Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

158377 August 13, 2010

Leoncia and her children did not repay the amount of P500.00. The Spouses Francia both died intestate (i.e., Monica Ajoco on September 16, 1963, and Benedicto Francia on January 13, 1964). Alejandro Reyes (Alejandro), the son of Jose, Sr., first partially paid to the Spouses Francia the amount of P265.00 for the obligation of Leoncia, his uncles and his father. Alejandro later paid the balance of P235.00. Thus, on August 11, 1970, the heirs of Spouses Francia executed a deed entitled Pagsasa-ayos ng Pag-aari at Pagsasalin, 5 whereby they transferred and conveyed to Alejandro all their rights and interests in the property for P500.00. On August 21, 1970, Alejandro executed a Kasulatan ng Pagmeme-ari,6 wherein he declared that he had acquired all the rights and interests of the heirs of the Spouses Francia, including the ownership of the property, after the vendors had failed to repurchase within the given period. On the basis of the Kasulatan ng Pagmeme-ari, Tax Declaration No. 3703 covering the property7 was canceled by Tax Declaration No. 8715, 8 effective 1971, issued to Alejandro. From then on, he had paid the realty taxes for the property. Nevertheless, on October 17, 1970, Alejandro, his grandmother (Leoncia), and his father (Jose, Sr.) executed a Magkakalakip na Salaysay,9 by which Alejandro acknowledged the right of Leoncia, Jose, Jr., and Jose, Sr. to repurchase the property at any time for the same amount of P500.00. On October 22, 1970, Leoncia died intestate. 10 She was survived by Jose, Sr., Teofilo, Jose, Jr. and the heirs of Potenciana. Even after Leonica's death, Teofilo and Jose, Jr., with their respective families, continued to reside in the property. Subsequently, Tax Declaration 1228, 11 under the name of Alejandro, was issued effective 1980. All of Leoncia's sons eventually died intestate, survived by their respective heirs, namely: Name of Decedent Teofilo Jose, Sr. Surviving Heirs Romeo Reyes, Leonardo Reyes, and Leonora C. Reyes Rodrigo Reyes, Nenita Reyes- dela Cruz, Rodolfo Reyes, Oscar Reyes, Gamaliel Reyes, Magdalena Reyes (petitioners herein), Efren Reyes and Amado Reyes dela Cruz Alejandro Reyes (respondents' predecessor)12

HEIRS OF JOSE REYES, JR., namely: MAGDALENA C. REYES, OSCAR C. REYES, GAMALIEL C. REYES, NENITA R. DELA CRUZ, RODOLFO C. REYES, and RODRIGO C. REYES, Petitioners, vs. AMANDA S. REYES, CONSOLACION S. REYES, EUGENIA R. ELVAMBUENA, LUCINA R. MENDOZA, PEDRITO S. REYES, MERLINDA R. FAMODULAN, EDUARDO S. REYES, and JUNE S. REYES, Respondents. DECISION The petitioners1 assail the decision dated July 31, 2002 rendered in C.A.G.R. CV No. 53039, 2 by which the Court of Appeals (CA) affirmed the decision dated May 21, 1996 of the Regional Trial Court (RTC), Branch 9, in Malolos, Bulacan.3 Antecedents Antonio Reyes and his wife, Leoncia Mag-isa Reyes (Leoncia), were owners of a parcel of residential land with an area of 442 square meters, more or less, located in Pulilan, Bulacan and covered by Tax Declaration No. 7590. On that land they constructed their dwelling. The couple had four children, namely: Jose Reyes, Sr. (Jose, Sr.), Teofilo Reyes (Teofilo), Jose Reyes, Jr. (Jose, Jr.) and Potenciana Reyes-Valenzuela (Potenciana). Antonio Reyes died intestate, and was survived by Leoncia and their three sons, Potenciana having predeceased her father. Potenciana also died intestate, survived by her children, namely: Gloria ReyesValenzuela, Maria Reyes Valenzuela, and Alfredo Reyes Valenzuela. Jose, Jr., and his family resided in the house of the parents, but Teofilo constructed on the property his own house, where he and his family resided. On July 9, 1955, Leoncia and her three sons executed a deed denominated Kasulatan ng Biling Mabibiling Muli,4 whereby they sold the land and its existing improvements to the Spouses Benedicto Francia and Monica Ajoco (Spouses Francia) for P500.00, subject to the vendors' right to repurchase for the same amount sa oras na sila'y makinabang. Potenciana's heirs did not assent to that deed. Nonetheless, Teofilo and Jose, Jr. and their respective families remained in possession of the property and paid the realty taxes thereon.

Jose, Sr.

On September 2, 1993, Alejandro also died intestate. 13 Surviving him were his wife, Amanda Reyes, and their children, namely: Consolacion Reyes, Eugenia Reyes-Elvambuena, Luciana Reyes-Mendoza, Pedrito S. Reyes, Merlinda Reyes-Famodulan, Eduardo Reyes and June S. Reyes (respondents herein). In 1994, respondent Amanda Reyes asked the heirs of Teofilo and Jose, Jr., to vacate the property because she and her children already needed it. After the petitioners refused to comply, she filed a complaint against the petitioners in the barangay, seeking their eviction from the property. When no amicable settlement was reached, the Barangay Lupon issued a certification to file action to the respondents on September 26, 1994. 14 In the interim, petitioner Nenita R. de la Cruz and her brother Romeo Reyes also constructed their respective houses on the property. 15 RTC Proceedings and Ruling On September 28, 1994, the respondents initiated this suit for quieting of title and reconveyance in the RTC. 16 The complaint, docketed as Civil Case No. 817-M-94 and entitled Amanda Reyes, et al. v. Heirs of Jose Reyes, Jr., et al., was later amended. 17 They alleged that their predecessor Alejandro had acquired ownership of the property by virtue of the deed Pagsasa-ayos ng Pag-aari at Pagsasalin executed on August 11, 1970 by the heirs of the Spouses Francia; that on the basis of such deed of assignment, Alejandro had consolidated his ownership of the property via his Kasulatan ng Pagmeme-ari; and that under the Magkasanib na Salaysay, Alejandro had granted to Leoncia, his father Jose, Sr., and his uncles, Teofilo and Jose, Jr. the right to repurchase the property, but they had failed to do so. The respondents prayed for judgment in their favor, as follows: WHEREFORE, it is respectfully prayed that judgment be rendered: 1. Quieting the title to the property by declaring the plaintiffs (respondents herein) as the rightful and lawful owners thereof; 2. Ordering the defendants (petitioners herein) to vacate subject premises and reconvey and or surrender possession thereof to the plaintiffs; 3. Ordering the defendants to recognize the right of the plaintiffs as the lawful owners of subject property; 4. Ordering the defendants to pay plaintiffs the following: a. Moral damages in the amount of P50,000.00;

b. Exemplary damages in the amount of P20,000.00; c. Attorney's fees of P20,000.00, acceptance fee of P10,000.00 and P500.00 per recorded Court appearance of counsel; d. The costs of this suit. Plaintiffs further pray for such other relief which the Honorable Court may deem just and equitable under the premises. 18 In their answer,19 the petitioners averred that the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale; that the mortgagors had retained ownership of the property; that the heirs of the Spouses Francia could not have validly sold the property to Alejandro through the Pagsasaayos ng Pag-aari at Pagsasalin; that Alejandro's right was only to seek reimbursement of the P500.00 he had paid from the coowners, namely: Leoncia, Teofilo, Jose, Jr. and Jose, Sr. and the heirs of Potenciana; and that Alejandro could not have also validly consolidated ownership through the Kasulatan ng Pagmeme-ari, because a consolidation of ownership could only be effected via a court order. The petitioners interposed a counterclaim for the declaration of the transaction as an equitable mortgage, and of their property as owned in common by all the heirs of Leoncia, Teofilo, Jose, Jr. and Jose, Sr. On May 21, 1996, the RTC ruled in favor of the respondents, declaring that Alejandro had acquired ownership of the property in 1965 by operation of law upon the failure of the petitioners' predecessors to repurchase the property; that the joint affidavit executed by Alejandro, Leoncia and Jose, Jr. and Jose, Sr., to extend the period of redemption was inefficacious, because there was no more period to extend due to the redemption period having long lapsed by the time of its execution; and that the action should be dismissed insofar as the heirs of Potenciana were concerned, considering that Potenciana, who had predeceased her parents, had no successional rights in the property. Accordingly, the RTC decreed as follows: WHEREFORE, on the basis of the evidence adduced and the law/jurisprudence applicable thereon, judgment is hereby rendered: a) sustaining the validity of the "Kasulatan ng Biling Mabibiling Muli" (Exh. B/Exh. 1) executed on July 9, 1955 by Leoncia Mag-isa and her sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in favor of Spouses Benedicto Francia and Monica Ajoco as well as the "Pagsasa-ayos ng Pag-aari at Pagsasalin" (Settlement of Estate and Assignment) [Exh. C/Exh. 4] executed on August 11, 1970 by the

heirs of spouses Benedicto Francia and Monica Ajoco in favor of the spouses Alejandro Reyes and Amanda Salonga; b) declaring the aforementioned "Kasulatan Ng Biling Mabibili Muli" (Exh. B/ Exh. 1) to be a contract of sale with right to repurchase and not an equitable mortgage; c) confirming the consolidation of ownership, by operation of law, of spouses Alejandro M. Reyes and Amanda Salonga over the residential lot mentioned and referred to in Exhibit B/Exhibit 1 and Exhibit C/Exhibit 4; d) allowing the registration with the Registry of Deeds for the Province of Bulacan of the "Kasulatan ng Pagmeme-ari" (Document of Ownership) [Exh. E/Exh. 5] executed by Alejandro M. Reyes on August 21, 1970 or of any appropriate deed of consolidation of ownership over the residential lot covered by Exhibit E/Exhibit 5 which the plaintiffs, as eventual owners by succession of the aforementioned proeprty, may deem proper to execute; e) ordering the defendants and all persons claiming rights under them to vacate the residential lot subject of the above-entitled case and to restore possession thereof unto the plaintiffs; f) directing the defendants (except the heirs of Potenciana ReyesValenzuela) to pay unto the plaintiffs the amount of P20,000.00 as attorney's fees; and g) dismissing the complaint in so far as the defendant heirs of Potenciana Reyes-Valenzuela are concerned as well as their counterclaim for damages and attorney's fees.1avvphi1 No pronouncement as to costs. SO ORDERED.
20

families had remained in possession of the property and continued paying realty taxes for the property; that the purported vendees had not declared the property for taxation purposes under their own names; and that such circumstances proved that the parties envisaged an equitable mortgage in the Kasulatan ng Biling Mabibiling Muli. The CA observed that the heirs of the Spouses Francia had themselves admitted in paragraph 5 of the Pagsasa-ayos ng Pag-aari at Pagsasalin that the property had been mortgaged to their predecessors-in-interest, viz: Na, sa oras ng kamatayan ay nakaiwan sila ng isang lagay na lupang nakasanla sa kanila na makikilala sa kasulatang kalakip nito sa halagang LIMANG DAANG PISO (P500.00). Ngunit nuong nabubuhay pa ang magasawang Benedicto Francia at Monica Ajoco ay nakatanggap na ng halagang P265.00 kay Alejandro Reyes - Filipino, kasal kay Amanda Salonga, may sapat na gulang at naninirahan sa Pulilan, Bulacan. 21 However, the CA held that the appellants' (petitioners herein) failure to file an action for the reformation of the Kasulatan ng Biling Mabibiling Muli to reflect the true intention of the parties within ten years from the deed's execution on July 9, 1955, pursuant to Article 1144 of the Civil Code,22 already barred them from claiming that the transaction executed between Leoncia and her children, on one hand, and the Spouses Francia, on the other hand, was an equitable mortgage. The CA agreed with the RTC that the Magkakalakip na Salaysay did not effectively extend the period for Leoncia and her children to repurchase the property, considering that the period to repurchase had long lapsed by the time the agreement to extend it was executed on October 17, 1970. Issues In this appeal, therefore, the petitioners insist that:23 I. The Honorable Court of Appeals erred in finding that respondents (were) already barred from claiming that the transaction entered into by their predecessors-in-interest was an equitable mortgage and not a pacto de retro sale; II.

