue a writ of
demolition against them.
SO ORDERED.4
To prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City from
issuing a writ of demolition and the Quezon City sheriff from implementing
the alias writ of execution, petitioners filed with the Court of Appeals a petition for
prohibition with prayer for a restraining order and preliminary injunction on April
17, 1998.5 Petitioners alleged that they bought the subject parcel of land in good
faith and for value, hence, they were parties in interest. Since they were not
impleaded in Civil Case No. Q-12918, the writ of demolition issued in connection
therewith cannot be enforced against them because to do so would amount to
deprivation of property without due process of law.
The Court of Appeals dismissed the petition on January 28, 1999. It held that as
buyers and successors-in-interest of Mariano Lising, petitioners were considered
privies who derived their rights from Lising by virtue of the sale and could be

reached by the execution order in Civil Case No. Q-12918. Thus, for lack of
merit, the petition was ordered dismissed.6
Petitioners motion for reconsideration was denied. Hence, this petition, where
petitioners aver that:
I.THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE DECISION IN CIVIL CASE NO. Q-12918 CAN ALSO BE
ENFORCED AGAINST THE PETITIONERS EVEN IF THEY WERE NOT
IMPLEADED AS PARTIES THERETO.
II.THE HONORABLE COURT OF APPEALS ERRED IN NOT
UPHOLDING PETITIONERS TITLE DESPITE THEIR BEING BUILDER
IN GOOD FAITH AND INNOCENT PURCHASER AND FOR VALUE.
III.PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF
CONSIDERING THAT THEY STAND TO SUFFER GRAVE AND
IRREPARABLE INJURY IF ALIAS WRIT OF EXECUTION AND THE
SPECIAL ORDER ISSUED BY THE COURT A QUO IN CIVIL CASE NO.
Q-12918 FOR THE DEMOLITION OF ALL THE STRUCTURES ON THE
DISPUTED PROPERTY WERE ENFORCED AGAINST THE
PETITIONERS WHO WERE NOT EVEN GIVEN THEIR DAY IN
COURT.7
For our resolution are the following issues: (1) whether the alias writ of execution
may be enforced against petitioners; and (2) whether petitioners were innocent
purchasers for value and builders in good faith.
On the first issue, petitioners claim that the alias writ of execution cannot be
enforced against them. They argue that the appellate court erred when it relied
heavily on our ruling in Vda. de Medina vs. Cruz8 in holding that petitioners are
successors-in-interest of Mariano Lising, and as such, they can be reached by
the order of execution in Civil Case No. Q-12918 even though they were not
impleaded as parties thereto. Petitioners submit that Medina is not applicable in
this case because the circumstances therein are different from the circumstances
in the present case.
In Medina, the property in dispute was registered under Land Registration Act
No. 496 in 1916 and Original Certificate of Title No. 868 was issued in the name
of Philippine Realty Corporation (PRC). In 1949, Benedicta Mangahas and
Francisco Ramos occupied and built houses on the lot without the PRCs
consent. In 1959, PRC sold the lot to Remedios Magbanua. Mangahas and

Ramos opposed and instituted Civil Case No. C-120 to annul the sale and to
compel PRC to execute a contract of sale in their favor. The trial court dismissed
the complaint and ordered Mangahas and Ramos to vacate the lot and surrender
possession thereof to Magbanua. The judgment became final and executory.
When Magbanua had paid for the land in full, PRC executed a deed of absolute
sale in her favor and a new title was consequently issued in her name.
Magbanua then sought the execution of the judgment in Civil Case No. C-120.
This was opposed by petitioner Medina who alleged that she owned the houses
and lot subject of the dispute. She said that she bought the houses from spouses
Ricardo and Eufrocinia de Guzman, while she purchased the lot from the heirs of
the late Don Mariano San Pedro y Esteban. The latter held the land by virtue of
a Titulo de Composicion Con El Estado Num. 4136, dated April 29, 1894. In
opposing the execution, Medina argued that the trial court did not acquire
jurisdiction over her, claiming that she was not a party in Civil Case No. C-120,
thus, she could not be considered as "a person claiming under" Ramos and
Mangahas.
When Medina reached this Court, we held that the decision in Civil Case No. C120, which had long become final and executory, could be enforced against
petitioner even though she was not a party thereto. We found that the houses on
the subject lot were formerly owned by Mangahas and Ramos who sold them to
spouses de Guzman, who in turn sold them to Medina. Under the circumstances,
petitioner was privy to the two judgment debtors Mangahas and Ramos, and thus
Medina could be reached by the order of execution and writ of demolition issued
against the two. As to the lot under dispute, we sustained Magbanuas ownership
over it, she being the holder of a Torrens title. We declared that a Torrens title is
generally conclusive evidence of ownership of the land referred to therein, and a
strong presumption exists that a Torrens title was regularly issued and valid. A
Torrens title is incontrovertible against any informacion possessoria, or other title
existing prior to the issuance thereof not annotated on the Torrens title. Moreover,
persons dealing with property covered by a Torrens certificate of title are not
required to go beyond what appears on its face.
Medina markedly differs from the present case on major points. First, the
petitioner in Medina acquired the right over the houses and lot subject of the
dispute after the original action was commenced and became final and
executory. In the present case, petitioners acquired the lot before the
commencement of Civil Case No. Q-12918.Second, the right over the disputed
land of the predecessors-in-interest of the petitioner in Medina was based on a
title of doubtful authenticity, allegedly a Titulo de Composicion Con El
Estado issued by the Spanish Government in favor of one Don Mariano San
Pedro y Esteban, while the right over the land of the predecessors-in-interest of

herein petitioners is based on a fully recognized Torrens title. Third, petitioners in


this case acquired the registered title in their own names, while the petitioner
in Medina merely relied on the title of her predecessor-in-interest and tax
declarations to prove her alleged ownership of the land.
We must stress that where a case like the present one involves a sale of a parcel
of land under the Torrens system, the applicable rule is that a person dealing with
the registered property need not go beyond the certificate of title; he can rely
solely on the title and he is charged with notice only of such burdens and claims
as are annotated on the title. 9 It is our view here that the petitioners, spouses
Victor and Honorata Orquiola, are fully entitled to the legal protection of their lot
by the Torrens system, unlike the petitioner in the Medina case who merely relied
on a mere Titulo de Composicion.
Coming now to the second issue, were petitioners purchasers in good faith and
for value? A buyer in good faith is one who buys the property of another without
notice that some other person has a right to or interest in such property. He is a
buyer for value if he pays a full and fair price at the time of the purchase or
before he has notice of the claim or interest of some other person in the
property.10 The determination of whether one is a buyer in good faith is a factual
issue which generally is outside the province of this Court to determine in a
petition for review. An exception is when the Court of Appeals failed to take into
account certain relevant facts which, if properly considered, would justify a
different conclusion.11 The instant case is covered by this exception to the
general rule. As found by the Court of Appeals and not refuted by private
respondent, petitioners purchased the subject land in 1964 from Mariano
Lising.12 Civil Case No. Q-12918 was commenced sometime in 1969. The Court
of Appeals overlooked the fact that the purchase of the land took place prior to
the institution of Civil Case No. Q-12918. In other words, the sale to petitioners
was made before Pura Kalaw Ledesma claimed the lot. Petitioners could
reasonably rely on Mariano Lisings Certificate of Title which at the time of
purchase was still free from any third party claim. Hence, considering the
circumstances of this case, we conclude that petitioners acquired the land
subject of this dispute in good faith and for value.

now, to avoid circuitous litigation and further delay in the disposition of this case.
On this score, we find that petitioners are indeed builders in good faith.
A builder in good faith is one who builds with the belief that the land he is building
on is his, and is ignorant of any defect or flaw in his title. 14 As earlier discussed,
petitioner spouses acquired the land in question without knowledge of any defect
in the title of Mariano Lising. Shortly afterwards, they built their conjugal home on
said land. It was only in 1998, when the sheriff of Quezon City tried to execute
the judgment in Civil Case No. Q-12918, that they had notice of private
respondents adverse claim. The institution of Civil Case No. Q-12918 cannot
serve as notice of such adverse claim to petitioners since they were not
impleaded therein as parties.
As builders in good faith and innocent purchasers for value, petitioners have
rights over the subject property and hence they are proper parties in interest in
any case thereon.15 Consequently, private respondents should have impleaded
them in Civil Case No. Q-12918. Since they failed to do so, petitioners cannot be
reached by the decision in said case. No man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not bound by
any judgment rendered by the court. In the same manner, a writ of execution can
be issued only against a party and not against one who did not have his day in
court. Only real parties in interest in an action are bound by the judgment therein
and by writs of execution and demolition issued pursuant thereto. 16In our view,
the spouses Victor and Honorata Orquiola have valid and meritorious cause to
resist the demolition of their house on their own titled lot, which is tantamount to
a deprivation of property without due process of law.1wphi1.nt
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals
dated January 28, 1999, and its resolution dated December 29, 1999, in CA-G.R.
SP No. 47422, are REVERSED and SET ASIDE. Respondents are hereby
enjoined from enforcing the decision in Civil Case No. Q-12918 through a writ of
execution and order of demolition issued against petitioners. Costs against
private respondent.
SO ORDERED.

The final question now is: could we consider petitioners builders in good faith?
We note that this is the first time that petitioners have raised this issue. As a
general rule, this could not be done. Fair play, justice, and due process dictate
that parties should not raise for the first time on appeal issues that they could
have raised but never did during trial and even during proceedings before the
Court of Appeals.13 Nevertheless, we deem it proper that this issue be resolved

G.R. No. 125683 March 2, 1999


EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY
LING, petitioners,
vs.
COURT OF APPEALS, GONZALO GO, WINSTON GO, LI CHING YAO,
ARANETA INSTITUTE OF AGRICULTURE and JOSE N.
QUEDDING, respondents.
PUNO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals
dated March 25, 1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan., et. al.,
plaintiffs-appellees v. Gonzalo Go and Winston Go, appellants and third-party
plaintiffs-appellants v. Li Ching Yao, et. al., third-party defendants." 1
The instant case arose from a dispute over forty-two (42) square meters of
residential land belonging to petitioners. The parties herein are owners of
adjacent lots located at Block No. 3, Poinsettia Street, Araneta University Village,
Malabon, Metro Manila. Lot No. 24, 414 square meters in area, is registered in
the name of petitioners Eden Ballatan and spouses Betty Martinez and Chong
Chy Ling. 2 Lots Nos. 25 and 26, with an area of 415 and 313 square meters
respectively, are registered in the name of respondent Gonzalo Go, Sr. 3 On Lot
No. 25, respondent Winston Go, son of Gonzalo Go, Sr., constructed his house.
Adjacent to Lot No. 26 is Lot No. 27, 417 square meters in area, and is registered
in the name of respondent Li Ching Yao. 4
In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the
construction, she noticed that the concrete fence and side pathway of the
adjoining house of respondent Winston Go encroached on the entire length of
the eastern side of her property. 5 Her building contractor formed her that the
area of her lot was actually less than that described in the title. Forthwith,
Ballatan informed respondent Go of this discrepancy and his encroachment on
her property. Respondent Go, however, claimed that his house, including its
fence and pathway, were built within the parameters of his father's lot; and that
this lot was surveyed by Engineer Jose Quedding, the authorized surveyor of the
Araneta Institute of Agriculture (AIA), the owner-developer of the subdivision
project.
Petitioner Ballatan called the attention of the IAI to the discrepancy of the land
area in her title and the actual land area received from them. The AIA authorized
another survey of the land by Engineer Jose N. Quedding.

In a report dated February 28, 1985, Engineer Quedding found that the lot area
of petitioner Ballatan was less by few meters and that of respondent Li Ching
Yao, which was three lots away, increased by two (2) meters. Engineer Quedding
declared that he made a verification survey of Lots Nos. 25 and 26 of
respondents Go in 1983 and allegedly found the boundaries to have been in their
proper position. He, however, could not explain the reduction in Ballatan's area
since he was not present at the time respondents Go constructed their boundary
walls. 6
On June 2, 1985, Engineer Quedding made a third relocation survey upon
request of the parties. He found that Lot No. 24 lost approximately 25 square
meters on its eastern boundary that Lot No. 25, although found to have
encroached on Lot No. 24, did not lose nor gain any area; that Lot No. 26 lost
some three (3) square meters which, however, were gained by Lot No. 27 on its
western boundary. 7 In short, Lots Nos. 25, 26 and 27 moved westward to the
eastern boundary of Lot No. 24.
On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written
demand on respondents Go to remove and dismantle their improvements on Lot
No. 24. Respondents Go refused. The parties including Li Ching Yao, however,
met several times to reach an agreement one matter.
Failing to agree amicably, petitioner Ballatan brought the issue before the
barangay. Respondents Go did not appear. Thus, on April 1, 1986, petitioner
Ballatan instituted against respondents Go Civil Case No. 772-MN for recovery of
possession before the Regional Trial Court, Malabon, Branch 169. The Go' s filed
their "Answer with Third-Party Complaint" impleading as third-party defendants
respondents Li Ching Yao, the AIA and Engineer Quedding.
On August 23, 1990, the trial court decided in favor of petitioners. It ordered the
Go's to vacate the subject portion of Lot No. 24, demolish their improvements
and pay petitioner Ballatan actual damages, attorney's fees and the costs of the
suit. It dismissed the third-party complaint against: (1) AIA after finding that the
lots sold to the parties were in accordance with the technical description a
verification plan covered by their respective titles; (2) Jose N. Quedding, there
being no privity of relation between him and respondents Go and his erroneous
survey having been made at the instance of AIA, not the parties; and (3) Li Ching
Yao for failure to prove that he committed any wrong in the subject
encroachment. 8 The court made the following disposition:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendants, ordering the latter:

1. To demolish and remove all improvements existing and


encroaching on plaintiff's lot;
2. To clear, vacate and deliver possession of the encroached
area to the plaintiffs;
3. To pay plaintiffs jointly and severally the following:
a) P7,800.00 for the expenses paid to the
surveyors;

1) Defendants-appellants are hereby ordered to pay plaintiffsappellees the reasonable value of the forty-two (42) square
meters of their lot at the time of its taking;
2) Third-party defendant Li Ching Yao is hereby ordered to pay
defendants-appellants the reasonable value of the thirty-seven
(37) square meters of the latter's lot at the time of its taking; and
3) Third-party defendant Jose N. Quedding is hereby ordered to
pay to defendants-appellants the amount of P5,000.00 as
attorney's fees.

b) P5,000.00 for plaintiffs' transportation;


4. To pay plaintiffs, jointly and severally, attorney's fees
equivalent to 25% of the current market value of the subject
matter in litigation at the time of execution; and

LET THE RECORD of the case be remanded to the Regional


Trial Court of Malabon for further proceedings and reception of
evidence for the determination of the reasonable value of Lots
Nos. 24 and 26.

5. To pay the costs of suit.

SO ORDERED. 9

The third-party complaint filed by third-party plaintiff Gonzalo Go


and Winston Go against third-party defendants Araneta Institute
of Agriculture, Jose N. Quedding and Li Ching Yao is hereby
DISMISSED, without pronouncement as to costs.

Hence, this petition. Petitioners allege that:

SO ORDERED.
Respondents Go appealed. On March 25, 1996, the Court of Appeals modified
the decision of the trial court. It affirmed the dismissal of the third-party complaint
against the AIA but reinstated the complaint against Li Ching Yao and Jose
Quedding. Instead of ordering respondents Go to demolish their improvements
on the subject land, the appellate court ordered them to pay petitioner Ballatan,
and respondent Li Ching Yao to pay respondents Go, a reasonable amount for
that portion of the lot which they encroached, the value to be fixed at the time of
taking. It also ordered Jose Quedding to pay respondents Go attorney's fees of
P5,000.00 for his erroneous survey. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the decision appealed
from is hereby AFFIRMED insofar as the dismissal of the thirdparty complaint against Araneta Institute of Agriculture is
concerned but modified in all other aspects as follows:

RESPONDENT COURT OF APPEALS ERRED ON


QUESTIONS OF LAW AND GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OF JURISDICTION
WHEN:
1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE
INSTANT CASE IN UTTER DISREGARD AND IN VIOLATION
OR GROSS IGNORANCE OF EXISTING LAWS AND
JURISPRUDENCE VESTING BASIC PROPERTY RIGHTS TO
HEREIN PETITIONERS. RESPONDENT COURT HAS NO
POWER TO APPLY/USE EQUITY IN THE PRESENCE OF
EXISTING LAWS TO THE CONTRARY.
2. UNDER THE GUISE OF APPLYING EQUITY BUT IN
EFFECT A VERY APPARENT PARTIALITY AND FAVOR TO
RESPONDENTS GO, IT ORDERED PAYMENT OF THE
ENCROACHED AREA AT THE VALUE AT THE TIME OF ITS
TAKING AND NOT THE VALUE AT THE TIME OF PAYMENT,
THEREBY ENRICHING THE GO'S BUT DEPRIVING
PETITIONERS OF THE FRUITS OR INCREASE IN VALUE OF
THEIR PROPERTY TO WHICH THEY ARE ENTITLED UNDER

THE LAW AS THE REGISTERED OWNERS WITH TORRENS


TITLE IN THEIR NAMES.
3. WHEN IT DID NOT DISMISS THE THIRD-PARTY
COMPLAINT DUE TO NON-PAYMENT OF ANY FILING OR
DOCKET FEE.
4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE
NECESSARY EXPENSES IN PROTECTING THEIR RIGHTS
IN THIS CASE. 10
Petitioners question the admission by respondent Court of Appeals of the thirdparty complaint by respondents Go against the AIA, Jose Quedding and Li Ching
Yao. Petitioners claim that the third-party complaint should not have been
considered by the Court of Appeals for lack of jurisdiction due to third-party
plaintiffs' failure to pay the docket and filing fees before the trial court.
The third-party complaint in the instant case arose from the complaint of
petitioners against respondents Go. The complaint filed was for accion
publiciana, i.e., the recovery of possession of real property which is a real action.
The rule in this jurisdiction is that when an action is filed in court, the complaint
must be accompanied the payment of the requisite docket and filing fees. 11 In
real actions, the docket and filing fees are based on the value of the property and
the amount of damages claimed, if any 12 If the complaint is filed but the fees are
not paid at the time of filing, the court acquires jurisdiction upon full payment of
the fees within a reasonable time as the court may grant, barring
prescription. 13 Where the fees prescribed for the real action have been paid but
the fees of certain related damages are not, the court, although having
jurisdiction over the real action, may not have acquired jurisdiction over the
accompnying claim for damages. 14 Accordingly, the court may expunge those
claims for damages, or allow, on motion, a reasonable time for amendment of the
complaint so as to allege the precise amount of damages and accept payment of
the requisite legal fee. 15 If there are unspecified claims, the determination of
which may arise after the filing of the complaint or similar pleading, the additional
filing fee thereon shall constitute a lien on the judgment award. 16 The same rule
also applies to third-party claims and other similar pleadings. 17
In the case at bar, the third-party complaint filed by respondents Go was
incorporated in their answer to the complaint. The third-party complaint sought
the same remedy as the principal complaint but added a prayer for attorney's
fees and costs without specifying their amounts, thus:

ON THE THIRD PARTY COMPLAINT


1. That summons be issued against Third-Party Defendants
Araneta Institute of Agriculture, Jose N. Quedding and Li Ching
Yao;
2. That after hearing, they be sentenced to indemnify the ThirdParty Plaintiffs for whatever is adjudged against the latter in
favor of the Plaintiffs;
3. That Third-Party Defendants be ordered to pay attorney's
fees as may be proved during trial;
4. That Third-Party Defendants be ordered to pay the costs.
Other just and equitable reliefs are also prayed for. 18
The Answer with Third-Party Complaint was admitted by the trial court without the
requisite payment of filing fees, particularly on the Go's prayer for
damages. 19 The trial court did not award the Go's any damages. It dismissed the
third-party complaint. The Court of Appeals, however, granted the third-party
complaint in part by ordering third-party defendant Jose N. Quedding to pay the
Go's the sum of P5,000.00 as attorney's fees.
Contrary to petitioners' claim, the Court of Appeal did not err in awarding
damages despite the Go's failure to specify the amount prayed for and pay the
corresponding additional filing fees thereon. The claim for attorney's fees refers
to damages arising after the filing of the complaint against the Go's. The
additional filing fee on this claim is deemed to constitute a lien on the judgment
award. 20
The Court of Appeals found that the subject portion is actually forty-two (42)
square meters in area, not forty-five (45), as initially found by the trial court; that
this forty-two (42) square meter portion is on the entire eastern side of Lot No. 24
belonging to petitioners; that this said portion is found the concrete fence and
pathway that extends from respondent Winston Go's house on adjacent Lot No.
25; that inclusive of the subject portion, respondents Go did not gain nor lose any
portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li
Ching Yao built his house, encroached on the land of respondents Go, gaining in
the process thirty-seven (37) square meters of the latter's land. 21

We hold that the Court of Appeals correctly dismissed the third-party complaint
against AIA.. The claim that the discrepancy in the lot areas was due to AIA's
fault was not proved. The appellate court, however, found that it was the
erroneous survey by Engineer Quedding that triggered these discrepancies. And
it was this survey that respondent Winston Go relied upon in constructing his
house on his father's land. He built his house in the belief that it was entirely
within the parameters of his father's land. In short, respondents Go had no
knowledge that they encroached petitioners' lot. They are deemed builders in
good faith 22 until the time petitioner Ballatan informed them of their
encroachment on her property. 23
Respondent Li Ching Yao built his house on his lot before any of the other parties
did. 24 He constructed his house in 1982, respondents Go in 1983, and
petitioners in 1985. 25 There is no evidence, much less, any allegation that
respondent Li Ching Yao was aware that when he built his house he knew that a
portion thereof encroached on respondents Go's adjoining land. Good faith is
always presumed, and upon him who alleges bad faith on the part of a possessor
rests the burden of proof. 26
All the parties are presumed to have acted in good faith. Their rights must,
therefore, be determined in accordance with the appropriate provisions of the
Civil Code on property.
Art. 448 of the Civil Code 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, 27 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.
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 building,
planting or sowing, after payment to the builder, planter or sower of the

necessary and useful expenses, and in the proper case, expenses for
pure luxury or mere pleasure. The owner of the land may also oblige the
builder, planter or sower to purchase and pay the price of the land. If the
owner chooses to sell his land, the builder, planter or sower must
purchase the land, otherwise the owner may remove the improvements
thereon. The builder, planter or sower, however, is not obliged to
purchase the land if its value considerably more than the building,
planting or sowing. In such case, the builder, planter or sower must pay
rent to the owner of the land. If the parties cannot come to terms over
the conditions of the lease, the court must fix the terms thereof. The right
to choose between appropriating the improvement or selling the land on
which the improvement stands to the builder, planter or sower, is given
to the owner of the land. 28
Art. 448 has been applied to improvements or portions of improvements built by
mistaken belief on land belonging to the adjoining owner. 29 The facts of the
instant case are similar to those in Cabral v. Ibanez, 30 to wit:
[P]laintiffs Geronima Zabala and her husband Justino Bernardo,
constructed their house in the belief that it was entirely within
the area of their own land without knowing at that time that part
of their house was occupying a 14-square meter portion of the
adjoining lot belonging to the defendants, and that the
defendants Bernardo M. Cabral and Mamerta M. Cabral were
likewise unaware of the fact that a portion of plaintiff's house
was extending and occupying a portion of their lot with an area
of 14 square meters. The parties came to know of the fact that
part of the plaintiff's house was occupying part of defendant's
land when the construction of plaintiff's house was about to be
finished, after a relocation of the monuments of the two
properties had been made by the U.S. Army through the Bureau
of Lands, according to their "Stipulation of Facts," dated August
17, 1951.
On the basis of these facts, we held that:
The court, therefore, concludes that the plaintiffs are builders in
good faith and the relative rights of the defendant Mamerta
Cabral as owner of the land and of the plaintiffs as owners of
the building is governed by Article 361 of the Civil Code (Co Tao
v. Joaquin Chan Chico, 46 Off. Gaz.5514). Article 361 of the old

Civil Code has been reproduced with an additional provision in


Article 448 of the new Civil Code, approved June 18, 1949. 31

of their house constructed thereon. If the value of the land is much more than the
Go's improvement, the respondents Go must pay reasonable rent. If they do not
agree on the terms of the lease, then they may go to court to fix the same.

Similarly, in Grana and Torralba v. Court of Appeals, 32 we held that:


Although without any legal and valid claim over the land in
question, petitioners, however, were found by the Court of
Appeals to have constructed a portion of their house thereon in
good faith. Under Article 361 of the old Civil Code (Article 448 of
the new), the owner of the land on which anything has been
built in good faith shall have the right to appropriate as his own
the building, after payment to the builder of necessary or useful
expenses, and in the proper case, expenses for pure luxury or
mere pleasure, or to oblige the builder to pay the price of the
land. Respondents, as owners of the land, have therefore the
choice of either appropriating the portion of petitioners' house
which is on their land upon payment of the proper indemnity to
petitioners, or selling to petitioners that part of their land on
which stands the improvement. It may here be pointed out that it
would be impractical for respondents to choose to exercise the
first alternative, i.e., buy that portion of the house standing on
their land, for in that event the whole building might be rendered
useless. The more workable solution, it would seem, is for
respondents to sell to petitioners that part of their land on which
was constructed a portion of the latter's house. If petitioners are
unwilling or unable to buy, then they must vacate the land and
must pay rentals until they do so. Of course, respondents
cannot oblige petitioners to buy the land if its value is
considerably more than that of the aforementioned portion of
the house. If such be the case, then petitioners must pay
reasonable rent. The parties must come to an agreement as to
the conditions of the lease, and should they fail to do so, then
the court shall fix the same. 33
In light of these rulings, petitioners, as owners of Lot No. 24, may choose to
purchase the improvement made by respondents Go on their land, or sell to
respondents Go the subject portion. If buying the improvement is impractical as it
may render the Go's house useless, then petitioners may sell to respondents Go
that portion of Lot No. 24 on which their improvement stands. If the Go's are
unwilling or unable to buy the lot, then they must vacate the land and, until they
vacate, they must pay rent to petitioners. Petitioners, however, cannot compel
respondents Go to buy the land if its value is considerably more than the portion

In the event that petitioners elect to sell to respondents Go the subject portion of
their lot, the price must be fixed at the prevailing market value at the time of
payment. The Court of Appeals erred in fixing the price at the time of taking,
which is the time the improvements were built on the land. The time of taking is
determinative of just compensation in expropriation proceedings. The instant
case is not for expropriation. It is not a taking by the state of private property for a
public purpose upon payment of just compensation. This is a case of an owner
who has been paying real estate taxes on his land but has been deprived of the
use of a portion of this land for years. It is but fair and just to fix compensation at
the time of payment. 34
Art. 448 and the same conditions abovestated also apply to respondents Go as
owners and possessors of their land and respondent Li Ching Yao as builder of
the improvement that encroached on thirty-seven (37) square meters of
respondents Go's land.
IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as
follows:
(1) Petitioners are ordered to exercise within thirty (30) days from finality of this
decision their option to either buy the portion of respondents Go's improvement
on their Lot No. 24, or sell to said respondents the portion of their land on which
the improvement stands. If petitioners elect to sell the land or buy the
improvement, the purchase price must be at the prevailing market price at the
time of payment. If buying the improvement will render respondents Go's house
useless, then petitioners should sell the encroached portion of their land to
respondents Go. If petitioners choose to sell the land but respondents Go are
unwilling or unable to buy, then the latter must vacate the subject portion and pay
reasonable rent from the time petitioners made their choice up to the time they
actually vacate the premises. But if the value of the land is considerably more
than the value of the improvement, then respondents Go may elect to lease the
land, in which case the parties shall agree upon the terms, the lease. Should they
fail to agree on said terms, the court of origin is directed to fix the terms of the
lease.
From the moment petitioners shall have exercised their option, respondents Go
shall pay reasonable monthly rent up to the time the parties agree on the terms
of the lease or until the court fixes such terms.

(2) Respondents Go are likewise directed to exercise their rights as owners of


Lots Nos. 25 and 26, vis-a-visrespondent Li Ching Yao as builder of the
improvement that encroached on thirty seven (37) square meters of respondents
Go 's land in accordance with paragraph one abovementioned.
(3) The Decision of the Court of Appeals ordering Engineer Quedding, as thirdparty defendant, to pay attorney's fees of P5,000.00 to respondents Go is
affirmed. The additional filing fee on the damages constitutes a lien on this
award.
(4) The Decision of the Court of Appeals dismissing third-party complaint against
Araneta Institute of Agriculture is affirmed.SO ORDERED.
G.R. No. 151815

February 23, 2005

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners,


vs.
HON. COURT OF APPEALS AND PEDRO P. PECSON, respondents.

Pedro P. Pecson owned a commercial lot located at 27 Kamias Road, Quezon


City, on which he built a four-door two-storey apartment building. For failure to
pay realty taxes, the lot was sold at public auction by the City Treasurer of
Quezon City to Mamerto Nepomuceno, who in turn sold it for P103,000 to the
spouses Juan and Erlinda Nuguid.
Pecson challenged the validity of the auction sale before the RTC of Quezon City
in Civil Case No. Q-41470. In its Decision, 3 dated February 8, 1989, the RTC
upheld the spouses title but declared that the four-door two-storey apartment
building was not included in the auction sale. 4 This was affirmed in toto by the
Court of Appeals and thereafter by this Court, in its Decision 5 dated May 25,
1993, in G.R. No. 105360 entitled Pecson v. Court of Appeals.
On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid decision in
G.R. No. 105360, the Nuguids became the uncontested owners of the 256square meter commercial lot.
As a result, the Nuguid spouses moved for delivery of possession of the lot and
the apartment building.

DECISION
QUISUMBING, J.:
This is a petition for review on certiorari of the Decision1 dated May 21, 2001, of
the Court of Appeals in CA-G.R. CV No. 64295, which modified the Order dated
July 31, 1998 of the Regional Trial Court (RTC) of Quezon City, Branch 101 in
Civil Case No. Q-41470. The trial court ordered the defendants, among them
petitioner herein Juan Nuguid, to pay respondent herein Pedro P. Pecson, the
sum of P1,344,000 as reimbursement of unrealized income for the period
beginning November 22, 1993 to December 1997. The appellate court, however,
reduced the trial courts award in favor of Pecson from the said P1,344,000
to P280,000. Equally assailed by the petitioners is the appellate courts
Resolution2 dated January 10, 2002, denying the motion for reconsideration.
It may be recalled that relatedly in our Decision dated May 26, 1995, in G.R. No.
115814, entitled Pecson v. Court of Appeals, we set aside the decision of the
Court of Appeals in CA-G.R. SP No. 32679 and the Order dated November 15,
1993, of the RTC of Quezon City, Branch 101 and remanded the case to the trial
court for the determination of the current market value of the four-door two-storey
apartment building on the 256-square meter commercial lot.
The antecedent facts in this case are as follows:

In its Order6 of November 15, 1993, the trial court, relying upon Article 546 7 of the
Civil Code, ruled that the Spouses Nuguid were to reimburse Pecson for his
construction cost of P53,000, following which, the spouses Nuguid were entitled
to immediate issuance of a writ of possession over the lot and improvements. In
the same order the RTC also directed Pecson to pay the same amount of
monthly rentals to the Nuguids as paid by the tenants occupying the apartment
units or P21,000 per month from June 23, 1993, and allowed the offset of the
amount of P53,000 due from the Nuguids against the amount of rents collected
by Pecson from June 23, 1993 to September 23, 1993 from the tenants of the
apartment.8
Pecson duly moved for reconsideration, but on November 8, 1993, the RTC
issued a Writ of Possession,9directing the deputy sheriff to put the spouses
Nuguid in possession of the subject property with all the improvements thereon
and to eject all the occupants therein.
Aggrieved, Pecson then filed a special civil action for certiorari and prohibition
docketed as CA-G.R. SP No. 32679 with the Court of Appeals.
In its decision of June 7, 1994, the appellate court, relying upon Article 448 10 of
the Civil Code, affirmed the order of payment of construction costs but rendered
the issue of possession moot on appeal, thus:

WHEREFORE, while it appears that private respondents [spouses Nuguid] have


not yet indemnified petitioner [Pecson] with the cost of the improvements, since
Annex I shows that the Deputy Sheriff has enforced the Writ of Possession and
the premises have been turned over to the possession of private
respondents, the quest of petitioner that he be restored in possession of the
premises is rendered moot and academic, although it is but fair and just that
private respondents pay petitioner the construction cost of P53,000.00; and that
petitioner be ordered to account for any and all fruits of the improvements
received by him starting on June 23, 1993, with the amount of P53,000.00 to be
offset therefrom.
11

IT IS SO ORDERED. [Underscoring supplied.]


