FIRST DIVISION

[G.R. No. 180683. June 1, 2011.]

AURORA L. TECSON, SPOUSES JOSE L. TECSON and LEONILA TECSON, petitioners, vs.
MINERVA, MARIA, FRANCISCO, AGUSTINA, JOSE, ROMUALDO, ELIZABETH and VICTOR, all
surnamed FAUSTO, and ISABEL VDA. DE FAUSTO, respondents.
DECISION
PEREZ, J p:
For Review 1 are the Decision 2 dated 12 December 2006 and Resolution 3 dated 2 October 2007 of
the Court of Appeals in CA-G.R. CV No. 70303. In the said decision and resolution, the Court of
Appeals reversed the Regional Trial Court (RTC), Branch 19 of Pagadian City 4 thereby allowing the
respondents to recover four hundred fifty-seven (457) square meters of land from Transfer Certificate of
Title (TCT) No. T-4,342 in the name of petitioner Jose Tecson. The decretal portion of the decision of
the appellate court reads: 5
WHEREFORE, in the light of the foregoing, the appeal is hereby GRANTED. The assailed decision is
hereby REVERSED and SET ASIDE.
Defendant-appellee Atty. Jose L. Tecson is entitled only to 507 square meters under Lot 2189-A; he is
DIRECTED to reconvey, within thirty (30) days from notice, the excess of 457 square meters thereof to
herein plaintiff-appellants in order to restore the latter's original area of 508 square meters under Lot
2189-B pursuant to Exhibit "B" (Subdivision Plan Psd-09-06-000110 dated March 25, 1974) and Exhibit
"C" (the Agreement of Partition dated April 15, 1974). Failure on his part to reconvey the aforesaid 457
square meters within the period prescribed thereto, the Clerk of Court of RTC, Branch 19, Pagadian
City, is hereby directed to cause the transfer of the same in favor of herein plaintiff-appellants pursuant
to Section 10, Rule 39 of the Rules of Court. THCSAE
Defendant-appellees Aurora L. Tecson and Atty. Jose L. Tecson are directed to pay, jointly and
severally, plaintiff-appellants the following:
a.) P200,000 as moral damages;
b.) P10,000 as exemplary damages; and
c.) P20,000 as attorney's fees.
The antecedents of this case are as follows:
Sometime in 1945, Atty. Agustin Fausto (Atty. Fausto) acquired in co-ownership with his sister,
Waldetrudes Fausto-Nadela (Waldetrudes), Lot 2189 a one thousand fifteen (1,015) square meter
parcel of land situated at Jose Zulueta Street corner National Highway in Pagadian City, Zamboanga
Del Sur. 6 In 1953, Atty. Fausto constructed his house on a portion of the said lot. 7
In 1970, following a cadastral proceeding, Atty. Fausto and Waldetrudes were recognized as co-owners
of Lot 2189. Consequently, Original Certificate of Title (OCT) No. 734 8 covering Lot 2189 was issued
in the names of:
[I]n undivided shares, Waldetrudes Fausto, married to Leon Nadela; and Agustin Fausto, married to
Isabel Pareja, . . . .
Not long after, Atty. Fausto and Waldetrudes decided to partition Lot 2189. For this purpose,
Waldetrudes hired one Engr. Ernesto D. Aguilar (Engr. Aguilar) to prepare a subdivision plan for the lot.
On 25 March 1974, Engr. Aguilar prepared subdivision plan Psd-09-06-000110 (First Plan) 9 that
divided Lot 2189 into two (2) lots, i.e., Lot 2189-A with an area of 507 square meters, and Lot 2189-B
with an area of 508 square meters. An illustration of the First Plan shows this division: cEHITA
An illustration of the First Plan will further highlight these changes:

On 6 April 1974, the Regional Director of the Bureau of Lands approved the First Plan.
On 15 April 1974, Atty. Fausto and Waldetrudes formalized their decision to subdivide Lot 2189 by
executing an Agreement of Partition. 10 Under this agreement (First Partition Agreement), Waldetrudes
was to be given absolute ownership over Lot 2189-A, while Atty. Fausto was to be conferred separate
dominion over Lot 2189-B. 11 The First Partition Agreement, however, was never registered with the
Register of Deeds.
On 14 March 1975, Atty. Fausto died. He was survived by herein respondents, who are his wife 12 and
children. 13
On 7 July 1977, however, Waldetrudes entered into a Contract to Sell 14 with herein petitioner Aurora
L. Tecson (Aurora). In it, Waldetrudes undertook to sell, among others, her "ideal share" in Lot 2189 to
Aurora upon full payment of the purchase price. 15
On 28 July 1977, Engr. Aguilar prepared a second subdivision plan (Second Plan) 16 for Lot 2189. The
Second Plan, designated as Psd-268803, drastically altered the division of Lot 2189 under the First
Plan. 17 It introduced the following changes:
1. Waldetrudes' Lot 2189-A with an area of 507 square meters under the First Plan was now Lot
2189-B with an increased area of 964 square meters. 18
2. Atty. Fausto's Lot 2189-B with an area of 508 square meters under the First Plan was now
Lot 2189-A with a decreased area of 51 square meters. 19
An illustration of the Second Plan will further highlight these changes:

The Second Plan was approved by the Land Registration Commission on 12 August 1977.
On 28 September 1977, a second partition over Lot 2189 (Second Partition Agreement) 20 was
executed between the respondents in their capacity as heirs of Atty. Fausto on one hand, and
Waldetrudes on the other. Presumably with the Second Plan as a new basis, the agreement named
Waldetrudes as the owner of Lot 2189-B while the respondents were allocated Lot 2189-A.
On 8 May 1978, Waldetrudes sold Lot 2189-B, with an area of nine hundred sixty-four (964) square
meters, to Aurora. 21 TAIEcS
Meanwhile, it would seem that the Register of Deeds had refused registration of the Second Partition
Agreement in view of the fact that several of the respondents, namely Jose, Romualdo, Elizabeth and
Victor were still minors. 22 Hence, a guardianship proceeding was commenced by respondent Isabel
Vda. de Fausto (Isabel) the wife of Atty. Fausto to secure her appointment as the legal guardian
of her minor children in connection with the Second Partition Agreement. 23
On 28 July 1978, the guardianship court granted Isabel's Petition 24 and, on 17 January 1980, issued
an Order approving the Second Partition Agreement. 25
On 19 February 1980, the following events transpired:
1. The Second Partition Agreement was finally registered with the Register of Deeds. As a
consequence, OCT No. 734 covering Lot 2189 was cancelled and, in lieu thereof, were issued the
following titles:
a. Transfer Certificate of Title (TCT) No. T-4,335 covering Lot 2189-A in the name of Atty.
Fausto; and
b. TCT No. T-4,336 for Lot 2189-B in the name of Waldetrudes. 26
2. The sale of Lot 2189-B in favor of Aurora was likewise registered with the Register of Deeds.
27 Accordingly, the newly issued TCT No. T-4,336 was immediately cancelled and replaced by TCT
No. T-4,338 28 in the name of Aurora.