Aggrieved, the petitioners appealed to the CA. CA Ruling In the CA, the petitioners assailed the RTC's dispositions, except the dismissal of the complaint as against Potenciana's heirs. In its decision dated July 31, 2002, the CA ruled that the transaction covered by the Kasulatan ng Biling Mabibiling Muli was not a pacto de retro sale but an equitable mortgage under Article 1602 of the Civil Code; that even after the deed's execution, Leoncia, Teofilo, Jose, Jr. and their

The Honorable Court of Appeals erred in affirming the findings of the court a quo that the Magkasanib na Salaysay (Joint Affidavit), executed by Alejandro, Leoncia and Jose, Jr., wherein Leoncia and her children were granted by Alejandro the right to repurchase the property at anytime for the amount of P500.00, was of no legal significance.

Ruling of the Court The petition is meritorious. A. The CA correctly concluded that the true agreement of the parties vis--vis the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage, not a pacto de retro sale. There was no dispute that the purported vendors had continued in the possession of the property even after the execution of the agreement; and that the property had remained declared for taxation purposes under Leoncia's name, with the realty taxes due being paid by Leoncia, despite the execution of the agreement. Such established circumstances are among the badges of an equitable mortgage enumerated in Article 1602, paragraphs 2 and 5 of the Civil Code, to wit: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: xxx (2) When the vendor remains in possession as lessee or otherwise; xxx (5) When the vendor binds himself to pay the taxes on the thing sold; xxx The existence of any one of the conditions enumerated under Article 1602 of the Civil Code, not a concurrence of all or of a majority thereof, suffices to give rise to the presumption that the contract is an equitable mortgage. 24 Consequently, the contract between the vendors and vendees (Spouses Francia) was an equitable mortgage. B. Are the petitioners now barred from claiming that the transaction under the Kasulatan ng Biling Mabibiling Muli was an equitable mortgage by their failure to redeem the property for a long period of time?

The petitioners contend that prescription, if it must apply to them, should as well be applied to the respondents, who had similarly failed to enforce their right under the equitable mortgage within ten years from its execution on July 9, 1955. Consequently, they urge the upholding of the original intention of the parties to the Kasulatan ng Biling Mabibiling Muli, without taking prescription into account, because both parties did not enforce their respective rights within the ten-year prescriptive period, is more in keeping with fairness and equity. We agree with the petitioners. Considering that sa oras na sila'y makinabang, the period of redemption stated in the Kasulatan ng Biling Mabibiling Muli, signified that no definite period had been stated, the period to redeem should be ten years from the execution of the contract, pursuant to Articles 1142 and 1144 of the Civil Code.25 Thus, the full redemption price should have been paid by July 9, 1955; and upon the expiration of said 10-year period, mortgagees Spouses Francia or their heirs should have foreclosed the mortgage, but they did not do so. Instead, they accepted Alejandro's payments, until the debt was fully satisfied by August 11, 1970. The acceptance of the payments even beyond the 10-year period of redemption estopped the mortgagees' heirs from insisting that the period to redeem the property had already expired. Their actions impliedly recognized the continued existence of the equitable mortgage. The conduct of the original parties as well as of their successors-in-interest manifested that the parties to the Kasulatan ng Biling Mabibiling Muli really intended their transaction to be an equitable mortgage, not a pacto de retro sale. In Cuyugan v. Santos,26 the purported buyer under a socalled contract to sell with right to repurchase also accepted partial payments from the purported seller. We held that the acceptance of partial payments was absolutely incompatible with the idea of irrevocability of the title of ownership of the purchaser upon the expiration of the term stipulated in the original contract for the exercise of the right of redemption. Thereby, the conduct of the parties manifested that they had intended the contract to be a mortgage, not a pacto de retro sale. C.

When Alejandro redeemed the property on August 11, 1970, he did not thereby become a co-owner thereof, because his father Jose, Sr. was then still alive. Alejandro merely became the assignee of the mortgage, and the property continued to be co-owned by Leoncia and her sons Jose, Sr., Jose Jr., and Teofilo. As an assignee of the mortgage and the mortgage credit, Alejandro acquired only the rights of his assignors, nothing more. He himself confirmed so in the Magkasanib na Salaysay, whereby he acknowledged the co-owners' right to redeem the property from him at any time (sa ano mang oras) for the same redemption price of P500.00. It is worthy to note that Alejandro's confirmation in the Magkasanib na Salaysay of the co-owners' right to redeem was made despite 15 years having meanwhile elapsed from the execution of the original Kasulatan ng Biling Mabibiling Muli (July 9, 1955) until the execution of the Magkasanib na Salaysay (August 21, 1970). D.

Aptly did the Court hold in Montevirgen v. Court of Appeals: 27 The declaration, therefore, in the decision of July 1, 1971 to the effect that absolute ownership over the subject premises has become consolidated in the respondents upon failure of the petitioners to pay their obligation within the specified period, is a nullity, for consolidation of ownership is an improper and inappropriate remedy to enforce a transaction declared to be one of mortgage. It is the duty of respondents, as mortgagees, to foreclose the mortgage if he wishes to secure a perfect title to the mortgaged property if he buys it in the foreclosure sale. Moreover, the respondents, as Alejandro's heirs, were entirely bound by his previous acts as their predecessorsin-interest. Thus, Alejandro's acknowledgment of the effectivity of the equitable mortgage agreement precluded the respondents from claiming that the property had been sold to him with right to repurchase. 28 E.

Neither did the petitioners' failure to initiate an action for reformation within ten years from the execution of the Kasulatan ng Biling Mabibiling Muli bar them from insisting on their rights in the property. The records show that the parties in the Kasulatan ng Biling Mabibiling Muli had abided by their true agreement under the deed, to the extent that they and their successors-in-interest still deemed the agreement as an equitable mortgage despite the lapse of 15 years from the execution of the purported pacto de retro sale. Hence, an action for reformation of the Kasulatan ng Biling Mabibiling Muli was unnecessary, if not superfluous, considering that the reason underlying the requirement for an action for reformation of instrument has been to ensure that the parties to a contract abide by their true intended agreement. The Kasulatan ng Pagmeme-ari executed by Alejandro on August 21, 1970 was ineffectual to predicate the exclusion of the petitioners and their predecessors in interest from insisting on their claim to the property. Alejandro's being an assignee of the mortgage did not authorize him or his heirs to appropriate the mortgaged property for himself without violating the prohibition against pactum commissorium contained in Article 2088 of the Civil Code, to the effect that "[t]he creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to the contrary is null and void."

What was the effect of the Magkasanib na Salaysay? Both the trial court and the CA declared that the Magkasanib na Salaysay, which extended the redemption period of the mortgaged property, was inefficacious, because the period to redeem could no longer be extended after the original redemption period had already expired. In contrast, the petitioners submit that disregarding the Magkasanib na Salaysay made no sense, considering that the respondents' predecessorsin-interest admitted therein that the petitioners had a right to redeem the property. The respondents counter, however, that the Magkasanib na Salaysay, which acknowledged the other co-owners' right to redeem the property, was void; that the petitioners could no longer claim to be co-owners entitled to redeem the property, because the co-ownership had come to an end by Alejandro having openly repudiated the co-ownership; that Alejandro's acts of repudiation had consisted of: (a) redeeming the property from the Spouses Francia; (b) acquiring the property from the heirs of Spouses Francia by virtue of a deed of assignment denominated as Pag-aayos ng Pag-aari at Pagsasalin; (c) executing an affidavit of consolidation of ownership over the property (Kasulatan ng Pagmeme-ari); (d) applying for the cancellation of the tax declaration of property in the name of Leoncia, and the subsequent issuance of a new tax declaration in his name; (e) his continuous possession of the property from 1955, which possession the respondents as his heirs had continued up to the present

time, or for a period of almost 50 years already; and (f) the payment of the taxes by Alejandro and the respondents for more than 30 years without any contribution from the petitioners; and that such repudiation established that Alejandro and his successors-in-interest had already acquired sole title over the property through acquisitive prescription. The respondents' and the lower courts' positions cannot be sustained. The provisions of the Civil Code governing equitable mortgages disguised as sale contracts, like the one herein, are primarily designed to curtail the evils brought about by contracts of sale with right to repurchase, particularly the circumvention of the usury law and pactum commissorium.29 Courts have taken judicial notice of the well-known fact that contracts of sale with right to repurchase have been frequently resorted to in order to conceal the true nature of a contract, that is, a loan secured by a mortgage. It is a reality that grave financial distress renders persons hard-pressed to meet even their basic needs or to respond to an emergency, leaving no choice to them but to sign deeds of absolute sale of property or deeds of sale with pacto de retro if only to obtain the muchneeded loan from unscrupulous money lenders.30 This reality precisely explains why the pertinent provision of the Civil Code includes a peculiar rule concerning the period of redemption, to wit: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: xxx (3)When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; xxx Ostensibly, the law allows a new period of redemption to be agreed upon or granted even after the expiration of the equitable mortgagor's right to repurchase, and treats such extension as one of the indicators that the true agreement between the parties is an equitable mortgage, not a sale with right to repurchase. It was indubitable, therefore, that the Magkasanib na Salaysay effectively afforded to Leoncia, Teofilo, Jose, Sr. and Jose, Jr. a fresh period within which to pay to Alejandro the redemption price of P500.00. F. Did Alejandro and his heirs (respondents herein) acquire the mortgaged property through prescription?