Frustrated by this turn of events, Pecson filed a petition for review docketed as
G.R. No. 115814 before this Court.
On May 26, 1995, the Court handed down the decision in G.R. No 115814, to wit:
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679
and the Order of 15 November 1993 of the Regional Trial Court, Branch 101,
Quezon City in Civil Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current
market value of the apartment building on the lot. For this purpose, the parties
shall be allowed to adduce evidence on the current market value of the
apartment building. The value so determined shall be forthwith paid by the
private respondents [Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro
Pecson] otherwise the petitioner shall be restored to the possession of the
apartment building until payment of the required indemnity.

also in ordering Pecson to account for the rentals of the apartment building from
June 23, 1993 to September 23, 1993.
On the basis of this Courts decision in G.R. No. 115814, Pecson filed a Motion to
Restore Possession and a Motion to Render Accounting, praying respectively for
restoration of his possession over the subject 256-square meter commercial lot
and for the spouses Nuguid to be directed to render an accounting under oath, of
the income derived from the subject four-door apartment from November 22,
1993 until possession of the same was restored to him.
In an Order13 dated January 26, 1996, the RTC denied the Motion to Restore
Possession to the plaintiff averring that the current market value of the building
should first be determined. Pending the said determination, the resolution of the
Motion for Accounting was likewise held in abeyance.
With the submission of the parties assessment and the reports of the subject
realty, and the reports of the Quezon City Assessor, as well as the members of
the duly constituted assessment committee, the trial court issued the following
Order14 dated October 7, 1997, to wit:
On November 21, 1996, the parties manifested that they have arrived at a
compromise agreement that the value of the said improvement/building
is P400,000.00 The Court notes that the plaintiff has already
receivedP300,000.00. However, when defendant was ready to pay the balance
of P100,000.00, the plaintiff now insists that there should be a rental to be paid
by defendants. Whether or not this should be paid by defendants, incident is
hereby scheduled for hearing on November 12, 1997 at 8:30 a.m.
Meantime, defendants are directed to pay plaintiff the balance of P100,000.00.

No costs.

SO ORDERED.15

SO ORDERED.12 [Emphasis supplied.]

On December 1997, after paying the said P100,000 balance to Pedro Pecson the
spouses Nuguid prayed for the closure and termination of the case, as well as
the cancellation of the notice of lis pendens on the title of the property on the
ground that Pedro Pecsons claim for rentals was devoid of factual and legal
bases.16

In so ruling, this Court pointed out that: (1) Article 448 of the Civil Code is not
apposite to the case at bar where the owner of the land is the builder, sower, or
planter who then later lost ownership of the land by sale, but may, however, be
applied by analogy; (2) the current market value of the improvements should be
made as the basis of reimbursement; (3) Pecson was entitled to retain ownership
of the building and, necessarily, the income therefrom; (4) the Court of Appeals
erred not only in upholding the trial courts determination of the indemnity, but

After conducting a hearing, the lower court issued an Order dated July 31, 1998,
directing the spouses to pay the sum of P1,344,000 as reimbursement of the
unrealized income of Pecson for the period beginning November 22, 1993 up to

December 1997. The sum was based on the computation of P28,000/month


rentals of the four-door apartment, thus:
The Court finds plaintiffs motion valid and meritorious. The decision of the
Supreme Court in the aforesaid case [Pecson vs. Court of Appeals, 244 SCRA
407] which set aside the Order of this Court of November 15, 1993 has in effect
upheld plaintiffs right of possession of the building for as long as he is not fully
paid the value thereof. It follows, as declared by the Supreme Court in said
decision that the plaintiff is entitled to the income derived therefrom, thus
...
Records show that the plaintiff was dispossessed of the premises on November
22, 1993 and that he was fully paid the value of his building in December 1997.
Therefore, he is entitled to the income thereof beginning on November 22, 1993,
the time he was dispossessed, up to the time of said full payment, in December
1997, or a total of 48 months.
The only question left is the determination of income of the four units of
apartments per month. But as correctly pointed out by plaintiff, the defendants
have themselves submitted their affidavits attesting that the income derived from
three of the four units of the apartment building is P21,000.00 or P7,000.00 each
per month, or P28,000.00 per month for the whole four units. Hence, at
P28,000.00 per month, multiplied by 48 months, plaintiff is entitled to be paid by
defendants the amount of P1,344,000.00. 17
The Nuguid spouses filed a motion for reconsideration but this was denied for
lack of merit.18
The Nuguid couple then appealed the trial courts ruling to the Court of Appeals,
their action docketed as CA-G.R. CV No. 64295.
In the Court of Appeals, the order appealed from in CA-G.R. CV No. 64295, was
modified. The CA reduced the rentals from P1,344,000 to P280,000 in favor of
the appellee.19 The said amount represents accrued rentals from the
determination of the current market value on January 31, 1997 20 until its full
payment on December 12, 1997.
Hence, petitioners state the sole assignment of error now before us as follows:
THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS LIABLE TO
PAY RENT OVER AND ABOVE THE CURRENT MARKET VALUE OF THE

IMPROVEMENT WHEN SUCH WAS NOT PROVIDED FOR IN THE


DISPOSITIVE PORTION OF THE SUPREME COURTS RULING IN G.R. No.
115814.
Petitioners call our attention to the fact that after reaching an agreed price
of P400,000 for the improvements, they only made a partial payment
of P300,000. Thus, they contend that their failure to pay the full price for the
improvements will, at most, entitle respondent to be restored to possession, but
not to collect any rentals. Petitioners insist that this is the proper interpretation of
the dispositive portion of the decision in G.R. No. 115814, which states in part
that "[t]he value so determined shall be forthwith paid by the private respondents
[Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwise
the petitioner shall be restored to the possession of the apartment building until
payment of the required indemnity." 21
Now herein respondent, Pecson, disagrees with herein petitioners contention.
He argues that petitioners are wrong in claiming that inasmuch as his claim for
rentals was not determined in the dispositive portion of the decision in G.R. No.
115814, it could not be the subject of execution. He points out that in moving for
an accounting, all he asked was that the value of the fruits of the property during
the period he was dispossessed be accounted for, since this Court explicitly
recognized in G.R. No. 115814, he was entitled to the property. He points out that
this Court ruled that "[t]he petitioner [Pecson] not having been so paid, he was
entitled to retain ownership of the building and, necessarily, the income
therefrom."22 In other words, says respondent, accounting was necessary. For
accordingly, he was entitled to rental income from the property. This should be
given effect. The Court could have very well specifically included rent (as fruit or
income of the property), but could not have done so at the time the Court
pronounced judgment because its value had yet to be determined, according to
him. Additionally, he faults the appellate court for modifying the order of the RTC,
thus defeating his right as a builder in good faith entitled to rental from the period
of his dispossession to full payment of the price of his improvements, which
spans from November 22, 1993 to December 1997, or a period of more than four
years.
It is not disputed that the construction of the four-door two-storey apartment,
subject of this dispute, was undertaken at the time when Pecson was still the
owner of the lot. When the Nuguids became the uncontested owner of the lot on
June 23, 1993, by virtue of entry of judgment of the Courts decision, dated May
25, 1993, in G.R. No. 105360, the apartment building was already in existence
and occupied by tenants. In its decision dated May 26, 1995 in G.R. No. 115814,
the Court declared the rights and obligations of the litigants in accordance with

Articles 448 and 546 of the Civil Code. These provisions of the Code are directly
applicable to the instant case.

the apartment building. It was only four years later that they finally paid its full
value to the respondent.

Under Article 448, the landowner is given the option, either to appropriate the
improvement as his own upon payment of the proper amount of indemnity or to
sell the land to the possessor in good faith. Relatedly, Article 546 provides that a
builder in good faith is entitled to full reimbursement for all the necessary and
useful expenses incurred; it also gives him right of retention until full
reimbursement is made.

Petitioners interpretation of our holding in G.R. No. 115814 has neither factual
nor legal basis. The decision of May 26, 1995, should be construed in connection
with the legal principles which form the basis of the decision, guided by the
precept that judgments are to have a reasonable intendment to do justice and
avoid wrong.27

While the law aims to concentrate in one person the ownership of the land and
the improvements thereon in view of the impracticability of creating a state of
forced co-ownership,23 it guards against unjust enrichment insofar as the goodfaith builders improvements are concerned. The right of retention is considered
as one of the measures devised by the law for the protection of builders in good
faith. Its object is to guarantee full and prompt reimbursement as it permits the
actual possessor to remain in possession while he has not been reimbursed (by
the person who defeated him in the case for possession of the property) for those
necessary expenses and useful improvements made by him on the thing
possessed.24 Accordingly, a builder in good faith cannot be compelled to pay
rentals during the period of retention25 nor be disturbed in his possession by
ordering him to vacate. In addition, as in this case, the owner of the land is
prohibited from offsetting or compensating the necessary and useful expenses
with the fruits received by the builder-possessor in good faith. Otherwise, the
security provided by law would be impaired. This is so because the right to the
expenses and the right to the fruits both pertain to the possessor, making
compensation juridically impossible; and one cannot be used to reduce the
other.26
As we earlier held, since petitioners opted to appropriate the improvement for
themselves as early as June 1993, when they applied for a writ of execution
despite knowledge that the auction sale did not include the apartment building,
they could not benefit from the lots improvement, until they reimbursed the
improver in full, based on the current market value of the property.
Despite the Courts recognition of Pecsons right of ownership over the apartment
building, the petitioners still insisted on dispossessing Pecson by filing for a Writ
of Possession to cover both the lot and the building. Clearly, this resulted in a
violation of respondents right of retention. Worse, petitioners took advantage of
the situation to benefit from the highly valued, income-yielding, four-unit
apartment building by collecting rentals thereon, before they paid for the cost of

The text of the decision in G.R. No. 115814 expressly exempted Pecson from
liability to pay rentals, for we found that the Court of Appeals erred not only in
upholding the trial courts determination of the indemnity, but also in ordering him
to account for the rentals of the apartment building from June 23, 1993 to
September 23, 1993, the period from entry of judgment until Pecsons
dispossession. As pointed out by Pecson, the dispositive portion of our decision
in G.R. No. 115814 need not specifically include the income derived from the
improvement in order to entitle him, as a builder in good faith, to such income.
The right of retention, which entitles the builder in good faith to the possession as
well as the income derived therefrom, is already provided for under Article 546 of
the Civil Code.
Given the circumstances of the instant case where the builder in good faith has
been clearly denied his right of retention for almost half a decade, we find that
the increased award of rentals by the RTC was reasonable and equitable. The
petitioners had reaped all the benefits from the improvement introduced by the
respondent during said period, without paying any amount to the latter as
reimbursement for his construction costs and expenses. They should account
and pay for such benefits.
We need not belabor now the appellate courts recognition of herein respondents
entitlement to rentals from the date of the determination of the current market
value until its full payment. Respondent is clearly entitled to payment by virtue of
his right of retention over the said improvement.
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision
dated May 21, 2001 of the Court of Appeals in CA-G.R. CV No. 64295 is SET
ASIDE and the Order dated July 31, 1998, of the Regional Trial Court, Branch
101, Quezon City, in Civil Case No. Q-41470 ordering the herein petitioners,
Spouses Juan and Erlinda Nuguid, to account for the rental income of the fourdoor two-storey apartment building from November 1993 until December 1997, in
the amount of P1,344,000, computed on the basis of Twenty-eight Thousand
(P28,000.00) pesos monthly, for a period of 48 months, is hereby REINSTATED.

Until fully paid, said amount of rentals should bear the legal rate of interest set at
six percent (6%) per annum computed from the date of RTC judgment. If any
portion thereof shall thereafter remain unpaid, despite notice of finality of this
Courts judgment, said remaining unpaid amount shall bear the rate of interest
set at twelve percent (12%) per annum computed from the date of said notice.
Costs against petitioners.
SO ORDERED.

G.R. Nos. 154391-92

September 30, 2004

Spouses ISMAEL and TERESITA MACASAET, petitioners,


vs.
Spouses VICENTE and ROSARIO MACASAET, respondents.

option to be taken by Vicente and Rosario and to implement the


same with dispatch."4
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts

DECISION
Petitioners Ismael and Teresita 5 Macasaet and Respondents Vicente and Rosario
Macasaet are first-degree relatives. Ismael is the son of respondents, and
Teresita is his wife.6

PANGANIBAN, J.:
The present case involves a dispute between parents and children. The children
were invited by the parents to occupy the latters two lots, out of parental love
and a desire to foster family solidarity. Unfortunately, an unresolved conflict
terminated this situation. Out of pique, the parents asked them to vacate the
premises. Thus, the children lost their right to remain on the property. They have
the right, however, to be indemnified for the useful improvements that they
constructed thereon in good faith and with the consent of the parents. In short,
Article 448 of the Civil Code applies.

On December 10, 1997, the parents filed with the Municipal Trial Court in Cities
(MTCC) of Lipa City an ejectment suit against the children. 7 Respondents alleged
that they were the owners of two (2) parcels of land covered by Transfer
Certificate of Title (TCT) Nos. T-78521 and T-103141, situated at Banay-banay,
Lipa City; that by way of a verbal lease agreement, Ismael and Teresita occupied
these lots in March 1992 and used them as their residence and the situs of their
construction business; and that despite repeated demands, petitioners failed to
pay the agreed rental of P500 per week.8

The Case
1

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing
the March 22, 2002 Decision 2and the June 26, 2002 Resolution 3 of the Court of
Appeals (CA) in CA-GR SP Nos. 56205 & 56467. The challenged Decision
disposed as follows:
"WHEREFORE, the assailed Decision is AFFIRMED with the following
MODIFICATIONS:
1. Vicente and Rosario should reimburse Ismael and Teresita
one-half of the value of the useful improvements introduced in
the premises prior to demand, which is equivalent
to P475,000.00. In case the former refuse to reimburse the said
amount, the latter may remove the improvements, even though
the land may suffer damage thereby. They shall not, however,
cause any more impairment upon the property leased than is
necessary.

Ismael and Teresita denied the existence of any verbal lease agreement. They
claimed that respondents had invited them to construct their residence and
business on the subject lots in order that they could all live near one other,
employ Marivic (the sister of Ismael), and help in resolving the problems of the
family.9 They added that it was the policy of respondents to allot the land they
owned as an advance grant of inheritance in favor of their children. Thus, they
contended that the lot covered by TCT No. T-103141 had been allotted to Ismael
as advance inheritance. On the other hand, the lot covered by TCT No. T-78521
was allegedly given to petitioners as payment for construction materials used in
the renovation of respondents house.10

2. The award of attorneys fees is DELETED.

The MTCC11 ruled in favor of respondents and ordered petitioners to vacate the
premises. It opined that Ismael and Teresita had occupied the lots, not by virtue
of a verbal lease agreement, but by tolerance of Vicente and Rosario. 12 As their
stay was by mere tolerance, petitioners were necessarily bound by an implied
promise to vacate the lots upon demand. 13 The MTCC dismissed their contention
that one lot had been allotted as an advance inheritance, on the ground that
successional rights were inchoate. Moreover, it disbelieved petitioners allegation
that the other parcel had been given as payment for construction materials. 14

3. The records of these consolidated cases are REMANDED to


the Court of origin for further proceedings to determine the

On appeal, the regional trial court 15 (RTC) upheld the findings of the MTCC.
However, the RTC allowed respondents to appropriate the building and other

improvements introduced by petitioners, after payment of the indemnity provided


for by Article 448 in relation to Articles 546 and 548 of the Civil Code. 16 It added
that respondents could oblige petitioners to purchase the land, unless its value
was considerably more than the building. In the latter situation, petitioners should
pay rent if respondents would not choose to appropriate the building. 17

"2. a) Whether or not the rule on appearance of parties during the


Pretrial should apply on appearance of parties during Preliminary
Conference in an unlawful detainer suit;
b) Whether or not the case of Philippine Pryce Assurance
Corporation vs. Court of Appeals (230 SCRA 164) is applicable
to appearance of parties in an unlawful detainer suit;

Upon denial of their individual Motions for Reconsideration, the parties filed with
the CA separate Petitions for Review, which were later consolidated. 18
Ruling of the Court of Appeals
The CA sustained the finding of the two lower courts that Ismael and Teresita had
been occupying the subject lots only by the tolerance of Vicente and
Rosario.19 Thus, possession of the subject lots by petitioners became illegal upon
their receipt of respondents letter to vacate it.20
Citing Calubayan v. Pascual,21 the CA further ruled that petitioners status was
analogous to that of a lessee or a tenant whose term of lease had expired, but
whose occupancy continued by tolerance of the owner. 22Consequently, in
ascertaining the right of petitioners to be reimbursed for the improvements they
had introduced on respondents properties, 23 the appellate court applied the Civil
Codes provisions on lease. The CA modified the RTC Decision by declaring that
Article 448 of the Civil Code was inapplicable. The CA opined that under Article
1678 of the same Code, Ismael and Teresita had the right to be reimbursed for
one half of the value of the improvements made. 24
Not satisfied with the CAs ruling, petitioners brought this recourse to this Court. 25

"3. Whether or not Article 1678 of the Civil Code should apply to the
case on the matters of improvements, or is it Article 447 of the Civil
Code in relation to the Article 453 and 454 thereof that should apply, if
ever to apply the Civil Code;
"4. Whether or not the [D]ecision of the Court of Appeals is supported by
evidence, appropriate laws, rules and jurisprudence;
"5. Whether or not Assisting Judge Norberto Mercado of the MTCC Lipa
City should be held accountable in rendering the MTCC [D]ecision;
"6. Whether or not Atty. Glenn Mendoza and Atty. Andrew Linatoc of the
same [l]aw office should be held accountable for pursuing the
[e]jectment case[.]"26
The Courts Ruling
The Petition is partly meritorious.
First Issue:

The Issues
Petitioners raise the following issues for our consideration:
"1. a) Whether or not Section 17[,] Rule 70 of the Rules of Court on
Judgment should apply in the rendition of the decision in this case;
b) Whether or not the Complaint should have been dismissed;
c) Whether or not damages including attorneys fees should
have been awarded to herein petitioners;

Ejectment
Who is entitled to the physical or material possession of the premises? At the
outset, we stress that this is the main issue in ejectment proceedings. 27 In the
present case, petitioners failed to justify their right to retain possession of the
subject lots, which respondents own. Since possession is one of the attributes of
ownership,28respondents clearly are entitled to physical or material possession.
Allegations of the Complaint
Petitioners allege that they cannot be ejected from the lots, because respondents
based their Complaint regarding the nonpayment of rentals on a verbal lease

agreement, which the latter failed to prove. 29 Petitioners contend that the lower
courts erred in using another ground (tolerance of possession) to eject them.

of the [respondents], and not by virtue of a verbal lease agreement


between them."36

In actions for unlawful detainer, possession that was originally lawful becomes
unlawful upon the expiration or termination of the defendants right to possess,
arising from an express or implied contract. 30 In other words, the plaintiffs cause
of action comes from the expiration or termination of the defendants right to
continue possession.31 The case resulting therefrom must be filed within one year
from the date of the last demand.

Having found a cause of action for unlawful detainer, the MTCC (as well as the
RTC and the CA) did not err in ordering the ejectment of petitioners as prayed for
by respondents. There was no violation of Section 17 of Rule 70 37 of the Rules of
Court. As earlier explained, unlawful detainer was sufficiently alleged in the
Complaint and duly proven during the trial. Significantly, the issue of whether
there was enough ground to eject petitioners was raised during the preliminary
conference.38

To show a cause of action in an unlawful detainer, an allegation that the


defendant is illegally withholding possession from the plaintiff is sufficient. The
complaint may lie even if it does not employ the terminology of the law, provided
the said pleading is couched in a language adequately stating that the
withholding of possession or the refusal to vacate has become unlawful. 32 It is
equally settled that the jurisdiction of the court, as well as the nature of the
action, is determined from the averments of the complaint.33
In the present case, the Complaint alleged that despite demands, petitioners
"refused to pay the accrued rentals and [to] vacate the leased premises." 34 It
prayed that judgment be rendered "[o]rdering [petitioners] and all those claiming
rights under them to vacate the properties x x x and remove the structures x x x
constructed thereon."35Effectively then, respondents averred that petitioners
original lawful occupation of the subject lots had become unlawful.
The MTCC found sufficient cause to eject petitioners. While it disbelieved the
existence of a verbal lease agreement, it nevertheless concluded that petitioners
occupation of the subject lots was by mere tolerance of respondents. Basing its
conclusion on the fact that the parties were close relatives, the MTCC ruled thus:
"x x x [T]he parties herein are first degree relatives. Because of this
relationship, this Court takes judicial notice of the love, care, concern
and protection imbued upon the parents towards their [children], i.e., in
the instant case, the love, care, concern and protection of the
[respondents] to the [petitioners]. With this in mind, this Court is inclined
to believe the position of the [petitioners] that there was no such verbal
lease agreement between the parties herein that took place in 1992. x x
x.
"From the allegations of the [petitioners], this Court is convinced that
their stay and occupancy of the subject premises was by mere tolerance

Not Merely Tolerated


Possession
Petitioners dispute the lower courts finding that they occupied the subject lots on
the basis of mere tolerance. They argue that their occupation was not under such
condition, since respondents had invited, offered and persuaded them to use
those properties.39
This Court has consistently held that those who occupy the land of another at the
latters tolerance or permission, without any contract between them, are
necessarily bound by an implied promise that the occupants will vacate the
property upon demand.40 A summary action for ejectment is the proper remedy to
enforce this implied obligation.41 The unlawful deprivation or withholding of
possession is to be counted from the date of the demand to vacate. 42
Toleration is defined as "the act or practice of permitting or enduring something
not wholly approved of."43 Sarona v. Villegas44 described what tolerated acts
means, in this language:
"Professor Arturo M. Tolentino states that acts merely tolerated are
those which by reason of neighborliness or familiarity, the owner of
property allows his neighbor or another person to do on the property;
they are generally those particular services or benefits which ones
property can give to another without material injury or prejudice to the
owner, who permits them out of friendship or courtesy. x x x. And,
Tolentino continues, even though this is continued for a long time, no
right will be acquired by prescription." x x x. Further expounding on the
concept, Tolentino writes: There is tacit consent of the possessor to the
acts which are merely tolerated. Thus, not every case of knowledge and
silence on the part of the possessor can be considered mere tolerance.

By virtue of tolerance that is considered as an authorization, permission


or license, acts of possession are realized or performed. The question
reduces itself to the existence or non-existence of the permission." 45
We hold that the facts of the present case rule out the finding of possession by
mere tolerance. Petitioners were able to establish that respondents had invited
them to occupy the subject lots in order that they could all live near one other and
help in resolving family problems. 46 By occupying those lots, petitioners
demonstrated their acceptance of the invitation. Hence, there was a meeting of
minds, and an agreement regarding possession of the lots impliedly arose
between the parties.
The occupancy of the subject lots by petitioners was not merely "something not
wholly approved of" by respondents. Neither did it arise from what Tolentino
refers to as "neighborliness or familiarity." In point of fact, their possession was
upon the invitation of and with the complete approval of respondents, who
desired that their children would occupy the premises. It arose from familial love
and a desire for family solidarity, which are basic Filipino traits.
Right to Use the Lots Terminated
That Ismael and Teresita had a right to occupy the lots is therefore clear. The
issue is the duration of possession. In the absence of a stipulation on this point,
Article 1197 of the Civil Code allows the courts to fix the duration or the period.
"Article 1197. If the obligation does not fix a period, but from its nature
and the circumstances it can be inferred that a period was intended, the
courts may fix the duration thereof.
"The courts shall also fix the duration of the period when it depends
upon the will of the debtor.
"In every case the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by them."
Article 1197, however, applies to a situation in which the parties intended a
period. Such qualification cannot be inferred from the facts of the present case.
To repeat, when Vicente and Rosario invited their children to use the lots, they
did so out of parental love and a desire for solidarity expected from Filipino
parents. No period was intended by the parties. Their mere failure to fix the

duration of their agreement does not necessarily justify or authorize the courts to
do so.47
Based on respondents reasons for gratuitously allowing petitioners to use the
lots, it can be safely concluded that the agreement subsisted as long as the
parents and the children mutually benefited from the arrangement. Effectively,
there is a resolutory condition in such an agreement. 48 Thus, when a change in
the condition existing between the parties occurs -- like a change of ownership,
necessity, death of either party or unresolved conflict or animosity -- the
agreement may be deemed terminated. Having been based on parental love, the
agreement would end upon the dissipation of the affection.
When persistent conflict and animosity overtook the love and solidarity between
the parents and the children, the purpose of the agreement ceased. 49 Thus,
petitioners no longer had any cause for continued possession of the lots. Their
right to use the properties became untenable. It ceased upon their receipt of the
notice to vacate. And because they refused to heed the demand, ejectment was
the proper remedy against them. Their possession, which was originally lawful,
became unlawful when the reason therefor -- love and solidarity -- ceased to
exist between them.
No Right to Retain
Possession
Petitioners have not given this Court adequate reasons to reverse the lower
courts dismissal of their contention that Lots T-78521 and T-103141,
respectively, were allegedly allotted to them as part of their inheritance and given
in consideration for past debts.
The right of petitioners to inherit from their parents is merely inchoate and is
vested only upon the latters demise. Indisputably, rights of succession are
transmitted only from the moment of death of the decedent. 50 Assuming that
there was an "allotment" of inheritance, ownership nonetheless remained with
respondents. Moreover, an intention to confer title to certain persons in the future
is not inconsistent with the owners taking back possession in the meantime for
any reason deemed sufficient.51 Other than their self-serving testimonies and
their affidavits, petitioners offered no credible evidence to support their outlandish
claim of inheritance "allocation."
We also agree with the lower courts that petitioners failed to prove the allegation
that, through a dation in payment, Lot T-78521 had been transferred to the latter

as payment for respondents debts.52 The evidence presented by petitioners


related only to the alleged indebtedness of the parents arising from the latters
purported purchases and advances. 53 There was no sufficient proof that
respondents had entered into a contract of dation to settle the alleged debt.
Petitioners even stated that there was a disagreement in the accounting of the
purported debt,54 a fact that disproves a meeting of the minds with the parents.
Petitioners also admitted that a portion of the alleged debt is the subject matter of
a collection case against respondents (Civil Case No. 0594-96). 55 Thus, the
formers allegation that the indebtedness has been paid through a dation cannot
be given credence, inconsistent as it is with their action to recover the same debt.

amicable settlement, to submit to alternative modes of dispute resolution, and to


enter into stipulations or admissions of facts and of documents. 59
Section 4 of Rule 18 may supplement Section 8 of Rule 70. Thus, the spirit
behind the exception to personal appearance under the rules on pretrial is
applicable to the preliminary conference. If there are valid reasons or if a
representative has a "special authority," a partys appearance may be waived. As
petitioners are challenging only the applicability of the rules on pretrial to the rule
on preliminary conference, the written authorization from respondents can indeed
be readily considered as a "special authorization."
Third Issue:

Despite their protestations, petitioners recognized the right of the parents to


recover the premises when they admitted in their Position Paper filed with the
MTCC that respondents had a title to the lots.
"The [respondents] want to get their property because the title is theirs,
the [petitioners] do not object but what is due the [petitioners] including
the reparation for the tarnish of their dignity and honor must be given the
[petitioners] for the benefits of their children before the premises will be
turned over."56

Rights of a Builder in Good Faith


As applied to the present case, accession refers to the right of the owner to
everything that is incorporated or attached to the property.60 Accession industrial
-- building, planting and sowing on an immovable -- is governed by Articles 445 to
456 of the Civil Code.
Articles 447 and 1678 of the

As a rule, the right of ownership carries with it the right of possession.

Civil Code Inapplicable

Second Issue:

To buttress their claim of reimbursement for the improvements introduced on the


property, petitioners cite Article 447.61 They allege that the CA erred in applying
Article 1678, since they had no lease agreement with respondents.

Appearance at the Preliminary Conference


Section 8 of Rule 70 of the Rules of Court requires the appearance of the plaintiff
and the defendant during the preliminary conference. On the basis of this
provision, petitioners claim that the MTCC should have dismissed the case upon
the failure of respondents to attend the conference. However, petitioners do not
dispute that an attorney-in-fact with a written authorization from respondents
appeared during the preliminary conference. 57 The issue then is whether the
rules on ejectment allow a representative to substitute for a partys personal
appearance.
Unless inconsistent with Rule 70, the provisions of Rule 18 on pretrial applies to
the preliminary conference.58Under Section 4 of this Rule, the nonappearance of
a party may be excused by the showing of a valid cause; or by the appearance of
a representative, who has been fully authorized in writing to enter into an

We clarify. Article 447 is not applicable, because it relates to the rules that apply
when the owner of the property uses the materials of another. It does not refer to
the instance when a possessor builds on the property of another, which is the
factual milieu here.
In view of the unique factual setting of the instant case, the contention of
petitioners regarding the inapplicability of Article 1678 deserves attention. The CA
applied the provisions on lease, because it found their possession by mere
tolerance comparable with that of a lessee, per the pronouncement in Calubayan
v. Pascual,62 from which we quote:
"x x x. It has been held that a person who occupies the land of another
at the latters tolerance or permission, without any contract between
them, is necessarily bound by an implied promise that he will vacate

upon demand, failing which a summary action for ejectment is the proper
remedy against them. The status of defendant is analogous to that of a
lessee or tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner. In such a case, the unlawful
deprivation or withholding of possession is to be counted from the date
of the demand to vacate."63 (Emphasis in the original.)
As explained earlier, Ismael and Teresitas possession of the two lots was not by
mere tolerance, a circumstance that negates the applicability of Calubayan.

faith despite their reliance on the consent of another, whom they had mistakenly
believed to be the owner of the land.72
Based on the aforecited special cases, Article 448 applies to the present factual
milieu. The established facts of this case show that respondents fully consented
to the improvements introduced by petitioners. In fact, because the children
occupied the lots upon their invitation, the parents certainly knew and approved
of the construction of the improvements introduced thereon. 73 Thus, petitioners
may be deemed to have been in good faith when they built the structures on
those lots.

Article 448 Applicable


On the other hand, when a person builds in good faith on the land of another, the
applicable provision is Article 448, which reads: 64
"Article 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."
This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to
have a claim of title thereto. 65 It does not apply when the interest is merely that of
a holder, such as a mere tenant, agent or usufructuary.66 From these
pronouncements, good faith is identified by the belief that the land is owned; or
that -- by some title -- one has the right to build, plant, or sow thereon. 67
However, in some special cases, this Court has used Article 448 by recognizing
good faith beyond this limited definition. Thus, in Del Campo v. Abesia, 68 this
provision was applied to one whose house -- despite having been built at the
time he was still co-owner -- overlapped with the land of another. 69 This article
was also applied to cases wherein a builder had constructed improvements with
the consent of the owner. The Court ruled that the law deemed the builder to be
in good faith.70 In Sarmiento v. Agana,71 the builders were found to be in good

The instant case is factually similar to Javier v. Javier. 74 In that case, this Court
deemed the son to be in good faith for building the improvement (the house) with
the knowledge and consent of his father, to whom belonged the land upon which
it was built. Thus, Article 44875 was applied.
Rule on Useful Expenses
The structures built by petitioners were "useful" improvements, because they
augmented the value or income of the bare lots. 76 Thus, the indemnity to be paid
by respondents under Article 448 is provided for by Article 546, which we quote:
"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."
Consequently, respondents have the right to appropriate -- as their own -- the
building and other improvements on the subject lots, but only after (1) refunding
the expenses of petitioners or (2) paying the increase in value acquired by the
properties by reason thereof. They have the option to oblige petitioners to pay
the price of the land, unless its value is considerably more than that of the
structures -- in which case, petitioners shall pay reasonable rent.
In accordance with Depra v. Dumlao, 77 this case must be remanded to the trial
court to determine matters necessary for the proper application of Article 448 in
relation to Article 546. Such matters include the option that respondents would

take and the amount of indemnity that they would pay, should they decide to
appropriate the improvements on the lots. We disagree with the CAs
computation of useful expenses, which were based only on petitioners bare
allegations in their Answer.78

a. Spouses Vicente and Rosario Macasaets option to


appropriate -- as their own -- the improvements on the lots, after
paying the indemnity, as provided under Article 546 in relation to
Article 448 of the Civil Code; or in requiring Spouses Ismael and
Rosita Macasaet to pay for the value of the lots, unless it is
considerably more than that of the improvements, in which case
petitioners shall pay reasonable rent based upon the terms
provided under the Civil Code

Ruling on Improvement Justified


While, ordinarily, the jurisdiction of the MTCC on ejectment proceedings is limited
to the issue of physical or material possession of the property in question, this
Court finds it necessary to abbreviate the issue on the improvements in relation
to Article 448. First, the determination of the parties right to those improvements
is intimately connected with the MTCC proceedings in the light of the ejectment
of petitioners. Second, there is no dispute that while they constructed the
improvements, respondents owned the land. Third, both parties raised no
objection when the RTC and the CA ruled accordingly on this matter.

b. The value of the useful expenses incurred by Spouses Ismael


and Rosita Macasaet in the construction of the improvements
on the lots
c. The increase in value acquired by the lots by reason of the
useful improvements

Equitable considerations compel us to settle this point immediately, pro hoc vice,
to avoid needless delay. Both parties have already been heard on this issue; to
dillydally or equivocate would not serve the cause of substantial justice.

d. Spouses Vicente and Rosario Macasaets choice of type of


indemnity to be paid (whether b or c)
e. Whether the value of the lots is considerably more than that
of the improvements built thereon

Other Issues Raised


Given the foregoing rulings, it is no longer necessary to address petitioners
allegation that the MTCC judge and respondents lawyers should be respectively
held personally accountable for the Decision and for filing the case. 79 The
insinuation of petitioners that the lawyers manipulated the issuance of a false
barangay certification is unavailing. 80 Their contention that respondents did not
attend the barangay conciliation proceedings was based solely on hearsay,
which has little or no probative value.81
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals
are AFFIRMED with the followingMODIFICATIONS:
1. The portion requiring Spouses Vicente and Rosario Macasaet to
reimburse one half of the value of the useful improvements, amounting
to P475,000, and the right of Spouses Ismael and Rosita Macasaet to
remove those improvements (if the former refuses to reimburse)
is DELETED.
2. The case is REMANDED to the court of origin for further proceedings
to determine the facts essential to the proper application of Articles 448
and 546 of the Civil Code, specifically to the following matters:

No pronouncement as to costs.
SO ORDERED.