3. Aurora executed a Deed of Absolute Sale, 29 conveying Lot 2189-B to her brother, herein
petitioner Atty. Jose L. Tecson (Atty. Tecson). TcHEaI
4. On the very same day, the above deed was registered with the Register of Deeds. 30
On 20 February 1980, TCT No. T-4,338 was cancelled. In its place, TCT No. T-4,342 31 was issued,
this time, in the name of Atty. Tecson.
Seven (7) years after, or on 28 May 1987, the respondents filed a Complaint 32 for the Declaration of
Nullity of Documents, Titles, Reconveyance and Damages against Waldetrudes and the petitioners
before the Regional Trial Court (RTC) of Pagadian City. In essence, the respondents seek the recovery
of four hundred fifty-seven (457) square meters of land from TCT No. T-4,342, which they believe was
unlawfully taken from the lawful share of their predecessor-in-interest, Atty. Fausto, in Lot 2189. 33
The respondents allege that Atty. Fausto and Waldetrudes are, in actual fact, co-owners in equal share
of Lot 2189. 34 They insist on the First Partition Agreement as the only true, correct and binding
division of Lot 2189. 35 Hence, Atty. Fausto is entitled not merely to the meager fifty-one (51) square
meter lot actually given to him under the Second Plan and Second Partition Agreement, but to the five
hundred eight (508) square meters of land allotted for him under the original partition. 36
Verily, Waldetrudes could not have sold more than her rightful share of only five hundred seven (507)
square meters. 37 The respondents, thus, ask for the nullification of the sale of Lot 2189-B to the
petitioners, at least with respect to the excess amounting to four hundred fifty-seven (457) square
meters. 38
In the same vein, the respondents impugn the validity and binding effect of the Second Plan and the
ensuing Second Partition Agreement. 39 They denounce the said plan and agreement as mere
handiworks of respondent Atty. Tecson himself in a fraudulent scheme to get a lion's share of Lot 2189.
40 More particularly, the respondents claim that:
1. Atty. Tecson was the one who deceived them into signing the Second Partition Agreement.
41 The respondents say that they were not involved in the preparation of the Second Partition
Agreement. 42 It was only respondent Atty. Tecson who presented them with the said agreement and
who misleadingly told them that it was required to facilitate the sale of Waldetrudes' share. 43 The
respondents explain that they believed Atty. Tecson because he was their long-time neighbor, a close
family friend and, not the least, a respected member of the community being a former governor of the
province. 44
2. The respondents also point out that the Second Partition Agreement did not specify the exact
areas allotted for each component lot, and that they were never furnished with copies of the Second
Plan. 45
3. The Second Plan, which supposedly supplants the First Plan and divides Lot 2189 into two
(2) vastly unequal portions, was prepared without the respondents' knowledge or consent. 46 For which
reason, the Second Plan could not be binding upon them. TacSAE
4. The guardianship proceeding purportedly initiated in the name of respondent Isabel was
actually orchestrated and financed by Atty. Tecson. 47 Atty. Tecson was the one who hired Atty. Fausto
M. Lingating, his former legal adviser during his term as governor, to handle the guardianship case for
and on behalf of Isabel. 48
On 20 October 1988, Waldetrudes, who was originally sued by the respondents as a defendant in the
RTC, executed an affidavit 49 expressing her intent to join the respondents in their cause. In the
mentioned affidavit, Waldetrudes confirmed the allegations of the respondents as follows:
xxx xxx xxx
4. That the truth of the matter is that, my brother the late Agustin Fausto and I are co-owners of
a parcel of land covered by Original Certificate of Title No. 734 of Lot 2189, situated at Gatas District,
Pagadian City, containing an area of 1,015 square meters, more or less, in equal share pro indiviso;
5. That sometimes (sic) in 1974 the late Agustin Fausto and myself agreed to terminate our co-
ownership and have the area surveyed and the same was approved and designated as PSD-09-06-
000110, of which we have executed an agreement of partition on April 15, 1974 apportioning Lot No.
2189-A with an area of 508 square meters in favor of my late brother Agustin Fausto and Lot No. 2189-
B with an area of 507 square meters in my favor;
6. That the aforestated documents were not registered in the Office of the Register of Deeds
until the death of my brother Agustin Fausto on March 14, 1975, however, the papers or documents
involving Lot No. 2189 was kept by me;
7. That due to financial problem especially I am already very old and sickly, I thought of selling
my portion which is Lot 2189-B in favor of Jose L. Tecson, however, in the document the vendee
appears to be the sister of Jose L. Tecson in the person of Aurora L. Tecson;
8. That I do not know later on how Jose L. Tecson maneuvered to have the parcel of land again
surveyed reducing the area of my brother to only 51 square meters, when in truth and in fact the portion
of my late brother has an area of 508 square meters;
9. That while it is true that I sold Jose L. Tecson my portion of Lot 2189-B but the area sold is
only 507 square meters and there is no intention on my part to sell to Jose L. Tecson more than that
area;
10. That several occasion in the past I was made to sign documents by Jose L. Tecson in
relation to the portion sold in his favor, trusting him to be closed (sic) to the family, not knowing later on
that he maneuvered to change the area of my portion from 507 square meters to 964 square meters
encroaching the share of my late brother Atty. Agustin Fausto thereby reducing his area to 51 square
meters;
11. That because of the illegal maneuvering which does not reflect to be my true intention in
selling my share to Jose L. Tecson, I am informing the Honorable Court that I am joining as party
plaintiff in Civil Case No. 2692 in order that the truth will come out and justice will prevail. cDTCIA
On 18 August 1992, the trial court ordered Waldetrudes to be dropped as a party-defendant from the
case and, instead, be impleaded therein as a party-plaintiff. 50
During the trial, Waldetrudes 51 and respondents Romualdo, 52 Minerva 53 and Isabel 54 were able to
testify.
In its decision dated 8 December 2000, the RTC dismissed the complaint of the respondents. 55 The
trial court found no merit in the position of the respondents and considered the petitioners to be
innocent purchasers for value of Lot 2189-B. 56 The dispositive portion of the ruling of the trial court
reads: 57
WHEREFORE, judgment is hereby rendered dismissing the case, and placing defendants spouses
Jose Tecson and Leonila F. Tecson in physical possession of Lot No. 2189-B, with an area of 964
square meters in accordance with the approved subdivision plan on August 12, 1977 of the then Land
Registration Commission; and ordering the plaintiffs to pay defendants:
a. Moral damages in the amount of P30,000.00;
b. Attorney's fee in the amount of P15,000.00;
c. And the cost of litigation expenses in the amount of P5,000.00.
As earlier mentioned, the Court of Appeals reversed the ruling of the trial court on appeal. 58 Hence,
the present appeal by the petitioners.
The primary issue in this appeal is whether the respondents may recover the four hundred fifty-seven
(457) square meters of land from TCT No. T-4,342, registered in the name of petitioner Atty. Tecson.
The petitioners would like this Court to answer in the negative.