It is true that Alejandro became a co-owner of the property by right of representation upon the death of his father, Jose Sr.31 As a co-owner, however, his possession was like that of a trustee and was not regarded as adverse to his co-owners but in fact beneficial to all of them. 32 Yet, the respondents except to the general rule, asserting that Alejandro, having earlier repudiated the co-ownership, acquired ownership of the property through prescription. The Court cannot accept the respondents' posture. In order that a co-owner's possession may be deemed adverse to that of the cestui que trust or the other co-owners, the following elements must concur: 1. The co-owner has performed unequivocal acts of repudiation of the co-ownership amounting to an ouster of the cestui que trust or the other co-owners; 2. Such positive acts of repudiation have been made known to the cestui que trust or the other co-owners; 3. The evidence on the repudiation is clear and conclusive; and 4. His possession is open, continuous, exclusive, and notorious. 33 The concurrence of the foregoing elements was not established herein. For one, Alejandro did not have adverse and exclusive possession of the property, as, in fact, the other co-owners had continued to possess it, with Alejandro and his heirs occupying only a portion of it. Neither did the cancellation of the previous tax declarations in the name of Leoncia, the previous co-owner, and the issuance of a new one in Alejandro's name, and Alejandro's payment of the realty taxes constitute repudiation of the coownership. The sole fact of a co-owner declaring the land in question in his name for taxation purposes and paying the land taxes did not constitute an unequivocal act of repudiation amounting to an ouster of the other coowner and could not constitute adverse possession as basis for title by prescription.34 Moreover, according to Blatero v. Intermediate Appellate Court,35 if a sale a retro is construed as an equitable mortgage, then the execution of an affidavit of consolidation by the purported buyer to consolidate ownership of the parcel of land is of no consequence and the "constructive possession" of the parcel of land will not ripen into ownership, because only possession acquired and enjoyed in the concept of owner can serve as title for acquiring dominion. 36

In fine, the respondents did not present proof showing that Alejandro had effectively repudiated the co-ownership. Their bare claim that Alejandro had made oral demands to vacate to his co-owners was self-serving and insufficient. Alejandro's execution of the affidavit of consolidation of ownership on August 21, 1970 37 and his subsequent execution on October 17, 1970 of the joint affidavit38 were really equivocal and ambivalent acts that did not manifest his desire to repudiate the co-ownership. The only unequivocal act of repudiation was done by the respondents when they filed the instant action for quieting of title on September 28, 1994, nearly a year after Alejandro's death on September 2, 1993. However, their possession could not ripen into ownership considering that their act of repudiation was not coupled with their exclusive possession of the property. G.

b) Declaring the Kasulatan ng Biling Mabibili Muli to be an equitable mortgage, not a contract of sale with right to repurchase;1avvphi1 c) Finding the Magkakalakip na Salaysay executed on October 17, 1970 by and among Leoncia Mag-isa Reyes, Jose Reyes, Sr. and Alejandro Reyes valid and effective; c) Nullifying the Kasulatan ng Pagmeme-ari executed by Alejandro M. Reyes on August 21, 1970; and d) Dismissing the petitioners' counterclaim. Costs of suit to be paid by the respondents. SO ORDERED.

The respondents can only demand from the petitioners the partition of the co-owned property and the reimbursement from their co-owners of the amount advanced by Alejandro to repay the obligation. They may also seek from their co-owners the proportional reimbursement of the realty taxes paid for the property, pursuant to Article 488 of the Civil Code.39 In the alternative, they may opt to foreclose the equitable mortgage, considering that the petitioners' period to redeem the mortgaged property, which was ten years from the execution on October 17, 1970 of the Magkakasanib na Salaysay, had already long lapsed. We clarify, however, that the respondents may take these recourses only through the appropriate actions commenced in court. H. The petitioners' counterclaim for damages is dismissed for their failure to prove their entitlement to it.40 WHEREFORE, we grant the petition for review on certiorari. The decision dated July 31, 2002 rendered by the Court of Appeals is reversed and set aside, and another judgment is rendered: a) Upholding the validity of the Kasulatan ng Biling Mabibiling Muli (Deed of Sale with Right of Repurchase) executed on July 9, 1955 by Leoncia Mag-isa Reyes and her sons Teofilo, Jose, Sr. and Jose, Jr., all surnamed Reyes, in favor of the late Spouses Benedicto Francia and Monica Ajoco as well as the Pagsasa-ayos ng Pag-aari at Pagsasalin (Settlement of Estate and Assignment) executed on August 11, 1970 by the heirs of the late Spouses Benedicto Francia and Monica Ajoco in favor of the spouses Alejandro Reyes and Amanda Salonga;

stay would last until anyone of appellants would need the subject property. Forthwith, appellees and their children occupied the same as agreed upon. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 172292 July 23, 2010 In November 1997, appellants made known to appellees that they were already in need of the subject property. They explained that appellant Shirley Yu-Go needed the same and, besides, appellees already have their own house in Villa Grande Homes, Naga City. Yet, appellees begged that they be given a 6-month extension to stay thereat or until May 1998. However, even after May 1998, appellees failed to make good their promise and even further asked that they be allowed to stay therein until October 1998, which was again extended until the end of the same year. Thus, sometime in the first week of January 1999, appellants gave their final demand for appellees to vacate the subject property. However, instead of heeding such demand, appellees hired some laborers and started demolishing the improvements on the subject property on January 20, 1999. Appellants protest fell on deaf ears because appellees continued their demolition and even took away and appropriated for themselves the materials derived from such unlawful demolition. Consequently, appellants instituted the said action for injunction where they also prayed for the reimbursement of the value of the residential building illegally demolished as well as for the payment of moral damages, attorneys fees, litigation expenses and costs of suit. On February 5, 1999, appellees filed their Answer where they denied the material averments of the complaint. They claimed that appellee Antonio Mores, who was appellants uncle, used to be the assistant manager and cashier of appellants father at their Caltex Service Station until the laters death sometime in 1980. Appellants Caltex Filling Station had stopped operation and was just rented out to Herce Trucking Service. Upon the expiration of such lease contract, appellees were allowed to occupy the subject property as their dwelling places. They were the ones who caused its renovation consisting of a 3-bedroom annex, a covered veranda and a concrete hollow block fence, at their own expense, and with appellants consent, which renovation was made without altering the form and substance of the subject property. They denied that appellants made a demand for them to vacate the subject property, insisting that it was merely a sort of reminder that sooner or later appellees should yield possession thereof since, after all, they had already bought a second-hand house which was undergoing repair. Appellees argued that what they removed was merely the improvements made on the subject property, which removal had not caused any substantial damage thereto as, in fact, it remained intact. By way of counterclaims, they demanded payment of actual damages, attorneys fees and litigation expenses. 5 The Trial Courts Ruling

ALIDA MORES Petitioner, vs. SHIRLEY M. YU-GO, MA. VICTORIA M. YU-LIM, and MA. ESTRELLA M. YU, Respondents. DECISION G.R. No. 172292 is a petition for review assailing the Decision promulgated on 26 August 2005 by the Court of Appeals (appellate court) as well as the Resolution3 promulgated on 14 March 2006 in CA-G.R. CV No. 76076. The appellate court partially granted the petition filed by Shirley M. Yu-Go, Ma. Victoria M. Yu-Lim, and Ma. Estrella M. Yu (Yu siblings) and reversed the decision of the Regional Trial Court of Naga City, Branch 27 (trial court), dated 28 June 2002 in Civil Case No. 99-4216. The appellate court ordered spouses Antonio and Alida Mores (spouses Mores) to pay the Yu siblings moral damages in the amount of P100,000. The Facts Antonio Mores passed away during the pre-trial stage. Hence, Alida Mores remained as the only defendant, per the trial courts order dated 3 May 2000.4 The appellate court narrated the facts as follows: On January 21, 1998, plaintiffs-appellants Shirley M. Yu-Go, Ma. Victoria M. Yu-Lim and Ma. Estrella M. Yu ("appellants") filed a Complaint for Injunction and Damages with Prayer for Issuance of a Temporary Restraining Order and Preliminary Injunction before the Regional Trial Court in Naga City against defendants-appellees, spouses Antonio and Alida Mores ("appellees"). Appellants alleged that they co-owned a parcel of land located in Sto. Tomas, Magarao, Camarines Sur on which a building of strong materials ("subject property") was built. In March 1983, appellees pleaded to appellants that they be allowed to stay in the subject property in the meantime that they did not own a house yet. Since appellee Antonio Mores used to be an errand boy of appellants family, they readily agreed without asking for any rental but subject only to the condition that the said
1 2

On 28 June 2002, the trial court promulgated its Decision in favor of the spouses Mores. The trial court ratiocinated and ruled thus: Defendants, who are possessors in good faith, were able to prove by preponderance of evidence that they removed only the improvements they introduced without destroying the principal building, after the plaintiffs refused to pay them the reasonable value of the improvements. x x x But defendants failed to prove the allegations in their counterclaims that plaintiffs acted in bad faith and/or through gross and reckless negligence in filing this complaint, and the damages defendants allegedly suffered. Failing in this, plaintiffs must also be presumed to have acted in good faith when they filed this complaint with the honest belief that their rights were violated when defendants removed the useful improvements from the principal building and land of plaintiffs. Applying the same principle, the equipoise rule, defendants counterclaims must necessarily fail. Both parties having acted in good faith, the court will not disturb the present status, and will leave the parties where it found them. Wounds should not be scratched in order to hasten the healing process, and neither should this Court scratch herein parties rift that torn [sic] them apart from being close relatives before this controversy started. Parties owe to their siblings and to their posterity to reconcile. Anyway, this case was started because parties were very close relatives. The courts are not only courts of justice but also courts of equity. WHEREFORE, the complaint and the counterclaims are hereby dismissed. No pronouncement as to cost. SO ORDERED. 6 The trial court gave due course to the Yu siblings Notice of Appeal in an Order dated 22 July 2002. The Appellate Courts Ruling The appellate court partially granted the Yu siblings appeal. The appellate court disagreed with the trial courts conclusion that the spouses Mores were builders in good faith and have the right of accession under Articles 546 and 547 of the Civil Code. Instead, the appellate court believed that the relationship between the Yu siblings and the spouses Mores is one between a lessor and a lessee, making Article 1678 of the Civil Code applicable to the present case. The options given by Article 1678, the right of appropriating the useful improvements after reimbursing 50% of its value or the right of removal of the useful improvements, are given by law to the lessor - the Yu siblings. The spouses Mores, however, failed to give the Yu siblings the opportunity to choose from these two options. The

appellate court thus ordered the spouses Mores to pay the Yu siblings moral damages worth P100,000. The appellate court resolved to deny Alida Mores Motion for Reconsideration for want of merit.7 The Issues In her petition, Alida Mores stated that the decision of the appellate court awarding the Yu siblings moral damages in the amount of P100,000 is rendered with grave abuse of discretion and is not in accord with the decisions of this Court.8 The Courts Ruling The petition has merit. Alida Mores argues that in case of breach of contract between a lessor and a lessee, moral damages are not awarded to the lessor if the lessee is not shown to have acted in bad faith. She proves her and her husbands alleged good faith by quoting the appellate courts decision which stated that: [The Spouses Mores] good faith is underscored by the fact that no one from appellants had objected or prevented appellees from effecting said improvements which, obviously, were undertaken in quite a span of time. Even if we believe appellant Victoria Yu-Lims testimony that they would only learn of the introduction of such improvements after each of such improvements had already been built, [the Yu siblings] never made known their objections thereto nor did they pose a warning against future introduction of any improvement. After all, the said improvements were not introduced simultaneously.9 The good faith referred to by Alida Mores was about the building of the improvements on the leased subject property. However, tenants like the spouses Mores cannot be said to be builders in good faith as they have no pretension to be owners of the property. 10 Indeed, full reimbursement of useful improvements and retention of the premises until reimbursement is made applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where ones only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property.11 The appellate court is correct in ruling that Article 1678 of the Civil Code should apply in the present case. Article 1678 reads:

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 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.1avvphi1 With regard to the ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. It is incorrect, however, for the appellate court to state that the spouses Mores did not give the Yu siblings the option to retain the improvements. The appellate court stated that "nothing in the records reveal that [the Yu siblings] were given the chance to choose from the options of either paying one-half () of the value of the improvements at the time they were made on the subject property, or to demand the removal by [the spouses Mores] of such improvements at their expense." 12 The trial court even quoted from the transcript of Alida Mores direct testimony on 10 October 2001 on the subject: Q: Plaintiff Yu-Lim likewise testified that the plaintiffs demanded in 1998 that you vacate the premises because it will be needed by plaintiff Shirley Yu-Co, what can you say to that? A: It was in November 1998 that the plaintiff intimated that we will soon vacate the place because by that time we had already bought a second-hand house. Q: What happened after that? A: My husband good-naturedly asked for reimbursement for the improvements we constructed at our expense. Q: What happened to that demand? A: The plaintiffs became mad at us and refused to pay. Q: What happened after that, what did your husband do? A: My husband removed the roofing, coco lumber, trusses, the electrical installation and the improvements constructed, glass panel and window panel.