G.R. No. 108222 May 5, 1997


HENRY L. SIA, petitioner,
vs.
THE HON. COURT OF APPEALS, and TORRE DE ORO DEVELOPMENT
CORPORATION, respondents.
HERMOSISIMA, JR., J.:

A parcel of commercial land, without the improvements,


bounded on the North by Cruz Taal St., on the East by Matilda
Menciano; on the South by Rodolfo N. Pelaez and on the West
by Tiano Bros. St., having an approximate area of 391.62 sq.
meters, per Tax Decla. No. 0907 assessed at P153,440.00
covered by TCT No. 36954 in the name of TORRE DE ORO
DEVELOPMENT CORPORATION subject to the following
conditions, to wit:

Before us is a petition for review of the decision 1 of the Court of


Appeals 2 in an ejectment case. 3 Respondent appellate court affirmed the
decision on appeal 4 rendered by the Regional Trial Court of Misamis
Oriental 5 which ordered the ejectment of petitioner on the ground of expiration of
lease contract. The Court of Appeals and the Regional Trial Court in effect
reversed the Municipal Trial Court 6 which decided in favor of petitioner and
dismissed private respondent's complaint for ejectment. 7

1. That the LESSEE agrees to pay the sum of TWO


THOUSAND PESOS (P2,000.00) as monthly rental
effective January 1987;

Petitioner, in setting forth his summary statement of facts, quoted the narration
thereof rendered by the Court of Appeals in the herein assailed decision. Said
narration runs in this wise:

3. That the LESSOR shall pay all the taxes of the


property, except the improvements;

The facts are as follows: Atty. Rodolfo N. Pelaez was the owner of a
parcel of land at the corner of Tiano Bros. Street and Cruz Taal Street,
Cagayan de Oro, City. He leased the land to Henry L. Sia's parents, the
spouses Lim Siok Oan and Sia Bon Suan, who in 1970, constructed a
building with the consent of lessor. When Rodolfo Pelaez died, the land
was inherited by his son, Atty. Pacifico Pelaez, who sold it to the private
respondent Torre de Oro Development Corp. On the other hand,
petitioner succeeded to the rights of his parents as lessees of property,
upon the latter's death.
On March 22, 1988, private respondent Torre de Oro Development
Corp., represented by Atty. Pacifico Pelaez, and petitioner Henry L. Sia
entered into a lease contract (Exh. H) of the land in question under the
following terms and conditions:
That the LESSOR hereby leases unto the LESSEE, his property
located at Corner Tiano Bros.-St., and Cruz Taal St., known as
Cad. Lot No. 401 (bigger portion) for a period of One (1) year
counting from this date, particularly bounded as follows:

2. That the LESSEE cannot sublease the property


without the written consent of the LESSOR during the
life of this contract;

4. That the LESSEE shall pay all the bills for the
electric light and telephone bills including (telephone)
installations;
5. That all installations of any appliances such as airconditioning unit, TV sets or other electrical appliances
shall be for the account of the LESSEE;
6 That the period of this lease is for One (1) year
counted from January 1988 and renewable for another
year [after] every expiration of the contract upon
agreement of both parties;
7. That a sketch of the property occupied is herein
attached marked as Annex "A" and made an integral
part of this contract;
8. That the LESSEE agrees to pay increase of the
rental for 1987-1988 should there be an increase in the
assessed value (Taxable) value of real property subject
matter of this contract resulting from the general
revision of property assessment conducted by our

National Government pursuant to the provision of


existing law.
On December 22, 1988, private respondent sent a letter (Exh. I) to
petitioner, informing him that it was not renewing their least contract after
its expiration, on the ground that petitioner had subleased the property
without the written consent of private respondent, in violation of condition
par. 2 of the lease contract. In letters dated December 26, 1988
(Annexes B-l to B-5) the sublessees were similarly notified of the
expiration of petitioner's lease and were advised that in case they
wished to continue with their lease, arrangements should be made
directly with private respondent.
Petitioner, through counsel, wrote a letter to private respondent dated
January 20, 1989 (Exh. J), stating that the increase in rent from
P2,000.00 to P8,500.00, which private respondent demanded, was
excessive. He intimated that he was willing to pay an increase of
P500.00 only.
Private respondent ignored the offer, but petitioner insisted on remaining
in the premises. Private respondent Torre de Oro Development Corp.,
therefore, brought this suit in the court below for his ejectment.
On June 26, 1990, the Municipal Trial Court rendered judgment in favor
of petitioner. However, on appeal, the Regional Trial Court reversed its
decision. 8
The Regional Trial Court, on appeal, ascribed error to the Municipal Trial Court
for having dismissed private respondent's complaint for ejectment on the ground
of prematurity, for at the time said complaint was filed on February 8, 1989, the
lease contract had in fact already expired. The Regional Trial Court pointed out:
. . . Exhibit H, the lease contract appears to be a common evidence of
the parties. Exhibit H was signed by the parties on March 22, 1988 and
notarized on April 5, 1988. These different dates are normal occurrences
in notarial practice due to the peculiar circumstances of the parties and
the notary. . . [B]ecause the contract must have an end or "cut off" date
to govern the relationship of the signatories thereto the parties agree to
fix the start and the end of the contract by declaring a date clearly
expressed in the contract. In this particular contract, the parties signed
and agreed to the expressed terms, to wit:

That the LESSOR hereby leases unto the LESSEE, his property
located at Corner Tiano Bros. St. and Cruz Taal St. known as
Cad. Lot No. 401 (bigger portion) for a period of One (1) year
counting from this date. . .
1. That the Lessee agrees to pay the sum of Two Thousand
Pesos (P2,000.00) as monthly rental effective January 1987.
That the period of this lease is for one (1) year counted from
January, 1988 and renewable for another year [after] every
expiration of the contract upon agreement of both parties. . .
The foregoing terms are voluntarily agreed by the parties as there was
no allegation of force, undue influence or intimidation that attended the
signing thereof. All the three paragraphs must perforce be read and
understood in its [sic] entire context as we are not allowed to emasculate
any part thereof or add anything which is not found in the agreement. In
short, the parties agreed that the Lessee shall pay a monthly rent to
plaintiff in the sum of P2,000.00 . . .; that the lifetime of the contract is for
one year; and that the one year period of the lease shall start or be
"counted from January, 1988 and renewable [sic] for another year [after]
every expiration of the contract upon agreement of both the parties."
It is the strong conviction of this court that in the interpretation of
contracts the entire document must be fully read, evaluated and
considered, taking into consideration the intention of the parties and
giving effect and force to all its provisions. . . . Every paragraph leads to
one intention if taken as a whole and that is, that the rental every month
is P2,000.00; that the contract is on a yearly basis renewable only if
agreed by both parties, that the one year period shall be counted from
January, 1988. To give the said provisions and covenants another
interpretation would result in an absurd situation as the one year period
was never meant to start on March 22, 1988 or April 5, 1988; otherwise
the parties should have included or expressed the same within the
enumeration of the terms, conditions or lifetime of the lease contract.
Besides, the date of signing is not material or decisive to the present
discussion because the parties had already agreed in writing as to a
specific date, which is January 1988 and to end December, 1988. In
view of the foregoing observation, this court finds that the contract
started in January, 1988 and ended one year after, ergo, the complaint
has stated a sufficient cause of action and must perforce be reinstated
and given legal effect. 9

Consequently, the Regional Trial Court upheld the right of private respondent as
lessor to terminate the contract of lease upon expiration thereof, regardless of
the tenability of petitioner's violation of the prohibition against the sub-leasing of
the leased premises which was private respondent's original ground for ejecting
petitioner.
At the time of the filing of this case and during the execution of the
Lease Contract, Exhibit H, the parties cannot deny that there was
already a commercial building standing on the land in dispute since the
early part of 1971 because there was a big fire in 1969 that razed down
the Divisoria area including the building that used to stand on the land.
After the construction of the building it cannot be denied that the purpose
of the building which cost the defendant's predecessors the sum of
P35,000.00
was to have it subleased to several tenants subject to the terms of their
contract which expressly prohibited any sub-lease. This court finds the
situation incongruous but cannot fault the defendant on this because the
violation or non-violation of this prohibition is not very relevant to this
resolution. Whether there was a violation or not on the sublease, the fact
remains that it is the legal and contractual right of plaintiff to terminate
the contract as he pleases after the expiration of the same. It is therefore
the submission of this court that this issue simply has by its own nature
and weight paled into insignificance and limbo. 10

In connection with the petitioner's contention that she be


considered a builder in good faith and, therefore, entitled to
reimbursement in addition to reasonable expenses that may be
incurred in transferring the house to another place, the same
cannot stand legal scrutiny. The rule is well-settled that lessees,
like petitioner, are not possessors in good faith, the premises
continues only during the life of the lease, and they cannot as a
matter of right, recover the value of their improvements from the
lessor, much less retain the premises until they are reimbursed.
Their rights are governed by Article 1678 of the Civil Code
which allows reimbursement of lessees up to one-half of the
value of their improvements if the lessor so elects. (p. 250,
emphasis supplied) (Bocaling vs. Laguna, et al. 54 SCRA 243).
Moreover, as correctly found by the trial court, the plaintiffsappellants, as lessees, are neither builders in good faith nor in
bad faith. Their rights are governed not by Article 448 but by Art.
1678 of the New Civil Code. . . As lessees, they may remove
the improvements should the lessor refuse to reimburse them,
but the lessee does not have the right to buy the land. (pp. 368369, citing Southwestern University vs. Salvador, 90 SCRA 318,
329-330)
xxx xxx xxx

The Municipal Trial Court, in the course of dismissing private respondent's


complaint for ejectment, also ruled that petitioner is a builder in good faith in
contemplation of Article 448 in relation to Article 546 of the New Civil Code and
that as such, he cannot be ejected without being paid the fair market value of the
commercial building erected on the leased premises by his parents. Again, the
Regional Trial Court found this ruling by the court a quoto be erroneous. The
Regional Trial Court ratiocinated, thus:
It must always be remembered that Art. 448 of the New Civil Code
comes in only when the possessor builds on the land of another
believing that he is the owner of the land of another. The facts in this
proceeding are very much different. Defendant Henry Sia is a tenant of
plaintiff and no amount of denial or legal forensic can add or alter that
status of the defendant. This being so, it must perforce be safe to uphold
that the provisions of Article 1678 of the New Civil Code shall govern the
respective rights of the parties herein. The Supreme Court said a
mouthful in the following cases affirming the applicability of Art. 1678, as
it ruled as follows:

In this connection, this court finds that the court a quo erred in applying
the provisions of Arts. 448 and 527 of the New Civil Code to the case at
bar because said ruling is against the principles set by the New Civil
Code and of our established jurisprudence. 11
The Regional Trial Court therefore rendered its decision on appeal setting aside
the judgment of the court a quoand ordering petitioner to vacate the leased
premises and to pay private respondent a monthly rental of P5,000.00 from
December, 1988 until he actually vacates said premises. Petitioner was also
adjudged liable for P5,000.00 as litigation expenses and P10,000.00 as
attorney's fees.
Aggrieved by the foregoing decision, petitioner appealed to the Court of Appeals.
Respondent appellate court, however, also found the court a quo's decision in
favor of petitioner, to be starkingly lacking factual and legal basis, if not contrary
to prevailing legal jurisprudence. In agreeing with the Regional Trial Court's,

critique of the court a quo's decision, the Court of Appeals made its ruling in the
following manner:
First. The contract of lease between private respondent Torre de Oro
Development Corp., as lessor, and petitioner, as lessee, was for one
year. This period was to be counted from January 1988, so that the
lease expired on December 31, 1988. Private respondent gave notice in
December 1988 of its intent not to renew the contract, by sending letters
to petitioner and his sub-lessees. Private respondent, therefore, had the
right to eject the lessee, in accordance with art. 1673(1) of the Civil
Code, after the expiration of the contract.
Petitioner contends, however, that under art. 448, in relation to art. 546
of the Civil Code, he is entitled to remain in the building until he is paid
its value because he is a builder in good faith, and that art. 1678 does
not apply because this provision refers to a case where the lessor is the
owner of both the land and the building until the lessee makes
improvements on the building. Petitioner contends that in that case, the
lessee cannot be considered to be a builder in good faith because he
knows he is not the owner of either the land or the building.
This contention is without merit. Art. 546 applies only to a case where a
party builds or sows or plants in a land in which he believes himself to
have a title and not to lands wherein his interest is merely that of tenant
under a lease contract. [5 Tolentino, Civil Code of the Philippines 222
(1959); Salonga v. Farrales, 105 SCRA 359 (1981); Balacunag v.
Francisco, 122 SCRA 498 (1983); Gabrito v. Court of Appeals, 167
SCRA 771 (1988); Maceda v. Court of Appeals, 176 SCRA 440 (1989)]
Petitioner, then, as a lessee, is not a builder (whether in good faith or in
bad faith). His rights are governed entirely by art. 1678 of the Civil Code,
which provides:
If the lessee makes on good faith, useful improvements which
are suitable to the use for which the lease is intended, without
altering the form or substance of the property leased, the lessor
upon the termination of the lease shall pay the lessee one-half
of' the value of the improvements at that time. Should the lessor
refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary.

Thus, his only right is to reimbursement for his useful improvements but
he has no right of retention. [Mantruste System, Inc. v. Court of Appeals,
179 SCRA 137 (1989); Vda. de Bacaling v. Laguna, 54 SCRA 243
(1973); Racaza v. Susana Realty, Inc. 18 SCRA 1172 [1966]; Lopez, Inc.
vs. Phil. & Eastern Trading Co., 98 Phil. 348 [1956]. 12
The respondent appellate court, however, modified the decision of the Regional
Trial Court; it computed the monthly rental of P5,000.00 from January, 1989 and
not from December, 1988, and deleted the award of attorney's fees. The Court of
Appeals explained the modification in this wise:
Petitioner also contends that the RTC had no power to fix the monthly
rental at P5,000.00 since the original monthly rental of P2,000.00 as
stated in the lease contract was the law between the parties.
The monthly rental of P2,000.00 was fixed in the contract of lease, which
expired on December 31, 1988. After that, there was no longer any
agreement concerning the monthly rental. As petitioner remained in the
premises over private respondent's objection, he is liable to private
respondent for such reasonable compensation for the use and
enjoyment of the land as may [be] fixed by the courts. [Shoemart, Inc. v.
Court of Appeals, 190 SCRA 189 (1990); Felisilda v. Villanueva, 139 431
(1985)]
In this case the amount of P5,000.00 was fixed by the RTC taking into
account the following factors, to wit: the realty assessment of the land,
which the commissioner found to be a prime lot, the increase in realty
taxes; and the prevailing rate of rentals in the vicinity. We find the
amount fixed to be fair and reasonable. However, the rentals should be
computed from January 1989, after the expiration of the lease contract,
and not from December 1988, since it has been established that
petitioner had already paid the rental for the month of December, on
December 27, 1988. (Exh. J)
The award of attorney's fees should also be deleted since the RTC in its
decision did not justify such award. As an award of attorney's fees is the
exception rather than the rule, it should be justified in the decision of the
trial court; otherwise it must be deleted on appeal. [Abrograr v. IAC, 157
SCRA 57 (1988); Buan v. Camaganacan, 16 SCRA 321 (1966). 13
Despite the categorical pronouncement of respondent Court of Appeals and of
the Regional Trial Court as to private respondent's right to terminate its lease

contract with petitioner upon the undisputed expiration and non-renewal thereof
as well as private respondent's right under Article 1678 of the Civil Code to
choose between (1) paying petitioner 50% of his building's fair market value at
the time of the termination of the lease contract and (2) refusing to so pay, in
which case petitioner may remove his building from private respondent's land,
petitioner has persisted to draw from Article 448 in relation to Article 546 of the
New Civil Code, the right to retain possession of the leased premises until
petitioner has been reimbursed an amount equivalent to 100% of his building's
fair market value. This is mainly his around for seeking from us the reversal of
the herein assailed decision of the Court of Appeals, although he also decries
what he perceives as the lack of jurisdiction on the part of the court a quo to
adjudicate the issues of (1) the applicability in the instant case of Article 448 of
the New Civil Code and (2) the determination of the reasonable value of the
improvements built on the leased premises. 14
Petitioner's contentions are utterly bereft of merit.
First. Petitioner, after obtaining a favorable decision from the court a quo, now
renounces the jurisdiction of that same court simply because its decision has
been struck down twice on appeal and appears doomed to a final reversal by this
court. To buttress its contentions, petitioner asserts that the jurisdiction of the
court a quo in any ejectment case is only limited to the issue of possession de
facto and may not be expanded as to make it legally permissible for the court a
quo to determine the retention right of a lessee-builder and to fix the reasonable
value of the improvements that the lessor is to reimburse and pay the lesseebuilder.
Petitioner asserts this obviously in utter desperation if only to salvage his case.
He cannot renounce the jurisdiction of the court a quo considering that he had
earlier submitted to such jurisdiction and, in fact took advantage of it, in order to
obtain a declaration of his rights, as builder in good faith, to retain the leased
premises until he is paid the full amount of the fair market value of the building
constructed by his parents on private respondent's land. Now that not only one
but two appellate courts have more than amply exposed the substantial errors in
the decision of the court a quo, petitioner vents his attack against the court a
quo itself which if allowed by this court could result in the nullification of the
decision of the court a qua and the remand thereto of the case for further
proceedings, thereby buying petitioner some more time to hold on to the
possession of both his building and private respondent's land where his building
stands. Not only will we not allow this, but more importantly, we may not and
should not, allow petitioner's measure of desperation.

Petitioner during the pre-trial, agreed with private respondent as to what issues
shall be passed upon by the courta quo. Stated said court in its decision:
As embodied in the order of this court dated March 21, 1989 and
January 18, 1990, the issues to be resolved are: 1. Whether the contract
of lease has not yet expired when the instant complaint was filed; 2.
Whether defendant subleased the area or not; 3. Whether plaintiff owns
the building upon the expiration of the contract; and 4. Whether plaintiff
can legally eject defendant from the leased premises. 15
In resolving issues 3 and 4, the court a quo found it necessary to determine the
good faith or bad faith of petitioner's parents in constructing the building on
private respondent's land. Having agreed to the foregoing stipulation of issues
and their determination having in fact been favorable to petitioner, petitioner is
now estopped to assail the act of the court a quo of resolving such issues.
Petitioner is bound thereby, and we cannot sanction petitioner's belated
jurisdictional attack which we perceive to be motivated not by a genuine belief in
the correctness of his legal posturings but by his mounting fear that the decision
on appeal adverse to him, will be ultimately affirmed by this court and attain
finality. As we have held in the case ofCloma v. Court of Appeals: 16
. . . (I)t is too late in the day for petitioners to question the jurisdiction of
the trial court. . . . Voluntarily submitting to the jurisdiction of the trial
court, petitioners freely participated in all the hearings of the case and
adduced their own evidence. It was only after an adverse judgment that
petitioners raised the trial court's alleged lack of jurisdiction. Our Law
and policy do not sanction such a somersault. The polestar of Tijam v.
Sibonghanoy (23 SCRA 29, 35-36) still provides good guidance on the
issue, viz:
It has been held that a party can not invoke the jurisdiction of a
court to secure affirmative relief against his opponent and, after
obtaining or failing to obtain such relief, repudiate or question
that same jurisdiction (Dean v. Dean, 136 Or. 694, 86 A.L.R 79).
In the cave just cited, by way of explaining the rule, it was
further said that the question whether the court had jurisdiction
either of the subject-matter of the action or of the parties alas
not important in such cases because the party is barred from
such conduct not because the judgment or order of the court is
valid and conclusive as an adjudication, but for the reason that
such a practice can not be tolerated obviously for reasons of
public policy.

Furthermore, it has also been held that after voluntarily


submitting a cause and encountering an adverse decision on
the merits it is too late for the loser to question the jurisdiction or
power of the court (Pease v. Rathbun-Jones etc., 243 U.S. 273,
61 L. Ed. 715, 37 S. Ct. 283; St. Louis etc. v. McBridge, 141
U.S. 127, 35 L. Ed. 659). And in Littleton v. Burgessm 16 Wyo.
58, the Court said that it is not right for a party who has affirmed
and invoked the jurisdiction of a court in a particular matter to
secure an affirmative relief, to afterwards deny that same
jurisdiction to escape a penalty.
Upon this same principle is what We said in the three cases
mentioned in the resolution of the Court of Appeals of May 20,
1963 (supra) to the effect that we frown upon the
"undesirable practice" of a party submitting his case for decision
and then accepting the judgment, only if favorable, and
attacking
it
for
lack
of
jurisdiction,
when
adverse as well as Pindagan etc. v., Dans, et al., G.R. L14591, September 26, 1962; Montelibano, et al. v. BacolodMurcia Milling Co., Inc., G.R. L-15092; Young Men Labor Union,
etc. v. The Court of Industrial Relations, et al. G.R. L-20307,
Feb. 26, 1965, and Mejia v. Lucas, 100 Phil. p.
277. 17 (Emphasis Supplied)
Second. Petitioner stubbornly insists that he may not be ejected from private
respondent's land because he has the right, under Articles 448 and 546 of the
New Civil Code, to retain possession of the leased premises until he is paid the
full fair market value of the building constructed thereon by his parents. Petitioner
is wrong, of course. The Regional Trial Court and the Court of Appeals correctly
held that it is Article 1678 of the New Civil Code that governs petitioner's
right vis-a-vis the improvements built by his parents on private respondent's land.
In the 1991 case of Cabangis v. Court of Appeals 18 where the subject of the
lease contract was also a parcel of land and the lessee's father constructed a
family residential house thereon, and the lessee subsequently demanded
indemnity for the improvements built on the lessor's land based on Articles 448
and 546 of the New Civil Code, we pointed out that reliance on said legal
provisions was misplaced.
The reliance by the respondent Court of Appeals on Articles 448 and 546
of the Civil Code of the Philippines is misplaced. These provisions have

no application to a contract of lease which is the subject matter of this


controversy. Instead, Article 1678 of the Civil Code applies. We quote:
Art. 1678. If the lessee makes, in good faith, useful
improvements which are suitable to the use for which the lease
is intended, without altering the form or substance of the
property leased, the lessor upon termination of the lease shall
pay the lessee one-half of the value of the improvements at that
time. Should the lessor refuse to reimburse said amount, the
lessee may remove the improvements, even though the
principal thing may suffer damage thereby. He shall not,
however, cause any more impairment upon the property leased
than is necessary.
xxx xxx xxx
On the other hand, Article 448 governs the right of accession while
Article 546 pertains to effects of possession. The very language of these
two provisions clearly manifest their inapplicability to lease contracts.
They 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 obligate 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.
xxx xxx xxx
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 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.
The petitioners do not dispute the contention of the private respondent
that her father Gaspar Devis, filled the leased parcel of land with truck
loads of big stones or rocks (escumbro), and enclosed or walled the
same with hollow blocks before constructing a residential house thereon.
All these, being in the nature of expenses which augmented the value of
the land, (Manresa, 270 cited in 2, A. Tolentino Civil Code 110 [2nd ed.,
1972]) or increased the income from it, or improved its productivity, are
useful improvements within the purview of the law (Alburo v. Villanueva,
7 Phil. 277 [1907]; Valencia V. Roxas, 13 Phil. 45 (1909).
But, it must he remembered, as in fact it is not controverted, that Gaspar
Devis was a lessee by virtue of a lease contract between him and the
City of Manila. As a mere lessee, he knew that the parcel of land in
question was not his but belonged to the latter. Even the respondent
court conceded this fact when it stated that the private respondent was
"not claiming prior possession much less ownership of the land as heir of
her father." (Rollo, p. 16).
Thus, the improvements that the private respondent's father had
introduced in the leased premises were done at his own risk as lessee.
The right to indemnity equivalent to one-half of the value of the said
improvements the house, the filling materials, and the hollow block
fence or wall is governed, as earlier adverted to, by the provisions of
Art. 1678, first paragraph of the Civil Code above quoted. But this right
to indemnity exists only if the lessor opts to appropriate the
improvements (Alburo v. Villanueva, supra, note 10 at 279-280; Valencia
v. Ayala de Roxas, supra, note 10 at 46). The refusal of the lessor to pay
the lessee one-half of the value of the useful improvements gives rise to
the right of removal. On this score, the commentary of Justice Paras is
enlightening.
Note that under the 1st paragraph of Art. 1678, the law on the
right of REMOVAL says that "should the lessor refuse to
reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer
thereby." While the phrase "even though" implies that Art. 1678

always applies regardless of whether or not the improvements


can be removed without injury to the leased premises, it is
believed that application of the Article cannot always be done.
The rule is evidently intended for cases where a true accession
takes place as when part of the land leased is, say, converted
into a fishpond; and certainly not where as easily removable
thing (such as a wooden fence) has been introduced. There is
no doubt that in a case involving such a detachable fence, the
lessee can take the same away with him when the lease expires
(5 E. Paras, Civil Code of the Philippines Annotated 345 [11th
ed., 1986]).
Now then, indeed the private respondent would have a cause of action
against the petitioners for indemnity under Article 1678 of the Civil Code
if the latter had chosen to appropriate the said improvements. However,
there is nothing in the records to indicate that such choice was made.
On the other hand, there is no showing either that the private respondent
manifested her desire to remove these improvements absent any
payment of the required indemnity. She, or her deceased father, should
have removed the improvements at the time when the lease expired on
July 26, 1968 . . . or at the time of the filing of the unlawful detainer case
which was on October 19, 1968. 19
Petitioner grumbles that Article 1678 does not apply when what is leased
is only the land and not also the building standing thereon. The reason
for this, petitioner submits, is that Article 1678 speaks of "improvements"
and that a building is not an "improvement" that is within contemplation
of Article 1678. But we categorically ruled in the aforecited case
of Cabangis that a building, such as a family residential house, is
deemed an "improvement" for purposes of Article 1678 of the Civil Code.
Moreover, petitioner's postulations are disjoined from the well-settled
interrelated principles that (1) Articles 448 and 546 of the New Civil Code
vest the right of retention and the right to reimbursement in a possessor
of a parcel of land who believed himself to be the owner of said land and
as such, built thereon and incurred expenses in so doing; (2) a lessee,
being conclusively presumed to know that he is not the owner of the land
that he is leasing, is not such a possessor-builder contemplated of by
Articles 448 and 546 of the New Civil Code; and (3) a lessee who
constructs a house or building or any other improvement or structure on
the leased land, only has the right granted to him by Article 1678 of the
New Civil Code to remove the same in case the lessor elects not to
appropriate the building and pay 50% of its value. All these are already

settled doctrines and uniformly applied in such recent cases as Guzman


v. Court of Appeals, 20 Guiang v. Samano,21 Heirs of the late Jaime
Binuya v. Court of Appeals, 22 and Chua v. Court of Appeals. 23
Finally, petitioner submits that the award of monthly rental of P5,000.00 as fixed
by the Regional Trial Court and affirmed by respondent Court of Appeals, is
excessive, exorbitant and unreasonable. We disagree. On the contrary, the
records bear out that the P5,000.00 monthly rental is a reasonable amount,
considering that the subject lot is prime commercial real property whose value
has significantly increased and that P5,000.00 is within the range of prevailing
rental rates in that vicinity. Moreover, petitioner has not proffered controverting
evidence to support what he believes to be the fair rental value of the leased
building since the burden of proof to show that the rental demanded is
unconscionable or exorbitant rests upon the lessee. Thus, here and now we rule,
as we did in the case of Manila Bay Club v. Court of Appeals, 24 that petitioner
having failed to prove its claim of excessive rentals, the valuation made by the
Regional Trial Court, as affirmed by the respondent Court of Appeals, stands.
It is worth stressing at this juncture that the trial court had the authority to
fix the reasonable value for the continued use and occupancy of the
leased premises after the termination of the lease of the lease contract,
and that it was not bound by the stipulated rental in the contract of lease
since it is equally settled that upon termination or expiration of the
contract of lease, the rental stipulated therein may no longer he the
reasonable value for the use and occupation of the premises as a result
or by reason of the change or rise in values. Moreover, the trial court can
take judicial notice of the general increase in rentals of real estate
specially of business establishments . . . 25
WHEREFORE, premises considered, the instant petition is hereby DISMISSED
for lack of merit.
Costs against petitioner.
SO ORDERED.

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


METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner,
vs.
THE COURT OF APPEALS and THE CITY OF DAGUPAN, respondents.
FERIA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals
which affirmed the decision of the then Court of First Instance of Pangasinan.
The lower court had declared respondent City of Dagupan the lawful owner of the
Dagupan Waterworks System and held that the National Waterworks and
Sewerage Authority, now petitioner Metropolitan Waterworks and Sewerage
System, was a possessor in bad faith and hence not entitled to indemnity for the
useful improvements it had introduced.
Before proceeding further, it may be necessary to invite attention to the common
error of joining the court (be it a Regional Trial Court, the Intermediate Appellate
Court, or the Sandiganbayan) as a party respondent in an appeal by certiorari to
this Court under Rule 45 of the Rules of Court. The only parties in an appeal by
certiorari are the appellant as petitioner and the appellee as respondent. (Cf. Elks
Club vs. Rovira, 80 Phil. 272) The court which rendered the judgment appealed
from is not a party in said appeal. It is in the special civil action of certiorari under
Section 5 of Rule 65 of the Rules of Court where the court or judge is required to
be joined as party defendant or respondent. The joinder of the Intermediate
Appellate Court or the Sandiganbayan as party respondent in an appeal by
certiorari is necessary in cases where the petitioner-appellant claims that said
court acted without or in excess of its jurisdiction or with grave abuse of
discretion. An example of this is a case where the petitioner-appellant claims that
the Intermediate Appellate Court or the Sandiganbayan acted with grave abuse
of discretion in making its findings of fact, thus justifying the review by this court
of said findings of fact. (See the exceptions to the rule of conclusiveness of the
findings of fact of the Intermediate Appellate Court or the Sandiganbayan in the
case of Sacay vs. Sandiganbayan, G.R. Nos. 66497-98, July 10, 1986.) In such a
case, the petition for review on certiorari under Rule 45 of the Rules of Court is at
the same time a petition for certiorari under Rule 65, and the joinder of the
Intermediate Appellate Court or the Sandiganbayan becomes necessary. (Cf.
Lianga Lumber Company vs. Lianga Timber Co., Inc., March 31, 1977, 76 SCRA
197).
The City of Dagupan (hereinafter referred to as the CITY) filed a complaint
against the former National Waterworks and Sewerage Authority (hereinafter

referred to as the NAWASA), now the Metropolitan Waterworks and Sewerage


System (hereinafter referred to as MWSS), for recovery of the ownership and
possession of the Dagupan Waterworks System. NAWASA interposed as one of
its special defenses R.A. 1383 which vested upon it the ownership, possession
and control of all waterworks systems throughout the Philippines and as one of
its counterclaims the reimbursement of the expenses it had incurred for
necessary and useful improvements amounting to P255,000.00. Judgment was
rendered by the trial court in favor of the CITY on the basis of a stipulation of
facts. The trial court found NAWASA to be a possessor in bad faith and hence not
entitled to the reimbursement claimed by it. NAWASA appealed to the then Court
of Appeals and argued in its lone assignment of error that the CITY should have
been held liable for the amortization of the balance of the loan secured by
NAWASA for the improvement of the Dagupan Waterworks System. The
appellate court affirmed the judgment of the trial court and ruled as follows:
However, as already found above, these useful expenses were made in
utter bad faith for they were instituted after the complaint was filed and
after numerous Supreme Court decisions were promulgated declaring
unconstitutional the taking by NAWASA of the patrimonial waterworks
systems of cities, municipalities and provinces without just
compensation.
Under Article 546 of the New Civil Code cited by the appellant, it is clear
that a builder or a possessor in bad faith is not entitled to indemnity for
any useful improvement on the premises. (Santos vs. Mojica, L-25450,
Jan. 31, 1969). In fact, he is not entitled to any right regarding the useful
expenses (II Paras (1971) 387). He shall not have any right whatsoever.
Consequently, the owner shall be entitled to all of the useful
improvements without any obligation on his part (Jurado, Civil Law
Reviewer (1974) 223).
Petitioner-Appellant MWSS, successor-in-interest of the NAWASA, appealed to
this Court raising the sole issue of whether or not it has the right to remove all the
useful improvements introduced by NAWASA to the Dagupan Waterworks
System, notwithstanding the fact that NAWASA was found to be a possessor in
bad faith. In support of its claim for removal of said useful improvements, MWSS
argues that the pertinent laws on the subject, particularly Articles 546, 547 and
549 of the Civil Code of the Philippines, do not definitely settle the question of
whether a possessor in bad faith has the right to remove useful improvements.
To bolster its claim MWSS further cites the decisions in the cases of Mindanao
Academy, Inc. vs. Yap (13 SCRA 190) and Carbonell vs. Court of Appeals (69
SCRA 99).