The claim of petitioner Atty. Tecson over the entire nine hundred sixty-four (964) square meters of land
covered by TCT No. T-4,342 is intricately linked with the validity of the Second Plan and the Second
Partition Agreement. As a perusal of the facts reveal, TCT No. T-4,342, along with its precursors TCT
Nos. T-4,338 and T-4,336, are but derivates of the division of Lot 2189 fixed by the Second Plan and
the Second Partition Agreement.
Understandably, the petitioners argue in favor of the validity of the Second Plan and the Second
Partition Agreement. 59 They deny Atty. Tecson's participation in the preparation of the said
instruments. 60 The petitioners insist that the Second Plan and the Second Partition Agreement were
voluntary and intelligent deeds of Waldetrudes and the respondents themselves. 61
The petitioners also claim that the Second Plan and the Second Partition Agreement present a more
accurate reflection of the true nature of the co-ownership between Atty. Fausto and Waldetrudes.
Contrary to what the respondents profess, Waldetrudes and Atty. Fausto were not actually co-owners in
equal share of Lot 2189. 62 In truth, the siblings were not even co-owners at all. 63 SEHaDI
According to the petitioners, Lot 2189 was originally the conjugal property of Waldetrudes and her late
husband, Leon Nadela. 64 At the inception, Atty. Fausto was never a co-owner of Lot 2189. 65
Suitably, it was only Waldetrudes who initially declared Lot 2189 for taxation purposes per Tax
Declaration No. 6521. 66
During the cadastral proceedings in 1970, however, Waldetrudes allowed Lot 2189 to be registered in
her name and the name of Atty. Fausto as co-owners. 67 The petitioners claim that Waldetrudes
consented to such a registration only because Atty. Fausto had already constructed his house on a
portion of Lot 2189. 68 The registered co-ownership between Waldetrudes and Atty. Fausto is,
therefore, based merely on the siblings' actual occupancy of Lot 2189. 69
The petitioners point out that the interest of Atty. Fausto in Lot 2189 was only limited to the house he
constructed thereon which, as it happened, lies evenly on the fifty-one (51) square meter portion
eventually assigned to him under the Second Plan and Second Partition Agreement. 70 Hence, the
Second Plan and the Second Partition Agreement must be sustained as perfectly valid instruments.
We are not convinced.
Waldetrudes and Atty. Fausto are Co-owners in Equal Share
After reviewing the arguments and evidence presented in this case, We rule that Waldetrudes and Atty.
Fausto are, indeed, co-owners of Lot 2189. Moreover, We hold that the siblings have equal shares in
the said lot.
First. The mother title of Lot 2189, OCT No. 734, states in no unclear terms that Waldetrudes and Atty.
Fausto were co-owners of the subject lot. The inscription in the original title for Lot 2189 carries more
than sufficient weight to prove the existence of a co-ownership between Waldetrudes and Atty. Fausto.
Second. Other than the bare assertion of the petitioners, there is absolutely no proof on record that
Waldetrudes was the sole beneficial owner of Lot 2189. Tax Declaration No. 6521 simply cannot prevail
over OCT No. 734 as conclusive evidence of the true ownership of Lot 2189. 71
Third. During the cadastral proceeding involving Lot 2189, Waldetrudes herself stated that Atty. Fausto
was a co-owner of the subject lot. The transcript taken from the proceeding shows: 72
Commissioner:
What is your relation with Waldetrudes Fausto who is the claimant of Lot No. 2189 (portion)
of a parcel of land located at Pagadian City and more particularly bounded as follows: On the North by
Lot No. 2190, on the East by Zulueta St., on the South by National Highway and on the West by Gatas
Creek with an area of 1015 sq. meters and a house as a permanent improvement.
A: I am the very one sir.
Q: How did you acquire the said land?
A: I purchase (sic) it from Sofia Vda. Claro in the year 1945 but a copy of the document was
lost.
xxx xxx xxx
Q: Who is your co-owner of this land? IADCES
A: My co-owner is my brother Atty. Agustin Fausto.
Fourth. There was likewise no evidence behind the petitioners' allegation that the registered co-
ownership between Waldetrudes and Atty. Fausto was based on their actual occupancy of Lot 2189.
On the contrary, OCT No. 734 categorically states that Waldetrudes and Atty. Fausto are co-owners "in
undivided share" of Lot 2189. The conspicuous silence of OCT No. 734 as to the definite extent of the
respective shares of Atty. Fausto and Waldetrudes in Lot 2189 gives rise to a presumption that they are
in equal measure. We are at once reminded of Article 485 of the Civil Code, 73 to wit:
Article 485. . . . .
The portions belonging to the co-owners in the co-ownership shall be presumed equal, unless the
contrary is proved.
Fifth. The equality in terms of share in Lot 2189, was affirmed by Waldetrudes when she testified in
open court, to wit: 74
DIRECT EXAMINATION
ATTY. PERALTA
Q: Now considering that you are, you owned that parcel of land jointly with your younger brother
Atty. Agustin Fausto, what is the extent of your ownership?
A: We have co-equal shares sir.
Clearly, the evidence preponderates in favor of the position that Waldetrudes and Atty. Fausto were co-
owners in equal share of Lot 2189.
Second Plan and Second Partition Agreement is Invalid
Having settled the existence and extent of the co-ownership between Waldetrudes and Atty. Fausto,
We next inquire into the validity of the Second Plan and Second Partition Agreement.
We find the Second Plan and Second Partition Agreement to be invalid.
We agree with the findings of the Court of Appeals that Atty. Tecson was behind the execution of the
Second Partition Agreement. 75 It was Atty. Tecson who misled Waldetrudes and the respondents into
signing the Second Partition Agreement without giving them notice of the existence of a Second Plan.
76 As a consequence, Waldetrudes and the respondents were misinformed as to the true nature of the
Second Partition Agreement. These factual findings are adequately supported by the positive
testimonies of respondents Romualdo Fausto, 77 Minerva Fausto 78 and Isabel, 79 to wit:
ROMUALDO'S DIRECT EXAMINATION
ATTY. PERALTA:
Q: Will you please go over if this is the machine copy of the Deed of partition which was brought
to you by Atty. Tecson and requested you to sign the same?
A: Yes sir that is the one. DcTaEH
xxx xxx xxx
Q: When was that Deed of Partition marked as Exhibit "G" presented to you by Atty. Tecson?
A: Early part of 1977. I was already connected with the Provincial Assessor that was the time I
have seen so many Deed of Sale and the area is specified so before I signed I asked Atty. Tecson
where is the area and he told me never mind the area it will be surveyed and I did not insist because I
trusted him very much.
Q: By the time this was presented to you by Atty. Tecson there was no survey of 2189?
A: There was no survey.
xxx xxx xxx
COURT:
This document which you said you were present during the signing of your brothers and
sisters but you cannot remember whether you were present for the others where did you sign this
document?
A: At our house.
COURT:
Who delivered this document to you[r] house?
A: Atty. Tecson.
COURT:
You want to impress this court that when you affixed your signatures in your house Atty.
Tecson was present?
A: Yes sir.
COURT:
After signing what was done to this document?
A: We are not aware of that but we just waited for the survey because Atty. Tecson told us that
the survey follows later.
COURT:
Who kept this document?