Q: By the way, who spent for the introduction of these improvements? A: My husband and I.13 There is thus no reason for the appellate courts award of moral damages to the Yu siblings. We agree with the trial courts finding that the spouses Mores "removed only the improvements they introduced without destroying the principal building, after the [Yu siblings] refused to pay them the reasonable value of the improvements."14 When the spouses Mores demanded reimbursement, the Yu siblings should have offered to pay the spouses Mores one-half of the value of the improvements. Since the Yu siblings failed to make such offer, the spouses Mores had the right to remove the improvements. WHEREFORE, we GRANT the petition. We AFFIRM with MODIFICATION the Decision of the Court of Appeals promulgated on 26 August 2005 as well as the Resolution promulgated on 14 March 2006 in CA-G.R. CV No. 76076. Article 1678 of the Civil Code is applicable to the present case. The award of moral damages worth P100,000 to the Yu siblings is deleted. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-54753 June 24, 1983 MARIETTA E. DAKUDAO, ANTONIETTA E. QUINTOS, ELSA E. ALMEDA, JOSE R. EBRO, JR., and LUCIA E. PELAYO, petitioners, vs. HON. JUDGE FRANCISCO Z. CONSOLACION, FRANCISCO ANG SINGCO, FEDERICO LAURECIO and CARMEN LAURECIO, respondents. This is a petition for review on certiorari with pre mandatory injunction seeking to reverse the orders of the respondent Court of First Instance of Davao dated June 10, 1980 and July 18, 1980. The petitioners have come to this Court on pure questions of law. There is no dispute over the basic facts of this case which are summarized by the respondent court as follows: Plaintiffs are co-owners of a parcel of land Identified as Lot 202-F-13 embraced on transfer Certificate of Title No. T34254 of the Registry of Deeds of Davao City. On this land stands the house of defendant Francisco Ang Singco who had a verbal lease contract with herein plaintiffs. The monthly agreed rental is P25.00. On July of 1977, without the knowledge and consent of plaintiffs, defendant Ang Singco sold his house to his COdefendants, the Laurecios. When plaintiff Marietta Dakudao visited the premises in question, she was told of the transaction that transpired between Ang Singco and the Laurecios. Ang Singco left the premises in July or August of 1977 knowing that he was in arrears in his rentals for one year and seven months. Since the house is at present occupied by the Laurecios, plaintiffs through Marietta Dakudao demanded that they vacate the premises and for the payment of the use and occupation of the same at P100.00 a month. The Laurecios were willing to pay P50.00 a month and for failure to reach an agreement for the rental of the premises, plaintiffs filed this suit. Having received an adverse judgment, applicants elevated the same with the assignment of errors...

In its decision dated July 18, 1979, the City Court of Davao City, Branch II dismissed the case for unlawful detainer against the Laurecios. With respect to defendant Ang Singco, the Court ruled that the action against him was converted into a simple one for collection of back rentals since he was no longer in possession of the land leased to him. (Decision of City Court, Annex "C", Rollo, p. 58) As regards the respondents Federico and Carmen Laurecio, the City Court held: 1. That there has never been a contract of lease, expressed or implied, between the plaintiff and the defendant Laurecios as regards that portion of land occupied by the house sold to them by the original lessee Francisco Ang Singco. This is the contention and theory of the plaintiffs. The defendants Laurecios cannot be considered as the lawful successor-in- interest of the original lessee of the land occupied by the house sold. (Art. 1649 Civil Code); 2. That the demand of the plaintiffs upon the defendant Laurecios was to vacate the premises occupied by the house they purchased from the defendant Ang Singco and to pay the reasonable compensation for the use of said premises, not back rentals. With the foregoing facts as background, are the plaintiffs entitled to the remedy of unlawful detainer as against the defendants? The Court does not believe so because the essence of the action for unlawful detainer is the existence of a contract, expressed or implied, between the plaintiff and the defendant. ... (Decision of the City Court of Davao, Annex "C", Rollo, p. 57). Having received an adverse judgment, the petitioners elevated the case to the Court of First Instance of Davao, Branch II. (Annex "H", Rollo, P. 69) On January 15, 1980, the CFI of Davao modified the abovementioned decision of the City Court of Davao City. The Court held This Court does not agree with the foregoing findings. When defendant Ang Singco sold his house to his codefendants without the consent and knowledge of herein plaintiffs, there was stealth employed and this allegation is incorporated in the pleadings as well as in the trial of this case. However, an implied contract of lease was created when plaintiffs demanded of the Laurecios to pay rental over the parcel of land as compensation for the occupation

thereof hence an unlawful detainer case can be filed against the Laurecios. On February 14, 1980, the private respondents Med a motion for reconsideration of the decision of the CFI of Davao on the following grounds: I THAT THE EVIDENCE IS INSUFFICIENT TO JUSTIFY THE DECISION; and II THAT THE DECISION IS AGAINST THE LAW AND/OR JURISPRUDENCE. In its order dated June 10, 1980, the CFI of Davao City reconsidered and set aside its decision and entered a new one affirming in toto the appealed decision of the City Court. According to the amended decision: xxx xxx xxx The Court, after a thorough consideration of the pleadings filed, finds that it committed an error in modifying the decision of the court a quo. The fact of lease and the expiration of its are the essential elements of an unlawful detainer case. Since no contract had been executed, either express or implied, an action for unlawful detainer win not lie against the Laurecios. xxx xxx xxx The petitioners moved for the reconsideration of the amended ruling. However, the CFI of Davao, in its order dated July 18, 1980, denied the motion for reconsideration of the plaintiffs-appellees for lack of merit. The plaintiffs-appellees, therefore, filed this instant petition for review on certiorari raising the following arguments: 1. That although there is no contract express or implied, between plaintiffs and defendants Laurecios, an action for unlawful detainer nevertheless lies against said respondents. 2. That respondents Laurecios who occupy the land of petitioners at the latter's tolerance, without any contract between them are necessarily bound by an implied promise that they will vacate upon demand, failing which a summary action for unlawful detainer is the proper remedy against them.

3. That even assuming for the sake of argument that an action for unlawful detainer win not lie against respondents Laurecios, petitioners have nevertheless alleged and proven strategy and stealth on the part of said respondents regarding their entry into, and occupation of, the leased premises sufficient to make out an action for forcible entry against them. This is a good example of how persons who have failed to adduce any legal grounds for their continued stay on property "I to another have nonetheless managed to stave off eviction for more than four years through the improper use of procedural technicalities and reliance on delays caused by heavy caseloads of courts of justice. In its June 18, 1979 decision, the City Court of Davao City admitted that the plaintiffs had a right to recover possession of the land involved in the litigation but "unfortunately" for them their cause of action did not fit within an unlawful detainer case. Neither could it be a forcible entry case, according to the judge, because the plaintiffs failed to allege in the pleadings or prove with evidence the fact that the defendants occupied the land through stealth and strategy The primary argument of the respondents Laurecio in this petition is that they are not unlawfully withholding possession from the petitioners after the expiration or termination of the right to hold possession by virtue of any contract because there never was any contract express or implied between them and the petitioners. The private respondents further claim that they cannot be considered privies or successors-in-interest of the former lessee, Francisco Ang Singco, because Article 1649 of the Civil Code provides that "the lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary." The respondents fail to state by what right they are occupying the land. If they have no contract, express or implied with the owners and they have no claim as successors-in-interest of the former lessee, they become mere usurpers or squatters through their own admission. Article 1649 of the Civil Code is intended to protect the owner of the leased property. It was never intended to permit one who claims no right to the premises to avoid ejectment by the dubious allegation that his occupation is not lawful as the Civil Code prohibits it. As a matter of fact, the respondents averred in their answer filed with the City Court of Davao City that the plaintiffs, now petitioners, gave their consent when the Laurecios purchased the house from Ang Singco "otherwise the defendants Laurecio could have desisted from buying the subject house." The defendants averred that the Laurecios and the petitioners agreed to maintain the P25.00 monthly rentals at the time of the sale in July, 1977 but a year later, the lot owners suddenly raised the rent to P50.00 monthly and that "if defendants Laurecio have failed to pay

their rental, the same is due to plaintiffs' unreasonable and malicious refusal to receive the payments." The present claim of the respondents on the absence of any contract or agreement is due to their taking advantage of the ruling of the respondent court that "since no contract had been executed, either express or implied, an action for unlawful detainer will not lie against the Laurecios." It was not an original defense. The City Court found the averments of the private respondents in their answer as contrary to the evidence. The facts are: It is established by the evidence that the plaintiffs have never consented or ratified the sale of the house in question by the defendant Ang Singco to the Laurecios. There has never been any definite agreement between the plaintiff and the Laurecios as to the amount of rentals the latter were going to pay. In fact the Laurecios have not paid any amount by way of rentals to the plaintiff except that which they deposited in Court during the pendency of this case on February 2, 1979 in the amount of P450.00 for the period from August, 1977 to January, 1979 (Exhibit '3' and Exhibit '4'). Since there was no contract between the lot owners and the Laurecios, the latter's occupation of the land is only as successors of Ang Singco from whom they purchased the house built on the lot. If Article 1649 had been followed and the consent of the owners to the sale secured, the Laurecios would be more than mere successors-in-interest. They would have become the new lessees. The unlawful detainer case was proper. If we view the failure of the petitioners to file an ejectment case from February, 1978 when they first learned of the respondents presence on their land up to June 1, 1978 when the letter demanding that they vacate the lot was sent, as tolerance or permission by the owners, the unlawful detainer case is still proper. We held in the case of Vda. de Cachuela v. Francisco (.98 SCRA 172) citing the case of Calubayan v. Pascual (21 SCRA 146, 148) that a person who occupies the land of another at the latter's 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 him. The status of the 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. Likewise in the case of Yu v. de Lara (6 SCRA 785), we ruled that the proper remedy against a person who occupies the land of another, who has no contract with the owner, and whose possession is merely tolerated, but who refuses to vacate despite demand, is the summary action for ejectment.