The CITY in its brief questions the raising of the issue of the removal of useful
improvements for the first time in this Court, inasmuch as it was not raised in the
trial court, much less assigned as an error before the then Court of Appeals. The
CITY further argues that petitioner, as a possessor in bad faith, has absolutely no
right to the useful improvements; that the rulings in the cases cited by petitioner
are not applicable to the case at bar; that even assuming that petitioner has the
right to remove the useful improvements, such improvements were not actually
identified, and hence a rehearing would be required which is improper at this
stage of the proceedings; and finally, that such improvements, even if they could
be identified, could not be separated without causing substantial injury or
damage to the Dagupan Waterworks System.
The procedural objection of the CITY is technically correct. NAWASA should
have alleged its additional counterclaim in the alternative-for the reimbursement
of the expenses it had incurred for necessary and useful improvements or for the
removal of all the useful improvements it had introduced.
Petitioner, however, argues that although such issue of removal was never
pleaded as a counterclaim nevertheless it was joined with the implied consent of
the CITY, because the latter never filed a counter-manifestation or objection to
petitioner's manifestation wherein it stated that the improvements were separable
from the system, and quotes the first part of Sec. 5 of Rule 10 of the Rules of
Court to support its contention. Said provision reads as follows:
SEC. 5. Amendment to conform to or authorize presentation of
evidence.-When issues not raised by the pleadings are tried by express
or implied consent of the parties, they shall be treated in all respects, as
if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure so to amend does not
affect the result of the trial of these issues. ...
This argument is untenable because the above-quoted provision is premised on
the fact that evidence had been introduced on an issue not raised by the
pleadings without any objection thereto being raised by the adverse party. In the
case at bar, no evidence whatsoever had been introduced by petitioner on the
issue of removability of the improvements and the case was decided on a
stipulation of facts. Consequently, the pleadings could not be deemed amended
to conform to the evidence.

However, We shall overlook this procedural defect and rule on the main issue
raised in this appeal, to wit: Does a possessor in bad faith have the right to
remove useful improvements? The answer is clearly in the negative. Recognized
authorities on the subject are agreed on this point. *
Article 449 of the Civil Code of the Philippines provides that "he who builds,
plants or sows in bad faith on the land of another, loses what is built, planted or
sown without right to indemnity." As a builder in bad faith, NAWASA lost whatever
useful improvements it had made without right to indemnity (Santos vs. Mojica,
Jan. 31, 1969, 26 SCRA 703).
Moreover, under Article 546 of said code, only a possessor in good faith shall be
refunded for useful expenses with the right of retention until reimbursed; and
under Article 547 thereof, only a possessor in good faith may remove useful
improvements if this can be done without damage to the principal thing and if the
person who recovers the possession does not exercise the option of reimbursing
the useful expenses. The right given a possessor in bad faith is to remove
improvements applies only to improvements for pure luxury or mere pleasure,
provided the thing suffers no injury thereby and the lawful possessor does not
prefer to retain them by paying the value they have at the time he enters into
possession (Article 549, Id.).
The decision in the case of Mindanao Academy, Inc. vs. Yap (13 SCRA 190) cited
by petitioner does not support its stand. On the contrary, this Court ruled in said
case that "if the defendant constructed a new building, as he alleges, he cannot
recover its value because the construction was done after the filing of the action
for annulment, thus rendering him a builder in bad faith who is denied by law any
right of reimbursement." What this Court allowed appellant Yap to remove were
the equipment, books, furniture and fixtures brought in by him, because they
were outside of the scope of the judgment and may be retained by him.
Neither may the decision in the case of Carbonell vs. Court of Appeals (69 SCRA
99), also cited by petitioner, be invoked to modify the clear provisions of the Civil
Code of the Philippines that a possessor in bad faith is not entitled to
reimbursement of useful expenses or to removal of useful improvements.
In said case, both the trial court and the Court of Appeals found that respondents
Infantes were possessors in good faith. On appeal, the First Division of this Court
reversed the decision of the Court of Appeals and declared petitioner Carbonell
to have the superior right to the land in question. On the question of whether or
not respondents Infantes were possessors in good faith four Members ruled that
they were not, but as a matter of equity allowed them to remove the useful

improvements they had introduced on the land. Justice Teehankee (now Chief
Justice) concurred on the same premise as the dissenting opinion of Justice
Munoz Palma that both the conflicting buyers of the real property in question,
namely petitioner Carbonell as the first buyer and respondents Infantes as the
second buyer, may be deemed purchasers in good faith at the respective dates
of their purchase. Justice Munoz Palma dissented on the ground that since both
purchasers were undoubtedly in good faith, respondents Infantes' prior
registration of the sale in good faith entitled them to the ownership of the land.
Inasmuch as only four Members concurred in ruling that respondents Infantes
were possessors in bad faith and two Members ruled that they were possessors
in good faith said decision does not establish a precedent. Moreover, the
equitable consideration present in said case are not present in the case at bar.
WHEREFORE, the decision of the appellate court is affirmed with costs against
petitioner.
SO ORDERED.

G.R. No. 73418 September 20, 1988


PELICULA SABIDO and MAXIMO RANCES, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT and DOMINADOR
STA. ANA, respondents.
GUTIERREZ, JR., J.:
This petition for review on certiorari seeks to set aside the decision of the then
Intermediate Appellate Court which nullified the orders of the trial court for the
issuance of the writs of execution and demolition in favor of the petitioners and
which ordered the trial court to assess the value of the demolished properties of
the private respondent for the purposes of set-off against respondent's liability to
the petitioners.
This case originated from an action for quieting of title which was filed by the
spouses Victor Dasal and Maria Pecunio against herein petitioners, Maximo
Rances and Pelicula Sabido on the question of ownership over two parcels of
land otherwise known as Lots "B" and "D".
On October 7, 1969, the trial court presided by Judge Delfin Sunga declared the
petitioners as owners of Lots "B" and "D". The decision became final. However,
when the decision was being carried out to put the petitioners in possession of
Lot "B", the Provincial Sheriff found three (3) persons occupying portions of Lot
"B". One of them was private respondent Dominador Sta. Ana.
The petitioners filed a motion to require the private respondent to show cause
why he should not be ejected from the portion of Lot "B". In his answer, Sta. Ana
claimed ownership by purchase from one Prudencio Lagarto, of a bigger area of
which Lot "B" is a part. He stated that the two other persons occupying the
disputed portion are his tenants.
Subsequently, an order of demolition was issued by the trial court against the
private respondent. This order was challenged by the private respondent and
upon his filing of certiorari proceedings, this Court on November 26, 1973, set
aside the order of the trial court and remanded the case to the latter for further
reception of evidence to determine: 1) Whether or not the private respondent is
privy to the spouses Victor Dasal and Maria Pecunio as the losing parties in the
action below; and 2) Whether or not the petitioners and the private respondent
are litigating over the same parcel of land or whether there is overlapping of
boundaries of their respective lands.

On December 12, 1974, after conducting an ocular inspection and hearing,


Judge Sunga issued an order for the private respondent to vacate Lot "B" upon
finding that there is no proof that what the respondent allegedly purchased from
Lagarto covers a portion of Lot "B" but on the contrary, the deed of sale and tax
declaration show that what was sold to the respondent was bounded on the
south by Tigman river and therefore, the respondent's ownership could not have
extended to Lot "B" which was separated by the Tigman river and mangrove
swamps from the portion he purchased.
Before the order of December 12, 1974, could be executed, however, Judge
Sunga inhibited himself from the case so the same was transferred to the then
Court of First Instance (now Branch M, Regional Trial Court) of Naga City
presided by Judge Mericia B. Palma.
The execution of the order met with some further delay when the records were
reconstituted. Judge Palma, feeling the need for a clearer understanding of the
facts and issues involved in the case, proceeded to hear and received evidence.
On May 16, 1983, Judge Palma issued a resolution finding that there was privity
between the private respondent and the spouses Victor Dasal and Maria Pecunio
as to the ownership of Lot "C" and as to the possession over the western portion
of the private road and the disputed Lot "B"; and that Lot "B" and the private road
are not included in the land purchased by the respondent from Lagarto.
According to the trial court, the private respondent was in the company of Dasal
(from whom he was renting Lot "C' and who was also the brother-in-law of
Lagarto) and was present when Commissioner Tubianosa inspected the land in
question in 1953 supporting the claim that the respondent knew that the land was
already in dispute between Dasal and the petitioners; and if the respondent really
believed that he owns the entire Lot "B" and the private road, he should have
raised his claim of ownership when Tubianosa inspected the land. The
respondent also failed to include the land in dispute in the survey of his
purchased lot with the flimsy excuse that the surveyor failed to return to finish the
survey and include the disputed land.
Before arriving at the above findings, however, the trial court clarified the issues
involved in the case. It said:
WE NOW come to the RESOLUTION OF THE TWO ISSUES: (1) Was
there privity between Petitioner Sta. Ana and Plaintiffs Dasal? and (2) Is
the disputed area Identified in paragraph 1 of the foregoing enumeration,
part of the land purchased by Petitioner from Prudencio Lagarto?

If there is a privity between the Petitioner and Dasal, then the


Petitioner is bound by the final decision in this CC No. R-396
(2040) against Dasal and therefore Petitioner is subject to the
order of execution and is bound to vacate the land in question
or subject a portion of his house and the surrounding walls to
demolition. If there is no privity then he is not bound by said final
decision. (Rollo, pp. 48-49).
In the dispositive portion, however, the trial court held:
WHEREFORE, premises considered, the Court finds:
1.) That there is privity between the petitioner and the plaintiffs spouses
Victor Dasal and Maria Pecunio as to ownership of Lot C and as to the
possession over the western portion of the private road and the disputed
Lot B as so Identified in Exhibit 5;
2.) That the private road Identified as within points 1, 2, 3, 4, 5, 6 and 1
in Exh. 5 is owned by the respondents as already decided in CC No.
1103, and the same private road and the Lot B in Exhibit 5 are both
owned by the respondents as already decided in this CC No. R-396
(2040);
3.) That the balcony of the present house of the petitioner is located in
the disputed Lot B and its southern (or southeastern) part of the western
portion of the 'private road';
xxx xxx xxx
6.) That therefore, this Court recommends to the Honorable Supreme
Court, that the petitioner be ordered to remove the entire balcony and
the northern portion of the main house to the extent of about one meter
found to be standing on the private road, as well as the northern
extension of the hollow block walls on the eastern boundary of Lot C that
stand on the private road and to the northern end of Lot B which wall
measures to a total length of about 15 meters from the northern
boundary of Lot B to the southern edge of the private road; or in the
alternative to require the petitioner to pay the respondents the value of
the western portion of the disputed area which is now enclosed in the
wall constructed by the petitioner;

7.) And to hold the petitioner liable to the respondents for reasonable
attorney's fees and damages. (Rollo, p. 52)
On June 7, 1983, the private respondent filed with this Court a pleading
captioned "Notice of Appeal for Review." Said petition was denied in this Court's
resolution on October 26,1983, to wit:
L-32642 (Dominador Sta. Ana v. Hon. Delfin Vir, Sunga, etc., et al.).
Considering the petition of petitioner for review of trial court resolution
dated May 16, 1983, the Court Resolved to DENY the petition, said
resolution of May 16, 1983, being in accord with the decision of
November 26, 1973 (Rec., p. 438) and the resolution of May 16, 1975
(idem, p. 595) as well as the order of December 12,1974 (idem, p. 500)
which ordered the petitioner to vacate the premises (which is
presumably final). As stated in the aforesaid resolution of May 16, 1975,
any review has to be sought by timely appeal to the appellate court and
cannot be sought in this case. (Rollo, p. 65).
A series of resolutions were subsequently issued by this Court denying the
private respondent's motion to reconsider the above-quoted resolution. Finally,
on February 27, 1984, this Court issued a resolution ordering "the Chief of the
Judgment Division of this Court to RETURN the records thereof to the
respondent court for execution of judgment."
On August 9, 1984, the petitioners filed motion for execution of judgment,
accompanied by a bill of costs, as follows: 1) Attorney's fees P 25,000.00; 2)
Cost of litigation P7,000.00; 3) Expenses for transcript of record P600.00;
4) Expenses for xeroxing of important papers and documents-P 500.00; 5)
Accrued rentals for the lot in question P11,800.00 and 6) Legal interest of
accrued rentals at 12% a year P1,436.00 for a total of P46,336.00.
On October 5, 1984, the trial court issued an order granting the petitioners'
motion for execution and application for a writ of attachment and approving the
bill of costs. In said order, the trial court ordered the demolition of any part of the
private respondent's building and all other construction within Lot "B" and the
private road. The demolition was effected.
The private respondent appealed to the then Intermediate Appellate Court,
contending that the order of the trial court departed from the intention of the
Supreme Court's resolution ordering execution of the judgment, for it thereby
deprived him of the alternative choice of paying the value of the disputed area
which was allowed in the trial court's resolution of May 16, 1983, which the

Supreme Court found to be in accord with, among others, its decision in G.R. No.
L-32642 (Sta. Ana v. Sunga, 54 SCRA 36).
On September 20, 1985, the appellate court rendered the assailed decision, the
dispositive portion of which provided;
WHEREFORE, the writs of certiorari and prohibition applied for are
granted. The Order of October 5, 1984 approving the bill of courts and
granting execution of 'previous orders', as well as the order/writ of
demolition are hereby set aside, Respondent Court is ordered to
forthwith determine the value of the demolished portion of petition of
petitioner's residential building and other structures affected by the
demolition and also, to assess the value of the disputed area for
purposes of set off and whatever is the excess in value should be paid to
the party entitled thereto. (Rollo, pp. 40-41)
In its decision, the appellate court explained the rationale behind the dispositive
portion. It said:
xxx xxx xxx
The unqualified affirmance of said resolution of May 16, 1983, to Our
Mind, carried with it the approval of the above recommendation. The fact
that the Supreme Court was silent on the recommended alternative
choice of demolition and payment of the disputed area and merely
returned the records for execution of judgment, did not indicate that the
recommended demolition was preferred. The sufficiency and efficacy of
the resolution of May 16, 1983, as the judgment to be enforced or
executed, cannot be doubted considering its substance rather than its
form. The aforequoted recommendation, itself the dispositive portion,
can be ascertained as to its meaning and operation. Thereby, the
petitioner is given the option to pay the value of the western portion of
the disputed area which is enclosed in the wall constructed by said
petitioner. It is petitioner who is given the alternative choice since if he
does not pay, then he can be ordered to remove whatever structure he
had introduced in the questioned premises. Notably, petitioner indicated
his willingness to pay the price of the disputed area or otherwise
exercised that option.
Respondent Court therefore acted with grave abuse of discretion
tantamount to lack or excess of jurisdiction in abandoning the alternative
choice of payment of the value of the area in dispute, which it authorized

in its final resolution of May 16, 1983, when it ordered execution of its
'previous orders' for the petitioner to vacate the land in question and for
demolition, which was set aside when the case was remanded for
hearing pursuant to the Supreme Court decision of November 26, 1973.
The previous orders referred to have not been specified by the
respondent Court in its Order of October 6, 1984. If it is the Order of
December 12, 1974 which is being referred to by respondent Court, it
should have so specified; however, it did not presumably because it was
reconsidered as can be deduced from the fact that thereafter,
respondent Court further heard the parties and received their respective
evidence in compliance with the decision of November 26, 1973, or
which proceedings, the respondent Court issued its resolution of May
16, 1983. (Rollo, p. 38)
In the petition before us, the petitioners maintain that the appellate court
committed grave abuse of discretion when it granted the private respondent the
option of exercising the alternative choice of staying in the disputed land when it
has been established that the private respondent was in privy with the spouses
Victor Dasal and Maria Pecunio and, therefore, he could not be considered a
builder in good faith as to entitle him to the alternative choice of retention; and
that the demolition of the private respondent's construction on Lot "B" and on the
private road is a logical consequence of the finding that he was privy to the losing
parties who were also the adversaries of the petitioners in the original case.
We agree.
When this Court ordered the remand of the case between the petitioners and the
private respondent in our decision of November 26, 1973 (see Sta. Ana v. Sunga,
supra), it was precisely to determine whether herein respondent was privy to the
spouses Dasals as to make the decision against the latter and in favor of the
petitioners over Lot "B" binding upon him. And this fact was clearly pointed out by
Judge Palma in her resolution of May 16, 1983 stating that if there is privity
between the private respondent and the spouses Dasals, then the former is
bound by the final decision in CC No. R-396 (2040) which is the case between
the Dasals and the petitioners. However, an apparent confusion was brought
about by the dispositive portion of the aforementioned resolution when it
recommended to this Court either to order the respondent to remove all his
constructions over Lot "B" or to require said respondent to pay the petitioners the
value of the disputed area which was already enclosed by a wall constructed by
the respondent. This, nevertheless, was rectified when we issued the series of
resolutions denying the respondent's petition and motions for reconsideration
before this Court wherein we stated that the resolution of May 16, 1983 was in

accord, among others, with the order of December 12, 1974 "which ordered the
petitioner (private respondent) to vacate the premises (which is presumably
final)."

issued by the trial court for the purpose of satisfying the award for damages and
the bill of costs is, however, permanently SET ASIDE.
SO ORDERED.

Hence, it is clear that the private respondent has to remove all his constructions
over Lot "B" and vacate the premises. This is his only option. Being adjudged in
privy with the spouses Dasals, he cannot avail himself of the rights granted to a
builder in good faith. He, therefore, must remove all his useful improvements
over Lot "B" at his own expense and if the same have already been removed, he
cannot be entitled to the right of retention or to any reimbursement. Thus, in the
case of Metropolitan Waterworks and Sewarage System v. Court of Appeals,
(143 SCRA 623, 629), we ruled:
Article 449 of the Civil Code of the Philippines provides that "he who
builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right to indemnity." As a builder in bad
faith, NAWASA lost whatever useful improvements it had made without
right to indemnity (Santos v. Mojica, Jan. 31, 1969, 26 SCRA 703)
Moreover, under Article 546 of said code, only a possessor in good faith
shall be refunded for useful expenses with the right of retention until
reimbursed; and under Article 547 thereof, only a possessor in good faith
may remove useful improvements if this can be done without damage to
the principal thing and if the person who recovers the possession does
not exercise the option of reimbursing the useful expenses. The right
given a possessor in bad faith to remove improvements applies only to
improvements for pure luxury or mere pleasure, provided the thing
suffers no injury thereby and the lawful possessor does not prefer to
retain them by paying the value they have at the time he enters into
possession (Article 549, Id.).
We, therefore, find that the appellate court committed reversible error in holding
that the private respondent is entitled to exercise the option to pay the value of
the disputed area of Lot "B" and to reimbursement for the value of the
demolished portion of his building. We, however, affirm its ruling that the
petitioner's bill of costs must be set aside and that while the resolution of May 16,
1983 included attorney's fees and damages, the necessity of proof cannot be
dispensed with. Since no proof was presented before the trial regarding any of
these claims, they cannot be awarded.
WHEREFORE, the petition is GRANTED and the decision of the court of Appeals
dated September 20, 1985 is ANNULED and SET ASIDE. The writ of attachment

G.R. No. 117642 April 24, 1998


EDITHA ALVIOLA and PORFERIO ALVIOLA, petitioners,
vs.
HONORABLE COURT OF APPEALS, FORENCIA BULING Vda de TINAGAN,
DEMOSTHENES TINAGAN, JESUS TINAGAN, ZENAIDA T., JOSEP and
JOSEPHINE TINAGAN, respondents.
MARTINEZ, J.:
In this petition for review on certiorari, petitioners assail the decision 1 of the Court
of Appeals dated April 8, 1994 which affirmed the decision of the lower court
ordering petitioners to peacefully vacate and surrender the possession of the
disputed properties to the private respondents.
Culled from the record are the following antecedent facts of this case to wit:
On April 1, 1950, Victoria Sonjaconda Tinagan purchased from Mauro Tinagan
two (2) parcels of land situated at Barangay Bongbong, Valencia, Negros
Oriental. 2 One parcel of land contains an area of 5,704 square meters, more or
less; 3 while the other contains 10,860 square meters. 4 Thereafter, Victoria and
her son Agustin Tinagan, took possession of said parcels of land.
Sometime in 1960, petitioners occupied portions thereof whereat they built a
copra dryer and put up a store wherein they engaged in the business of buying
and selling copra.
On June 23, 1975, Victoria died. On October 26, 1975, Agustin died, survived by
herein private respondents, namely his wife, Florencia Buling Vda. de Tinagan
and their children Demosthenes, Jesus, Zenaida and Josephine, all surnamed
Tinagan.
On December 24, 1976, petitioner Editha assisted by her husband filed a
complaint for partition and damages before the then Court of First Instance of
Negros Oriental, Branch 1, Dumaguete City, docketed as Civil Case No. 6634,
claiming to be an acknowledged natural child of deceased Agustin Tinagan and
demanding the delivery of her shares in the properties left by the deceased. 5
On October 4, 1979, the aforesaid case was dismissed by the trial court on the
ground that recognition of natural children may be brought only during the lifetime
of the presumed parent and petitioner Editha did not fall in any of the exceptions
enumerated in Article 285 of the Civil Code. 6

Petitioners assailed the order of dismissal by filing a petition


for certiorari and mandamus before this Court. 7 On August 9, 1982, this Court
dismissed the petition for lack of merit. 8 Petitioners filed a motion for
reconsideration but the same was denied on October 19, 1982. 9
On March 29, 1988, private respondents filed a complaint for recovery of
possession against Editha and her husband Porferio Alviola before the Regional
Trial Court of Negros Oriental, Branch 35, Dumaguete City, docketed as Civil
Case No. 9148, praying, among others, that they be declared absolute owners of
the said parcels of land, and that petitioners be ordered to vacate the same, to
remove their copra dryer and store, to pay actual damages (in the form of
rentals), moral and punitive damages, litigation expenses and attorney's fees. 10
In their answer, petitioners contend that they own the improvements in the
disputed properties which are still public land; that they are qualified to be
beneficiaries of the comprehensive agrarian reform program and that they are
rightful possessors by occupation of the said properties for more than twenty
years. 11
After trial, the lower court rendered judgment in favor of the private respondents,
the dispositive portion of which reads:
WHEREFORE, premises considered, in Civil Case No. 9148, for
Recovery of Property, the court hereby renders judgment:
a) Declaring plaintiffs as the absolute owners of the land in question
including the portion claimed and occupied by defendants;
b) Ordering defendants Editha Alviola and her husband Porfirio Alviola to
peacefully vacate and to surrender the possession of the premises in
question to plaintiffs; Defendants may remove their store and dryer on
the premises without injury and prejudice to the plaintiffs;
c) Ordering defendants to pay the following amounts to the plaintiffs:
1. P150.00 monthly rentals from April 1988 up to the time the
improvements in the questioned portions are removed;
2. P5,000.00 for attorney's fees;
3. P3,000.00 for litigation expenses and to pay the costs.

SO ORDERED. 12
Petitioners appealed to the Court of Appeals. On April 8, 1994, the respondent
court rendered its decision, 13 affirming the judgment of the lower court.
Petitioners filed a motion for reconsideration 14 but the same was denied by the
respondent court in an order dated October 6, 1994. 15

always been declared in the name of the Tinagans. The first, Tax Declaration No.
3335 18 is in the name of Mauro Tinagan. It was thereafter cancelled by Tax
Declaration No. 19534 effective 1968, 19 still in the name of Mauro. This
declaration was cancelled by Tax Declaration No. 016740 now in the name of
Agustin Tinagan, 20 effective 1974, followed by Tax Declaration No. 08-421 in the
name of Jesus Tinagan, effective 1980; 21 and finally by Tax Declaration No. 08816 in the name of Jesus Tinagan, effective 1985. 22

Hence, this petition.


Petitioners aver that respondent court erred in declaring private respondents the
owners of the disputed properties. They contend that ownership of a public land
cannot be declared by the courts but by the Executive Department of the
Government, citing the case of Busante vs. Hon. Court of Appeals, Oct. 20, 1992,
214 SCRA 774; and that the respondent court erred in not considering that
private respondents' predecessor-in-interest, Victoria Sonjaco Tinagan, during
her lifetime, ceded her right to the disputed properties in favor of petitioners.
Moreover, petitioners maintain that the respondent court erred in holding that
they were in bad faith in possessing the disputed properties and in ruling that the
improvements thereon are transferable. They claim that the copra dryer and the
store are permanent structures, the walls thereof being made of hollow-blocks
and the floors made of cement.
Private respondents counter that the question of whether or not the disputed
properties are public land has been resolved by overwhelming evidence showing
ownership and possession by the Tinagans and their predecessors-in-interest
prior to 1949. They further aver that they merely tolerated petitioners' possession
of the disputed properties for a period which was less than that required for
extraordinary prescription.
The petition must fail.
Petitioners claim that the disputed properties are public lands. This is a factual
issue. The private respondents adduced overwhelming evidence to prove their
ownership and possession of the two (2) parcels of land on portions of which
petitioners built the copra dryer and a store. Private respondents' tax declarations
and receipts of payment of real estate taxes, as well as other related documents,
prove their ownership of the disputed properties. As stated previously in the
narration of facts, these two (2) parcels of land were originally owned by Mauro
Tinagan, who sold the same to Victoria S. Tinagan on April 1, 1950, as evidenced
by a Deed of Sale, 16wherein the two (2) lots, Parcels 1 and 2, are
described. 17 Anent Parcel 1, tax declarations indicate that the property has

With regard to Parcel 2, private respondents presented Tax Declaration No.


20973 in the name of Mauro Tinagan, effective 1959, 23 Tax Declaration No.
016757, effective 1974; 24 Tax Declaration No. 08-405-C in the name of Agustin
Tinagan, effective 1980 25 and Tax Declaration No. 08-794 in the name of Agustin
Tinagan, effective 1985. 26 Moreover, the realty taxes on the two lots have always
been paid by the private respondents. 27 There can be no doubt, therefore, that
the two parcels of land are owned by the private respondents.
The record further discloses that Victoria S. Tinagan and her son, Agustin
Tinagan, took possession of the said properties in 1950, introduced
improvements thereon, and for more than 40 years, have been in open,
continuous, exclusive and notorious occupation thereof in the concept of owners.
Petitioners' own evidence recognized the ownership of the land in favor of
Victoria Tinagan. In their tax declarations, 28 petitioners stated that the house and
copra dryer are located on the land of Victoria S. Tinagan/Agustin Tinagan. By
acknowledging that the disputed portions belong to Victoria/Agustin Tinagan in
their tax declarations, petitioners' claim as owners thereof must fail.
The assailed decision of the respondent court states that "Appellants do not
dispute that the two parcels of land subject matter of the present complaint for
recovery of possession belonged to Victoria S. Tinagan, the grandmother of
herein plaintiffs-appellees; that Agustin Tinagan inherited the parcels of land from
his mother Victoria; and that plaintiffs-appellees, in turn, inherited the same from
Agustin." 29
Taking exception to the aforequoted finding, petitioners contend that while the 2
parcels of land are owned by private respondents, the portions wherein the copra
dryers and store stand were ceded to them by Victoria S. Tinagan in exchange
for an alleged indebtedness of Agustin Tinagan in the sum of P7,602.04. 30
This claim of the petitioners was brushed aside by the respondent court as
merely an afterthought, thus

Appellants' claim that they have acquired ownership over the floor areas
of the store and dryer "in consideration of the account of Agustin
Tinagan in the sum of P7,602.04" is not plausible. It is more of an "afterthought" defense which was not alleged in their answer. Although the
evidence presented by them in support of this particular claim was not
duly objected to by counsel for appellees at the proper time and
therefore deemed admissible in evidence, an examination of the oral
and documentary evidence submitted in support thereof, reveals the
weakness of their claim.
Appellant testified that the areas on which their store and dryer were
located were exchanged for the amount of P7,602.04 owed to them by
Agustin in 1967 (TSN, Hearing of April 14, 1989, p. 9); that he did not
bother to execute a document reflecting such agreement "because they
were our parents and we had used the land for quite sometime already
they had also sold their copra to us for a long time." (id.) Yet, as earlier
discussed, the tax declarations in appellants' answer show that even
after 1967, they expressly declared that the parcels of land on which
their store and dryer were constructed, belonged to Victoria and Agustin
(Exhs. 2-A, 2-B, 2-C, 3-A, 3-B). If appellants really believed that they
were in possession of the said particular areas in the concept of owners,
they could have easily declared it in said tax declarations. 31
Concededly, petitioners have been on the disputed portions since 1961.
However, their stay thereon was merely by tolerance on the part of the private
respondents and their predecessor-in-interest. The evidence shows that the
petitioners were permitted by Victoria Sanjoco Tinagan to build a copra dryer on
the land when they got married. Subsequently, petitioner Editha Alviola, claiming
to be the illegitimate daughter of Agustin Tinagan, filed a petition for partition
demanding her share in the estate of the deceased Agustin Tinagan on
December 6, 1976. However, the petition was dismissed since it was brought
only after the death of Agustin Tinagan. This Court dismissed the petition
for certiorari and mandamus filed by petitioner Editha Alviola on August 9, 1982.
It was on March 29, 1988, when private respondents filed this complaint for
recovery of possession against petitioners. Considering that the petitioners'
occupation of the properties in dispute was merely tolerated by private
respondents, their posture that they have acquired the property by "occupation"
for 20 years does not have any factual or legal foundation.
As correctly ruled by the respondent court, there was bad faith on the part of the
petitioners when they constructed the copra dryer and store on the disputed
portions since they were fully aware that the parcels of land belonged to Victoria

Tinagan. And, there was likewise bad faith on the part of the private respondents,
having knowledge of the arrangement between petitioners and Victoria Tinagan
relative to the construction of the copra dryer and store. Thus, for purposes of
indemnity, Article 448 of the New Civil Code should be applied. 32 However, the
copra dryer and the store, as determined by the trial court and respondent court,
are transferable in nature. Thus, it would not fall within the coverage of Article
448. As the noted civil law authority, Senator Arturo Tolentino, aptly explains: "To
fall within the provision of this Article, the construction must be of permanent
character, attached to the soil with an idea of perpetuity; but if it is of a transitory
character or is transferable, there is no accession, and the builder must remove
the construction. The proper remedy of the landowner is an action to eject the
builder from the land." 33
The private respondents' action for recovery of possession was the suitable
solution to eject petitioners from the premises.
WHEREFORE, this petition should be, as it is hereby, DISMISSED.
The assailed decision is hereby AFFIRMED.
SO ORDERED.

G.R. No. 146608

October 23, 2003

SPOUSES CONSTANTE FIRME AND AZUCENA E. FIRME, petitioners,


vs.
UKAL ENTERPRISES AND DEVELOPMENT CORPORATION, respondent.