A: My Auntie Waldetrudes Nadela.
COURT:
It is clear now that this document was signed in your house and it was kept by your Auntie?
A: Yes, sir. IADaSE
xxx xxx xxx
ATTY. PERALTA:
Q: When Atty. Tecson went your house to request you to sign how did he tell you?
A: He told us just to sign the document and the survey will just follow we just sign the document
without the area and he told us that the area will just follow later.
Q: When you signed the document with your mother, brothers and sisters Atty. Tecson brought
the documents?
A: Yes, sir.
MINERVA FAUSTO'S DIRECT EXAMINATION
ATTY. PERALTA:
Q: Why, at the time when who brought this deed of partition for signature?
A: Jose L. Tecson.
Q: You are referring to one of the defendants, Jose L. Tecson?
A: Yes, sir.
Q: Now, when this was brought by Jose L. Tecson, the defendant Jose L. Tecson, where did he
COURT:
For a moment.
Q: You said that defendant Jose L. Tecson brought that deed of partition. Were you there when
defendant Jose L. Tecson brought that deed of partition?
A: Yes, your Honor.
Q: Where was it brought?
A: In the house.
COURT:
Proceed.
ATTY. PERALTA:
Q: Who were present in your house when this was brought by defendant Jose L. Tecson?
A: Myself, Neneth or Agustin, Romualdo and Jose Fausto. There were four (4) of us when that
deed of partition was brought to the house, myself, my sister Agustina, my brothers Romualdo and
Jose.
Q: Do you want to convey to the Court that when this was brought to you Francisco Fausto,
Victor Fausto and your sister Elizabeth, Maria Fausto were not around when this was brought by Jose
L. Tecson for signature in your house?
A: Yes, sir.
xxx xxx xxx
Q: Why did you sign above the typewritten name of Francisco Fausto knowing that he was not
around?
A: Because defendant Jose L. Tecson told me to affix the signature of Francisco Fausto
because this deed of partition is just to facilitate the transferring (sic) of the title of the land.
xxx xxx xxx
Q: Who signed for her, for and behalf of Maria Lilia Fausto?
A: I signed myself.
Q: Why did you sign for Maria Lilia Fausto?
A: Because Jose L. Tecson told me to sign the document in order that the deed of partition
could be accomplished.
xxx xxx xxx
Q: Now, how about the residence certificates appearing after the name of Agustina Fausto, with
her own residence certificate 3976584 to have been issued January 6, 1977, Pagadian City, and the
Residence Certificate of Jose Fausto which has the same number 3976584 issued on January 6, 1977,
Pagadian City, who placed this residence certificate?
A: All of us sir never exhibited our residence certificates. It was the Tecsons who supplied the
residence certificate numbers. HcSETI
ISABEL'S DIRECT EXAMINATION
ATTY. PERALTA:
Q: Do you remember having signed a Deed of Partition together with some of your children?
A: Yes sir[.] I can remember.
Q: Who brought that Deed of Partition for signature together with some of your children?
A: Governor Tecson.
Q: Were you able to sign the Deed of Partition?
A: I signed that Deed of Partition because according to him "just sign this for purposes of
subdividing the property."
xxx xxx xxx
Q: Do you recall if you have filed guardianship proceeding?
A: I have not remembered having filed a guardianship proceeding.
Q: Have you heard that there was guardianship proceeding?
A: All I can remember about that guardianship proceeding was that when Gov. Tecson let me
sign a guardianship because some of my children were not around.
Q: Do you want to convey to this court that personally you have not filed guardianship
proceeding but it was Governor Tecson who let you sign some documents regarding guardianship?
A: It was Governor Tecson who explained to me to sign that guardianship proceeding because
according to him it will facilitate and I thought that guardianship was only for purposes of being guardian
to my children as a mother.
Indeed, the lack of a plausible explanation why a co-owner would gratuitously cede a very substantial
portion of his rightful share to another co-owner in partition renders the foregoing testimonies more
credible as against the plain general denial of Atty. Tecson. On this point, We find no reversible error on
the part of the Court of Appeals.
The established facts have several legal consequences:
First. The Second Plan, having been prepared without the knowledge and consent of any of the co-
owners of Lot 2189, have no binding effect on them.
Second. The Second Partition Agreement is null and void as an absolute simulation, 80 albeit induced
by a third party. The fraud perpetrated by Atty. Tecson did more than to vitiate the consent of
Waldetrudes and the respondents. It must be emphasized that Waldetrudes and the respondents never
had any intention of entering into a new partition distinct from the First Partition Agreement. The
established facts reveal that Waldetrudes and the respondents assented to the Second Partition
Agreement because Atty. Tecson told them that the instrument was merely required to expedite the
sale of Waldetrudes' share. 81 aDcEIH
In other words, the deceit employed by Atty. Tecson goes into the very nature of the Second Partition
Agreement and not merely to its object or principal condition. Evidently, there is an absence of a
genuine intent on the part of the co-owners to be bound under a new partition proposing a new division
of Lot 2189. The apparent consent of Waldetrudes and the respondents to the Second Partition
Agreement is, in reality, totally wanting. For that reason, the Second Partition Agreement is null and
void.
Third. The Second Partition Agreement being a complete nullity, it cannot be ratified either by the lapse
of time or by its approval by the guardianship court. 82
Fourth. The First Plan and the First Partition Agreement remain as the valid and binding division of Lot
2189. Hence, pursuant to the First Partition Agreement, Waldetrudes is the absolute owner of Lot 2189-
A with an area of only five hundred seven (507) square meters. Atty. Fausto, on the other hand, has
dominion over Lot 2189-B with an area of five hundred eight (508) square meters.
Fifth. Inevitably, Waldetrudes can only sell her lawful share of five hundred seven (507) square meters.
The sales in favor of Aurora and, subsequently, Atty. Tecson, are thereby null and void insofar as it
exceeded the 507 square meter share of Waldetrudes in Lot 2189. Nemo dat quod non habet. 83
Atty. Tecson is not an innocent purchaser for value
The remaining bar to the recovery by the respondents of the excess area held by Atty. Tecson is the
principle of an innocent purchaser for value of land under the Torrens System of Registration.
The petitioners claim that they are bona fide purchasers of the entire nine hundred sixty-four (964)
square meters of land covered by Lot 2189-B with Aurora merely relying on the strength of TCT No.
T-4,336 in the name of Waldetrudes, while Atty. Tecson placing confidence in TCT No. T-4,338 in the
name of Aurora. Both TCT Nos. T-4,336 and T-4,338 define the area of Lot 2189-B as nine hundred
sixty-four (964) square meters. 84 The petitioners allege that at the time they made their respective
purchase, they did not know of the existing partition of Lot 2189 per the First Plan and the First Partition
Agreement. 85
We disagree. The proven facts indicate that Atty. Tecson knew or, at the very least, should have known
that Atty. Fausto and Waldetrudes were co-owners in equal share of Lot 2189. We must be reminded of
the following circumstances:
1. Atty. Tecson was a long-time friend and neighbor of the Faustos. 86 Atty. Tecson himself
testified that he considered Atty. Fausto as a good friend and even admitted that he would sometimes
visit the latter in his house to play mahjong. 87 By this, Atty. Tecson knew that Atty. Fausto has an
actual interest in Lot 2189.
