G.R. No.

L-17455 August 31, 1964

ROMAN OZAETA, plaintiff-appellee, vs. SEBASTIAN C. PALANCA and LIBERTY
INS. CORP., defendants; SEBASTIAN C. PALANCA, defendant-appellant.

FACTS: On June 24, 1956, Sebastian Palanca executed with, and in favor of his
co-heirs, a Deed of Assignment over his shares in the estate of his father and late
sister Marciana Palanca de Santos under terms and conditions, in consideration of the
adjudication and transfer of certain properties in Sorsogon. In Special Proceeding No.
12126, said Deed of Assignment was approved on July 3, 1956 and Roman Ozaeta,
the executor of the testate intestate of Carlos Palanca y Tanguinlay, was directed to
deliver the properties to Sebastian. Pursuant to the court order, Ozaeta executed a
Deed of Conveyance of the subject property in favor of Sebastian. Thereafter, Palanca
filed a case against Ozaeta before the CFI of Manila. On June 29, 1959, the first and
second counterclaim of such case was dismissed for failure to state a cause of action.
Sebastian then appealed to the Court of Appeals, which certified the case to the
Supreme Court because it involves a question of law.

In summary, Palancas first counterclaim states that as a result of the Ozaetas
failure to transfer and convey certain properties, free from all liens and encumbrances
(as such properties are in the name and actual possession of third parties), Palanca
was deprived of ownership and possession. His second counterclaim states that
several properties, which were not conveyed and delivered to him, have been planted
with coconuts, abaca and rice, consisting of a total area of approximately 150 hectares.
Due to Ozaetas failure to convey and deliver the title and possession of such land, he
was unable to collect the yearly harvest estimated at Php75, 000.00 from and after July
1956 and until Ozaeta shall have delivered said properties free from all liens and
encumbrances.

ISSUES: (1) Is there a cause of action against Ozaeta, in his capacity as an
executor of Carlos Palancas estate?

(2) More importantly, is adverse possession by third parties considered
an encumbrance?

RULING:

(1) None. The court ruled that there is no cause of action against Roman
Ozaeta, in his capacity as executor in Special Proceeding No. 12126, since he was not
a party to the Deed of Assignment. Ozaetas participation relative to the contract was
merely to comply with the order of the probate court.
The remedy of Sebastian Palanca, if any, lies only against the persons with
whom he has contracted the Deed of Assignment.
(2) No. Adverse possession by another is not considered as an encumbrance
in law, and does not go against the condition that the subject property be free from
encumbrance (Yuson, et al. v. Diaz, 42 Phil. 22). Adverse possession cannot also be regarded
as a lien, which indicates security for a claim (Shanghai Banking Corp. v. Rafferty, 39 Phil. 145).
WHEREFORE, the order appealed from is affirmed. Costs against appellant,
Sebastian C. Palanca.