KNOW ALL MEN BY THESE PRESENTS:


This DEED OF ABSOLUTE SALE made and executed by and between the
Spouses CONSTANTE FIRME and AZUCENA E. FIRME, both of legal age,
Filipino citizens and with postal address at No. 1450 Union, Paco, City of Manila,
hereinafter called the VENDOR, and

DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari of the Decision 1 dated 3 January 2001 of
the Court of Appeals in CA-G.R. CV No. 60747. The Court of Appeals reversed
the Decision2 of the Regional Trial Court, Branch 223, Quezon City ("trial court"),
which held that there was no perfected contract of sale since there was no
consent on the part of the seller.
The Facts
Petitioner Spouses Constante and Azucena Firme ("Spouses Firme") are the
registered owners of a parcel of land 3 ("Property") located on Dahlia Avenue,
Fairview Park, Quezon City. Renato de Castro ("De Castro"), the vice president
of Bukal Enterprises and Development Corporation ("Bukal Enterprises")
authorized his friend, Teodoro Aviles ("Aviles"), a broker, to negotiate with the
Spouses Firme for the purchase of the Property.
On 28 March 1995, Bukal Enterprises filed a complaint for specific performance
and damages with the trial court, alleging that the Spouses Firme reneged on
their agreement to sell the Property. The complaint asked the trial court to order
the Spouses Firme to execute the deed of sale and to deliver the title to the
Property to Bukal Enterprises upon payment of the agreed purchase price.
During trial, Bukal Enterprises presented five witnesses, namely, Aviles, De
Castro, Antonio Moreno, Jocelyn Napa and Antonio Ancheta.
Aviles testified that De Castro authorized him to negotiate on behalf of Bukal
Enterprises for the purchase of the Property. According to Aviles, he met with the
Spouses Firme on 23 January 1995 and he presented them with a draft deed of
sale4 ("First Draft") dated February 1995. The First Draft of the deed of sale
provides:
DEED OF ABSOLUTE SALE

BUKAL ENTERPRISES and DEVELOPMENT CORPORATION, a corporation


duly organized and registered in accordance with Philippine Laws, with business
address at Dahlia Avenue, Fairview Park, Quezon City, herein represented by its
PRESIDENT, MRS. ZENAIDA A. DE CASTRO, hereinafter called the VENDEE.
WITNESSETH:
That the VENDOR is the absolute and registered owner of a certain parcel of
land located at Fairview Park, Quezon City, and more particularly described as
follows:
A parcel of land (Lot 4, Block 33 of the consolidation-subdivision plan (LRC) Pcs8124, Sheet No.I, being a portion of the consolidation of Lots 41-B-2-A and 41-B2-C, Psd-1136 and Lot (LRC) Pcs-2665, (LRC) GLRO) Record.No. 1037),
situated in Quezon City, Island of Luzon.Bounded on the NE., points 2 to 5 by
Road Lot 24, of the consolidation-subdivision plan. Beginning at a point marked
"1" on plan, being S. 67 deg. 23W., 9288.80 m. from BLLM I, Mp of Montalban,
Rizal; thence N. 85 deg. 35E., 17.39 m. to point 2; thence S. 54 deg. 22E., 4.00
m. to point 3; thence S. 14 deg. 21E., 17.87 m. to point 4; thence 3 deg. 56E.,
17.92 m. to point 5; thence N. 85 deg. 12 W., 23.38 m. to point 6; thence N. 4
deg. 55 W., 34.35 m. to the point of beginning; containing an area of EIGHT
HUNDRED AND SIX (806) SQUARE METERS, more or less.
VENDORS title thereto being evidenced by Transfer Certificate of Title No.
264243 issued by the Register of Deeds of Quezon City;
That the VENDOR, for and in consideration of the sum of THREE MILLION TWO
HUNDRED TWENTY FOUR THOUSAND PESOS (P3,224,000.00) Philippine
Currency, to them in hand paid and receipt whereof is hereby acknowledged, do
hereby SELL, TRANSFER and CONVEY unto the said VENDEE, its assigns,
transferees and successors in interest the above described property, free from all
liens and encumbrances whatsoever;
It is hereby mutually agreed that the VENDEE shall bear all the expenses for the
capital gains tax, documentary stamps, documentation, notarization, removal and
relocation of the squatters, registration, transfer tax and other fees as may be
required by law;

That the VENDOR shall pay the real estate tax for the current year and back real
estate taxes, charges and penalties if there are any.
IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day
of February, 1995, at Quezon City, Philippines.
CONSTANTE FIRME

BUKAL ENTERPRISES AND


DEVELOPMENT CORP.
BY:

AZUCENA E. FIRME
VENDOR

ZENAIDA A. DE CASTRO
President

xxx
The Spouses Firme rejected this First Draft because of several objectionable
conditions, including the payment of capital gains and other government taxes by
the seller and the relocation of the squatters at the sellers expense. During their
second meeting, Aviles presented to the Spouses Firme another draft deed of
sale5 ("Second Draft") dated March 1995. The Spouses Firme allegedly accepted
the Second Draft in view of the deletion of the objectionable conditions contained
in the First Draft. According to Aviles, the Spouses Firme were willing to sell the
Property at P4,000 per square meter. They then agreed that payment would be
made at the Far East Bank and Trust Company ("FEBTC"), Padre Faura Branch,
Manila. However, the scheduled payment had to be postponed due to problems
in the transfer of funds. The Spouses Firme later informed Aviles that they were
no longer interested in selling the Property.6
De Castro testified that he authorized Aviles to negotiate for Bukal Enterprises
the purchase of the Property owned by the Spouses Firme. The Property was
located beside the Dahlia Commercial Complex owned by Bukal Enterprises.
Aviles informed him that the Spouses Firme agreed to sell the Property at P4,000
per square meter, payable in cash for a lump sum of P3,224,000. Furthermore,
Bukal Enterprises agreed to pay the taxes due and to undertake the relocation of
the squatters on the Property. For this purpose, Bukal Enterprises applied for a
loan of P4,500,000 which FEBTC granted. Bukal Enterprises then relocated the
four families squatting on the Property at a cost of P60,000 per family. After the
squatters vacated the Property, Bukal Enterprises fenced the area, covered it
with filling materials, and constructed posts and riprap. Bukal Enterprises spent
approximatelyP300,000 for these improvements. In a letter 7 dated 7 March 1995,
Bukal Enterprises offered to pay the purchase price of P3,224,000 to the
Spouses Firme upon execution of the transfer documents and delivery of the
owners duplicate copy of TCT No. 264243. The Spouses Firme did not accept
this offer but instead sent Bukal Enterprises a letter demanding that its workers
vacate the Property. Bukal Enterprises then filed a complaint for specific
performance and damages.8

Antonio Moreno, one of the alleged squatters on the Property, testified that he
constructed his house on the Property sometime in 1982. On 26 February 1995,
he was summoned together with the other squatters to a meeting with Aviles
regarding their relocation. They agreed to relocate provided they would be given
financial assistance of P60,000 per family. Thus, on 6 March 1995, the squatter
families were each paid P60,000 in the presence of De Castro and Aviles.
Thereafter, they voluntarily demolished their houses and vacated the Property.9
Jocelyn Mapa, the manager of FEBTC, Padre Faura Branch, testified that Bukal
Enterprises has been their client since 1994. According to her, Bukal Enterprises
applied for a loan of P4,500,000 on the third week of February 1995 allegedly to
buy a lot in Fairview. FEBTC approved the loan on the last week of February and
released the proceeds on the first week of March.10
Antonio Ancheta ("Ancheta"), barangay captain of Barangay Fairview, testified
that he was present when one of the officers of Bukal Enterprises, a certain
Renato, paid each of the four squatter families around P60,000 toP100,000.
Ancheta informed Dr. Constante Firme that he told the squatters to leave
considering that they already received payment for their relocation. According to
Ancheta, Dr. Constante Firme must have misunderstood him and thought that the
squatters left through Anchetas own efforts.11
On the other hand, Dr. Constante Firme ("Dr. Firme") was the sole witness for the
defendant spouses.
Dr. Firme testified that on 30 January 1995, he and his wife met with Aviles at the
Aristocrat Restaurant in Quezon City. Aviles arranged the meeting with the
Spouses Firme involving their Property in Fairview. Aviles offered to buy the
Property at P2,500 per square meter. The Spouses Firme did not accept the offer
because they were reserving the Property for their children. On 6 February 1995,
the Spouses Firme met again with Aviles upon the latters insistence. Aviles
showed the Spouses Firme a copy of a draft deed of sale 12 ("Third Draft") which
Aviles prepared. The Third Draft of the deed of sale provides:
CONRACT OF SALE
KNOW ALL MEN BY THESE PRESENTS:
This AGREEMENT, executed this ___ day of February, 1995, by and between
the Spouses CONSTANTE FIRME and AZUCENA E. FIRME, both of legal age,
Filipino citizen and with postal address at __________, Quezon City, hereinafter
referred to as the VENDORS, and BUKAL ENTERPRISES and DEVELOPMENT
CORPORATION, a corporation duly organized and registered in accordance with
Philippine Laws, with postal address at Fairview Park, Quezon City, herein
represented by its President and Chief Executive Officer, hereinafter referred to
as the VENDEE.

WITNESSETH:

balance a monthly interest based on existing bank rate until said


fortuitous event is no longer present;

That for and in consideration of the sum of THREE MILLION TWO HUNDRED
TWENTY FOUR THOUSAND PESOS (P3,224,000.00), Philippine Currency,
payable in the form hereinafter expressed, agreed to sell to the VENDEE and the
VENDEE has agreed to buy from the VENDORS, a parcel of land situated at
Dahlia Avenue corner Rolex Street, Fairview Park, Quezon City, containing an
area of 806 Square Meters more or less, of which the VENDORS are the
absolute registered owners in accordance with the Land Registration Act, as
evidenced by Transfer Certificate of Title No. 264243 issued by the Register of
Deeds of Quezon City, more particularly described and bounded as follows:

5. The VENDEE shall remove and relocate the Squatters,


however, such actual, reasonable and necessary expenses
shall be charged to the VENDORS upon presentation of
receipts and documents to support the act;
6. The VENDEE shall be allowed for all legal purposes to take
possession of the parcel of land after the execution of this
Contract and payment of the downpayment;

(DESCRIPTION AND BOUNDARIES OF PROPERTY)

7. The VENDEE shall shoulder all expenses like the


documentation, registration, transfer tax and relocation of the
property.

THE FURTHER TERMS AND CONDITIONS OF THE CONTRACT ARE AS


FOLLOWS:
1. The VENDEE agrees to pay the VENDORS upon execution
of this Contract the sum of ONE MILLION PESOS
(P1,000,000.00), Philippine Currency, as downpayment and
agrees to pay the balance of TWO MILLION TWO HUNDRED
TWENTY FOUR THOUSAND PESOS (P2,224,000.00) at the
post office address of the VENDORS in Quezon City, or such
other place or Office as the VENDORS may designate within a
period of sixty (60) days counted from the date of this Contract;
2. The VENDORS have hereunto authorized the VENDEE to
mortgage the property and submit this Contract, together with a
certified true copy of the TCT, Tax Declaration, Tax Clearance
and Vicinity/Lot Plan, with their Lending Bank. The proceeds of
the VENDEES Loan shall directly be paid and remitted by the
Bank to the VENDORS;
3. The said parcel of land shall remain in the name of the
VENDORS until the Lending Bank of the VENDEE shall have
issued a Letter Guaranty Payment in favor of the VENDORS, at
which time the VENDORS agree to execute a Deed of Absolute
Sale in favor of the VENDEE and cause the issuance of the
Certificate of Title in the name of the latter. The Capital Gains
Tax and Documentary Stamps shall be charged from the
VENDORS in accordance with law;1awphi1.nt
4. The payment of the balance of P2,224,000.00 by the
VENDEE to the VENDORS shall be within a period of sixty (60)
days effective from the date of this Contract. After the lapse of
60 days and the loan has not yet been released due to
fortuitous events the VENDEE shall pay an interest of the

IN WITNESS WHEREOF, we have hereunto affixed our signatures this ____ day
of February, 1995, at Quezon City, Philippines.
CONSTANTE E. FIRME BUKAL ENTERPRISES
VENDOR
VENDEE

DEV. CORP.

BY:
AZUCENA
VENDOR

E.

FIRME ________________________
President & Chief Executive Officer

xxx
The Spouses Firme did not accept the Third Draft because they found its
provisions one-sided. The Spouses Firme particularly opposed the provision on
the delivery of the Propertys title to Bukal Enterprises for the latter to obtain a
loan from the bank and use the proceeds to pay for the Property. The Spouses
Firme repeatedly told Aviles that the Property was not for sale when Aviles called
on 2 and 4 March 1995 regarding the Property. On 6 March 1995, the Spouses
Firme visited their Property and discovered that there was a hollow block fence
on one side, concrete posts on another side and bunkers occupied by workers of
a certain Florante de Castro. On 11 March 1995, Spouses Firme visited the
Property again with a surveyor. Dr. Firme talked with Ancheta who told him that
the squatters had voluntarily demolished their shanties. The Spouses Firme sent
a letter13 dated 20 March 1995 to Bukal Enterprises demanding removal of the
bunkers and vacation by the occupants of the Property. On 22 March 1995, the
Spouses Firme received a letter 14 dated 7 March 1995 from Bukal Enterprises
demanding that they sell the Property.15
On 7 August 1998, the trial court rendered judgment against Bukal Enterprises as
follows:

WHEREFORE, in the light of the foregoing premises, the above-entitled case [is]
hereby DISMISSED and plaintiff BUKAL ENTERPRISES DEVELOPMENT
CORPORATION is hereby ordered to pay the defendants Spouses Constante
and Azucena Firme:

not validly finalize the purchase of the Property on behalf of Bukal Enterprises.
There is no basis to apply the Statute of Frauds since there was no perfected
contract of sale.
The Ruling of the Court of Appeals

1. the sum of Three Hundred Thirty Five Thousand Nine Hundred Sixty
Four and 90/100 (P335,964.90) as and by way of actual and
compensatory damages;
2. the sum of Five Hundred Thousand Pesos (P500,000.00) as and by
way of moral damages;
3. the sum of One Hundred Thousand Pesos (P100,000.00) as and by
way of attorneys fees; and
4. the costs of the suit.
SO ORDERED.16
Bukal Enterprises appealed to the Court of Appeals, which reversed and set
aside the decision of the trial court. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the Decision, dated August 7, 1998, is
hereby REVERSED and SET ASIDE. The complaint is granted and the appellees
are directed to henceforth execute the Deed of Absolute Sale transferring the
ownership of the subject property to the appellant immediately upon receipt of
the purchase price of P3,224,000.00 and to perform all such acts necessary and
proper to effect the transfer of the property covered by TCT No. 264243 to
appellant. Appellant is directed to deliver the payment of the purchase price of
the property within sixty days from the finality of this judgment. Costs against
appellees.
SO ORDERED.17
Hence, the instant petition.1a\^/phi1.net
The Ruling of the Trial Court
The trial court held there was no perfected contract of sale. Bukal Enterprises
failed to establish that the Spouses Firme gave their consent to the sale of the
Property. The parties did not go beyond the negotiation stage and there was no
evidence of meeting of the minds between the parties. Furthermore, Aviles had
no valid authority to bind Bukal Enterprises in the sale transaction. Under
Sections 23 and 36 (No. 7) of the Corporation Code, the corporate power to
purchase a specific property is exercised by the Board of Directors of the
corporation. Without an authorization from the Board of Directors, Aviles could

The Court of Appeals held that the lack of a board resolution authorizing Aviles to
act on behalf of Bukal Enterprises in the purchase of the Property was cured by
ratification. Bukal Enterprises ratified the purchase when it filed the complaint for
the enforcement of the sale.
The Court of Appeals also held there was a perfected contract of sale. The
appellate court ruled that the Spouses Firme revealed their intent to sell the
Property when they met with Aviles twice. The Spouses Firme rejected the First
Draft because they considered the terms unacceptable. When Aviles presented
the Second Draft without the objectionable provisions, the Spouses Firme no
longer had any cause for refusing to sell the Property. On the other hand, the
acts of Bukal Enterprises in fencing the Property, constructing posts, relocating
the squatters and obtaining a loan to purchase the Property are circumstances
supporting their claim that there was a perfected contract of sale.
The Spouses Firme allowed Bukal Enterprises to exercise acts of ownership over
the Property when the latter introduced improvements on the Property and
evicted the squatters. These acts constitute partial performance of the contract of
sale that takes the oral contract out of the scope of the Statute of Frauds.
The Issues
The Spouses Firme raise the following issues:
1. WHETHER THE COURT OF APPEALS ERRED IN FINDING THAT
THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN
PETITIONERS AND RESPONDENT DESPITE THE ADDUCED
EVIDENCE PATENTLY TO THE CONTRARY;
2. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING
THAT THE ALLEGED CONTRACT OF SALE IS ENFORCEABLE
DESPITE THE FACT THAT THE SAME IS COVERED BY THE
STATUTE OF FRAUDS;
3. WHETHER THE COURT OF APPEALS ERRED IN DISREGARDING
THE FACT THAT IT WAS NOT LEGALLY AND FACTUALLY POSSIBLE
FOR RESPONDENT TO PERFECT A CONTRACT OF SALE; AND

4. THE COURT OF APPEALS ERRED IN RULING THAT THE AWARD


BY THE TRIAL COURT OF MORAL AND COMPENSATORY DAMAGES
TO PETITIONERS IS IMPROPER.18
The Ruling of the Court
The petition is meritorious.
The fundamental question for resolution is whether there was a perfected
contract of sale between the Spouses Firme and Bukal Enterprises. This requires
a review of the factual and legal issues of this case. As a rule, only questions of
law are appealable to this Court under Rule 45 19 of the Rules of Civil Procedure.
The findings of fact by the Court of Appeals are generally conclusive and binding
on the parties and are not reviewable by this Court. 20 However, when the factual
findings of the Court of Appeals are contrary to those of the trial court or when
the inference made is manifestly mistaken, this Court has the authority to review
the findings of fact.21Likewise, this Court may review findings of fact when the
judgment of the Court of Appeals is premised on a misapprehension of
facts.22 This is the situation in this case.
Whether there was a perfected contract of sale

the same provisions. The only difference is that the date of the First Draft is
February 1995 while that of the Second Draft is March 1995.
When Aviles testified again as rebuttal witness, his testimony became more
confusing. Aviles testified that during his first meeting with the Spouses Firme on
30 January 1995, he showed them the Third Draft, which was not acceptable to
the latter.29 However, upon further questioning by his counsel, Aviles concurred
with Dr. Firmes testimony that he presented the Third Draft (Exh. "5"; Exh."L") to
the Spouses Firme only during their second meeting. He also stated that he
prepared and presented to the Spouses Firme the First Draft (Exh. "C") and the
Second Draft (Exh. "C-1") during their first or second meeting. He testified:
ATTY. MARQUEDA:
Q: On page 11 of the tsn dated August 5, 1997 a question was posed
"How did you find this draft the Contract of Sale which was presented to
you by Mr. Aviles on the second meeting?" The answer is "On the first
meeting(sic), we find it totally unacceptable, sir." 30 What can you say on
this? Before that, Mr. Witness, what is this Contract of Sale that you
presented to Mr. Aviles on the second meeting? Is this different from the
Contract of Sale that was marked as Exhibit "5-L"?

We agree with the finding of the trial court that there was no perfected contract of
sale. Clearly, the Court of Appeals misapprehended the facts of the case in ruling
otherwise.

Q: May I see the document Exhibit 5 L?31

First, the records indubitably show that there was no consent on the part of the
Spouses Firme. Aviles did not present any draft deed of sale during his first
meeting with the Spouses Firme on 30 January 1995. 23 Dr. Firme was consistent
in his testimony that he and his wife rejected the provisions of the Third Draft
presented by Aviles during their second meeting on 6 February 1995. The
Spouses Firme found the terms and conditions unacceptable and told Aviles that
they would not sell the property.24 Aviles showed them only one draft deed of sale
(Third Draft) during their second and last meeting on 6 February 1995. 25 When
shown a copy of the First Draft, Dr. Firme testified that it was not the deed of sale
shown to them by Aviles during their second meeting 26and that the Third Draft
was completely different from the First Draft.27

Witness going over the record.

On the other hand, Aviles gave conflicting testimony as to what transpired during
the two meetings with the Spouses Firme. In his direct examination, Aviles
testified that during his first meeting with the Spouses Firme on 23 January 1995,
he showed them the First Draft which the Spouses Firme rejected. 28 On their
second meeting, Aviles showed the Spouses Firme the Second Draft, which the
Spouses Firme allegedly approved because the objectionable conditions
contained in the First Draft were already deleted. However, a perusal of the First
Draft and the Second Draft would show that both deeds of sale contain exactly

INTERPRETER:

ATTY. MARQUEDA:
Q: Is that the same document that was presented by you to Mr. Firme on
the second meeting or there is a different contract?
A: This is the same document draft of the document that I submitted to
them during our second meeting. That was February. This was the draft.
Q: What about Exhibit C and C-1 [which] were identified by you. When
was this presented to Dr. Firme?
A: This is the same.
Q: Exhibit C and C-1?
A: Yes because I prepared two documents during our meeting. One
already with notarial, the one without notarial page and the other one

with notarial page already, so I prepared two documents but with the
same contents both were dated February of 1995.32
Q: So, you are referring now to Exhibit C and C-1 for the plaintiff?
A: C-1 is already in the final form because we agreed already as to the
date of the payment, so I prepared already another document which is
dated March 1995.33 (Emphasis supplied)
In his cross-examination, Aviles again changed his testimony. According to him,
he presented the Third Draft to the Spouses Firme during their first
meeting.34 However, when he went over the records, he again changed his
answer and stated that he presented the Third Draft during their second
meeting.35
In his re-direct examination, Aviles gave another version of what he presented to
the Spouses Firme during the two meetings. According to him, he presented the
Third Draft during the first meeting. On their second meeting, he presented the
First and the Second Drafts to the Spouses Firme. 36
Furthermore, Aviles admitted that the first proposal of Bukal Enterprises was
at P2,500 per square meter for the Property.37 But the First, Second and Third
Drafts of the deed of sale prepared by Aviles all indicated a purchase price
of P4,000 per square meter or a lump sum of P3,224,000 (P4,000 per sq.m. x
806 sq.m. = P3,224,000) for the Property. Hence, Aviles could not have
presented any of these draft deeds of sale to the Spouses Firme during their first
meeting.
Considering the glaring inconsistencies in Aviles testimony, it was proper for the
trial court to give more credence to the testimony of Dr. Firme.
Even after the two meetings with Aviles, the Spouses Firme were firm in their
decision not to sell the Property. Aviles called the Spouses Firme twice after their
last meeting. The Spouses Firme informed Aviles that they were not selling the
Property.38 Aviles himself admitted this during his testimony, thus:
Q. Now, the next question which states: "But did you not have any
occasion to talk to him after that second meeting?" and the answer of Dr.
Firme is "He called up a month after, thats March 2, 1995." What can
you say on this?
A. I called him to inform him that the loan was already transferred from
Makati to Padre Faura Branch of the Far East Bank, so I scheduled
already the payment of their property.
Q. When?

A. On March 4, 1995.
Q. And then the next question which also states: "What did you talked
(sic) about over the telephone?" The answer of Dr. Firme was "When I
found out that he was calling, I told him that the property is not for sale."
What can you say on this?
A. He mentioned that they are no longer interested to sell their property,
perhaps they would like a higher price of the property. They did not
mention to me. I do not know what was their reason.
Q. The next question "So, what happened next?" The answer is "He
called up two days later, March 4 and my wife answered the telephone
and told him that the property is not for sale, sir." What can you say on
this?
A. That is true. That is what Mrs. Firme told me during our conversation
on the telephone that they are no longer interested to sell the property
for obvious reason.
Q. When was that?
A. March 4, 1995, your honor.39 (Emphasis supplied)
Significantly, De Castro also admitted that he was aware of the Spouses Firmes
refusal to sell the Property.40
The confusing testimony of Aviles taken together with De Castros admission that
he was aware of the Spouses Firmes refusal to sell the Property reinforces Dr.
Firmes testimony that he and his wife never consented to sell the Property.
Consent is one of the essential elements of a valid contract. The Civil Code
provides:
Art. 1318. There is no contract unless the following requisites concur:
1. Consent of the contracting parties;
2. Object certain which is the subject matter of the contract;
3. Cause of the obligation which is established.
The absence of any of these essential elements will negate the existence of a
perfected contract of sale.41 Thus, where there is want of consent, the contract is
non-existent.42 As held in Salonga, et al. v. Farrales, et al.:43

It is elementary that consent is an essential element for the existence of a


contract, and where it is wanting, the contract is non-existent. The essence of
consent is the conformity of the parties on the terms of the contract, the
acceptance by one of the offer made by the other. The contract to sell is a
bilateral contract. Where there is merely an offer by one party, without the
acceptance of the other, there is no consent. (Emphasis supplied)
In this case, the Spouses Firme flatly rejected the offer of Aviles to buy the
Property on behalf of Bukal Enterprises. There was therefore no concurrence of
the offer and the acceptance on the subject matter, consideration and terms of
payment as would result in a perfected contract of sale. 44 Under Article 1475 of
the Civil Code, the contract of sale is perfected at the moment there is a meeting
of minds on the thing which is the object of the contract and on the price.
Another piece of evidence which supports the contention of the Spouses Firme
that they did not consent to the contract of sale is the fact they never signed any
deed of sale. If the Spouses Firme were already agreeable to the offer of Bukal
Enterprises as embodied in the Second Draft, then the Spouses Firme could
have simply affixed their signatures on the deed of sale, but they did not.
Even the existence of a signed document purporting to be a contract of sale does
not preclude a finding that the contract is invalid when the evidence shows that
there was no meeting of the minds between the seller and buyer. 45 In this case,
what were offered in evidence were mere unsigned deeds of sale which have no
probative value.46 Bukal Enterprises failed to show the existence of a perfected
contract of sale by competent proof.1vvphi1.nt
Second, there was no approval from the Board of Directors of Bukal Enterprises
as would finalize any transaction with the Spouses Firme. Aviles did not have the
proper authority to negotiate for Bukal Enterprises. Aviles testified that his friend,
De Castro, had asked him to negotiate with the Spouses Firme to buy the
Property.47 De Castro, as Bukal Enterprises vice president, testified that he
authorized Aviles to buy the Property.48 However, there is no Board Resolution
authorizing Aviles to negotiate and purchase the Property on behalf of Bukal
Enterprises.49
It is the board of directors or trustees which exercises almost all the corporate
powers in a corporation. Thus, the Corporation Code provides:
SEC. 23.The board of directors or trustees. Unless otherwise provided in this
Code, the corporate powers of all corporations formed under this Code shall be
exercised, all business conducted and all property of such corporations
controlled and held by the board of directors or trustees to be elected from
among the holders of stock, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year and until their
successors are elected and qualified. x x x

SEC. 36.Corporate powers and capacity. Every corporation incorporated


under this Code has the power and capacity:
xxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage
and otherwise deal with such real and personal property, including securities and
bonds of other corporations, as the transaction of a lawful business of the
corporation may reasonably and necessarily require, subject to the limitations
prescribed by the law and the Constitution.
xxx
Under these provisions, the power to purchase real property is vested in the
board of directors or trustees. While a corporation may appoint agents to
negotiate for the purchase of real property needed by the corporation, the final
say will have to be with the board, whose approval will finalize the
transaction.50 A corporation can only exercise its powers and transact its
business through its board of directors and through its officers and agents when
authorized by a board resolution or its by-laws. 51 As held in AF Realty &
Development, Inc. v. Dieselman Freight Services, Co.:52
Section 23 of the Corporation Code expressly provides that the corporate powers
of all corporations shall be exercised by the board of directors. Just as a natural
person may authorize another to do certain acts in his behalf, so may the board
of directors of a corporation validly delegate some of its functions to individual
officers or agents appointed by it. Thus, contracts or acts of a corporation must
be made either by the board of directors or by a corporate agent duly authorized
by the board. Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but
not in the course of, or connected with, the performance of authorized duties of
such director, are held not binding on the corporation. (Emphasis supplied)
In this case, Aviles, who negotiated the purchase of the Property, is neither an
officer of Bukal Enterprises nor a member of the Board of Directors of Bukal
Enterprises. There is no Board Resolution authorizing Aviles to negotiate and
purchase the Property for Bukal Enterprises. There is also no evidence to prove
that Bukal Enterprises approved whatever transaction Aviles made with the
Spouses Firme. In fact, the president of Bukal Enterprises did not sign any of the
deeds of sale presented to the Spouses Firme. Even De Castro admitted that he
had never met the Spouses Firme. 53 Considering all these circumstances, it is
highly improbable for Aviles to finalize any contract of sale with the Spouses
Firme.
Furthermore, the Court notes that in the Complaint filed by Bukal Enterprises with
the trial court, Aviles signed54the verification and certification of non-forum
shopping.55 The verification and certification of non-forum shopping was not

accompanied by proof that Bukal Enterprises authorized Aviles to file the


complaint on behalf of Bukal Enterprises.
The power of a corporation to sue and be sued is exercised by the board of
directors. "The physical acts of the corporation, like the signing of documents,
can be performed only by natural persons duly authorized for the purpose by
corporate by-laws or by a specific act of the board of directors." 56
The purpose of verification is to secure an assurance that the allegations in the
pleading are true and correct and that it is filed in good faith. 57 True, this
requirement is procedural and not jurisdictional. However, the trial court should
have ordered the correction of the complaint since Aviles was neither an officer of
Bukal Enterprises nor authorized by its Board of Directors to act on behalf of
Bukal Enterprises.

Bukal Enterprises is not a builder in good faith. The Spouses Firme did not
accept Aviles offer to purchase the Property. Aviles testified that when he called
the Spouses Firme on 2 March 1995, Dr. Firme informed him that they were no
longer interested in selling the Property. On 4 March 1995, Aviles called again
and this time Mrs. Firme told him that they were not selling the Property. Aviles
informed De Castro of the refusal of the Spouses Firme to sell the Property.
However, Bukal Enterprises still proceeded in relocating the squatters and
constructing improvements on the Property. De Castro testified:
ATTY. EJERCITO:
Q: The truth of the matter, Mr. Witness, is that the post was constructed
sometime late 1994. Is that not correct?
A: No, sir. It is not true.

Whether the Statute of Frauds is applicable


Q: When was it constructed?
The Court of Appeals held that partial performance of the contract of sale takes
the oral contract out of the scope of the Statute of Frauds. This conclusion arose
from the appellate courts erroneous finding that there was a perfected contract
of sale. The records show that there was no perfected contract of sale. There is
therefore no basis for the application of the Statute of Frauds. The application of
the Statute of Frauds presupposes the existence of a perfected contract. 58 Article
1403 of the Civil Code provides:
Art. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one who has
been given no authority or legal representation, or who has acted
beyond his powers;

A: That March.
Q: When in March?
A: 1995.
Q: When in March 1995?
A: From the period of March 2, 1995 or two (2) weeks after the removal
of the squatters.
Q: When were the squatters removed?

(2) Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter made shall
be unenforceable by action, unless the same, or some note or
memorandum thereof, be in writing and subscribed by the party charged
or by his agent; evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its contents:
xxx
(e) An agreement for the leasing for a longer period than one year, or for
the sale of real property or of an interest therein;
xxx
Whether Bukal Enterprises is a builder in good faith

WITNESS:
A: March 6 and 7 because there were four (4) squatters.
ATTY. EJERCITO:
Q: When did you find out that the Spouses Firme did not want to sell the
same?
A: First week of March 1995.
Q: In your Complaint you said you find out on March 3, 1995. Is that not
correct?

A: I cannot exactly remember, sir.


ATTY. MARQUEDA:
In the Complaint it does not state March 3. Maybe counsel was thinking
of this Paragraph 6 which states, "When the property was rid of the
squatters on March 2, 1995 for the documentation and payment of the
sale, xxx".

Q: And yet that time you believe Mr. Aviles when he verbally told you that
the Sps. Firme agreed to sell the property? At what point of the
transaction with the Spouses Firme were you advised by your lawyer?
WITNESS:
A: At the time when they refused to sell the lot.
ATTY. EJERCITO:

ATTY. EJERCITO:
Q: So, you found out on March 2, 1995 that the defendants were no
longer interested in selling to you the property. Is that correct?

Q: Was that before the squatters were relocated allegedly by Bukal


Enterprises?
A: Yes, sir.

A: Yes, sir, because Mr. Aviles relayed it to me.


Q: Mr. Aviles relayed to you that the Spouses Firme were no longer
interested in selling to you the property in March 2, 1995. Is that correct?

Q: In fact, it was the lawyer who advised you to relocate the squatters. Is
it not true?
A: No, sir.59 (Emphasis supplied)

A: Yes, sir. Mr. Aviles told me.


Q: In so many words, Mr. Witness, you learned that the Spouses Firme
were no longer interested in selling the property before you spent
allegedly all the sum of money for the relocation of squatters for all this
construction that you are telling this Court now?
WITNESS:
A: The refusal to sell is not yet formal and the lawyer sent a letter
tendering full payment of the purchase price.
ATTY. EJERCITO:
Q: You mean to say that you did not believe Mr. Aviles when he told you
that the Spouses Firme were no longer selling the property?
A: No, sir.
Q: Was there anything formal when you say the Spouses Firme agreed
to sell the property?
A: None, sir.

Bukal Enterprises is obviously a builder in bad faith. No deed of sale has been
executed in this case. Despite the refusal of the Spouses Firme to sell the
Property, Bukal Enterprises still proceeded to introduce improvements on the
Property. Bukal Enterprises introduced improvements on the Property without the
knowledge and consent of the Spouses Firme. When the Spouses Firme learned
about the unauthorized constructions made by Bukal Enterprises on the Property,
they advised the latter to desist from further acts of trespass on their Property.60
The Civil Code provides:
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 owner the proper rent.
Under these provisions the Spouses Firme have the following options: (1) to
appropriate what Bukal Enterprises has built without any obligation to pay
indemnity; (2) to ask Bukal Enterprises to remove what it has built; or (3) to
compel Bukal Enterprises to pay the value of the land.61 Since the Spouses Firme
are undoubtedly not selling the Property to Bukal Enterprises, they may exercise
any of the first two options. They may appropriate what has been built without

paying indemnity or they may ask Bukal Enterprises to remove what it has built at
Bukal Enterprises own expense.
Bukal Enterprises is not entitled to reimbursement for the expenses incurred in
relocating the squatters. Bukal Enterprises spent for the relocation of the
squatters even after learning that the Spouses Firme were no longer interested in
selling the Property. De Castro testified that even though the Spouses Firme did
not require them to remove the squatters, they chose to spend for the relocation
of the squatters since they were interested in purchasing the Property.62
Whether the Spouses Firme are entitled to compensatory and moral damages
The Court agrees with the Court of Appeals to delete the award for compensatory
and moral damages. In awarding actual damages, the trial court took into
account the traveling expenses incurred by the Spouses Firme who are already
residing in the United States. However, the trial court failed to consider the
testimony of Dr. Firme that they normally travel to the Philippines more than once
a year to visit their children.63 Thus, the expenses for the roundtrip tickets dated
1996-1997 could not be attributed solely for the attendance of hearings in the
case.
Nevertheless, an award of nominal damages of P30,000 is warranted since
Bukal Enterprises violated the property rights of the Spouses Firme. 64 The 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 Civil Code
which states that the landowner is entitled to damages from the builder in bad
faith.65
WHEREFORE, we SET ASIDE the Decision of the Court of Appeals and
RENDER a new one:
1. Declaring that there was no perfected contract of sale;
2. Ordering Bukal Enterprises to pay the Spouses Firme P30,000 as
nominal damages.