2. Atty. Tecson was the one who presented the Second Partition Agreement to Waldetrudes
and the respondents; 88
3. Waldetrudes and the respondents were not involved in the preparation of the Second
Partition Agreement and, at the time they signed the said agreement, had no knowledge of the
existence of the Second Plan; 89 and
4. The Second Partition Agreement failed to state the specific areas allotted for each
component of Lot 2189 and made no mention of the division proposed by the Second Plan. 90
Being the one behind the execution of the Second Partition Agreement, there is no doubt that Atty.
Tecson knew that Lot 2189 was owned in common by Waldetrudes and Atty. Fausto. This, taken
together with the instrument's unusual silence as to the definite area allotted for each component lot
and the Second Plan, reveals a deliberate attempt on the part of Atty. Tecson to conceal from
Waldetrudes and the respondents the unequal division of Lot 2189.
The necessity to conceal the disproportionate division of Lot 2189 can only be explained by Atty.
Tecson's prior knowledge that such a partition is inherently defective for being contrary to the actual
sharing between Waldetrudes and Atty. Fausto. Atty. Tecson is clearly in bad faith.
Verily, Atty. Tecson cannot be considered as an innocent purchaser of the excess area of Lot 2189-B.
Based on the facts and circumstances prevailing in this case, Atty. Tecson may be charged with actual
notice of the defect plaguing the Second Partition Agreement. The respondents may, therefore,
recover.
WHEREFORE, the petition is hereby DENIED. Accordingly, the appealed Court of Appeals decision in
CA-G.R. CV No. 70303 dated 12 December 2006 is hereby AFFIRMED.
Costs against petitioner. TAIEcS
SO ORDERED.











FIRST DIVISION
[G.R. No. 168732. June 29, 2007.]
NATIONAL POWER CORPORATION, petitioner, vs. LUCMAN G. IBRAHIM, OMAR G. MARUHOM,
ELIAS G. MARUHOM, BUCAY G. MARUHOM, FAROUK G. MARUHOM, HIDJARA G. MARUHOM,
ROCANIA G. MARUHOM, POTRISAM G. MARUHOM, LUMBA G. MARUHOM, SINAB G.
MARUHOM, ACMAD G. MARUHOM, SOLAYMAN G. MARUHOM, MOHAMAD M. IBRAHIM, and
CAIRONESA M. IBRAHIM, respondents.
D E C I S I O N
AZCUNA, J p:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul the
Decision 1 dated June 8, 2005 rendered by the Court of Appeals (CA) in C.A.-G.R. CV No. 57792.
aSTAcH
The facts are as follows:
On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of his
co-heirs Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G.
Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom,
Sinab G. Maruhom, Acmad G. Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa
M. Ibrahim, instituted an action against petitioner National Power Corporation (NAPOCOR) for recovery
of possession of land and damages before the Regional Trial Court (RTC) of Lanao del Sur. ADSTCI
In their complaint, Ibrahim and his co-heirs claimed that they were owners of several parcels of land
described in Survey Plan FP (VII-5) 2278 consisting of 70,000 square meters, divided into three (3) lots,
i.e. Lots 1, 2, and 3 consisting of 31,894, 14,915, and 23,191 square meters each respectively.
Sometime in 1978, NAPOCOR, through alleged stealth and without respondents' knowledge and prior
consent, took possession of the sub-terrain area of their lands and constructed therein underground
tunnels. The existence of the tunnels was only discovered sometime in July 1992 by respondents and
then later confirmed on November 13, 1992 by NAPOCOR itself through a memorandum issued by the
latter's Acting Assistant Project Manager. The tunnels were apparently being used by NAPOCOR in
siphoning the water of Lake Lanao and in the operation of NAPOCOR's Agus II, III, IV, V, VI, VII
projects located in Saguiran, Lanao del Sur; Nangca and Balo-i in Lanao del Norte; and Ditucalan and
Fuentes in Iligan City. ECAaTS
On September 19, 1992, respondent Omar G. Maruhom requested the Marawi City Water District for a
permit to construct and/or install a motorized deep well in Lot 3 located in Saduc, Marawi City but his
request was turned down because the construction of the deep well would cause danger to lives and
property. On October 7, 1992, respondents demanded that NAPOCOR pay damages and vacate the
sub-terrain portion of their lands but the latter refused to vacate much less pay damages. Respondents
further averred that the construction of the underground tunnels has endangered their lives and
properties as Marawi City lies in an area of local volcanic and tectonic activity. Further, these illegally
constructed tunnels caused them sleepless nights, serious anxiety and shock thereby entitling them to
recover moral damages and that by way of example for the public good, NAPOCOR must be held liable
for exemplary damages.
Disputing respondents' claim, NAPOCOR filed an answer with counterclaim denying the material
allegations of the complaint and interposing affirmative and special defenses, namely that (1) there is a
failure to state a cause of action since respondents seek possession of the sub-terrain portion when
they were never in possession of the same, (2) respondents have no cause of action because they
failed to show proof that they were the owners of the property, and (3) the tunnels are a government
project for the benefit of all and all private lands are subject to such easement as may be necessary for
the same. 2 DIESHT
On August 7, 1996, the RTC rendered a Decision, the decretal portion of which reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Denying plaintiffs' [private respondents'] prayer for defendant [petitioner] National Power
Corporation to dismantle the underground tunnels constructed between the lands of plaintiffs in Lots 1,
2, and 3 of Survey Plan FP (VII-5) 2278;
2. Ordering defendant to pay to plaintiffs the fair market value of said 70,000 square meters of
land covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less the area of 21,995
square meters at P1,000.00 per square meter or a total of P48,005,000.00 for the remaining unpaid
portion of 48,005 square meters; with 6% interest per annum from the filing of this case until paid;
3. Ordering defendant to pay plaintiffs a reasonable monthly rental of P0.68 per square meter of
the total area of 48,005 square meters effective from its occupancy of the foregoing area in 1978 or a
total of P7,050,974.40.
4. Ordering defendant to pay plaintiffs the sum of P200,000.00 as moral damages; and
5. Ordering defendant to pay the further sum of P200,000.00 as attorney's fees and the costs.
DIESaC
SO ORDERED. 3
On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion for Execution of Judgment
Pending Appeal. On the other hand, NAPOCOR filed a Notice of Appeal by registered mail on August
19, 1996. Thereafter, NAPOCOR filed a vigorous opposition to the motion for execution of judgment
pending appeal with a motion for reconsideration of the Decision which it had received on August 9,
1996.
On August 26, 1996, NAPOCOR filed a Manifestation and Motion withdrawing its Notice of Appeal
purposely to give way to the hearing of its motion for reconsideration.
On August 28, 1996, the RTC issued an Order granting execution pending appeal and denying
NAPOCOR's motion for reconsideration, which Order was received by NAPOCOR on September 6,
1996.