The respondents Laurecios argue that the tolerance by the petitioners must be present right from the start of the possession sought to be recovered, to categorize a cause of action as one of unlawful detainer, not of forcible entry, citing the cases of Sarona, et al vs. Villegas, et al. (22 SCRA 1257) and Monteblanco v. Hinigaran Sugar Plantation (63 Phil. 797, 802, 803). We fail to see what advantage to the administration of justice would be served if we allow the private respondents to argue that, perhaps, they should be prosecuted for forcible entry and not unlawful detainer. In their opposition dated July 9, 1979, the private respondents alleged as ground for the opposition: THAT PLAINTIFFS' ALLEGATIONS IN THEIR COMPLAINT AND THE EVIDENCE THEY ADDUCED DO NOT PROVE ANY CAUSE OF ACTION FOR FORCIBLE ENTRY AGAINST THE DEFENDANTS LAURECIOS. Moreover, there is no conflict between the cases abovementioned and the case of Cachuela v. Francisco. As far as the petitioners are concerned, it may rightly be said that any supposed tolerance of the occupation by the respondents Laurecios was from February, 1978, when they first discovered the respondents to be in possession of the premises. To petitioners, this was the start of the respondent Laurecios' occupation since the latter's actual entry into the premises in July or August, 1977 had been concealed from the petitioners. Considering the foregoing, we see no need to discuss the third "question of law" raised in the petition. Equitable considerations also dictate that procedural technicalities, even if valid which they are not, should not be allowed to stand in the way of substantial justice. The certification from the Clerk of Court of the City Court of Davao shows that no deposits for rentals have been made from February, 1980 up to the date of the certification on March 9, 1982. The certification of the Acting Clerk of Court of the Court of First Instance of Davao shows that no deposits for rentals in this case are being made in that court. WHEREFORE, the judgment of the respondent court is hereby set aside. The private respondents are ordered to vacate the disputed premises. Respondents Laurecio are ordered to pay the amount of Fifty Pesos (P50.00) a month as reasonable compensation for the use and occupation of the premises beginning August, 1977 until they finally vacate the premises, minus whatever amounts may have been deposited as rentals with the court for delivery to the petitioners and to pay P500.00 in attorney's fees. The portion of the decisions of the City Court and the respondent court as regards Francisco Ang Singco is affirmed. This decision is immediately executory. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-19670 June 24, 1965

upon the ground that Pamintuan had paid a sum of money to Valeriano; that the balance of the money judgment in his favor was covered by several pieces of jewelry delivered by Pamintuan to Valeriano; and that Pamintuan had retaken possession of the aforementioned property in pursuance of a contract with Valeriano, who had agreed, not only to re-et the property, but, also, to sell it to Pamintuan. Sometime after the filing of said complaint and of the answer thereto, the lower court issued, after due hearing, the writ of preliminary injunction prayed for by Pamintuan. In due course, subsequently, or on April 17, 1961, the court, then presided over by Hon. Juan P. Enriquez, Judge, rendered judgment dismissing Pamintuan's complaint and sentencing him to pay P500 to Valeriano as attorney's fees and costs, and dissolving the writ of preliminary injunction aforementioned, as well as sentencing Pamintuan and his surety to pay Valeriano P500, as damages for the issuance of said writ. Copy of this decision was served upon Pamintuan on April 22, 1961. Thirty (30) days later, or on May 22, 1961, Pamintuan filed his notice of appeal, record on appeal, and appeal bond, but the lower court, then presided by another Judge, respondent, Hon. Manuel P. Barcelona, disapproved the record on appeal, upon the ground that the decision sought to be appealed from had become final and executory fifteen (15) days after notice of said decision, the case being one of certiorari, not injunction, as contended by Pamintuan and declared by Judge Enriquez. Judge Barcelona having refused to reconsider its aforementioned view, Pamintuan thereupon filed with the Court of Appeals a petition docketed as CA-G.R. No. 30156-R for a writ of certiorari and mandamus against Judge Barcelona as well as the Sheriff of Manila and Valeriano, to compel approval of the aforementioned record on appeal, upon the ground that Civil Case No. 44410 is an injunction case, not one for certiorari, and that Pamintuan had, accordingly, thirty (30) days from notice, within which to appeal from the decision therein rendered. However, on December 29, 1961, the Court of Appeals rendered a decision sustaining the view of Judge Barcelona and, consequently, dismissing Pamintuan's petition for certiorari and mandamus. A reconsideration of this decision of the Court of Appeals having been denied, Pamintuan now seeks a review thereof by certiorari. The only question we are called upon to resolve is the nature of the cause of action set forth in Pamintuan's complaint in said case No. 44410. Respondent Judge and the Court of Appeals held that it was one for certiorari because Pamintuan impugned therein the jurisdiction of the municipal court of issue the aforementioned alias writ of execution. it is well settled, however, that the nature of an action is determined by the allegations of the pleadings therein. Pamintuan's complaint in case No. 44410 contained, however, no allegation, either express or implied, assailing the jurisdiction of the municipal court to issue said alias writ of execution. There are in the complaint none of the allegations required in petitions for certiorari, namely, an act performed without jurisdiction or in excess of jurisdiction or with the grave abuse of discretion, amounting to

PEDRO D. PAMINTUAN, petitioner, vs. HON. COURT OF APPEALS (Third Division), respondent. Appeal by certiorari from a decision of the Court of Appeals. On May 12, 1959, Jose Valeriano commenced in the Municipal Court of Manila Civil Case No. 67399 thereof, against Pedro D. Pamintuan, to eject him from a property of Valerians. In due course, said court rendered judgment on August 3, 1959 sentencing Pamintuan to vacate said property and to pay a sum of money for its use, plus attorney's fees and costs. On September 16, 1960, the Sheriff of Manila ejected Pamintuan from the property and turned it over to Valeriano. Soon later, however, Pamintuan reoccupied the property, allegedly by force. After appropriate proceedings, Pamintuan was, accordingly, adjudged guilty of contempt of court, and sentenced accordingly. Subsequently, on motion of Valeriano, the Municipal Judge ordered the issuance of an alias writ of execution directing the Sheriff to eject Pamintuan once more and to collect from him the amount of the money judgment. Before this writ could be executed, Pamintuan instituted Civil Case No. 44410 of the Court of First Instance of Manila, against Valeriano, as well as the Municipal Judge and the Sheriff. In Pamintuan's complaint, he prayed that judgment be rendered 1. Immediately enjoining the defendants from proceeding with the said order of the Municipal Court ordering the herein plaintiff to vacate within four (4) days from October 1, 1960 the premises in question; 2. After trial making the injunction above-mentioned permanent and ordering the defendant not to eject the herein plaintiff without first filing a suit for ejectment based on the new contract created into between the herein plaintiff and the herein defendant; and 3. Plaintiff further prays for any other relief that may be found just and equitable under the premises.

want of jurisdiction, and absence of a plain, speedy and adequate remedy in the ordinary course of law (Rule 65, Section 1, Rules of Court). Pamintuan merely relied in his complaint, upon a contract he allegedly had with Valeriano, after the rendition of the decision of the municipal court and the partial execution thereof, whereby Valeriano had agreed to re-let and to sell the property in question to Pamintuan. What is more he made in his complaint the allegations peculiar to petitions for injunction, such as, for instance, that the alias writ of execution "would not only cause great and irreparable injury, but will, also, work injustice" to him (see Rule 58, Sections 3 and 5, Rules of Court). In fact, the complaint stated that it was "for injunction" and the decision of Judge Enriquez so characterized it. In other words, the cause of action set forth in Pamintuan's complaint was actually one for injunction, and so was the prayer in said pleading, regardless of whether or not the relief he should have applied for was certiorari, so that he had thirty (30) days from notice to appeal from said decision. The least that can be said, from a strictly technical viewpoint, is that the complaint could be considered as one either of injunction or of certiorari. Since, from the filing of said pleading up to the rendition of the decision on the merits the parties and the court had considered the case as one of injunction, and the Rules of Court shall be "liberally construed in order to promote their object and to assist the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding" (Rule 1, Section 2, Rules of Court), the spirit of the Rules and the interest of justice and fair play would be served by allowing Pamintuan to perfect his appeal within the period prescribed for injunction cases (Alonzo vs. Villamor, 16 Phil. 315; Case vs. Jugo, 77 Phil. 517; International Tobacco Co. vs. Yatco, 55 Off. Gaz. 811). WHEREFORE, the decision of the Court of Appeals is hereby reversed and respondent Judge is, accordingly, directed to approve the record on appeal filed by petitioner herein in said Civil Case No. 44410 of the Court of First Instance of Manila and to certify it to the appellate court, with costs against herein respondent Jose Valeriano. It is so ordered.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-68021 February 20, 1989 HEIRS OF FAUSTA DIMACULANGAN, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and FELIMON UY, respondents. This is a petition for review on certiorari of the July 2, 1984 decision of the Third Special Cases Division, Intermediate Appellate Court, in AC-G.R. SP. No. 01230, entitled "Heirs of Fausta Dimaculangan v. Hon. Baltazar R. Dizon, et al." dismissing for lack of merit the petition for review of the Orders dated June 6, 1983 and July 13, 1983, issued by the Regional Trial Court of Pasay City, Branch CXIII in Civil Case No. 8865-P which in turn affirmed on appeal the October 16, 1980 decision of Hon. Mariano A. Lacsamana, then presiding judge, Pasay City Court, Branch 11, in Civil Case No. 13591, entitled "Felimon Uy v. Fausta Dimaculangan, for Ejectment". Fausta Dimaculangan and her children, petitioners herein, occupy by lease an apartment located at No. 2490 E. Zamora St., Pasay City, at a monthly rental of P260.00. They have been living in said premises since 1961. To augment its income, the family maintains therein a sari-sari store and bakes hot pan de sal to sell to the general public. The capital investment involved is claimed to be P3,200.00 only. On July 5, 1978, private respondent Felimon Uy sent Fausta Dimaculangan a registered letter informing her that the property which she has been occupying has been sold to him and should she desire to continue occupying the same, she should sign a contract of lease for a period of two (2) years at a monthly rental of P1,500.00. Receiving no reply to his letter, the private respondent sent a second one, demanding payment of P750.00 covering unpaid rentals for the months of August, September and October, 1978 but still he received no answer to his-demand. Thus, he filed with the City Court of Pasay City a complaint for ejectment 1 praying, among others, that said court render judgment ordering Fausta Dimaculangan and all persons claiming rights under her to vacate the leased premises. In her answer with compulsory counterclaim, 2 Fausta Dimaculangan admitted that she received plaintiff's letter of July 5, 1978 but claimed that she sent plaintiff a reply which was however returned undelivered because plaintiff distorted his address. She denied having been in default in her monthly rentals to the plaintiff, and alleged that she has never been in default during the entire period of her occupancy of the premises since 1961 up to the present. In fact she tried to pay the plaintiff who did not want to collect the monthly rentals, even in the form of money orders which were however, returned unclaimed. She countered that the filing of the complaint was just a