SO ORDERED.

G.R. No. 77294 December 12, 1988


ANGELICA VIAJAR and CELSO VIAJAR, plaintiffs-appellants,
vs.
COURT OF APPEALS, LEONOR P. LADRIDO, LOURDES LADRIDO
IGNACIO, EUGENIO P. LADRIDO and L P. LADRIDO, defendants-appellees.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals
dated December 29, 1986, in CA-G.R. CV No. 69942 entitled, "ANGELICA
VIAJAR, et. al., Plaintiffs-Appellants, versus LEONOR LADRIDO, et. al.,
Defendants-Appellees," affirming the decision of the Court of First Instance (now
Regional Trial Court) of Iloilo dated December 10, 1981.

Ladrido is sustained. Defendant Te filed his answer to the amended complaint


and he counter claimed for damages. Plaintiffs answered the counterclaim.
During the pendency of the case, plaintiff Celso F. Viajar sold his rights over Lot
No. 7340 to his mother and co-plaintiff, Angelica F. Viajar. For this reason, plaintiff
Angelica F. Viajar now appears to be the sole registered owner of this lot.
On May 25, 1978, defendant Ladrido died. He was substituted in the civil action
by his wife, Leonor P. Ladrido, and children, namely: Lourdes Ladrido-Ignacio,
Eugenio P. Ladrido and Manuel P. Ladrido, as parties defendants.

The antecedent facts in the instant case are as follows: The spouses Ricardo Y.
Ladrido and Leonor P. Ladrido were the owners of Lot No. 7511 of the Cadastral
Survey of Pototan situated in barangay Cawayan, Pototan, Iloilo. This lot
contained an area of 154,267 square meters and was registered in the names of
the spouses under Transfer Certificate of Title No. T-21940 of the Register of
Deeds of Iloilo.

The facts admitted by the parties during the pre-trial show that the piece of real
property which used to be Lot No. 7340 of the Cadastral Survey of Pototan was
located in barangay Guibuanogan Pototan, Iloilo; that it consisted of 20,089
square meters; that at the time of the cadastral survey in 1926, Lot No. 7511 and
Lot No. 7340 were separated by the Suague River; that the area of 11,819
square meters of what was Lot No. 7340 has been in the possession of the
defendants; that the area of 14,036 square meters, which was formerly the river
bed of the Suague River per cadastral survey of 1926, has also been in the
possession of the defendants; and that the plaintiffs have never been in actual
physical possession of Lot No. 7340.

Spouses Rosendo H. Te and Ana Te were also the registered owners of a parcel
of land described in their title as Lot No. 7340 of the Cadastral Survey of Pototan.

After trial on the merits, a second amended complaint which included damages
was admitted.

On September 6, 1973, Rosendo H. Te, with the conformity of Ana Te, sold this
lot to Angelica F. Viajar and Celso F. Viajar for P5,000. A Torrens title was later
issued in the names of Angelica F. Viajar and Celso F. Viajar.

The plaintiffs raised the following issues to be resolved:

Later, Angelica F. Viajar had Lot No. 7340 relocated and found out that the
property was in the possession of Ricardo Y. Ladrido. Consequently, she
demanded its return but Ladrido refused.
On February 15, 1974, Angelica F. Viajar and Celso F. Viajar instituted a civil
action for recovery of possession and damages against Ricardo Y. Ladrido. This
case was docketed as Civil Case No. 9660 of the Court of First Instance of Iloilo.
Summoned to plead, defendant Ladrido filed his answer with a counterclaim.
Plaintiffs filed their reply to the answer.
Subsequently, the complaint was amended to implead Rosendo H. Te as another
defendant. Plaintiffs sought the annulment of the deed of sale and the restitution
of the purchase price with interest in the event the possession of defendant

1. Whether the change in the course of the Suague River was sudden as
claimed by the plaintiffs or gradual as contended by the defendants;
2. Assuming arguendo it was gradual, whether or not the plaintiffs are
still entitled to Lot "B' appearing in Exhibit "4" and to one-half () of Lot
"A," also indicated in Exhibit "4;" and
3. Damages (pp. 12-13, Rollo).
On December 10, 1981, the trial court rendered its decision, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the defendants
and against the plaintiffs:

1. Dismissing the complaint of plaintiffs Angelica F. Viajar and


Celso F. Viajar with costs against them;
2. Declaring defendants Leonor P. Ladrido, Lourdes LadridoIgnacio, Eugenio P. Ladrido and Manuel P. Ladrido as owner of
the parcel of land indicated as Lots A and B in the sketch plan
(Exhs. 'C' as well as '4,' '4-B' and '4-C') situated in barangays
Cawayan and Guibuanogan Pototan, Iloilo, and containing an
area of 25,855 square meters, more or less; and
3. Pronouncing that as owners of the land described in the
preceding paragraph, the defendants are entitled to the
possession thereof.
Defendants' claim for moral damages and attorney's fees are dismissed.
SO ORDERED (p. 36, Rollo).
Not satisfied with the decision, the plaintiffs appealed to the Court of Appeals and
assigned the following errors:
I.THE LOWER COURT ERRED IN NOT HOLDING THAT PLAINTIFFS
ARE ENTITLED TO LOT B APPEARING IN EXHIBIT "4" AND TO ONEHALF () OF LOT A IN THE SAID EXHIBIT "4."
II. THE LOWER COURT ERRED IN NOT AWARDING DAMAGES TO
PLAINTIFFS (p. 42, Rollo).
As earlier stated, the Court of Appeals affirmed the decision of the court a quo.
Plaintiffs (the petitioners herein) now come to Us claiming that the Court of
Appeals palpably erred in affirming the decision of the trial court on the ground
that the change in the course of the Suague River was gradual and not sudden.
In the decision appealed from, the Court of Appeals held:
This appeal is not impressed with merit.
Article 457 of the New Civil Code provides that:

Art. 457. 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 presumption is that the change in the course of the river was
gradual and caused by accretion and erosion (Martinez Canas vs.
Tuason, 5 Phil. 668; Payatas Estate Improvement Co. vs. Tuason, 53
Phil. 55; C.H. Hodges vs. Garcia, 109 Phil. 133). In the case at bar, the
lower court correctly found that the evidence introduced by the plaintiff to
show that the change in the course of the Suague River was sudden or
that it occurred through avulsion is not clear and convincing.
Contrariwise, the lower court found that:
... the defendants have sufficiently established that for many years after
1926 a gradual accretion on the eastern side of Lot No. 7511 took place
by action of the current of the Suague River so that in 1979 an alluvial
deposit of 29,912 square meters (2.9912 hectares), more or less, had
been added to Lot No. 7511. (Exhs.'1' as well as Exhs.'C' and '4').
Apropos it should be observed that the accretion consisted of Lot A with
an area of 14,036 square meters; Lot B, 11,819 square meters; and Lot
C, 4,057 square meters. (Exhs.'4-B,' '4-C' and '4-D'). Only Lot C is not
involved in this litigation. (See Pre-trial Order, supra)
The established facts indicate that the eastern boundary of Lot No. 7511
was the Suague River based on the cadastral plan. For a period of more
than 40 years (before 1940 to 1980) the Suague River overflowed its
banks yearly and the property of the defendant gradually received
deposits of soil from the effects of the current of the river. The
consequent increase in the area of Lot No. 7511 due to alluvion or
accretion was possessed by the defendants whose tenants plowed and
planted the same with coin and tobacco.
The quondam river bed had been filled by accretion through the years.
The land is already plain and there is no indication on the ground of any
abandoned river bed. The river bed is definitely no longer discernible
now.
What used to be the old river bed (Lot A) is in level with Lot No. 7511. So
are the two other areas to the East. (Lots B and C) Lots A, B and C are
still being cultivated.

Under the law, accretion which the banks or rivers may gradually receive
from the effects of the current of the waters becomes the property of the
owners of the lands adjoining the banks. (Art. 366, Old Civil Code; Art.
457, New Civil Code which took effect on August 30, 1950 [Lara v. Del
Rosario, 94 Phil. 778]. Therefore, the accretion to Lot No. 7511 which
consists of Lots A and B (see Exhs. 'C' and '4') belongs to the
defendants (pp. 34-35, Record on Appeal).
We find no cogent reason to disturb the foregoing finding and conclusion
of the lower court.

makes the decision of the Court of Appeals void. In effect, the petitioners are
expounding a new procedural theory that to render a questioned decision void,
all that has to be done is to simply abandon on appeal the pivotal issue as
resolved by the lower court and when its decision is affirmed on appeal, attack
the decision of the appellate court as void on the principle that a court of justice
has no jurisdiction or power to decide the question not in issue. This is not
correct. Even the authorities cited by the petitioners, more specifically the
Salvante and Lazo cases, supra, do not support their contention. They were
heard in the trial court and they cannot complain that the proceeding below was
irregular and hence, invalid.

The second assignment of error is a mere offshoot of the first


assignment of error and does not warrant further discussion (pp.
4244, Rollo).

The trial court found that the change in the course of the Suague River was
gradual and this finding was affirmed by the respondent Court of Appeals. We do
not find any valid reason to disturb this finding of fact.

The petition is without merit.


The petitioners contend that the first issue raised during the trial of the case on
the merits in the Court of First Instance, that is, "whether the change in the
course of the Suague River was sudden as claimed by the plaintiffs or gradual as
contended by the defendants," was abandoned and never raised by them in their
appeal to the Court of Appeals. Hence, the Court of Appeals, in holding that the
appeal is without merit, because of the change of the Suague River was gradual
and not sudden, disposed of the appeal on an issue that was never raised and,
accordingly, its decision is void. In support of its contention, petitioners cite the
following authorities:
It is a well-known principle in procedure that courts of justice have no
jurisdiction or power to decide a question not in issue (Lim Toco vs. Go
Fay, 80 Phil. 166).
A judgment going outside the issues and purporting to adjudicate
something upon which the parties were not heard, is not merely
irregular, but extra-judicial and invalid ( Salvante vs. Cruz, 88 Phil. 236244; Lazo vs. Republic Surety & Insurance Co., Inc., 31 SCRA 329,
334).
The pivotal issue in the petitioners' appeal was whether the change in the course
of the Suague River was gradual or sudden because the trial court below
resolved the same in its decision thus subjecting the same to review by
respondent appellate court. By simply abandoning this issue, the petitioners
cannot hope that the affirmance of the decision wherein this issue was resolved

Article 457 of the New Civil Code (reproduced from Article 366 of the Old), the
law applied by the courts a quoprovides:
Art. 457. To the owners of the lands adjoining the banks of rivers belong
the accretion which they gradually receive from the effects of the current
of the waters.
Petitioners contend that this article must be read together with Sections 45 an 46
of Act No. 496 which provides:
SEC. 45. 1The obtaining of a decree of registration and the entry of a
certificate of title shall be regarded as an agreement running with the
land, and binding upon the applicant and all successors in title that the
land shall be and always remain registered land, and subject to the
provisions of this Act and all Acts amendatory thereof.
SEC. 46. 2No title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse
possession.
As a result, petitioners contend, Article 457 of the New Civil Code must be
construed to limit the accretion mentioned therein as accretion of unregistered
land to the riparian owner, and should not extend to registered land. Thus, the lot
in question having remained the registered land of the petitioners, then the
private respondents cannot acquire title there in derogation to that of the
petitioners, by accretion, for that will defeat the indefeasibility of a Torrens Title.

The rule that registration under the Torrens System does not protect the riparian
owner against the diminution of the area of his registered land through gradual
changes in the course of an adjoining stream is well settled. InPayatas Estate
Improvement Co. vs. Tuason, 53 Phil. 55, We ruled:
The controversy in the present cases seems to be due to the erroneous
conception that Art. 366 of the Civil Code does not apply to Torrens
registered land. That article provides that "any accretions which the
banks of rivers may gradually receive from the effects of the current
belong to the owners of the estates bordering thereon." Accretions of
that character are natural incidents to land bordering on running streams
and are not affected by the registration laws. It follows that registration
does not protect the riparian owner against diminution of the area of his
land through gradual changes in the course of the adjoining stream.

G.R. No. L-43346

March 20, 1991

MARIO C. RONQUILLO, petitioner


vs.
THE COURT OF APPEALS, DIRECTOR OF LANDS, DEVELOPMENT BANK
OF THE PHILIPPINES, ROSENDO DEL ROSARIO, AMPARO DEL ROSARIO
and FLORENCIA DEL ROSARIO, respondents.*
REGALADO, J.:
This petition seeks the review of the decision 1 rendered by respondent Court of
Appeals on September 25, 1975 in CA-G.R. No. 32479-R, entitled "Rosendo del
Rosario, et al., Plaintiffs-Appellees, versus Mario Ronquillo, DefendantAppellant," affirming in toto the judgment of the trial court, and its amendatory
resolution 2 dated January 28, 1976 the dispositive portion of which reads:

In C.N. Hodges vs. Garcia, 109 Phil. 133, We also ruled:


It clearly appearing that the land in question has become part of
defendant's estate as a result of accretion, it follows that said land now
belongs to him. The fact that the accretion to his land used to pertain to
plaintiffs estate, which is covered by a Torrens Certificate of Title, cannot
preclude him (defendant) from being the owner thereof. Registration
does not protect the riparian owner against the diminution of the area of
his land through gradual changes in the course of the adjoining stream.
Accretions which the banks of rivers may gradually receive from the
effect of the current become the property of the owners of the banks
(Art. 366 of the Old Civil Code; Art. 457 of the New). Such accretions are
natural incidents to land bordering on running streams and the
provisions of the Civil Code in that respect are not affected by the
Registration Act.
We find no valid reason to review and abandon the aforecited rulings.
As the private respondents are the owners of the premises in question, no
damages are recoverable from them.
ACCORDINGLY, the petition is DISMISSED for lack of merit without
pronouncement as to costs.
SO ORDERED.

IN VIEW OF THE FOREGOING, the decision of this Court dated


September 25, 1975 is hereby amended in the sense that the first part of
the appealed decision is set aside, except the last portion "declaring the
plaintiffs to be the rightful owners of the dried-up portion of Estero
Calubcub which is abutting plaintiffs' property," which we affirm, without
pronouncement as to costs.
SO ORDERED.
The following facts are culled from the decision of the Court of Appeals:
It appears that plaintiff Rosendo del Rosario was a registered owner of a
parcel of land known as Lot 34, Block 9, Sulucan Subdivision, situated at
Sampaloc, Manila and covered by Transfer Certificate of Title No. 34797
of the Registry of Deeds of Manila (Exhibit "A"). The other plaintiffs
Florencia and Amparo del Rosario were daughters of said Rosendo del
Rosario. Adjoining said lot is a dried-up portion of the old Estero
Calubcub occupied by the defendant since 1945 which is the subject
matter of the present action.
Plaintiffs claim that long before the year 1930, when T.C.T. No. 34797
over Lot No. 34 was issued in the name of Rosendo del Rosario, the
latter had been in possession of said lot including the adjoining dried-up
portion of the old Estero Calubcub having bought the same from Arsenio
Arzaga. Sometime in 1935, said titled lot was occupied by Isabel Roldan
with the tolerance and consent of the plaintiff on condition that the

former will make improvements on the adjoining dried-up portion of the


Estero Calubcub. In the early part of 1945 defendant occupied the
eastern portion of said titled lot as well as the dried-up portion of the old
Estero Calubcub which abuts plaintiffs' titled lot. After a relocation survey
of the land in question sometime in 1960, plaintiffs learned that
defendant was occupying a portion of their land and thus demanded
defendant to vacate said land when the latter refused to pay the
reasonable rent for its occupancy. However, despite said demand
defendant refused to vacate.
Defendant on the other hand claims that sometime before 1945 he was
living with his sister who was then residing or renting plaintiffs' titled lot.
In 1945 he built his house on the disputed dried-up portion of the Estero
Calubcub with a small portion thereof on the titled lot of plaintiffs. Later in
1961, said house was destroyed by a fire which prompted him to rebuild
the same. However, this time it was built only on the called up portion of
the old Estero Calubcub without touching any part of plaintiffs titled land.
He further claims that said dried-up portion is a land of public domain. 3
Private respondents Rosendo, Amparo and Florencia, all surnamed del Rosario
(Del Rosarios), lodged a complaint with the Court of First Instance of Manila
praying, among others, that they be declared the rightful owners of the dried-up
portion of Estero Calubcub. Petitioner Mario Ronquillo (Ronquillo) filed a motion
to dismiss the complaint on the ground that the trial court had no jurisdiction over
the case since the dried-up portion of Estero Calubcub is public land and, thus,
subject to the disposition of the Director of Lands. The Del Rosarios opposed the
motion arguing that since they are claiming title to the dried-up portion of Estero
Calubcub as riparian owners, the trial court has jurisdiction. The resolution of the
motion to dismiss was deferred until after trial on the merits.
Before trial, the parties submitted the following stipulation of facts:
1. That the plaintiffs are the registered owners of Lot 34, Block 9,
Sulucan Subdivision covered by Transfer Certificate of Title No. 34797;
2. That said property of the plaintiffs abuts and is adjacent to the driedup river bed of Estero Calubcub Sampaloc, Manila;
3. That defendant Mario Ronquillo has no property around the premises
in question and is only claiming the dried-up portion of the old Estero
Calubcub, whereon before October 23, 1961, the larger portion of his
house was constructed;

4. That before October 23, 1961, a portion of defendant's house stands


(sic) on the above-mentioned lot belonging to the plaintiffs;
5. That the plaintiffs and defendant have both filed with the Bureau of
Lands miscellaneous sales application for the purchase of the
abandoned river bed known as Estero Calubcub and their sales
applications, dated August 5, 1958 and October 13, 1959, respectively,
are still pending action before the Bureau of Lands;
6. That the parties hereby reserve their right to prove such facts as are
necessary to support their case but not covered by this stipulation of
facts. 4
On December 26, 1962, the trial court rendered judgment the decretal portion of
which provides:
WHEREFORE, judgment is hereby rendered ordering the defendant to
deliver to the plaintiffs the portion of the land covered by Transfer
Certificate of title No. 34797 which is occupied by him and to pay for the
use and occupation of said portion of land at the rate of P 5.00 a month
from the date of the filing of the complaint until such time as he
surrenders the same to the plaintiffs and declaring plaintiffs to be the
owners of the dried-up portion of estero Calubcub which is abutting
plaintiffs' property.
With costs to the defendant.
SO ORDERED. 5
On appeal, respondent court, in affirming the aforequoted decision of the trial
court, declared that since Estero Calubcub had already dried-up way back in
1930 due to the natural change in the course of the waters, under Article 370 of
the old Civil Code which it considers applicable to the present case, the
abandoned river bed belongs to the Del Rosarios as riparian owners.
Consequently, respondent court opines, the dried-up river bed is private land and
does not form part of the land of the public domain. It stated further that "(e)ven
assuming for the sake of argument that said estero did not change its course but
merely dried up or disappeared, said dried-up estero would still belong to the
riparian owner," citing its ruling in the case of Pinzon vs. Rama. 6
Upon motion of Ronquillo, respondent court modified its decision by setting aside
the first portion of the trial court's decision ordering Ronquillo to surrender to the

Del Rosarios that portion of land covered by Transfer Certificate of Title No.
34797 occupied by the former, based on the former's representation that he had
already vacated the same prior to the commencement of this case. However,
respondent court upheld its declaration that the Del Rosarios are the rightful
owners of the dried-up river bed. Hence, this petition.
On May 17, 1976, this Court issued a resolution 7 requiring the Solicitor General
to comment on the petition in behalf of the Director of Lands as an indispensable
party in representation of the Republic of the Philippines, and who, not having
been impleaded, was subsequently considered impleaded as such in our
resolution of September 10, 1976. 8 In his Motion to Admit Comment, 9 the
Solicitor General manifested that pursuant to a request made by this office with
the Bureau of Lands to conduct an investigation, the Chief of the Legal Division
of the Bureau sent a communication informing him that the records of his office
"do not show that Mario Ronquillo, Rosendo del Rosario, Amparo del Rosario or
Florencia del Rosario has filed any public land application covering parcels of
land situated at Estero Calubcub Manila as verified by our Records Division.
10

The position taken by the Director of Lands in his Comment filed on September
3, 1978, which was reiterated in the Reply dated May 4, 1989 and again in the
Comment dated August 17, 1989, explicates:
5. We do not see our way clear to subscribe to the ruling of the
Honorable Court of Appeals on this point for Article 370 of the Old Civil
Code, insofar as ownership of abandoned river beds by the owners of
riparian lands are concerned, speaks only of a situation where such river
beds were abandoned because of a natural change in the course of the
waters. Conversely, we submit that if the abandonment was for some
cause other than the natural change in the course of the waters, Article
370 is not applicable and the abandoned bed does not lose its character
as a property of public dominion not susceptible to private ownership in
accordance with Article 502 (No. 1) of the New Civil Code. In the present
case, the drying up of the bed, as contended by the petitioner, is clearly
caused by human activity and undeniably not because of the natural
change of the course of the waters (Emphasis in the original text).
In his Comment 11 dated August 17, 1989, the Director of Lands further adds:
8. Petitioner herein and the private respondents, the del Rosarios, claim
to have pending sales application(s) over the portion of the dried up
Estero Calubcub, as stated in pages 4-5, of the Amended Petition.

9. However, as stated in the Reply dated May 4, 1989 of the Director of


Lands, all sales application(s) have been rejected by that office because
of the objection interposed by the Manila City Engineer's Office that they
need the dried portion of the estero for drainage purposes.
10. Furthermore, petitioner and private respondents, the del Rosarios
having filed said sales application(s) are now estopped from claiming
title to the Estero Calubcub (by possession for petitioner and by
accretion for respondents del Rosarios) because for (sic) they have
acknowledged that they do not own the land and that the same is a
public land under the administration of the Bureau of Lands (Director of
Lands vs. Santiago, 160 SCRA 186, 194).
In a letter dated June 29, 1979 12 Florencia del Rosario manifested to this Court
that Rosendo, Amparo and Casiano del Rosario have all died, and that she is the
only one still alive among the private respondents in this case.
In a resolution dated January 20, 1988, 13 the Court required petitioner Ronquillo
to implead one Benjamin Diaz pursuant to the former's manifestation 14 that the
land adjacent to the dried up river bed has already been sold to the latter, and the
Solicitor General was also required to inquire into the status of the investigation
being conducted by the Bureau of Lands. In compliance therewith, the Solicitor
General presented a letter from the Director of Lands to the effect that neither of
the parties involved in the present case has filed any public land application. 15
On April 3, 1989, petitioner filed an Amended Petition for Certiorari, 16 this time
impleading the Development Bank of the Philippines (DBP) which subsequently
bought the property adjacent to the dried-up river bed from Benjamin Diaz. In its
resolution dated January 10, 1990, 17 the Court ordered that DBP be impleaded
as a party respondent.
In a Comment 18 filed on May 9, 1990, DBP averred that "[c]onsidering the fact
that the petitioner in this case claims/asserts no right over the property sold to
Diaz/DBP by the del Rosarios; and considering, on the contrary, that Diaz and
DBP claims/asserts (sic) no right (direct or indirect) over the property being
claimed by Ronquillo (the dried-up portion of Estero Calubcub), it follows,
therefore, that the petitioner Ronquillo has no cause of action against Diaz or
DBP. A fortiori from the viewpoint of the classical definition of a cause of action,
there is no legal justification to implead DBP as one of the respondents in this
petition." DBP thereafter prayed that it be dropped in the case as party
respondent.

On
September
13,
1990,
respondent
DBP
filed
a
Manifestation/Compliance 19 stating that DBP's interest over Transfer Certificate
of Title No. 139215 issued in its name (formerly Transfer Certificate of Title No.
34797 of the Del Rosarios and Transfer Certificate of Title No. 135170 of
Benjamin Diaz) has been transferred to Spouses Victoriano and Pacita A.
Tolentino pursuant to a Deed of Sale dated September 11, 1990.
Petitioner Ronquillo avers that respondent Court of Appeals committed an error
of law and gross abuse of discretion, acted arbitrarily and denied petitioner due
process of law (a) when it declared private respondents Del Rosarios the rightful
owners of the dried-up portion of Estero Calubcub by unduly relying upon
decisional law in the case of Pinzon vs. Rama, ante, which case was decided
entirely on a set of facts different from that obtaining in this case; and (b) when it
ignored the undisputed facts in the present case and declared the dried-up
portion of Estero Calubcub as a private property.
The main issue posed for resolution in this petition is whether the dried-up
portion of Estero Calubcub being claimed by herein petitioner was caused by a
natural change in the course of the waters; and, corollary thereto, is the issue of
the applicability of Article 370 of the old Civil Code.

Rules of Court is limited to the review of errors of law, and that said appellate
court's finding of fact is conclusive upon this Court. However, there are certain
exceptions, such as (1) when the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly
absurd, mistaken or impossible; (3) when there is grave abuse of discretion in the
appreciation of facts; (4) when the judgment is premised on a misapprehension
of facts; (5) when the findings of fact are conflicting; and (6) when the Court of
Appeals in making its findings went beyond the issues of the case and the same
is contrary to the admissions of both appellant and appellee.
A careful perusal of the evidence presented by both parties in the case at bar will
reveal that the change in the course of Estero Calubcub was caused, not by
natural forces, but due to the dumping of garbage therein by the people of the
surrounding neighborhood. Under the circumstances, a review of the findings of
fact of respondent court thus becomes imperative.
Private respondent Florencia del Rosario, in her testimony, made a categorical
statement which in effect admitted that Estero Calubcub changed its course
because of the garbage dumped therein, by the inhabitants of the locality, thus:
Q When more or less what (sic) the estero fully dried up?

Respondent court, in affirming the findings of the trial court that there was a
natural change in the course of Estero Calubcub declared that:
The defendant claims that Article 370 of the old Civil Code is not
applicable to the instant case because said Estero Calubcub did not
actually change its course but simply dried up, hence, the land in dispute
is a land of public domain and subject to the disposition of the Director of
Land(s). The contention of defendant is without merit. As mentioned
earlier, said estero as shown by the relocation plan (Exhibit "D") did not
disappear but merely changed its course by a more southeasternly (sic)
direction. As such, "the abandoned river bed belongs to the plaintiffsappellees and said land is private and not public in nature. Hence,
further, it is not subject to a Homestead Application by the appellant."
(Fabian vs. Paculan CA-G.R. Nos. 21062-63-64-R, Jan. 25 1962). Even
assuming for the sake of argument that said estero did not change its
course but merely dried up or disappeared, said dried-up estero would
still belong to the riparian owner as held by this Court in the case
of Pinzon vs. Rama (CA-G.R. No. 8389, Jan. 8, 1943; 2 O.G. 307). 20
Elementary is the rule that the jurisdiction of the Supreme Court in cases brought
to it from the Court of Appeals in a petition for certiorari under Rule 45 of the

A By 1960 it is (sic) already dried up except for a little rain that


accumulates on the lot when it rains.
Q How or why did the Estero Calubcub dried (sic) up?
A It has been the dumping place of the whole neighborhood. There is no
street, they dumped all the garbage there. It is the dumping place of the
whole community, sir. 22
In addition, the relocation plan (Exhibit "D") which also formed the basis of
respondent court's ruling, merely reflects the change in the course of Estero
Calubcub but it is not clear therefrom as to what actually brought about such
change. There is nothing in the testimony of lone witness Florencia del Rosario
nor in said relocation plan which would indicate that the change in the course of
the estero was due to the ebb and flow of the waters. On the contrary, the
aforequoted testimony of the witness belies such fact, while the relocation plan is
absolutely silent on the matter. The inescapable conclusion is that the dried-up
portion of Estero Calubcub was occasioned, not by a natural change in the
course of the waters, but through the active intervention of man.

The foregoing facts and circumstances remove the instant case from the
applicability of Article 370 of the old Civil Code which provides:
Art. 370. The beds of rivers, which are abandoned because of a natural
change in the course of the waters, belong to the owners of the riparian
lands throughout the respective length of each. If the abandoned bed
divided tenements belonging to different owners the new dividing line
shall be equidistant from one and the other.
The law is clear and unambiguous. It leaves no room for
interpretation.1wphi1 Article 370 applies only if there is a natural change in the
course of the waters. The rules on alluvion do not apply to man-made or artificial
accretions23 nor to accretions to lands that adjoin canals or esteros or artificial
drainage systems. 24 Considering our earlier finding that the dried-up portion of
Estero Calubcub was actually caused by the active intervention of man, it follows
that Article 370 does not apply to the case at bar and, hence, the Del Rosarios
cannot be entitled thereto supposedly as riparian owners.
The dried-up portion of Estero Calubcub should thus be considered as forming
part of the land of the public domain which cannot be subject to acquisition by
private ownership. That such is the case is made more evident in the letter, dated
April 28, 1989, of the Chief, Legal Division of the Bureau of Lands 25 as reported
in the Reply of respondent Director of Lands stating that "the alleged application
filed by Ronquillo no longer exists in its records as it must have already been
disposed of as a rejected application for the reason that other applications
"covering Estero Calubcub Sampaloc, Manila for areas other than that contested
in the instant case, were all rejected by our office because of the objection
interposed by the City Engineer's office that they need the same land for
drainage purposes". Consequently, since the land is to be used for drainage
purposes the same cannot be the subject of a miscellaneous sales application.
Lastly, the fact that petitioner and herein private respondents filed their sales
applications with the Bureau of Lands covering the subject dried-up portion of
Estero Calubcub cannot but be deemed as outright admissions by them that the
same is public land. They are now estopped from claiming otherwise.
WHEREFORE, the decision appealed from, the remaining effective portion of
which declares private respondents Del Rosarios as riparian owners of the driedup portion of Estero Calubcub is hereby REVERSED and SET ASIDE.
SO ORDERED.

G.R. No. 95907 April 8, 1992


JOSE REYNANTE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE HON. VALENTIN CRUZ, as
Presiding Judge, Regional Trial Court of Bulacan, Branch VIII, and the
HEIRS OF LEONCIO CARLOS and DOLORES A. CARLOS, and HEIRS OF
GORGONIO CARLOS and CONCEPCION CARLOS, respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks the reversal of: a)
decision 1 of the Court of Appeals dated February 28, 1990 in CA-G.R. No. 1917
entitled "JOSE REYNANTE versus HON. VALENTIN CRUZ, Judge, RTC of
Malolos, Bulacan, and HEIRS OF LEONCIO AND DOLORES CARLOS, et al.",
affirming
the
decision 2 of
the
Regional
Trial
Court
of Malolos, Bulacan, Branch 8, Third Judicial Region which reversed the
decision 3 of the Municipal Trial Court of Meycauayan, Bulacan, Branch 1, Third
Judicial Region in Civil Case No. 1526 entitled "HEIRS OF LEONCIO CARLOS &
DOLORES A. CARLOS and HEIRS OF GORGONIO A. CARLOS &
CONCEPCION CARLOS versus JOSE REYNANTE: and b) the resolution
denying the motion for reconsideration.

"SINUMPAANG SALAYSAY NG PAGSASAULI NG KARAPATAN" dated


November 29, 1984 with petitioner Jose Reynante whereby the latter for and in
consideration of the sum of P200,000.00 turned over the fishpond he was
tenanting to the heirs of Don Cosme Carlos and surrendered all his rights therein
as caretaker or "bantay-kasama at tagapamahala" (Rollo, p. 77).
Pursuant to the said written agreement, petitioner surrendered the fishpond and
the two huts located therein to private respondents. Private respondents
thereafter leased the said fishpond to one Carlos de la Cruz. Petitioner continued
to live in the nipa hut constructed by him on lots 1 and 2 and to take care of the
nipa palms he had planted therein.
On February 17, 1988, private respondents formally demanded that the petitioner
vacate said portion since according to them petitioner had already been
indemnified for the surrender of his rights as a tenant. Despite receipt thereof,
petitioner refused and failed to relinquish possession of lots 1 and 2.
Hence, on April 22, 1988, private respondents filed a complaint for forcible entry
with preliminary mandatory injunction against petitioner alleging that the latter by
means of strategy and stealth, took over the physical, actual and material
possession of lots 1 and 2 by residing in one of the kubos or huts bordering the
Liputan River and cutting off and/or disposing of the sasa or nipa palms adjacent
thereto.