On September 9, 1996, NAPOCOR filed its Notice of Appeal by registered mail which was denied by
the RTC on the ground of having been filed out of time. Meanwhile, the Decision of the RTC was
executed pending appeal and funds of NAPOCOR were garnished by respondents Ibrahim and his co-
heirs. AHDaET
On October 4, 1996, a Petition for Relief from Judgment was filed by respondents Omar G. Maruhom,
Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G.
Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom asserting as follows:
1) they did not file a motion to reconsider or appeal the decision within the reglementary period
of fifteen (15) days from receipt of judgment because they believed in good faith that the decision was
for damages and rentals and attorney's fees only as prayed for in the complaint;
2) it was only on August 26, 1996 that they learned that the amounts awarded to the plaintiffs
represented not only rentals, damages and attorney's fees but the greatest portion of which was
payment of just compensation which in effect would make the defendant NPC the owner of the parcels
of land involved in the case;
3) when they learned of the nature of the judgment, the period of appeal has already expired;
4) they were prevented by fraud, mistake, accident, or excusable negligence from taking legal
steps to protect and preserve their rights over their parcels of land in so far as the part of the decision
decreeing just compensation for petitioners' properties;
5) they would never have agreed to the alienation of their property in favor of anybody,
considering the fact that the parcels of land involved in this case were among the valuable properties
they inherited from their dear father and they would rather see their land crumble to dust than sell it to
anybody. 4 cHCIDE
The RTC granted the petition and rendered a modified judgment dated September 8, 1997, thus:
WHEREFORE, a modified judgment is hereby rendered:
1) Reducing the judgment award of plaintiffs for the fair market value of P48,005,000.00 by
9,526,000.00 or for a difference by P38,479,000.00 and by the further sum of P33,603,500.00 subject
of the execution pending appeal leaving a difference of 4,878,500.00 which may be the subject of
execution upon the finality of this modified judgment with 6% interest per annum from the filing of the
case until paid.
2) Awarding the sum of P1,476,911.00 to herein petitioners Omar G. Maruhom, Elias G.
Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom,
Portrisam G. Maruhom and Lumba G. Maruhom as reasonable rental deductible from the awarded sum
of P7,050,974.40 pertaining to plaintiffs.
3) Ordering defendant embodied in the August 7, 1996 decision to pay plaintiffs the sum of
P200,000.00 as moral damages; and further sum of P200,000.00 as attorney's fees and costs.
SO ORDERED. 5 AEcTaS
Subsequently, both respondent Ibrahim and NAPOCOR appealed to the CA.
In the Decision dated June 8, 2005, the CA set aside the modified judgment and reinstated the original
Decision dated August 7, 1996, amending it further by deleting the award of moral damages and
reducing the amount of rentals and attorney's fees, thus:
WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED, the Modified
Judgment is ordered SET ASIDE and rendered of no force and effect and the original Decision of the
court a quo dated 7 August 1996 is hereby RESTORED with the MODIFICATION that the award of
moral damages is DELETED and the amounts of rentals and attorney's fees are REDUCED to
P6,888,757.40 and P50,000.00, respectively.
In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess and
determine the additional filing fee that should be paid by Plaintiff-Appellant IBRAHIM taking into
consideration the total amount of damages sought in the complaint vis--vis the actual amount of
damages awarded by this Court. Such additional filing fee shall constitute a lien on the judgment.
SO ORDERED. 6 AacSTE
Hence, this petition ascribing the following errors to the CA:
(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL USE OF THEIR SUBJECT
PROPERTIES TO ENTITLE THEM TO JUST COMPENSATION BY WAY OF DAMAGES;
(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO JUST COMPENSATION BY WAY
OF DAMAGES, NO EVIDENCE WAS PRESENTED ANENT THE VALUATION OF RESPONDENTS'
PROPERTY AT THE TIME OF ITS TAKING IN THE YEAR 1978 TO JUSTIFY THE AWARD OF ONE
THOUSAND SQUARE METERS (P1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS IS
ITSELF IMPROPER.
This case revolves around the propriety of paying just compensation to respondents, and, by extension,
the basis for computing the same. The threshold issue of whether respondents are entitled to just
compensation hinges upon who owns the sub-terrain area occupied by petitioner. EcIaTA
Petitioner maintains that the sub-terrain portion where the underground tunnels were constructed does
not belong to respondents because, even conceding the fact that respondents owned the property, their
right to the subsoil of the same does not extend beyond what is necessary to enable them to obtain all
the utility and convenience that such property can normally give. In any case, petitioner asserts that
respondents were still able to use the subject property even with the existence of the tunnels, citing as
an example the fact that one of the respondents, Omar G. Maruhom, had established his residence on
a part of the property. Petitioner concludes that the underground tunnels 115 meters below
respondents' property could not have caused damage or prejudice to respondents and their claim to
this effect was, therefore, purely conjectural and speculative. 7
The contention lacks merit.
Generally, in an appeal by certiorari under Rule 45 of the Rules of Court, the Court does not pass upon
questions of fact. Absent any showing that the trial and appellate courts gravely abused their discretion,
the Court will not examine the evidence introduced by the parties below to determine if they correctly
assessed and evaluated the evidence on record. 8 The jurisdiction of the Court in cases brought to it
from the CA is limited to reviewing and revising the errors of law imputed to it, its findings of fact being
as a rule conclusive and binding on the Court. cHTCaI
In the present case, petitioner failed to point to any evidence demonstrating grave abuse of discretion
on the part of the CA or to any other circumstances which would call for the application of the
exceptions to the above rule. Consequently, the CA's findings which upheld those of the trial court that
respondents owned and possessed the property and that its substrata was possessed by petitioner
since 1978 for the underground tunnels, cannot be disturbed. Moreover, the Court sustains the finding
of the lower courts that the sub-terrain portion of the property similarly belongs to respondents. This
conclusion is drawn from Article 437 of the Civil Code which provides:
ART. 437. The owner of a parcel of land is the owner of its surface and of everything under it,
and he can construct thereon any works or make any plantations and excavations which he may deem
proper, without detriment to servitudes and subject to special laws and ordinances. He cannot complain
of the reasonable requirements of aerial navigation. HaTAEc
Thus, the ownership of land extends to the surface as well as to the subsoil under it. In Republic of the
Philippines v. Court of Appeals, 9 this principle was applied to show that rights over lands are indivisible
and, consequently, require a definitive and categorical classification, thus:
The Court of Appeals justified this by saying there is "no conflict of interest" between the owners of the
surface rights and the owners of the sub-surface rights. This is rather strange doctrine, for it is a well-
known principle that the owner of a piece of land has rights not only to its surface but also to everything
underneath and the airspace above it up to a reasonable height. Under the aforesaid ruling, the land is
classified as mineral underneath and agricultural on the surface, subject to separate claims of title. This
is also difficult to understand, especially in its practical application.
Under the theory of the respondent court, the surface owner will be planting on the land while the
mining locator will be boring tunnels underneath. The farmer cannot dig a well because he may
interfere with the mining operations below and the miner cannot blast a tunnel lest he destroy the crops
above. How deep can the farmer, and how high can the miner go without encroaching on each others
rights? Where is the dividing line between the surface and the sub-surface rights? HcDSaT
The Court feels that the rights over the land are indivisible and that the land itself cannot be half
agricultural and half mineral. The classification must be categorical; the land must be either completely
mineral or completely agricultural.