scheme to compel her to agree to the capricious and whimsical demand for an unconscionable increase in the monthly rental from P250.00 to P1,500.00, in clear violation of the provisions of P.D. No. 20, as amended. She further alleged that when she received the plaintiff s letter of October 3, 1978, she caused the payment of the rentals for August, September and October, 1978. Defendant Fausta Dimaculangan prayed to the trial court that the complaint be dismissed and a favorable judgment be rendered in her favor. Pending trial of the case, Fausta Dimaculangan died. She was substituted by her children as defendants. After trial, the presiding judge of the City Court of Pasay found that the premises in question is partly residential and partly commercial; that defendant has no arrears and that the latter replied to plaintiff s demand letter and paid by way of money orders her rentals which were however, returned unclaimed. On October 16, 1980, the aforementioned court rendered a decision increasing the monthly rentals and fixing a definite period for the term of the lease, the dispositive portion of which reads: WHEREFORE, AND IN VIEW OF THE FOREGOING, the defendant is hereby ordered to pay the plaintiff the amount of P500.00 per month, as monthly rental from August 1978 to August 1980; defendant shall be granted a Contract of Lease for two (2) years from August 1980 to August 1982 of which the defendant shall pay the plaintiff a monthly rental of P750.00; the party-litigants are ordered to pay the amount of P1,500.00 to their respective counsels by way of attorney's fees; and the party-litigates (sic) shall equally pay the costs of suit. SO ORDERED. 3 On Appeal, the Regional Trial Court, Branch CXIII, Pasay City, affirmed the aforesaid decision of the City Court and denied petitioner's motion for reconsideration. 4 On review by certiorari, the Intermediate Appellate Court, now Court of Appeals, dismissed the petition for lack of merit. 5 Hence, the instant petition for review, raising the following issues for the resolution of this Court: 1. May the trial court in a complaint for ejectment increase the rental agreed upon by the parties, and in the instant case, from the agreed P250.00 to P500.00, and then to P750.00, without violating the provisions of existing laws; 2. May the trial court alter the agreement of the parties by shortening the period of the lease from an indefinite period within

the purview of Presidential Decree No. 20, the law in force at the time, and of the amendatory Batas Pambansa Blg. 25, to a fixed two (2) years; 3. In two dismissing the petition for review, and in effect, affirming the judgments of the Metropolitan Trial Court, and the Regional Trial Court, has the Honorable Intermediate Appellate Court committed a grave abuse of discretion amounting to lack or absence of jurisdiction, or at least a grave reversible error of a question of law, and/or of fact and law, correctible by the instant petition ? 6 It has been established that petitioners have been occupying the leased premises on a verbal contract since 1961 at a monthly rent of P250.00, and that although no fixed period for the duration of the lease has been agreed upon the original lessor and lessee, the rentals were paid monthly. Under the circumstances, there appears to be no dispute that subject contract of lease is covered by P.D. 20 and later by B.P. No. 25. The decisive issue therefore, in this case, is whether or not subject contract of lease is for an indefinite period, for the purpose of applying Presidential Decree No. 20. The pertinent provision of P.D. No. 20 reads: SEC. 4. Except when the lease is for a definite period, the provisions of paragraph (1) of Article 1673 of the Civil Code of the Philippines insofar as they refer to dwelling unit or land on which another's dwelling is located shall be suspended until otherwise provided; but other provisions of the Civil Code and the Rules of Court of the Philippines on lease contracts, insofar as they are not in conflict with the provisions of this act, shall apply. To exempt the lease from the application of P.D. No. 20, it must be one with a definite period. It will be recalled that the agreement between the original lessor and lessee was unwritten, so that it is difficult to determine with certainty the terms and conditions agreed upon. Be that as it may, it is undisputed that the rentals are paid monthly. This Court had already ruled that leases are deemed on a "month-to-month basis", if rentals therefore are paid monthly. 7 Similarly, it is well settled that a lease contract "on a month-to month basis" provides for a definite period and may be terminated at the end of any month. 8 By express exception of P.D. No. 20, judicial ejectment lies when the lease is for a definite period or when the fixed or definite period agreed upon has expired. 9

Even more recently, this Court clarified that "(I)n exempting from suspension ejectments on the ground of the expiration of the lease period, Section 4 of Presidential Decree No. 20 made no distinction between oral and written lease contracts and no distinction may, therefore, be inferred. Consequently, at the time of filing her action the private respondent had a clear and indubitable right to eject the petitioners, the period of the latter's lease expiring at the end of every monthly period ... 10 The Court further pointed out that the Rent Control Law now in force, Batas Pambansa Blg. 877, has erased the distinction between oral and written leases insofar as expiration of the lease period as a ground for judicial ejectment in leases covered by said law, is concerned. 11 In view of the foregoing, there appears to be no necessity to discuss the other issues in this case; more specifically whether or not the trial court may increase the rental and/or alter the period of the lease from an indefinite period to a definite period; both issues having become moot and academic. Citing the case of Mabalot v. Madela Jr. 12 the Court of Appeals ruled that the petition has been rendered moot and academic by the death of the lessee Fausta Dimaculangan, which terminated the lease in her favor. It will be noted however, that in the aforecited case, those seeking to continue in possession of the premises were not the heirs of the lessee but merely members of the lessee's household, which does not apply in the case at bar, where petitioners are the lessee's children. Authorities are of the view that lease is not essentially personal in character, thus the right is transmissible to the heirs. 13 At any rate, the period fixed by respondent Judge which appears acceptable to the lessor has expired in 1982 and has therefore become moot and academic, aside from the fact that with private respondent's conformity, it has become the latter's term which is well within his authority; that is, to terminate the contract and enter into a new one. WHEREFORE, the petition is hereby dismissed for lack of merit, with costs against the petitioner. SO ORDERED.

THIRD DIVISION [G.R. No. 110478[1], October 15, 2007] FERMIN MANAPAT, PETITIONER, VS. COURT OF APPEALS AND NATIONAL HOUSING AUTHORITY, RESPONDENTS. G.R. NO. 116176 DOMINGO LIM, PETITIONER, VS. COURT OF APPEALS AND NATIONAL HOUSING AUTHORITY, RESPONDENTS. G.R. NOS. 116491-503 NATIONAL HOUSING AUTHORITY, PETITIONER, VS. MAXIMO LOBERANES, ELADIO QUIMQUE, CESARIO VEGA, JUANITO SANTOS, ALEJANDRO ORACION AND GONZALO MERCADO, RESPONDENTS. DECISION NACHURA, J.: For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. G.R. No. 110478 assails the May 27, 1993 Decision[2] of the Court of Appeals (CA) in CA-G.R. CV Nos. 10200-10212. G.R. No. 116176 questions the June 28, 1994 Decision [3] of the appellate court in CA-G.R. CV No. 27159. G.R. Nos. 116491-503 assails the March 2, 1994 and the July 25, 1994 Resolutions[4] of the CA also in CA-G.R. CV Nos. 10200-10212. The three-decade saga of the parties herein has for its subject parcels of land forming part of what was originally known as the Grace Park Subdivision in Caloocan City and formerly owned by the Roman Catholic Archbishop of Manila (RCAM) and/or the Philippine Realty Corporation (PRC). The Facts Sometime in the 1960s, RCAM allowed a number of individuals to occupy the Grace Park property on condition that they would vacate the premises should the former push through with the plan to construct a school in the area. The plan, however, did not materialize, thus, the occupants offered to purchase the portions they occupied. Later, as they could not afford RCAMs proposed price, the occupants, organizing themselves as exclusive members of the Eulogio Rodriguez, Jr. Tenants Association, Inc., petitioned the Government for the acquisition of the said property, its subdivision into home lots, and the resale of the subdivided lots to them at a low price.[5] Acting on the associations petition, the Government, in 1963, through the

Land Tenure Administration (LTA), later succeeded by the Peoples Homesite and Housing Corporation (PHHC), negotiated for the acquisition of the property from RCAM/PRC. But because of the high asking price of RCAM and the budgetary constraints of the Government, the latters effort to purchase and/or to expropriate the property was discontinued. RCAM then decided to effect, on its own, the subdivision of the property and the sale of the individual subdivided lots to the public. [6] Petitioners Manapat and Lim and respondents Loberanes, Quimque, Vega, Santos, Oracion and Mercado in these consolidated cases were among those who purchased individual subdivided lots of Grace Park directly from RCAM and/or PRC. [7] A significant turn of events however happened in 1977 when the late President Ferdinand E. Marcos issued Presidential Decree (PD) No. 1072, [8] appropriating P1.2M out of the Presidents Special Operations Funds to cover the additional amount needed for the expropriation of Grace Park. The National Housing Authority (NHA), PHHCs successor, then filed several expropriation proceedings over the already subdivided lots for the purpose of developing Grace Park under the Zonal Improvement Program (ZIP) and subdividing it into small lots for distribution and resale at a low cost to the residents of the area.[9] The following cases were filed by the NHA with the Regional Trial Court (RTC) of Caloocan City: C-6225, C-6226, C-6227, C6228, C-6229, C-6230, C-6231, C-6232, C-6233, C-6234, C-6235, C-6236, C-6237, C-6238, C-6255 and C-6435. [10] After due proceedings, the trial court rendered separate decisions dismissing the expropriation cases, with the exceptions of Cases Nos. C6233 and C-6236 in which it ordered the condemnation of the involved lots.[11] On motion for reconsideration by the NHA in Cases Nos. C-6227, C6228, C-6230, C-6234, C-6235, C-6238 and C-6255, the trial court later amended its decision, set aside its dismissal of the said cases, ordered the condemnation of the involved lots and fixed the amount of just compensation at P180.00 per square meter. In Cases Nos. C-6225, C-6229, C-6231, C-6232, C-6237 and C-6435, the RTC however denied NHAs motion for reconsideration.[12] NHA eventually appealed to the CA the decisions in Cases Nos. C-6225, C6229, C-6231, C-6232, C-6237 and C-6435 on the issue of the necessity of the taking, and the amended ruling in Cases Nos. C-6227, C-6228, C-6230, C-6234, C-6235, C-6238 and C-6255 on the issue of just compensation. [13] The CA consolidated the appeals and docketed them as CA-G.R. CV No. 10200-10212. NHA likewise filed with the CA an appeal from the decision in C-6226, which was docketed as CA-G.R. CV No. 27159. On May 27, 1993, the appellate court rendered its Decision[14] in CA-G.R. CV No. 10200-10212 disposing of the appealed cases as follows: WHEREFORE, premises considered, judgment is hereby rendered: 1) Reversing and setting aside the decisions of dismissal in Cases Nos. C6225, C-6229, C-6231, C-6232, C-6237 and C-6435; and in lieu thereof an order of condemnation is entered declaring that plaintiff-appellant NHA has a lawful right to take the lots involved for the public use described in the