The facts as culled from the records of the case are as follows:
More than 50 years ago, petitioner Jose Reynante was taken as tenant by the
late Don Cosme Carlos, owner and father-in-law of herein private respondents,
over a fishpond located at Barrio Liputan, Meycauayan, Bulacan with an area of
188.711 square meters, more or less and covered by Transfer Certificate of Title
No. 25618, Land Registry of Bulacan.

On January 10, 1989, the trial court rendered its decision dismissing the
complaint and finding that petitioner had been in prior possession of lots 1
and 2.
Private respondents appealed to the Regional Trial Court and on August 8, 1989
it rendered its decision, the dispositive portion of which reads as follows:

During the tenancy, petitioner Jose Reynante constructed a nipa hut where he
and his family lived and took care of the nipa palms (sasahan) he had planted on
lots 1 and 2 covering an area of 5,096 square meters and 6,011 square meters
respectively. These lots are located between the fishpond covered by TCT No.
25618 and the Liputan (formerly Meycauayan) River. Petitioner harvested and
sold said nipa palms without interference and prohibition from anybody. Neither
did the late Don Cosme Carlos question his right to plant the nipa palms near the
fishpond or to harvest and appropriate them as his own.

WHEREFORE, this Court renders judgment in favor of the plaintiffs and


against defendant and hereby reverses the decision of the Court a quo.
Accordingly, the defendant is ordered to restore possession of that piece
of land particularly described and defined as Lots 1 & 2 of the land
survey conducted by Geodetic Engineer Restituto Buan on March 2,
1983, together with the sasa or nipa palms planted thereon. No
pronouncement as to attorney's fees. Each party shall bear their
respective costs of the suit.

After the death of Don Cosme Carlos, his heirs (private respondents'
predecessors-in-interest) entered into a written agreement denominated as

SO ORDERED.(Rollo, p. 55; Decision, p. 4).

From said decision, petitioner filed with the Court of Appeals a petition for review
(Rollo, p. 30; Annex "A"). On February 28, 1990, the Court of Appeals rendered
its decision, the dispositive portion of which reads as follows:
WHEREFORE, the decision of the court a quo, being consistent with law
and jurisprudence, is hereby AFFIRMED in toto. The instant petition
seeking to issue a restraining order is hereby denied.
SO ORDERED.(Rollo, p. 30; Decision, p. 3).
On November 5, 1990, the Court of Appeals denied the motion for
reconsideration filed by petitioner (Rollo, p. 35; Annex "B").
Hence, this petition.
In its resolution dated May 6, 1991, the Second Division of this court gave due
course to the petition and required both parties to file their respective
memoranda (Rollo, p. 93).
The main issues to be resolved in this case are: a) who between the petitioner
and private respondents has prior physical possession of lots 1 and 2; and b)
whether or not the disputed lots belong to private respondents as a result of
accretion.
An action for forcible entry is merely a quieting process and actual title to the
property is never determined. 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 oraccion
reivindicatoria (German Management & Services, Inc. v. Court of Appeals, G.R.
No. 76216, September 14, 1989, 177 SCRA 495, 498, 499). On the other hand, if
a plaintiff cannot prove prior physical possession, he has no right of action for
forcible entry and detainer even if he should be the owner of the property (Lizo v.
Carandang, 73 Phil. 469 [1942]).
Hence, the Court of Appeals could not legally restore private respondents'
possession over lots 1 and 2 simply because petitioner has clearly proven that he
had prior possession over lots 1 and 2.
The evidence on record shows that petitioner was in possession of the
questioned lots for more than 50 years. It is undisputed that he was the caretaker

of the fishpond owned by the late Don Cosme Carlos for more than 50 years and
that he constructed a nipa hut adjacent to the fishpond and planted nipa palms
therein. This fact is bolstered by the "SINUMPAANG SALAYSAY" executed by
Epifanio Lucero (Records, p. 66), Apolonio D. Morte (Records, p. 101) and
Carling Dumalay (Records, p. 103), all of whom are disinterested parties with no
motive to falsify that can be attributed to them, except their desire to tell the truth.
Moreover, an ocular inspection was conducted by the trial court dated December
2, 1988 which was attended by the parties and their respective counsels and the
court observed the following:
The Court viewed the location and the distance of the constructed nipa
hut and the subject "sasahan" which appears exists (sic) long ago,
planted and stands (sic) adjacent to the fishpond and the dikes which
serves (sic) as passage way of water river of lot 1 and lot 2. During the
course of the hearing, both counsel observed muniment of title
embedded on the ground which is located at the inner side of the
"pilapil" separating the fishpond from the subject "sasa" plant with a
height of 20 to 25 feet from water level and during the ocular inspection
it was judicially observed that the controversial premises is beyond the
titled property of the plaintiffs but situated along the Liputan,
Meycauayan River it being a part of the public domain. (Rollo, p. 51;
Decision, p. 12).
On the other hand, private respondents based their claim of possession over lots
1 and 2 simply on the written agreement signed by petitioner whereby the latter
surrendered his rights over the fishpond.
Evidently, the trial court did not err when it ruled that:
An examination of the document signed by the defendant (Exhibit "B"),
shows that what was surrendered to the plaintiffs was the fishpond and
not the "sasahan" or the land on which he constructed his hut where he
now lives. That is a completely different agreement in which a tenant
would return a farm or a fishpond to his landlord in return for the amount
that the landlord would pay to him as a disturbance compensation.
There is nothing that indicates that the tenant was giving other matters
not mentioned in a document like Exhibit "B". Moreover, when the
plaintiffs leased the fishpond to Mr. Carlos de La Cruz there was no
mention that the lease included the hut constructed by the defendant
and the nipa palms planted by him (Exhibit "1"), a circumstance that
gives the impression that the nipa hut and the nipa palms were not

included in the lease to Mr. de la Cruz, which may not belong to the
plaintiffs. (Rollo, p. 49; Decision, p. 9).
With regard to the second issue, it must be noted that the disputed lots involved
in this case are not included in Transfer Certificate of Title No. 25618 as per
verification made by the Forest Management Bureau, Department of
Environment and Natural Resources. That tract of land situated at Barrio Liputan,
Meycauayan, Bulacan containing an area of 1.1107 hectares as described in the
plan prepared and surveyed by Geodetic Engineer Restituto Buan for Jose
Reynante falls within Alienable and Disposable Land (for fishpond development)
under Project No. 15 per B.F.L.C. Map No. 3122 dated May 8, 1987 (Rollo, p. 31;
Decision, p. 2).
The respondent Court of Appeals ruled that lots 1 and 2 were created by alluvial
formation and hence the property of private respondents pursuant to Article 457
of the New Civil Code, to wit:
Art. 457. 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.
Accretion benefits a riparian owner when the following requisites are present: (1)
that the deposit be gradual and imperceptible; (2) that it resulted from the effects
of the current of the water; and (c) that the land where accretion takes place is
adjacent to the bank of a river (Republic v. Court of Appeals, G.R. No. L-61647,
October 12, 1984, 132 SCRA 514, cited in Agustin v. Intermediate Appellate
Court, G.R. Nos. 66075-76, July 5, 1990, 187 SCRA 218).
Granting without conceding that lots 1 and 2 were created by alluvial formation
and while it is true that accretions which the banks of rivers may gradually
receive from the effect of the current become the property of the owner of the
banks, such accretion to registered land does not preclude acquisition of the
additional area by another person through prescription.
This Court ruled in the case of Ignacio Grande, et al. v. Hon. Court of Appeals, et
al., G.R. No. L-17652, June 30, 1962, 115 Phil. 521 that:
An accretion does not automatically become registered land just
because the lot which receives such accretion is covered by a Torrens
Title. Ownership of a piece of land is one thing; registration under the
Torrens system of that ownership is another. Ownership over the
accretion received by the land adjoining a river is governed by the Civil

Code. Imprescriptibility of registered land is provided in the registration


law. Registration under the Land Registration and Cadastral Act does
not vest or give title to the land, but merely confirms and, thereafter,
protects the title already possessed by the owner, making it
imprescriptible by occupation of third parties. But to obtain this
protection, the land must be placed under the operation of the
registration laws, wherein certain judicial procedures have
beenprovided.
Assuming private respondents had acquired the alluvial deposit (the lot in
question), by accretion, still their failure to register said accretion for a period of
fifty (50) years subjected said accretion to acquisition through prescription by
third persons.
It is undisputed that petitioner has been in possession of the subject lots for more
than fifty (50) years and unless private respondents can show a better title over
the subject lots, petitioner's possession over the property must be respected.
PREMISES CONSIDERED, the decision of the respondent Court of Appeals
dated February 28, 1990 is REVERSED and SET ASIDE and the decision of the
Municipal Trial Court of Meycauayan, Bulacan, Branch I, is hereby REINSTATED.
SO ORDERED.

G.R. No. 98045 June 26, 1996


DESAMPARADO VDA. DE NAZARENO and LETICIA NAZARENO
TAPIA, petitioners,
vs.
THE COURT OF APPEALS, MR. & MRS. JOSE SALASALAN, MR. & MRS.
LEO RABAYA, AVELINO LABIS, HON. ROBERTO G. HILARIO, ROLLEO I.
IGNACIO, ALBERTO M. GILLERA and HON. ABELARDO G. PALAD, JR., in
their official and/or private capacities, respondents.
ROMERO, J.:p
Petitioners Desamparado Vda.de Nazareno and Leticia Nazareno Tapia
challenge the decision of the Court of Appeals which affirmed the dismissal of
petitioners' complaint by the Regional Trial Court of Misamis Oriental, Branch 22.
The complaint was for annulment of the verification, report and recommendation,
decision and order of the Bureau of Lands regarding a parcel of public land.
The only issue involved in this petition is whether or not petitioners exhausted
administrative remedies before having recourse to the courts.
The subject of this controversy is a parcel of land situated in Telegrapo, Puntod,
Cagayan de Oro City. Said land was formed as a result of sawdust dumped into
the dried-up Balacanas Creek and along the banks of the Cagayan river.
Sometime in 1979, private respondents Jose Salasalan and Leo Rabaya leased
the subject lots on which their houses stood from one Antonio Nazareno,
petitioners' predecessor-in-interest. In the latter part of 1982, private respondents
allegedly stopped paying rentals. As a result, Antonio Nazareno and petitioners
filed a case for ejectment with the Municipal Trial Court of Cagayan de Oro City,
Branch 4. A decision was rendered against private respondents, which decision
was affirmed by the Regional Trial Court of Misamis Oriental, Branch 20.
The case was remanded to the municipal trial court for execution of judgment
after the same became final and executory. Private respondents filed a case for
annulment of judgment before the Regional Trial Court of Misamis Oriental,
Branch 24 which dismissed the same. Antonio Nazareno and petitioners again
moved for execution of judgment but private respondents filed another case
for certiorari with prayer for restraining order and/or writ of preliminary injunction
with the Regional Trial Court of Misamis Oriental, Branch 25 which was likewise
dismissed. The decision of the lower court was finally enforced with the private
respondents being ejected from portions of the subject lots they occupied..

Before he died, Antonio Nazareno caused the approval by the Bureau of Lands
of the survey plan designated as Plan Csd-106-00571 with a view to perfecting
his title over the accretion area being claimed by him. Before the approved
survey plan could be released to the applicant, however, it was protested by
private respondents before the Bureau of Lands.
In compliance with the order of respondent District Land Officer Alberto M.
Gillera, respondent Land Investigator Avelino G. Labis conducted an
investigation and rendered a report to the Regional Director recommending that
Survey Plan No. MSI-10-06-000571-D (equivalent to Lot No. 36302, Cad. 237) in
the name of Antonio Nazareno, be cancelled and that private respondents be
directed to file appropriate public land applications.
Based on said report, respondent Regional Director of the Bureau of Lands
Roberto Hilario rendered a decision ordering the amendment of the survey plan
in the name of Antonio Nazareno by segregating therefrom the areas occupied
by the private respondents who, if qualified, may file public land applications
covering their respective portions.
Antonio Nazareno filed a motion for reconsideration with respondent Rolleo
Ignacio, Undersecretary of the Department of Natural Resources and Officer-inCharge of the Bureau of Lands who denied the motion. Respondent Director of
Lands Abelardo Palad then ordered him to vacate the portions adjudicated to
private respondents and remove whatever improvements they have introduced
thereon. He also ordered that private respondents be placed in possession
thereof.
Upon the denial of the late Antonio Nazareno's motion for reconsideration,
petitioners Desamparado Vda. de Nazareno and Leticia Tapia Nazareno, filed a
case before the RTC, Branch 22 for annulment of the following: order of
investigation by respondent Gillera, report and recommendation by respondent
Labis, decision by respondent Hilario, order by respondent Ignacio affirming the
decision of respondent Hilario and order of execution by respondent Palad. The
RTC dismissed the complaint for failure to exhaust administrative remedies which
resulted in the finality of the administrative decision of the Bureau of Lands.
On appeal, the Court of Appeals affirmed the decision of the RTC dismissing the
complaint. Applying Section 4 of C.A. No. 141, as amended, it contended that the
approval of the survey plan belongs exclusively to the Director of Lands. Hence,
factual findings made by the Metropolitan Trial Court respecting the subject land
cannot be held to be controlling as the preparation and approval of said survey

plans belong to the Director of Lands and the same shall be conclusive when
approved by the Secretary of Agriculture and Natural resources. 1
Furthermore, the appellate court contended that the motion for reconsideration
filed by Antonio Nazareno cannot be considered as an appeal to the Office of the
Secretary of Agriculture and Natural Resources, as mandated by C.A. No. 141
inasmuch as the same had been acted upon by respondent Undersecretary
Ignacio in his capacity as Officer-in-charge of the Bureau of Lands and not as
Undersecretary acting for the Secretary of Agriculture and Natural Resources.
For the failure of Antonio Nazareno to appeal to the Secretary of Agriculture and
Natural Resources, the present case does not fall within the exception to the
doctrine of exhaustion of administrative remedies. It also held that there was no
showing of oppressiveness in the manner in which the orders were issued and
executed..
Hence, this petition.
Petitioners assign the following errors:
I. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL,
ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION
OF THE LOWER COURT WHICH IS CONTRARY TO THE
PREVAILING FACTS AND THE LAW ON THE MATTER;
II. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL,
ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION
OF THE LOWER COURT DISMISSING THE ORIGINAL CASE WHICH
FAILED TO CONSIDER THAT THE EXECUTION ORDER OF PUBLIC
RESPONDENT ABELARDO G. PALAD, JR., DIRECTOR OF LANDS,
MANILA, PRACTICALLY CHANGED THE DECISION OF PUBLIC
RESPONDENT ROBERTO HILARIO, REGIONAL DIRECTOR,
BUREAU OF LANDS, REGION 10, THUS MAKING THE CASE
PROPER SUBJECT FOR ANNULMENT WELL WITHIN THE
JURISDICTION OF THE LOWER COURT.
The resolution of the above issues, however, hinges on the question of whether
or not the subject land is public land. Petitioners claim that the subject land is
private land being an accretion to his titled property, applying Article 457 of the
Civil Code which provides:

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.
In the case of Meneses v. CA, 2 this Court held that accretion, as a mode of
acquiring property under Art. 457 of the Civil Code, requires the concurrence of
these requisites : (1) that the deposition of soil or sediment be gradual and
imperceptible; (2) that it be the result of the action of the waters of the river (or
sea); and (3) that the land where accretion takes place is adjacent to the banks
of rivers (or the sea coast). These are called the rules on alluvion which if present
in a case, give to the owners of lands adjoining the banks of rivers or streams
any accretion gradually received from the effects of the current of waters.
For petitioners to insist on the application of these rules on alluvion to their case,
the above-mentioned requisites must be present. However, they admit that the
accretion was formed by the dumping of boulders, soil and other filling materials
on portions of the Balacanas Creek and the Cagayan River bounding their
land. 3 It cannot be claimed, therefore, that the accumulation of such boulders,
soil and other filling materials was gradual and imperceptible, resulting from the
action of the waters or the current of the Balacanas Creek and the Cagayan
River. In Hilario v. City of Manila, 4 this Court held that the word "current"
indicates the participation of the body of water in the ebb and flow of waters due
to high and low tide. Petitioners' submission not having met the first and second
requirements of the rules on alluvion, they cannot claim the rights of a riparian
owner.
In any case, this court agrees with private respondents that petitioners are
estopped from denying the public character of the subject land, as well as the
jurisdiction of the Bureau of Lands when the late Antonio Nazareno filed his
Miscellaneous Sales Application MSA (G-6) 571. 5 The mere filing of said
Application constituted an admission that the land being applied for was public
land, having been the subject of Survey Plan No. MSi-10-06-000571-D
(Equivalent to Lot No. 36302, Cad-237) which was conducted as a consequence
of Antonio Nazareno's Miscellaneous Sales Application wherein said land was
described as an orchard. Said description by Antonio Nazareno was, however,
controverted by respondent Labis in his investigation report to respondent Hilario
based on the findings of his ocular inspection that said land actually covers a dry
portion of Balacanas Creek and a swampy portion of Cagayan River. The
investigation report also states that, except for the swampy portion which is fully
planted to nipa palms, the whole area is fully occupied by a part of a big concrete
bodega of petitioners and several residential houses made of light materials,

including those of private respondents which were erected by themselves


sometime in the early part of 1978. 6

Regional Director of the Bureau of Lands acting for the Director of the Bureau of
Lands to an Officer-In-Charge of the Bureau of Lands.

Furthermore, the Bureau of Lands classified the subject land as an accretion


area which was formed by deposits of sawdust in the Balacanas Creek and the
Cagayan river, in accordance with the ocular inspection conducted by the Bureau
of Lands. 7 This Court has often enough held that findings of administrative
agencies which have acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect but even finality. 8 Again,
when said factual findings are affirmed by the Court of Appeals, the same are
conclusive on the parties and not reviewable by this Court. 9

In any case, respondent Rolleo Ignacio's official designation was "Undersecretary


of the Department of Agriculture and Natural Resources." He was only an
"Officer-In-Charge" of the Bureau of Lands. When he acted on the late Antonio
Nazareno's motion for reconsideration by affirming or adopting respondent
Hilario's decision, he was acting on said motion as an Undersecretary on behalf
of the Secretary of the Department. In the case ofHamoy v. Secretary of
Agriculture and Natural Resources, 15 this Court held that the Undersecretary of
Agriculture and Natural Resources may modify, adopt, or set aside the orders or
decisions of the Director of Lands with respect to questions involving public lands
under the administration and control of the Bureau of Lands and the Department
of Agriculture and Natural Resources. He cannot, therefore, be said to have
acted beyond the bounds of his jurisdiction under Sections 3, 4 and 5 of
Commonwealth Act No. 141 16

It is this Court's irresistible conclusion, therefore, that the accretion was manmade or artificial. In Republic v. CA,10 this Court ruled that the requirement that
the deposit should be due to the effect of the current of the river is indispensable.
This excludes from Art. 457 of the Civil Code all deposits caused by human
intervention. Putting it differently, alluvion must be the exclusive work of nature.
Thus, in Tiongco v. Director of Lands, et al., 11 where the land was not formed
solely by the natural effect of the water current of the river bordering said land but
is also the consequence of the direct and deliberate intervention of man, it was
deemed a man-made accretion and, as such, part of the public domain.
In the case at bar, the subject land was the direct result of the dumping of
sawdust by the Sun Valley Lumber Co. consequent to its sawmill
operations. 12 Even if this Court were to take into consideration petitioners'
submission that the accretion site was the result of the late Antonio Nazareno's
labor consisting in the dumping of boulders, soil and other filling materials into
the Balacanas Creek and Cagayan River bounding his land, 13 the same would
still be part of the public domain.
Having determined that the subject land is public land, a fortiori, the Bureau of
Lands, as well as the Office of the Secretary of Agriculture and Natural
Resources have jurisdiction over the same in accordance with the Public Land
Law. Accordingly, the court a quo dismissed petitioners' complaint for nonexhaustion of administrative remedies which ruling the Court of Appeals affirmed.
However, this Court agrees with petitioners that administrative remedies have
been exhausted. Petitioners could not have intended to appeal to respondent
Ignacio as an Officer-In-Charge of the Bureau of Lands. The decision being
appealed from was the decision of respondent Hilario who was the Regional
Director of the Bureau of Lands. Said decision was made "for and by authority of
the Director of Lands". 14 It would be incongruous to appeal the decision of the

As borne out by the administrative findings, the controverted land is public land,
being an artificial accretion of sawdust. As such, the Director of Lands has
jurisdiction, authority and control over the same, as mandated under Sections 3
and 4 of the Public Land Law (C.A. No. 141) which states, thus:
Sec. 3. The Secretary of Agriculture and Natural Resources shall be the
exclusive officer charged with carrying out the provisions of this Act
through the Director of Lands who shall act under his immediate control.
Sec. 4. Subject to said control, the Director of Lands shall have direct
executive control of the survey, classification, lease, sale or any other
form of concession or disposition and management of the lands of the
public domain, and his decisions as to questions of fact shall be
conclusive when approved by the Secretary of Agriculture and Natural
Resources.
In connection with the second issue, petitioners ascribe whim, arbitrariness or
capriciousness in the execution order of public respondent Abelardo G. Palad,
the Director of Lands. This Court finds otherwise since said decision was based
on the conclusive finding that the subject land was public land. Thus, this Court
agrees with the Court of Appeals that the Director of Lands acted within his rights
when he issued the assailed execution order, as mandated by the aforecited
provisions.

Petitioners' allegation that respondent Palad's execution order directing them to


vacate the subject land practically changed respondent Hilario's decision is
baseless. It is incorrect for petitioners to assume that respondent Palad awarded
portions of the subject land to private respondents Salasalans and Rabayas as
they had not yet been issued patents or titles over the subject land. The
execution order merely directed the segregation of petitioners' titled lot from the
subject land which was actually being occupied by private respondents before
they were ejected from it. Based on the finding that private respondents were
actually in possession or were actually occupying the subject land instead of
petitioners, respondent Palad, being the Director of Lands and in the exercise of
his administrative discretion, directed petitioners to vacate the subject land on the
ground that private respondents have a preferential right, being the occupants
thereof.
While private respondents may not have filed their application over the land
occupied by them, they nevertheless filed their protest or opposition to
petitioners' Miscellaneous Sales Application, the same being preparatory to the
filing of an application as they were in fact directed to do so. In any case,
respondent Palad's execution order merely implements respondent Hilario's
order. It should be noted that petitioners' own application still has to be given due
course. 17
As Director of Lands, respondent Palad is authorized to exercise executive
control over any form of concession, disposition and management of the lands of
the public domain. 18 He may issue decisions and orders as he may see fit under
the circumstances as long as they are based on the findings of fact.
In the case of Calibo v. Ballesteros, 19 this Court held that where, in the
disposition of public lands, the Director of Lands bases his decision on the
evidence thus presented, he clearly acts within his jurisdiction, and if he errs in
appraising the evidence, the error is one of judgment, but not an act of grave
abuse of discretion annullable by certiorari. Thus, except for the issue of nonexhaustion of administrative remedies, this Court finds no reversible error nor
grave abuse of discretion in the decision of the Court of Appeals.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.

G.R. No. 116290

December 8, 2000

DIONISIA P. BAGAIPO, petitioner,


vs.
THE HON. COURT OF APPEALS and LEONOR LOZANO, respondents.
QUISUMBING, J.:
This petition assails the decision dated June 30, 1994 of the Court of Appeals
affirming the dismissal by the Regional Trial Court of Davao City, Branch 8, in
Civil Case No. 555-89, of petitioners complaint for recovery of possession with
prayer for preliminary mandatory injunction and damages.
The undisputed facts of the case are as follows:
Petitioner Dionisia P. Bagaipo is the registered owner of Lot No. 415, a 146,900
square meter agricultural land situated in Ma-a, Davao City under Transfer
Certificate of Title No. T-15757 particularly described as follows:
Bounded on the NE., by Lots Nos. 419 and 416; on the SE by the Davao River;
on the SE., (sic) by Lots Nos. 1092 and 1091; and on the NW., by Lots Nos. 413
and 4181
Respondent Leonor Lozano is the owner of a registered parcel of land located
across and opposite the southeast portion of petitioners lot facing the Davao
River. Lozano acquired and occupied her property in 1962 when his wife
inherited the land from her father who died that year.
On May 26, 1989, Bagaipo filed a complaint 2 for Recovery of Possession with
Mandatory Writ of Preliminary Injunction and Damages against Lozano for: (1)
the surrender of possession by Lozano of a certain portion of land measuring
29,162 square meters which is supposedly included in the area belonging to
Bagaipo under TCT No. T-15757; and (2) the recovery of a land area measuring
37,901 square meters which Bagaipo allegedly lost when the Davao River
traversed her property. Bagaipo contended that as a result of a change in course
of the said river, her property became divided into three lots, namely: Lots 415-A,
415-B and 415-C.
In January 1988, Bagaipo commissioned a resurvey of Lot 415 and presented
before the trial court a survey plan3 prepared by Geodetic Engineer Gersacio A.
Magno. The survey plan allegedly showed that: a) the area presently occupied by
Bagaipo, identified as Lot 415-A, now had an area of only 79,843 square meters;

b) Lot 415-B, with an area measuring 37,901 square meters, which cut across
Bagaipos land was taken up by the new course of the Davao River; and c) an
area of 29,162 square meters designated as Lot 415-C was illegally occupied by
respondent Lozano. The combined area of the lots described by Engineer Magno
in the survey plan tallied with the technical description of Bagaipos land under
TCT No. T-15757. Magno concluded that the land presently located across the
river and parallel to Bagaipos property still belonged to the latter and not to
Lozano, who planted some 350 fruit-bearing trees on Lot 415-C and the old
abandoned river bed.
Bagaipo also presented Godofredo Corias, a former barangay captain and longtime resident of Ma-a to prove her claim that the Davao River had indeed
changed its course. Corias testified that the occurrence was caused by a big
flood in 1968 and a bamboo grove which used to indicate the position of the river
was washed away. The river which flowed previously in front of a chapel located
15 meters away from the riverbank within Bagaipos property now flowed behind
it. Corias was also present when Magno conducted the relocation survey in 1988.
For his part, Lozano insisted that the land claimed by Bagaipo is actually an
accretion to their titled property. He asserted that the Davao River did not change
its course and that the reduction in Bagaipos domain was caused by gradual
erosion due to the current of the Davao River. Lozano added that it is also
because of the rivers natural action that silt slowly deposited and added to his
land over a long period of time. He further averred that this accretion continues
up to the present and that registration proceedings instituted by him over the
alluvial formation could not be concluded precisely because it continued to
increase in size.
Lozano presented three witnesses: Atty. Pedro Castillo, his brother-in-law;
Cabitunga Pasanday, a tenant of Atty. Castillo; and Alamin Catucag, a tenant of
the Lozanos.
Atty. Castillo testified that the land occupied by the Lozanos was transferred to
his sister, Ramona when they extra-judicially partitioned their parents property
upon his fathers death. On September 9, 1973, Atty. Castillo filed a land
registration case involving the accretion which formed on the property and
submitted for this purpose, a survey plan4 approved by the Bureau of Lands as
well as tax declarations 5 covering the said accretion. An Order of General
Default6 was already issued in the land registration case on November 5, 1975,
but the case itself remained pending since the petition had to be amended to
include the continuing addition to the land area.

Mr. Cabitunga Pasanday testified that he has continuously worked on the land as
tenant of the Castillos since 1925, tilling an area of about 3 hectares. However,
the land he tilled located opposite the land of the Lozanos and adjacent to the
Davao River has decreased over the years to its present size of about 1 hectare.
He said the soil on the bank of the river, as well as coconut trees he planted
would be carried away each time there was a flood. This similar erosion occurs
on the properties of Bagaipo and a certain Dr. Rodriguez, since the elevation of
the riverbank on their properties is higher than the elevation on Lozanos side.

RESPONDENT LEONOR LOZANO WAS THE RESULT OF AN


ACCRETION, THE PRINCIPLE OF ACCRETION CANNOT AND DOES
NOT APPLY IN THE INSTANT CASE TO FAVOR SAID RESPONDENT
BECAUSE SAID LOT 415-C IS WITHIN AND FORM PART OF
PETITIONERS LAND DESCRIBED IN TCT NO. 15757 (EXHIBIT "A")

Alamin Catucag testified that he has been a tenant of the Castillos since 1939
and that the portion he occupies was given to Ramona, Lozanos wife. It was
only 1 hectare in 1939 but has increased to 3 hectares due to soil deposits from
the mountains and river. Catucag said that Bagaipos property was reduced to
half since it is in the curve of the river and its soil erodes and gets carried away
by river water.

....NOT ORDERING RESPONDENT LEONOR LOZANO TO VACATE


AND SURRENDER LOT 415-C IN FAVOR OF PETITIONER AND FOR
HIM TO PAY PETITIONER DAMAGES FOR ITS UNLAWFUL
OCCUPATION THEREOF.

On April 5, 1991, the trial court conducted an ocular inspection. It concluded that
the applicable law is Article 457 7. 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.7 of the New Civil Code and not Art. 461 8 The reduction in
the land area of plaintiff was caused by erosion and not by a change in course of
the Davao River. Conformably then, the trial court dismissed the complaint.
On appeal, the Court of Appeals affirmed the decision of the trial court and
decreed as follows:
WHEREFORE, the decision appealed from is hereby affirmed, with costs against
the plaintiff-appellant.9
Hence, this appeal.
Petitioner asserts that the Court of Appeals erred in:
....NOT GIVING PROBATIVE VALUE TO THE RELOCATION SURVEY
(EXHIBIT "B") PREPARED BY LICENSED GEODETIC ENGINEER
GERSACIO MAGNO. THE CASE OF "DIRECTOR OF LANDS VS.
HEIRS OF JUANA CAROLINA" 140 SCRA 396 CITED BY THE
RESPONDENT COURT IN DISREGARDING EXHIBIT "B" IS NOT
APPLICABLE TO THE CASE AT BAR.
....NOT FINDING THAT ASSUMING WITHOUT ADMITTING THAT THE
QUESTIONED LOT 415-C (EXHIBIT "B-1") OCCUPIED BY

....FINDING PETITIONER
INSTITUTED THE SUIT.

GUILTY

OF

LACHES

WHEN

SHE

....NOT HOLDING PETITIONER ENTITLED TO THE ABANDONED


RIVER BED.10
For this Courts resolution are the following issues: Did the trial court err in
holding that there was no change in course of the Davao River such that
petitioner owns the abandoned river bed pursuant to Article 461 of the Civil
Code? Did private respondent own Lot 415-C in accordance with the principle of
accretion under Article 457? Should the relocation survey prepared by a licensed
geodetic engineer be disregarded since it was not approved by the Director of
Lands? Is petitioners claim barred by laches?
On the first issue. The trial court and the appellate court both found that the
decrease in land area was brought about by erosion and not a change in the
rivers course. This conclusion was reached after the trial judge observed during
ocular inspection that the banks located on petitioners land are sharp, craggy
and very much higher than the land on the other side of the river. Additionally, the
riverbank on respondents side is lower and gently sloping. The lower land
therefore naturally received the alluvial soil carried by the river current. 11 These
findings are factual, thus conclusive on this Court, unless there are strong and
exceptional reasons, or they are unsupported by the evidence on record, or the
judgment itself is based on a misapprehension of facts. 12 These factual findings
are based on an ocular inspection of the judge and convincing testimonies, and
we find no convincing reason to disregard or disbelieve them.
The decrease in petitioners land area and the corresponding expansion of
respondents property were the combined effect of erosion and accretion
respectively. Art. 461 of the Civil Code is inapplicable. Petitioner cannot claim
ownership over the old abandoned riverbed because the same is inexistent. The

riverbeds former location cannot even be pinpointed with particularity since the
movement of the Davao River took place gradually over an unspecified period of
time, up to the present.
The rule is well-settled that accretion benefits a riparian owner when the following
requisites are present: 1) That the deposit be gradual and imperceptible; 2) That
it resulted from the effects of the current of the water; and 3) That the land where
accretion takes place is adjacent to the bank of the river.13 These requisites were
sufficiently proven in favor of respondents. In the absence of evidence that the
change in the course of the river was sudden or that it occurred through avulsion,
the presumption is that the change was gradual and was caused by alluvium and
erosion.14

that the plan was admitted in evidence without any objection as to its due
execution and authenticity does not signify that the courts shall give probative
value therefor. To admit evidence and not to believe it subsequently are not
contradictory to each other
In view of the foregoing, it is no longer necessary now to discuss the defense of
laches. It is mooted by the disquisition on the foregoing issues.
WHEREFORE, the assailed decision dated June 30, 1994, of the Court of
Appeals in C.A.-G. R. CV No. 37615, sustaining the judgment of the court a quo,
is AFFIRMED. Costs against petitioner.
SO ORDERED.