Registered landowners may even be ousted of ownership and possession of their properties in the
event the latter are reclassified as mineral lands because real properties are characteristically
indivisible. For the loss sustained by such owners, they are entitled to just compensation under the
Mining Laws or in appropriate expropriation proceedings. 10
Moreover, petitioner's argument that the landowners' right extends to the sub-soil insofar as necessary
for their practical interests serves only to further weaken its case. The theory would limit the right to the
sub-soil upon the economic utility which such area offers to the surface owners. Presumably, the
landowners' right extends to such height or depth where it is possible for them to obtain some benefit or
enjoyment, and it is extinguished beyond such limit as there would be no more interest protected by
law. 11 ACTEHI
In this regard, the trial court found that respondents could have dug upon their property motorized deep
wells but were prevented from doing so by the authorities precisely because of the construction and
existence of the tunnels underneath the surface of their property. Respondents, therefore, still had a
legal interest in the sub-terrain portion insofar as they could have excavated the same for the
construction of the deep well. The fact that they could not was appreciated by the RTC as proof that the
tunnels interfered with respondents' enjoyment of their property and deprived them of its full use and
enjoyment, thus:
Has it deprived the plaintiffs of the use of their lands when from the evidence they have already existing
residential houses over said tunnels and it was not shown that the tunnels either destroyed said houses
or disturb[ed] the possession thereof by plaintiffs? From the evidence, an affirmative answer seems to
be in order. The plaintiffs and [their] co-heirs discovered [these] big underground tunnels in 1992. This
was confirmed by the defendant on November 13, 1992 by the Acting Assistant Project Manager, Agus
1 Hydro Electric Project (Exh. K). On September 16, 1992, Atty. Omar Maruhom (co-heir) requested the
Marawi City Water District for permit to construct a motorized deep well over Lot 3 for his residential
house (Exh. Q). He was refused the permit "because the construction of the deep well as (sic) the
parcels of land will cause danger to lives and property." He was informed that "beneath your lands are
constructed the Napocor underground tunnel in connection with Agua Hydroelectric plant" (Exh. Q-2).
There in fact exists ample evidence that this construction of the tunnel without the prior consent of
plaintiffs beneath the latter's property endangered the lives and properties of said plaintiffs. It has been
proved indubitably that Marawi City lies in an area of local volcanic and tectonic activity. Lake Lanao
has been formed by extensive earth movements and is considered to be a drowned basin of
volcano/tectonic origin. In Marawi City, there are a number of former volcanoes and an extensive
amount of faulting. Some of these faults are still moving. (Feasibility Report on Marawi City Water
District by Kampsa-Kruger, Consulting Engineers, Architects and Economists, Exh. R). Moreover, it has
been shown that the underground tunnels [have] deprived the plaintiffs of the lawful use of the land and
considerably reduced its value. On March 6, 1995, plaintiffs applied for a two-million peso loan with the
Amanah Islamic Bank for the expansion of the operation of the Ameer Construction and Integrated
Services to be secured by said land (Exh. N), but the application was disapproved by the bank in its
letter of April 25, 1995 (Exh. O) stating that: 2005jur
"Apropos to this, we regret to inform you that we cannot consider your loan application due to the
following reasons, to wit:
That per my actual ocular inspection and verification, subject property offered as collateral has an
existing underground tunnel by the NPC for the Agus I Project, which tunnel is traversing underneath
your property, hence, an encumbrance. As a matter of bank policy, property with an existing
encumbrance cannot be considered neither accepted as collateral for a loan."
All the foregoing evidence and findings convince this Court that preponderantly plaintiffs have
established the condemnation of their land covering an area of 48,005 sq. meters located at Saduc,
Marawi City by the defendant National Power Corporation without even the benefit of expropriation
proceedings or the payment of any just compensation and/or reasonable monthly rental since 1978. 12
In the past, the Court has held that if the government takes property without expropriation and devotes
the property to public use, after many years, the property owner may demand payment of just
compensation in the event restoration of possession is neither convenient nor feasible. 13 This is in
accordance with the principle that persons shall not be deprived of their property except by competent
authority and for public use and always upon payment of just compensation. 14 SIcTAC
Petitioner contends that the underground tunnels in this case constitute an easement upon the property
of respondents which does not involve any loss of title or possession. The manner in which the
easement was created by petitioner, however, violates the due process rights of respondents as it was
without notice and indemnity to them and did not go through proper expropriation proceedings.
Petitioner could have, at any time, validly exercised the power of eminent domain to acquire the
easement over respondents' property as this power encompasses not only the taking or appropriation
of title to and possession of the expropriated property but likewise covers even the imposition of a mere
burden upon the owner of the condemned property. 15 Significantly, though, landowners cannot be
deprived of their right over their land until expropriation proceedings are instituted in court. The court
must then see to it that the taking is for public use, that there is payment of just compensation and that
there is due process of law. 16
In disregarding this procedure and failing to recognize respondents' ownership of the sub-terrain
portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be
emphasized that the acquisition of the easement is not without expense. The underground tunnels
impose limitations on respondents' use of the property for an indefinite period and deprive them of its
ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just
compensation. 17 Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it is
liable to pay not merely an easement fee but rather the full compensation for land. This is so because in
this case, the nature of the easement practically deprives the owners of its normal beneficial use.
Respondents, as the owners of the property thus expropriated, are entitled to a just compensation
which should be neither more nor less, whenever it is possible to make the assessment, than the
money equivalent of said property. 18 CHcTIA
The entitlement of respondents to just compensation having been settled, the issue now is on the
manner of computing the same. In this regard, petitioner claims that the basis for the computation of the
just compensation should be the value of the property at the time it was taken in 1978. Petitioner also
impugns the reliance made by the CA upon National Power Corporation v. Court of Appeals and
Macapanton Mangondato 19 as the basis for computing the amount of just compensation in this action.
The CA found that "the award of damages is not excessive because the P1000 per square meter as the
fair market value was sustained in a case involving a lot adjoining the property in question which case
involved an expropriation by [petitioner] of portion of Lot 1 of the subdivision plan (LRC) PSD 116159
which is adjacent to Lots 2 and 3 of the same subdivision plan which is the subject of the instant
controversy." 20
Just compensation has been understood to be the just and complete equivalent of the loss 21 and is
ordinarily determined by referring to the value of the land and its character at the time it was taken by
the expropriating authority. 22 There is a "taking" in this sense when the owners are actually deprived
or dispossessed of their property, where there is a practical destruction or a material impairment of the
value of their property, or when they are deprived of the ordinary use thereof. There is a "taking" in this
context when the expropriator enters private property not only for a momentary period but for more
permanent duration, for the purpose of devoting the property to a public use in such a manner as to
oust the owner and deprive him of all beneficial enjoyment thereof. 23 Moreover, "taking" of the
property for purposes of eminent domain entails that the entry into the property must be under warrant
or color of legal authority. 24 SHTcDE
Under the factual backdrop of this case, the last element of taking mentioned, i.e., that the entry into the
property is under warrant or color of legal authority, is patently lacking. Petitioner justified its
nonpayment of the indemnity due respondents upon its mistaken belief that the property formed part of
the public dominion.