complaints; 2) Affirming the decisions in Case Nos. C-6227, C-6228, C-6234, C-6235, C6238 and C-6255 insofar as said decision granted the expropriation; declaring that plaintiff-appellant NHA has a lawful right to take the lots involved for the public use stated in the complaint; but annulling and setting aside the just compensation fixed by the trial court at P180.00 per square meter in the said cases; 3) Ordering the remand of all the appealed cases, except for Case No. C6230, to the trial court for determination of the just compensation to which defendants are entitled in accordance with Rule 67 of the Revised Rules of Court; 4) Finding the compromise agreement in Case No. C-6230, entitled, NHA v. Aurora Dy dela Costa, et al. in accordance with law, and not contrary to morals or public policy, and rendering judgment in accordance therewith; 5) Ordering Remedios Macato to be joined as defendant with Julia C. Diaz in Case No. C-6227. No pronouncement as to costs. SO ORDERED. [15] Rosemarie and Dolores Guanzon, two of the owners of the lots in C-6225, filed before this Court a petition for review on certiorari of the aforesaid decision of the appellate court [Their petition was docketed as G.R. Nos. 110462-74]. On September 5, 1994, we dismissed their petition for failure to sufficiently show that the CA had committed any reversible error in the challenged decision.[16] An Entry of Judgment was issued on February 2, 1995.[17] Likewise, Julia Diez and Remedios Macato, the owners of the lots in C-6227, assailed before us the afore-quoted CA decision through a petition under Rule 45. On July 28, 1993, however, in G.R. No. 110770, we denied their Motion for Extension of Time to file a petition for review on certiorari for their failure to submit an affidavit of service of the motion as required by Circular No. 19-91.[18] After denying their motion for reconsideration, [19] we issued an Entry of Judgment on August 27, 1993. [20] Petitioner Manapat, the defendant-landowner in C-6229, also elevated the case before us via a petition for review on certiorari docketed as G.R. No. 110478.[21] We initially dismissed this petition for having been filed out of time,[22] but we reinstated it on motion for reconsideration. [23] In the meantime, the other defendants-landowners in the expropriation casesRCAM/PRC in C-6225, Maximo Loberanes and Eladio Quimque in C6231, Alejandro Oracion, Gonzalo Mercado, Cesario Vega and Juanito Santos in C-6435, and Remedios Macato in C-6227moved for the reconsideration of the said May 27, 1993 Decision of the CA. [24] In the

March 2, 1994 Resolution,[25] the appellate court resolved the motions in this wise: WHEREFORE, premises considered, the motion for reconsideration of movants Roman Catholic Archbishop of Manila and Philippine Realty Corporation (in Special Civil Action No. 6225) and movant-intervenor Remedios Macato (in Special Civil Action No. 6227) are DENIED. The motions for reconsideration of movants Gonzalo Mercado, Cesario Vega and Juanito Santos (in Special Civil Action No. 6435) and movants Maximo Loberanes and Eladio Quimque (in Special Civil Action No. 6231) are GRANTED. The motion for reconsideration of movant Alejandro Oracion (in Special Civil Action No. 6435) is partially granted to the extent of Three Hundred (300) square meters of Lot 22, Block 157. The decision of this Court promulgated May 27, 1993 is accordingly MODIFIED. Lot No. 26, Block No. 157 owned by Cesario Vega and Juanito Santos, and Lot No. 4, Block No. 157 owned by Maximo Loberanes and Eladio Quimque are declared exempt from expropriation and the corresponding complaints for expropriation (sic) DISMISSED insofar as said lots are concerned. Lot No. 22, Block No. 157 owned by movant Alejandro Oracion is declared exempt from expropriation to the extent of Three Hundred (300) square meters. Only the remaining Ninety (90) square meters shall be the subject of expropriation, the portion to be determined by the lower court in the manner most beneficial to the owner and consistent with the objective of PD 1072. SO ORDERED. [26] Aggrieved by the said March 2, 1994 CA Resolution specifically with regard to the exemption from expropriation of the lots of Loberanes, Quimque, Mercado, Vega and Santos, and the partial exemption of the lot of Oracion, NHA moved for the reconsideration of the same. In the subsequent July 25, 1994 Resolution,[27] the appellate court denied NHAs motion, together with the belated motion of Vivencio S. de Guzman, the defendantlandowner in C-6255. The dispositive portion of the July 25, 1994 Resolution reads: WHEREFORE, the motions for reconsideration of defendant-appellant Vivencio S. de Guzman of the decision promulgated May 27, 1993 and of plaintiff-appellant National Housing Authority of the resolution promulgated March 2, 1994 are DENIED. SO ORDERED. [28] With the denial of its motion for reconsideration, NHA filed with this Court a Consolidated Petition for Review[29] under Rule 45, as aforesaid, assailing the March 2, 1994 and the July 25, 1994 Resolutions of the appellate court. NHAs petition was docketed as G.R. Nos. 116491-503 against respondents Loberanes and Quimque (in C-6231), Vega, Santos, Oracion and Mercado (in C-6435). In a separate development, the CA, on June 28, 1994, rendered its Decision[30] in CA-G.R. CV No. 27159, reversing the RTCs ruling in C6226. The fallo of the decision reads:

WHEREFORE, FOREGOING PREMISES CONSIDERED, the appealed decision dated October 29, 1986 is hereby REVERSED for want of merit. Let the record of this case be remanded to the court of origin for further proceedings. IT IS SO ORDERED.[31] Discontented with the appellate courts ruling, petitioner Domingo Lim, one of the owners of the lots subject of C-6226, elevated the case to us via a petition for review on certiorari docketed as G.R. No. 116176.[32] The Issues Thus, for resolution by this Court are the following consolidated cases: (1) G.R. No. 110478 of Manapat; (2) G.R. Nos. 116491-503 of the NHA; and (3) G.R. No. 116176 of Lim. In G.R. No. 110487, petitioner Manapat argues in the main that, as he is also a member of the tenant association, the beneficiary of the expropriation, it would be incongruous to take the land away from him only to give it back to him as an intended beneficiary. Accordingly, the CA, in its May 27, 1993 Decision in CA-G.R. CV No. 10200-10212, should not have allowed the expropriation of his lot. To further support his stance, Manapat raises the following grounds: I THE COURT OF APPEALS ERRED IN HOLDING THAT THE ISSUANCE MADE IN THE EXERCISE OF LEGISLATIVE POWER, SPECIFYING THE LOTS TO BE EXPROPRIATED AND THE PURPOSE FOR WHICH THEY ARE INTENDED, REMOVES FROM THE JUDICIARY THE DETERMINATION OF THE NECESSITY OF THE TAKING, THERE BEING NO SHOWING OF ABUSE OF DISCRETION. [33] II SUPERVENING EVENT RENDERS IMPROPER THE DISPOSITION BY THE COURT OF APPEALS FOR AN ORDER OF CONDEMNATION DECLARING THAT NHA HAS A LAWFUL RIGHT TO TAKE THE LOT OF FERMIN MANAPAT FOR SUPPOSED PUBLIC USE AND FOR REMAND OF HIS CASE TO THE TRIAL COURT FOR DETERMINATION OF JUST COMPENSATION. [34] III THE COURT OF APPEALS SHOULD HAVE CONSIDERED THAT FERMIN MANAPAT IS NOT ONLY A BONA FIDE OCCUPANT IN THE GRACE PARK SUBDIVISION FOR PURPOSES OF P.D. 1072 BUT LIKEWISE HAS A TRANSFER CERTIFICATE OF TITLE NO. 42370 OF THE REGISTRY OF DEEDS FOR THE CITY OF CALOOCAN OVER THE SAME LOT SOUGHT TO BE EXPROPRIATED WHICH SHOULD NOT BE SUBJECT TO COLLATERAL ATTACK AS DISPOSED BY THE COURT OF APPEALS.[35] IV

THE COURT OF APPEALS SHOULD HAVE CONSIDERED THAT THE EVENTUAL BENEFICIARIES OF ITS BENEVOLENT EXPROPRIATION ARE SQUATTERS. [36] NHA, in its petition in G.R. Nos. 116491-503, primarily contends that the CA erred when it issued its March 2, 1994 Resolution and modified the May 27, 1993 Decision in CA-G.R. CV No. 10200-10212 to the extent that it applied retroactively Article VI, Section 10 of Republic Act (R.A.) No. 7279, thus exempting from expropriation the 300-sq m lots of respondents Loberanes, Quimque, Vega, Santos, Oracion and Mercado. NHA summarized its arguments as follows: I The Honorable Court of Appeals erred in applying retroactively Article VI, Section 10 of Republic Act No. 7279 to the subject expropriation cases instituted back in 1977 by petitioner-appellant NHA. [37]

A. Republic Act 7279 passed in 1992 should operate prospectively

and, therefore, should not be given retroactive effect. [38] Republic Act 7279 is a substantive and penal law with a penalty clause which cannot apply retroactively especially to pending actions.[39]

B. Republic Act No. 7279 and PD 1072 are not in pari materia.[40]
The retroactive application of Article VI, Section 10 of RA 7279 will affect vested rights of petitioner-appellant NHA arising from its exercise of the power of eminent domain.[41] II The Honorable Court of Appeals erred in ignoring the impractical consequences resulting from a selective expropriation of lots.[42] In G.R. No. 116176, petitioner Lim, a non-member of the tenant association who bought from RCAM/PRC four lots of the subdivided Grace Park Subdivision,[43] argues as follows: 1 Respondent NHA may not, as it would herein, legally re-group several smaller lots into which a much bigger lot had previously been subdivided, and consider and treat them as one again for the purpose of subdividing it once more into still smaller lots for distribution to its supposed or intended beneficiaries.[44] 2 There really was no genuine necessity for the expropriation of the lots in question to satisfy the purpose thereof as alleged in the complaint therefor.[45]