As to Lot 415-C, which petitioner insists forms part of her property under TCT No.
T-15757, it is well to recall our holding in C.N. Hodges vs. Garcia, 109 Phil. 133,
135:
The fact that the accretion to his land used to pertain to plaintiffs estate, which
is covered by a Torrens certificate of title, cannot preclude him (defendant) from
being the owner thereof. Registration does not protect the riparian owner against
the diminution of the area of his land through gradual changes in the course of
the adjoining stream. Accretions which the banks of rivers may gradually receive
from the effect of the current become the property of the owners of the banks
(Art. 366 of the old Civil Code; Art. 457 of the new). Such accretions are natural
incidents to land bordering on running streams and the provisions of the Civil
Code in that respect are not affected by the Land Registration Act. 15
Petitioner did not demonstrate that Lot 415-C allegedly comprising 29,162 square
meters was within the boundaries of her titled property. The survey plan
commissioned by petitioner which was not approved by the Director of Lands
was properly discounted by the appellate court. In Titong vs. Court of
Appeals16 we affirmed the trial courts refusal to give probative value to a private
survey plan and held thus:
the plan was not verified and approved by the Bureau of Lands in accordance
with Sec. 28, paragraph 5 of Act No. 2259, the Cadastral Act, as amended by
Sec. 1862 of Act No. 2711. Said law ordains that private surveyors send their
original field notes, computations, reports, surveys, maps and plots regarding a
piece of property to the Bureau of Lands for verification and approval.1wphi1 A
survey plan not verified and approved by said Bureau is nothing more than a
private writing, the due execution and authenticity of which must be proven in
accordance with Sec. 20 of Rule 132 of the Rules of Court. The circumstance

G.R. No. 142595. October 15, 2003.


RACHEL C. CELESTIAL, Petitioner, v. JESSE CACHOPERO, Respondent.

stands for expansion in the future. Moreover, it was also certified by the
Office of Municipal Mayor that the whole area covered by the
miscellaneous sales application of Jesse Cachopero is needed by the
municipal government for future public improvements.

DECISION
CARPIO MORALES, J.:
In the instant appeal by petition for review on certiorari, 1 petitioner Rachel
Cachopero Celestial assails the February 15, 1999 Decision of the Court of
Appeals in CA-G.R. SP No. 45927, "Jesse C. Cachopero v. Regional Executive
Director of DENR, Region XII and Rachel C. Celestial," which reversed and set
aside the Order of the Regional Trial Court (RTC) of Midsayap, Cotabato, Branch
18 dismissing respondents petition for certiorari, prohibition and mandamus, and
mandated the Regional Executive Director of the Department of Environment and
Natural Resources (DENR), Region XII to process the Miscellaneous Sales
Application (MSA) of respondent Jesse Cachopero in DENR Claim No. XII-05090 to which petitioner filed a protest.
Respondent, brother of petitioner, filed an MSA (Plan No. (XII-6)-1669) with the
Bureau of Lands covering a 415 square meter parcel of land located at Barrio 8,
Midsayap, Cotabato and formerly part of the Salunayan Creek in Katingawan,
Midsayap.
In his MSA, respondent alleged that he had, since 1968, been occupying the land
whereon he built a residential house and introduced other improvements.

From the foregoing facts, it is clear that the subject land is outside the
commerce of man and therefore, not susceptible of private acquisition
under the provision of the Public Land Act. However, in keeping with the
policy of our compassionate society in tilting the balance of social forces
by favoring the disadvantaged in life, we may allow Jesse Cachopero to
temporarily occupy the land in dispute, after excluding therefrom the
portion needed for the existing right of way being claimed by Rachel
Celestial to be [the] only adequate outlet to the public highway until such
time that the land is needed by the government for expansion of the
road.
WHEREFORE, it is ordered that this case, be, as hereby it is, dismissed
and this case (sic), dropped from the records. The Miscellaneous Sales
Application (New) of Jesse Cachopero is hereby rejected and in lieu
thereof, he shall file a revocable permit application for the land in
question after excluding from the southern part of the land the area of
five (5) meters for right of way purposes as shown in the sketch drawn at
the back of this order. The segregation survey of the area shall be at the
pro-rata
expense
of
the
parties.
SO ORDERED. 2 (Emphasis and Italics supplied)

Petitioner filed a protest against respondents MSA, claiming preferential right


over the land subject thereof since it is adjacent to, and is the only outlet from,
her residential house situated at Lot No. 2586-G-28 (LRC) Psd-105462,
Poblacion 8, Midsayap.

Petitioner thereafter instituted an action for ejectment against respondent and his
wife before the Municipal Trial Court of Midsayap, Cotabato, docketed as Civil
Case No. 711. A judgment based on a compromise was rendered in said case
under the following terms and conditions:

Following an ocular inspection, the Bureau of Lands, finding the land subject of
respondents MSA to be outside the commerce of man, dismissed petitioners
protest and denied respondents MSA, to wit:

That Spouses Jesse Cachopero and Bema Cachopero, defendants in


this case, are going to vacate the premises in question and transfer the
old house subject of this ejectment case at the back of Lot No. 2586-G28 (LRC) Psd-105462, located at 8, Midsayap, Cotabato, within eight (8)
months from today, but not later than April 30, 1990;

In the ocular inspection, it was verified that the land in dispute with an
area of 415 square meters was formerly a part of the Salunayan Creek
that became dry as a result of the construction of an irrigation canal by
the National Irrigation Administration. However, it was certified by Project
Engineer Reynaldo Abeto of the said office in his certification dated May
19, 1982, that only a portion of the same containing an area of 59.40
square meters more or less was taken as part of the National Irrigation
Administration service road. It was also ascertained that the P20,000.00
residential house wherein Jesse Cachopero and his family are living is
not within the 69-meters width of the national highway. However, per the
certification of the local office of the District Engineer for Public Works
and Highways, the government may need the area where the house

That plaintiff is willing to give a two (2)-meter wide exit alley on the
eastern portion of said lot as road-right-of-way up to the point of the NIA
road on the west of Lot No. 2586-G-28, (LRC) Psd-105462;
That defendants hereby promise to remove all their improvements
introduced fronting the residence of the plaintiff before August 31, 1989;
and the plaintiff shall likewise remove all her existing improvements on
the same area; (Emphasis supplied)

Subsequently or on May 21, 1991, respondent filed another MSA with the DENR
Regional Office of Cotabato involving a portion of the same lot subject of his first
MSA, covering an area of 334 square meters, more or less (the subject land),
and docketed as DENR-XII-Claim No. 050-90. This time, the MSA was supported
by a certification 4 dated January 9, 1989 issued by the Office of the Mayor of
Midsayap and an Indorsement 5 dated January 16, 1989 by the District Engineer
of the Department of Public Works and Highways stating that the subject land is
suitable for residential purposes and no longer needed by the municipal
government.
Petitioner likewise filed a protest against her brother-respondents second MSA,
alleging a preferential right over the subject land, she being the adjacent and
riparian owner, and maintaining that it is her only access to the national highway.
She thus reiterated her demand for a five (5)-meter road right of way through the
land.
After another investigation of the subject land, DENR Regional Executive
Director Macorro Macumbal issued an Order dated February 17, 1994 stating
that it was suitable for residential purposes but that, in light of the conflicting
interest of the parties, it be sold at public auction. Respondents second MSA
was accordingly dismissed, viz:
In the ocular investigation of the premises, it was established that the
said property is a dried bed of Salunayan Creek resulting from the
construction of the irrigation canal by the National Irrigation
Administration; that it is suitable for residential purpose . . .
It is evident that under the law, property of the public domain situated
within the first (1st) to fourth class municipalities are disposable by sales
only. Since municipality of Midsayap, Cotabato is classified as third (3rd)
class municipality and the property in dispute, Lot no. (MSA-XII-6)-1669,
is situated in the poblacion of Midsayap, Cotabato, and considering the
conflicting interest of the herein parties, it is therefore equitable to
dispose the same by sale at a public auction pursuant to Section 67,
C.A. No. 141, as amended, pertinent clause of which provides:
. . . sale shall be made through oral bidding; and adjudication
shall be made to the highest bidder,
WHEREFORE, in view of all the foregoing, it is ordered as hereby is
ordered that the instant protest is dismissed and dropped from the
records, and the Miscellaneous Sales Application (New) of Jesse C.
Cachopero is rejected and returned unrecorded. Accordingly, the CENR
Officer of CENRO XII-4B shall cause the segregation survey of a portion
of five (5) meters in width running parallel to line point C-1 of the
approved survey plan (MSA-XII-6)-1669, sketch is shown at the dorsal
side hereof, as a permanent easement and access road for the
occupants of Lot No. 2386-G-28, (LRC) Psd-105462 to the national

highway. Thereafter, and pursuant to paragraph G.2.3 of Department


Administrative Order No. 38, Series of 1990, the CENRO XII 4B shall
dispose the remaining area of the lot in question through oral bidding.
SO ORDERED." 6 (Emphasis and Italics supplied)
Respondent filed a Motion for Reconsideration of the above-said order of the
DENR Regional Executive Director, but it was denied by Order of February 27,
1995 by the OIC Regional Executive Director of Region XII, Cotabato City in this
wise:
A meticulous scrutiny of the records disclosed that Civil Case No. 711 for
ejectment, decided on the basis of compromise agreement of the parties
dated August 10, 1989, involved "transfer of the house from Lot No.
MSA XII-6-1669 to the litigants parents property situated at the back of
protestant property, Lot No. 2586-G-28 (LRC), Psd-105462." Whereas
the issue in DENR XII Claim No. 050-90 involved the disposition of lot
no. (MSA II-6)-1669 a residential public land being exclusively vested
with the Director of Lands (Sec. 4, C.A. 141).
The two (2) meters wide exit alley provided in the compromise
agreement was established by the protestant from her private property
(Lot No. 2586-G-28 (LRC), Psd-105462) for the benefit of her brother,
herein respondent, upon his transfer to their parents property at the back
of Lot No. 2586-G-28 (LRC), Psd-105462. Whereas the five (5) meters
wide easement imposed on Lot No. (MSA-XII-6)-1669, a public land,
provided in the decision in DENR Claim No. 050-90 is in accordance
with Article 670 of the New Civil Code . . .
With all the above foregoing, we find no reversible error to reconsider
our Order of February 17, 1994.
WHEREFORE, the instant motion for reconsideration is DENIED. 7
Respondent thereupon filed on April 3, 1995 with the RTC of Midsayap, Cotabato
a petition forcertiorari, prohibition and mandamus with preliminary mandatory
injunction and temporary restraining order assailing the Orders dated February
17, 1994 and February 27, 1995 of the DENR Regional Executive Director and
OIC Regional Executive Director of Region XII, Cotabato, attributing grave abuse
of
discretion
in
the
issuance
thereof.
Petitioner moved for the dismissal of the petition, alleging lack of jurisdiction and
non-exhaustion of administrative remedies.
By Order of March 26, 1997, the RTC denied respondents petition
for certiorari for lack of merit and non-exhaustion of administrative remedies, as it
did deny his motion for reconsideration.

The Court of Appeals, before which respondent assailed the RTC orders by
petition for certiorari, prohibition and mandamus, granted said petition, and
accordingly reversed and set aside the assailed orders of the RTC and ordered
the DENR to process the MSA of Respondent. 8
Petitioners Motion for Reconsideration 9 of the appellate courts decision having
been denied by Resolution of March 2, 2000, 10 she lodged the present petition,
alleging that the Court of Appeals acted contrary to law and jurisprudence 1) in
holding that the RTC of Midsayap had jurisdiction over respondents petition, the
doctrine of exhaustion of administrative remedies was not applicable to the
instant case, and the contested land is public land; and 2) in ordering the
processing of respondents MSA pursuant to R.A. 730.
Petitioner contends that the RTC of Midsayap had no jurisdiction over
respondents petition forcertiorari as (a) it "is in the nature of an appeal" 12 falling
within the jurisdiction of the Court of Appeals under Section 9(3) 13 of Batas
Pambansa Blg. 129 (B.P. 129), as amended; and (b) respondent failed to
exhaust administrative remedies when he failed to appeal the questioned Orders
to the Secretary of Environment and Natural Resources. 14
Petitioners petition fails.
Petitioner has apparently confused the separate and distinct remedies of an
appeal (i.e. through a petition for review of a decision of a quasi judicial agency
under Rule 43 of the Rules of Court) and a special civil action for certiorari (i.e.
through a petition for review under Rule 65 of the Rules of Court). In Silverio v.
Court of Appeals, 15 this Court, speaking through then Chief Justice Claudio
Teehankee, distinguished between these two modes of judicial review as follows:
The provisions of the Rules of Court permit an aggrieved party, in the
general types of cases, to take a cause and apply for relief to the
appellate courts by way of either of two distinctly different and dissimilar
modes through the broad process of appeal or the limited special civil
action ofcertiorari. An appeal brings up for review errors of judgment
committed by a court with jurisdiction over the subject of the suit and the
persons of the parties or any such error committed by the court in the
exercise of its jurisdiction amounting to nothing more than an error of
judgment. On the other hand, the writ of certiorari issues for the
correction of errors of jurisdiction only or grave abuse of discretion
amounting to lack or excess of jurisdiction. The writ of certiorari "cannot
legally be used for any other purpose." In terms of its function, the writ
of certiorari serves "to keep an inferior court within the bounds of its
jurisdiction or to prevent it from committing such a grave abuse of
discretion amounting to excess of jurisdiction" or to relieve parties from
arbitrary acts of courts acts which courts have no power or authority
in law to perform. 16 (Italics, emphasis and underscoring supplied)

Concomitantly, appellate jurisdiction is separate and distinct from the jurisdiction


to issue the prerogative writ of certiorari. An appellate jurisdiction refers to a
process which is a continuation of the original suit and not a commencement of a
new action. In contrast, to invoke a courts jurisdiction to issue the writ
of certiorari requires the commencement of a new and original action therefor,
independent of the proceedings which gave rise to the questioned decision or
order. 17 As correctly held by the Court of Appeals, 18 the RTCs have concurrent
jurisdiction with the Court of Appeals and the Supreme Court over original
petitions for certiorari, prohibition and mandamus 19 under Section 21 20 of B.P.
129.
A perusal of respondents Petition dated April 3, 1995 filed before the RTC clearly
shows that it alleged that the DENR Regional Executive Director and OIC
Regional Executive Director acted with "grave abuse of discretion and without or
in excess of jurisdiction amounting to lack of jurisdiction" when they issued the
questioned Orders dated February 17, 1994 and February 27, 1995. Evidently,
respondent sought a judicial review of the questioned Orders through a special
civil action forcertiorari which, as aforementioned, was within the jurisdiction of
the RTC of Midsayap, Cotabato. 21
Additionally, this Court finds no reason to disturb the Court of Appeals conclusion
that the instant case falls under the recognized exceptions to the rule on
exhaustion of administrative remedies, to wit:
The rule of exhaustion of administrative remedies is inapplicable if it
should appear that an irreparable injury or damage will be suffered by a
party if he should await, before taking court action, the final action of the
administrative official concerned on the matter as a result of a patently
illegal order (Vivo v. Cloribel, 18 SCRA 713; De Lara v. Cloribel, 14
SCRA 269); or where appeal would not prove to be speedy and
adequate remedy. 22
True, the doctrine of exhaustion of administrative remedies calls for resort first to
the appropriate administrative authorities in the resolution of a controversy falling
under their jurisdiction before the same may be elevated to the courts of justice
for review, and non-observance thereof is a ground for the dismissal of the
complaint, 23 the rationale being:
The thrust of the rule on exhaustion of administrative remedies is that the courts
must allow the administrative agencies to carry out their functions and discharge
their responsibilities within the specialized areas of their respective competence.
It is presumed that an administrative agency, if afforded an opportunity to pass
upon a matter, will decide the same correctly, or correct any previous error
committed in its forum. Furthermore, reasons of law, comity and convenience
prevent the courts from entertaining cases proper for determination by
administrative agencies. Hence, premature resort to the courts necessarily
becomes fatal to the cause of action of the petitioner. 24

However, this requirement of prior exhaustion of administrative remedies is not


absolute, there being instances when it may be dispensed with and judicial action
may be validly resorted to immediately, among which are: 1) when the question
raised is purely legal; 2) when the administrative body is in estoppel; 3) when the
act complained of is patently illegal; 4) when there is urgent need for judicial
intervention; 5) when the claim involved is small; 6) when irreparable damage will
be suffered; 7) when there is no other plain, speedy and adequate remedy; 8)
when strong public interest is involved; and 9) in quo warranto proceedings.25
Hence, where the act complained of is patently illegal since the administrative
body acted without or in excess of jurisdiction or with such grave abuse of
discretion as to be tantamount to lack of jurisdiction, as was alleged in
respondents petition before the RTC, prior exhaustion of administrative remedies
is not required and resort to the courts through a special civil action
for certiorari under Rule 65 is permitted:
We hold that it was an error for the court a quo to rule that the petitioners
should have exhausted its remedy of appeal from the orders denying
their application for waiver/suspension to the Board of Trustees and
thereafter to the Court of Appeals pursuant to the Rules. Certiorari is an
appropriate remedy to question the validity of the challenged issuances
of the HDMF which are alleged to have been issued with grave abuse of
discretion amounting to lack of jurisdiction.
Moreover, among the accepted exceptions to the rule on exhaustion of
administrative remedies are: (1) where the question in dispute is purely a
legal one; and (2) where the controverted act is patently illegal or was
performed without jurisdiction or in excess of jurisdiction. Moreover,
while certiorari as a remedy may not be used as a substitute for an
appeal, especially for a lost appeal, this rule should not be strictly
enforced if the petition is genuinely meritorious. It has been said that
where the rigid application of the rules would frustrate substantial justice,
or bar the vindication of a legitimate grievance, the courts are justified in
exempting a particular case from the operation of the rules. 26
(Emphasis supplied)
To justify the issuance of the writ of certiorari, however, it must be clearly shown
that there is a patent and grave abuse of discretion amounting to an evasion of a
positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at
all in contemplation of law, as where the power is exercised in an arbitrary and
despotic manner by reason of passion or personal hostility. 27
The crux of the case at bar is, therefore, whether the DENR Regional Executive
Director and OIC Regional Director acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the questioned Orders dated
February 17, 1994 and February 27, 1995, respectively.

In resolving respondents second MSA and petitioners protest thereto, the DENR
Regional Executive Director, after considering the conflicting interest of the
parties, found it equitable to resolve the same by directing the sale of the subject
land at public auction pursuant to Section 67, C.A. No. 141, as amended.
Section 67 of Commonwealth Act No. 141, otherwise known as "The Public Land
Act," provides the procedure for the disposition of lands of the public domain
which are open to disposition or concession and intended to be used for
residential, commercial, industrial or other productive purposes other than
agricultural, to wit:
SEC. 67. The lease or sale shall be made through oral bidding; and
adjudication shall be made to the highest bidder. However, where an
applicant has made improvements on the land by virtue of a permit
issued to him by competent authority, the sale or lease shall be made by
sealed bidding as prescribed in Section twenty-six of this Act, the
provisions of which shall be applied wherever applicable. If all or part of
the lots remain unleased or unsold, the Director of Lands shall from time
to time announce in the Official Gazette or in any other newspapers of
general circulation, the lease or sale of those lots, if necessary.
(Emphasis supplied)
With the enactment of Republic Act No. 730 28 on June 18, 1952, however, an
exception to the foregoing procedure was created by authorizing disposition of
lands of the public domain by private sale, instead of bidding, provided that: (1)
the applicant has in his favor the conditions specified therein and (2) the area
applied for is not more than 1,000 square meters. 29 The pertinent provision of
R.A. 730 thus provides:
SEC. 1. Notwithstanding the provisions of Sections 61 and 67 of
Commonwealth Act No. 141, as amended by Republic Act No. 293, any
Filipino citizen of legal age who is not the owner of a home lot in the
municipality or city in which he resides and who has in good faith
established his residence on a parcel of the public land of the Republic
of the Philippines which is not needed for the public service, shall be
given preference to purchase at a private sale of which reasonable
notice shall be given to him not more than one thousand square meters
at a price to be fixed by the Director of Lands with the approval of the
Secretary of Agriculture and Natural Resources. It shall be an essential
condition of this sale that the occupant has constructed his house on the
land and actually resided therein. Ten percent of the purchase price shall
be paid upon the approval of the sale and the balance may be paid in
full, or in ten equal annual installments.
SEC. 2. Land acquired under the provisions of this Act shall not be
subject to any restrictions against encumbrance or alienation before and
after the issuance of the patents thereon. 30

SEC. 3. The provisions of the Public Land Act with respect to the sale of
lands for residential purposes which are not inconsistent herewith shall
be applicable.
SEC. 4. This Act shall take effect upon its approval.
Approved, June 18, 1952. (Emphasis supplied)
Given the foregoing provisions of R.A. 730 which took effect on June 18, 1952,
and the DENR Regional Executive Directors February 17, 1994 finding that the
subject land was "suitable for residential purposes," it was incumbent upon him
to determine whether the provisions of R.A. 730 were applicable to respondents
MSA. As held by the Court of Appeals:
Finally, petitioner contends that the DENR Regional Executive Director and OIC
Regional Executive Director gravely erred in ordering the sale of the subject lot
through oral bidding applying Section 67, Commonwealth Act No. 141 and not
Republic Act 730 authorizing the sale of public land without bidding.
We agree with the petitioner.
Apropos is the case of Reyes v. Court of Appeals, 125 SCRA 785, ruling
that:
"When public land lots of not more than 1,000 sq. ms. are used, or to be
used as a residence . . . they can be sold on private sales under the
provisions of Republic Act No. 730."
In Agura v. Serfino, Sr., (204 SCRA 569), the Supreme Court held that:
"R.A. 730 authorizes a sale by private sale, as an exception to the
general rule that it should be by bidding, if the area applied for does not
exceed 1,000 square meters, . . ."
We see no reason why these ruling should not be applied in this case which
involves 415 [should have been 334] square meters only. 31
The Regional Director, however, summarily chose to apply Section 67 of the
Public Land Act upon a finding that it was more "equitable" in light of the
"conflicting interest" of the parties. In his "Answer" to respondents petition before
the RTC, the Director justified his non-application of R.A. 730 in this wise:
. . . Republic Act No. 730 is not applicable to the case at bar, the land
being disputed, Republic Act No. 730 requisite (sic) vas not meet (sic)
that for this law to apply to a particular case, the land must be in the first
place not a land in conflict. There being a pending protest for final
adjudication, the said conflict continues to exist thus an impediment to
the application of Republic Act 730 32 (Emphasis supplied)

which justification he reiterated in his Opposition 33 to respondents Motion for


Reconsideration of the RTC decision.
The Directors reliance on equity as basis for his action was misplaced, however.
It is well-settled that "equity follows the law." 34 Described as "justice outside
legality," it is applied only in the absence of, and never against, statutory law or
legal pronouncements. 35 Where pertinent positive rules are present, they
should pre-empt and prevail over all abstract arguments based only on equity. 36
A reading of R.A. 730 (or of the Public Land Act for that matter) shows nothing
therein to support the Directors contention that the pendency of a protest is a bar
to the application of R.A. 730 to an MSA. Indeed, that Section 1 of R.A. 730 gives
a qualified applicant preference to purchase alienable public land suitable for
residential purposes implies that there may be more than one party interested in
purchasing it.
What is more, under Section 91 of the Public Land Act, it is the duty of the
Director of the Lands Management Bureau (formerly the Director of Lands) to
determine whether the material facts set forth in an MSA are true:
SEC. 91. The statements made in the application shall be considered as
essential conditions and parts of any concession, title, or permit issued
on the basis of such application, and any false statement therein or
omission of facts altering, changing, or modifying the consideration of
the facts set forth in such statements, and any subsequent modification,
alteration, or change of the material facts set forth in the application shall
ipso facto produce the cancellation of the concession, title, or permit
granted. It shall be the duty of the Director of Lands, from time to time
and whenever he may deem it advisable, to make the necessary
investigations for the purpose of ascertaining whether the material facts
set out in the application are true, or whether they continue to exist and
are maintained and preserved in good faith, and for the purposes of
such investigation, the Director of Lands is hereby empowered to issue
subpoenas and subpoenas duces tecum and, if necessary, to obtain
compulsory process from the courts. In every investigation made in
accordance with this section, the existence of bad faith, fraud,
concealment, or fraudulent and illegal modification of essential facts
shall be presumed if the grantee or possessor of the land shall refuse or
fail to obey a subpoena or subpoena duces tecum lawfully issued by the
Director of Lands or his authorized delegates or agents, or shall refuse
or fail to give direct and specific answers to pertinent questions, and on
the basis of such presumption, an order of cancellation may issue
without further proceedings. (Emphasis supplied)
Likewise, under Section 102 of the same Public Land Act, it is the duty of the
Director of the Lands Management Bureau to, after due hearing, verify whether
the grounds of a protest or objection to an MSA are well founded, and, if so, to
cancel the MSA:

SEC. 102. Any person, corporation, or association may file an objection


under oath to any application or concession under this Act, grounded on
any reason sufficient under this Act for the denial or cancellation of the
application or the denial of the patent or grant. If, after the applicant or
grantee has been given suitable opportunity to be duly heard, the
objection is found to be well founded, the Director of Lands shall deny or
cancel the application or deny patent or grant, and the person objecting
shall, if qualified, be granted a prior right of entry for a term of sixty days
from the date of the notice. (Emphasis supplied)
There was thus clearly a positive duty on the part of the DENR Director to
process respondents MSA, and to ascertain, particularly in light of petitioners
protest, whether respondent was qualified to purchase the subject land at a
private
sale
pursuant
to
R.A.
730.
This,
he
did
not
do.
In fine, by abdicating his duty to process respondents MSA and summarily
ordering, without factual or legal basis, that the subject land be disposed of via
oral bidding pursuant to Section 67 of the Public Land Act, the Director acted with
patent grave abuse of discretion amounting to lack or excess of jurisdiction. As
the Court of Appeals held:
Considering that the assailed Orders of public respondent DENR
Regional Executive Director applying Section 67 of Commonwealth Act
No. 141 and ordering the sale of the subject lot by oral bidding are
patently erroneous, the authority of the court to issue writs of certiorari,
prohibition and mandamus is warranted. 37
The Directors commission of grave abuse of discretion does not, however, mean
that respondent automatically has the better right to the subject land. As
mandated by law, the Director must process respondents MSA, conduct an
investigation, and determine whether the material facts set forth therein are true
to bring it within the coverage of R.A. 730.
A thorough investigation is all the more imperative considering that petitioners
protest raises serious factual issues regarding respondents qualification to
purchase the subject land in particular, whether he already owns a home lot in
Midsayap and whether he has, in good faith, constructed his house on the
subject land and actually resided therein. These factual issues are properly within
the authority of the DENR and the Land Management Bureau, which are tasked
with carrying out the provisions of the Public Land Act and R.A. 730, 38 do
determine, after both parties have been given an opportunity to fully present their
evidence.
As for petitioners claim of ownership over the subject land, admittedly a dried-up
bed of the Salunayan Creek, based on (1) her alleged long term adverse
possession and that of her predecessor-in-interest, Marcelina Basadre, even
prior to October 22, 1966, when she purchased the adjoining property from the
latter, and (2) the right of accession under Art. 370 of the Spanish Civil Code of
1889 and/or Article 461 of the Civil Code, the same must fail.

Since property of public dominion is outside the commerce of man 39 and not
susceptible to private appropriation and acquisitive prescription, 40 the adverse
possession which may be the basis of a grant of title in the confirmation of an
imperfect title refers only to alienable or disposable portions of the public domain.
41 It is only after the Government has declared the land to be alienable and
disposable agricultural land that the year of entry, cultivation and exclusive and
adverse possession can be counted for purposes of an imperfect title. 42
A creek, like the Salunayan Creek, is a recess or arm extending from a river and
participating in the ebb and flow of the sea. 43 As such, under Articles 420(1) 44
and 502(1) 45 of the Civil Code, the Salunayan Creek, including its natural bed,
is property of the public domain which is not susceptible to private appropriation
and acquisitive prescription. 46 And, absent any declaration by the government,
that a portion of the creek has dried-up does not, by itself, alter its inalienable
character.
This, in fact, was the very reason behind the denial of respondents first MSA, the
District Engineer having certified that the government may need the subject land
for future expansion, and the office of the Municipal Mayor having certified that it
was needed by t he municipal government for future public improvements. 47
Consequently, it was only after the same offices subsequently certified 48 that
the subject land was suitable for residential purposes and no longer needed by
the municipal government that it became alienable and disposable. Confronted
with similar factual circumstances, this Court in Bracewell v. Court of Appeals 49
held:
Clear from the above is the requirement that the applicant must prove
that the land is alienable public land. On this score, we agree with
respondents that petitioner failed to show that the parcels of land subject
of his application are alienable or disposable. On the contrary, it was
conclusively shown by the government that the same were only
classified as alienable or disposable on March 27, 1972. Thus, even
granting that petitioner and his predecessors-in-interest had occupied
the same since 1908, he still cannot claim title thereto by virtue of such
possession since the subject parcels of land were not yet alienable land
at that time nor capable of private appropriation. The adverse
possession which may be the basis of a grant of title or confirmation of
an imperfect title refers only to alienable or disposable portions of the
public domain. 50 (Emphasis supplied)
With respect to petitioners invocation of the principle of accession under either
Article 370 of the Spanish Civil Code of 1889 or Article 461 of the Civil Code, the
same does not apply to vest her with ownership over subject land.
Under Article 370 51 of the Spanish Civil Code of 1889 which took effect in the
Philippines on December 7, 1889, 52 the beds of rivers which remain abandoned
because the course of the water has naturally changed belong to the owners of
the riparian lands throughout their respective lengths. If the abandoned bed

divided estates belonging to different owners, the new dividing line shall run at
equal distance therefrom. 53
When the present Civil Code took effect on August 30, 1950, 54 the foregoing
rule was abandoned in favor of the present Article 461, which provides:
ART. 461. River beds which are abandoned through the natural change
in the course of the waters ipso facto belong to the owners whose lands
are occupied by the new course in proportion to the area lost. However,
the owners of the lands adjoining the old bed shall have the right to
acquire the same by paying the value thereof, which value shall not
exceed the value of the area occupied by the new bed. (Emphasis
supplied)
Article 461 provides for compensation for the loss of the land occupied by the
new bed since it is believed more equitable to compensate the actual losers than
to add land to those who have lost nothing. 55 Thus, the abandoned river bed is
given to the owner(s) of the land(s) onto which the river changed its course
instead of the riparian owner(s). 56
Petitioner claims that on October 22, 1966, when she purchased the property
adjoining the subject land from Marcelina Basadre, the said subject land was
already a dried-up river bed such that "almost one-half portion of the residential
house . . . was so already built and is still now situated at the said dried-up
portion of the Salunayan Creek bed . . ." 57 She failed to allege, however, when
the subject portion of the Salunayan Creek dried up, a fact essential to
determining whether the applicable law is Article 370 of the Spanish Civil Code of
1889 or Article 461 of the Civil Code.
Had the disputed portion of the Salunayan Creek dried up after the present Civil
Code took effect, the subject land would clearly not belong to petitioner or her
predecessor-in-interest since under the aforementioned provision of Article 461,
"river beds which are abandoned through the natural change in the course of the
waters ipso facto belong to the owners of the land occupied by the new course,"
and the owners of the adjoining lots have the right to acquire them only after
paying their value. 58
And both Article 370 of the Old Code and Article 461 of the present Civil Code
are applicable only when" [r]iver beds are abandoned through the natural change
in the course of the waters." It is uncontroverted, however, that, as found by both
the Bureau of Lands and the DENR Regional Executive Director, the subject land
became dry as a result of the construction of an irrigation canal by the National
Irrigation Administration. Thus, in Ronquillo v. Court of Appeals, 59 this Court
held:
The law is clear and unambiguous. It leaves no room for interpretation.
Article 370 applies only if there is a natural change in the course of the
waters. The rules on alluvion do not apply to man-made or artificial

accretions nor to accretions to lands that adjoin canals or esteros or


artificial drainage systems. Considering our earlier finding that the driedup portion of Estero Calubcub was actually caused by the active
intervention of man, it follows that Article 370 does not apply to the case
at bar and, hence, the Del Rosarios cannot be entitled thereto
supposedly as riparian owners.
The dried-up portion of Estero Calubcub should thus be considered as
forming part of the land of the public domain which cannot be subject to
acquisition by private ownership. . . 60 (Emphasis supplied)
Furthermore, both provisions pertain to situations where there has been a
change in the course of a river, not where the river simply dries up. In the instant
Petition, it is not even alleged that the Salunayan Creek changed its course. In
such a situation, commentators are of the opinion that the dry river bed remains
property of public dominion. 61
Finally, while this Court notes that petitioner offered to purchase the subject land
from the government, 62 she did so through an informal letter dated August 9,
1989 63 instead of the prescribed form. By such move, she is deemed to have
acknowledged that the subject land is public land, for it would be absurd for her
to have applied for its purchase if she believed it was hers. She is thus stopped
from claiming otherwise. 64
WHEREFORE, the petition is hereby DENIED for lack of merit.
SO ORDERED.