petitions are private property. Thus, the first requisite is satisfied. 3 Respondent Court did not sustain the clear finding of the trial court that no evidence sufficient to prove its claim that the expropriation of said lots and subdividing them again into much smaller lots for resale to their present occupants would provide the latter with more healthful, decent and peaceful surroundings and thus improve the quality of their lives was ever presented by respondent NHA.[46] Stripped of non-essentials, the petitions raise only one fundamental issue, and that is, whether the NHA may validly expropriate the parcels of land subject of these cases. The Courts Ruling The power of eminent domain is an inherent and indispensable power of the State. Also called the power of expropriation, it is described as the highest and most exact idea of property remaining in the government that may be acquired for some public purpose through a method in the nature of a compulsory sale to the State. [47] By virtue of its sovereign character, the exercise of the power prevails over the non-impairment clause,[48] and is clearly superior to the final and executory judgment rendered by a court in an ejectment case. [49] Being inherent, the power need not be specifically conferred on the government by the Constitution. Section 9, Article III of the Constitution, which mandates that private property shall not be taken for a public use without just compensation, merely imposes a limit on the governments exercise of the power and provides a measure of protection to the individuals right to property. [50] Just like its two companion fundamental powers of the State, [51] the power of eminent domain is exercised by the Legislature. However, it may be delegated by Congress to the President, administrative bodies, local government units, and even to private enterprises performing public services.[52] Albeit the power partakes of a sovereign character, it is by no means absolute. Its exercise is subject to limitations, one of which is, precisely, Section 9, Article III of the Constitution. Over the years and in a plethora of cases, this Court has recognized the following requisites for the valid exercise of the power of eminent domain: (1) the property taken must be private property; (2) there must be genuine necessity to take the private property; (3) the taking must be for public use; (4) there must be payment of just compensation; and (5) the taking must comply with due process of law.[53] Accordingly, the question that this Court must resolve is whether these requisites have been adequately addressed. It is incontrovertible that the parcels of land subject of these consolidated With respect to the second, it is well to recall that in Lagcao v. Judge Labra, [54] we declared that the foundation of the right to exercise eminent domain is genuine necessity, and that necessity must be of a public character. As a rule, the determination of whether there is genuine necessity for the exercise is a justiciable question.[55] However, when the power is exercised by the Legislature, the question of necessity is essentially a political question. [56] Thus, in City of Manila v. Chinese Community,[57] we held: The legislature, in providing for the exercise of the power of eminent domain, may directly determine the necessity for appropriating private property for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well-settled that the utility of the proposed improvement, the extent of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected and the consequent necessity of taking the land selected for its site, are all questions exclusively for the legislature to determine, and the courts have no power to interfere, or to substitute their own views for those of the representatives of the people. In the instant cases, the authority to expropriate came from Presidential Decree No. 1072, issued by then President Ferdinand E. Marcos in 1977. At that time, and as explicitly recognized under the 1973 Constitution, President Marcos had legislative powers. Perforce, the expropriation of the subject properties identified with specificity in the P.D. --- was directed by legislation. The issue of necessity then assumed the nature of a political question. As to the third requisite of public use, we examine the purpose for which the expropriation was undertaken by NHA. As set forth in its petition, NHA justifies the taking of the subject property for the purpose of improving and upgrading the area by constructing roads and installing facilities thereon under the Governments zonal improvement program and subdividing them into much smaller lots for distribution and sale at a low cost to qualified beneficiaries, mostly underprivileged long-time occupants of Grace Park. Around 510 families with approximately 5 members each will be benefited by the project.[58] The only remaining obstacle in the completion of this project is the lots subject of these consolidated petitions as the other lots in Grace Park have already been expropriated. [59] The Zonal Improvement Program (ZIP), being implemented for government by NHA, draws breath from policy mandates found in the 1987 Constitution.[60] It is an integral part of the governments socialized housing program which, in Sumulong v. Guerrero,[61] we deemed compliant with the public use requirement, it being a program clearly devoted to a public purpose. Justice Irene R. Cortes, speaking eloquently for the Court, said: Socialized housing is defined as, the construction of dwelling units for the middle and lower class members of our society, including the construction of the supporting infrastructure and other facilities (Pres.

Decree No. 1224, par. 1). This definition was later expanded to include among others: a) The construction and/or improvement of dwelling units for the middle and lower income groups of the society, including the construction of the supporting infrastructure and other facilities; b) Slum clearance, relocation and resettlement of squatters and slum dwellers as well as the provision of related facilities and services; c) Slum improvement which consists basically of allocating homelots to the dwellers in the area or property involved, rearrangement and re-alignment of existing houses and other dwelling structures and the construction and provision of basic community facilities and services, where there are none, such as roads, footpaths, drainage, sewerage, water and power system, schools, barangay centers, community centers, clinics, open spaces, parks, playgrounds and other recreational facilities; d) The provision of economic opportunities, including the development of commercial and industrial estates and such other facilities to enhance the total community growth; and e) Such other activities undertaken in pursuance of the objective to provide and maintain housing for the greatest number of people under Presidential Decree No. 757. (Pres. Decree No. 1259, sec. 1) xxxx Specifically, urban renewal or redevelopment and the construction of lowcost housing is recognized as a public purpose, not only because of the expanded concept of public use but also because of specific provisions in the Constitution. The 1973 Constitution made it incumbent upon the State to establish, maintain and ensure adequate social services including housing [Art. II, sec. 7]. The 1987 Constitution goes even further by providing that: The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. [Art. II, sec. 9] The state shall, by law, and for the common good, undertake, in cooperation with the private sector, a continuing program of urban land reform and housing which will make available at affordable cost decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement areas. It shall also promote adequate employment opportunities to such citizens. In the implementation of such program the State shall respect the rights of small property owners. (Art. XIII, sec. 9, Emphasis supplied) Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and significantly affects public health, safety, the environment and in sum, the general welfare. The public character of housing measures does not change because units in housing projects

cannot be occupied by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not possible to provide housing for all who need it, all at once. Population growth, the migration to urban areas and the mushrooming of crowded makeshift dwellings is a worldwide development particularly in developing countries. So basic and urgent are housing problems that the United Nations General Assembly proclaimed 1987 as the International Year of Shelter for the Homeless to focus the attention of the international community on those problems. The General Assembly is [s]eriously concerned that, despite the efforts of Governments at the national and local levels and of international organizations, the living conditions of the majority of the people in slums and squatter areas and rural settlements, especially in developing countries, continue to deteriorate in both relative and absolute terms. [G.A. Res. 37/221, Yearbook of the United Nations 1982, Vol. 36, p. 1043-4] In the light of the foregoing, this Court is satisfied that "socialized housing" falls within the confines of "public use". It is, particularly important to draw attention to paragraph (d) of Pres. Dec. No. 1224 which should be construed in relation with the preceding three paragraphs. Provisions on economic opportunities inextricably linked with low-cost housing, or slum clearance, relocation and resettlement, or slum improvement emphasize the public purpose of the project. [62] It need only be added, at this juncture, that the public use requisite for the valid exercise of the power of eminent domain is a flexible and evolving concept influenced by changing conditions. At present, it may not be amiss to state that whatever is beneficially employed for the general welfare satisfies the requirement of public use. [63] Still, petitioner Manapat insists that, being himself a beneficiary of the expropriation (because he has been a long-time resident of Grace Park), it would be incongruous for government to take his land away from him only to give it back to him. This contention sadly fails to comprehend the public purpose for the taking under the socialized housing program. The parcels of land subject of the expropriation are, precisely, being taken so that they can be subdivided into much smaller lots --- at an average of 66.5 square meters per lot[64] --- for distribution to deserving dwellers in the area. Upon the completion of the project, Manapat, and those similarly situated as he, cannot assert any right to be awarded the very same lots they currently occupy, nor be entitled to the same area of the land they now have. Then, we have petitioner Lim and respondents Vega, Santos, Oracion, and Mercado, who argue that the lots they own should not be expropriated are already titled in their names and are very small in area, being already the subdivided portions of the original Grace Park Subdivision. We are not persuaded. J. M. Tuason & Co., Inc. v. Land Tenure Administration[65] is instructive. In that case, this Court adopted the dissenting opinion of Justice J. B. L. Reyes

in Republic v. Baylosis,[66] that the propriety of exercising the power of eminent domain cannot be determined on a purely quantitative or area basis, given that the Constitution speaks of lands, not of landed estates. Speaking through Justice (later Chief Justice) Enrique M. Fernando, the Court said: This is not to say of course that property rights are disregarded. This is merely to emphasize that the philosophy of our Constitution embodying as it does what Justice Laurel referred to as its nationalistic and socialist traits discoverable upon even a sudden dip into a variety of [its] provisions although not extending as far as the destruction or annihilation of the rights to property, negates the postulate which at one time reigned supreme in American constitutional law as to their well-nigh inviolable character. This is not so under our Constitution, which rejects the doctrine of laissez faire with its abhorrence for the least interference with the autonomy supposed to be enjoyed by the property owner. Laissez faire, as Justice Malcolm pointed out as far back as 1919, did not take too firm a foothold in our jurisprudence. Our Constitution is much more explicit. There is no room for it for laissez faire. So Justice Laurel affirmed not only in the above opinion but in another concurring opinion quoted with approval in at least two of our subsequent decisions. We had occasion to reiterate such a view in the ACCFA case, decided barely two months ago. This particular grant of authority to Congress authorizing the expropriation of land is a clear manifestation of such a policy that finds expression in our fundamental law. So is the social justice principle enshrined in the Constitution of which it is an expression, as so clearly pointed out in the respective dissenting opinions of Justice J.B.L. Reyes and Chief Justice Paras in the Baylosis case. Why it should be thus is so plausibly set forth in the ACCFA decision, the opinion being penned by Justice Makalintal. We quote: The growing complexities of modern society, however, have rendered this traditional classification of the functions of government quite unrealistic, not to say obsolete. The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally, and only because it was better equipped to administer for the public welfare than is any private individual or group of individuals, continue to lose their well-defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself in its declaration of principle concerning the promotion of social justice. In a more recent decision, [67] we had occasion to declare that the fact that the property is less than -hectare and that only a few would actually benefit from the expropriation does not diminish its public use character, inasmuch as public use now includes the broader notion of indirect public benefit or advantage, including in particular, urban land reform and housing. The Courts departure from the land size or area test finds further

affirmation in its rulings in Mataas na Lupa Tenants Association, Inc. v. Dimayuga [68] and the aforecited Sumulong v. Guerrero.[69] Given this discussion, it is clear that public use, as a requisite for the exercise of eminent domain in the instant cases, has been adequately fulfilled. To satisfy the fourth requisite, we affirm the appellate courts disposition that the subject cases be remanded to the trial court for the determination of the amount of just compensation. Under case law, the said determination is a judicial prerogative.[70] As to the observance of the fifth requisite, the due process clause, in the expropriation proceedings, all the parties have been given their day in court. That they are now before this Court is attestation enough that they were not denied due process of law. From the foregoing disquisitions, it is unmistakable that all the requirements for the valid exercise of the power of eminent domain have been complied with. Thus, our answer to the singular and fundamental issue in these consolidated cases is: YES, the NHA may validly expropriate the subject parcels of land. One final matter: the propriety of the application by the CA of R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992. The Court is not unaware of the condition now imposed by R.A. No. 7279[71] that, for purposes of urban development and housing under the Act, where expropriation is resorted to, parcels of land owned by small property owners shall be exempted. [72] Small property owners are owners of residential lands with an area not exceeding 300 sq m in highly urbanized cities and 800 sq m in other urban areas and who do not own any other real property.[73] Invoking this limitation under the said law, the appellate court in the questioned rulings exempted from expropriation the lots owned by Loberanes, Quimque, Mercado, Vega and Santos, and partially exempted the lot of Oracion. The CAs ruling on this point is incorrect. R.A. No. 7279 was enacted in 1992, almost two decades after the expropriation cases against the property owners herein were instituted with the RTC in 1977. Nova constitutio futuris formam imponere debet, non praeteritis. A new statute should affect the future, not the past. The law looks forward, not backward. [74] Article 4 of the Civil Code even explicitly declares, (l)aws shall have no retroactive effect, unless the contrary is provided. [75] In these consolidated cases, the Court finds that the language of R.A. No. 7279 does not suggest that the Legislature has intended its provisions to have any retroactive application. On the contrary, Section 49 of the said law indicates that it shall take effect upon its publication in at least two (2) national newspapers of general circulation. [76] The laws prospective application being clearly stated, the Court cannot agree with the disposition of the appellate court that the subject lots not exceeding 300 sq m are exempt from expropriation.

WHEREFORE, PREMISES CONSIDERED, the May 27, 1993 Decision of the Court of Appeals in CA-G.R. CV No. 10200-10212 and the June 28, 1994 Decision in CA-G.R. CV No. 27159 are AFFIRMED; and the March 2, 1994 and the July 25, 1994 Resolutions in CA-G.R. CV Nos. 10200-10212 are REVERSED and SET ASIDE. SO ORDERED.