This situation is on all fours with that in the Mangondato case. NAPOCOR in that case took the property
of therein respondents in 1979, using it to build its Aqua I Hydroelectric Plant Project, without paying
any compensation, allegedly under the mistaken belief that it was public land. It was only in 1990, after
more than a decade of beneficial use, that NAPOCOR recognized therein respondents' ownership and
negotiated for the voluntary purchase of the property.
In Mangondato, this Court held:
The First Issue: Date of Taking or Date of Suit?
The general rule in determining "just compensation" in eminent domain is the value of the property as of
the date of the filing of the complaint, as follows: TCaSAH
"Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails to defend
as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a
lawful right to take the property sought to be condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the date of the filing of the
complaint. . . ." (Italics supplied).
Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many
ruling of this Court have equated just compensation with the value of the property as of the time of filing
of the complaint consistent with the above provision of the Rules. So too, where the institution of the
action precedes entry to the property, the just compensation is to be ascertained as of the time of filing
of the complaint.
The general rule, however, admits of an exception: where this Court fixed the value of the property as
of the date it was taken and not the date of the commencement of the expropriation proceedings.
In the old case of Provincial Government of Rizal vs. Caro de Araullo, the Court ruled that ". . . the
owners of the land have no right to recover damages for this unearned increment resulting from the
construction of the public improvement (lengthening of Taft Avenue from Manila to Pasay) from which
the land was taken. To permit them to do so would be to allow them to recover more than the value of
the land at the time it was taken, which is the true measure of the damages, or just compensation, and
would discourage the construction of important public improvements." SHaATC
In subsequent cases, the Court, following the above doctrine, invariably held that the time of taking is
the critical date in determining lawful or just compensation. Justifying this stance, Mr. Justice (later
Chief Justice) Enrique Fernando, speaking for the Court in Municipality of La Carlota vs. The Spouses
Felicidad Baltazar and Vicente Gan, said, ". . . the owner as is the constitutional intent, is paid what he
is entitled to according to the value of the property so devoted to public use as of the date of taking.
From that time, he had been deprived thereof. He had no choice but to submit. He is not, however, to
be despoiled of such a right. No less than the fundamental law guarantees just compensation. It would
be injustice to him certainly if from such a period, he could not recover the value of what was lost. There
could be on the other hand, injustice to the expropriator if by a delay in the collection, the increment in
price would accrue to the owner. The doctrine to which this Court has been committed is intended
precisely to avoid either contingency fraught with unfairness."
Simply stated, the exception finds the application where the owner would be given undue incremental
advantages arising from the use to which the government devotes the property expropriated as for
instance, the extension of a main thoroughfare as was in the case in Caro de Araullo. In the instant
case, however, it is difficult to conceive of how there could have been an extra-ordinary increase in the
value of the owner's land arising from the expropriation, as indeed the records do not show any
evidence that the valuation of P1,000.00 reached in 1992 was due to increments directly caused by
petitioner's use of the land. Since the petitioner is claiming an exception to Rule 67, Section 4, it has the
burden in proving its claim that its occupancy and use not ordinary inflation and increase in land
values was the direct cause of the increase in valuation from 1978 to 1992. CIScaA
Side Issue: When is there "Taking" of Property?
But there is yet another cogent reason why this petition should be denied and why the respondent
Court should be sustained. An examination of the undisputed factual environment would show that the
"taking" was not really made in 1978.
This Court has defined the elements of "taking" as the main ingredient in the exercise of power of
eminent domain, in the following words:
"A number of circumstances must be present in "taking" of property for purposes of eminent domain: (1)
the expropriator must enter a private property; (2) the entrance into private property must be for more
than a momentary period; (3) the entry into the property should be under warrant or color of legal
authority; (4) the property must be devoted to a public use or otherwise informally appropriated or
injuriously affected; and (5) the utilization of the property for public use must be in such a way to oust
the owner and deprive him of all beneficial enjoyment of the property." (Italics supplied) AECcTS
In this case, the petitioner's entrance in 1978 was without intent to expropriate or was not made under
warrant or color of legal authority, for it believed the property was public land covered by Proclamation
No. 1354. When the private respondent raised his claim of ownership sometime in 1979, the petitioner
flatly refused the claim for compensation, nakedly insisted that the property was public land and
wrongly justified its possession by alleging it had already paid "financial assistance" to Marawi City in
exchange for the rights over the property. Only in 1990, after more than a decade of beneficial use, did
the petitioner recognize private respondent's ownership and negotiate for the voluntary purchase of the
property. A Deed of Sale with provisional payment and subject to negotiations for the correct price was
then executed. Clearly, this is not the intent nor the expropriation contemplated by law. This is a simple
attempt at a voluntary purchase and sale. Obviously, the petitioner neglected and/or refused to exercise
the power of eminent domain.
Only in 1992, after the private respondent sued to recover possession and petitioner filed its Complaint
to expropriate, did petitioner manifest its intention to exercise the power of eminent domain. Thus the
respondent Court correctly held: ASDCaI
"If We decree that the fair market value of the land be determined as of 1978, then We would be
sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent domain
would occupy another's property and when later pressed for payment, first negotiate for a low price and
then conveniently expropriate the property when the land owner refuses to accept its offer claiming that
the taking of the property for the purpose of the eminent domain should be reckoned as of the date
when it started to occupy the property and that the value of the property should be computed as of the
date of the taking despite the increase in the meantime in the value of the property."
In Noble vs. City of Manila, the City entered into a lease-purchase agreement of a building constructed
by the petitioner's predecessor-in-interest in accordance with the specifications of the former. The Court
held that being bound by the said contract, the City could not expropriate the building. Expropriation
could be resorted to "only when it is made necessary by the opposition of the owner to the sale or by
the lack of any agreement as to the price." Said the Court: SHTaID
"The contract, therefore, in so far as it refers to the purchase of the building, as we have interpreted it,
is in force, not having been revoked by the parties or by judicial decision. This being the case, the city
being bound to buy the building at an agreed price, under a valid and subsisting contract, and the
plaintiff being agreeable to its sale, the expropriation thereof, as sought by the defendant, is baseless.
Expropriation lies only when it is made necessary by the opposition of the owner to the sale or by the
lack of any agreement as to the price. There being in the present case a valid and subsisting contract,
between the owner of the building and the city, for the purchase thereof at an agreed price, there is no
reason for the expropriation." (Italics supplied)
In the instant case, petitioner effectively repudiated the deed of sale it entered into with the private
respondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its president to
negotiate, inter alia, that payment "shall be effective only after Agus I HE project has been placed in
operation." It was only then that petitioner's intent to expropriate became manifest as private
respondent disagreed and, barely a month, filed suit. 25 SCDaET
In the present case, to allow petitioner to use the date it constructed the tunnels as the date of valuation
would be grossly unfair. First, it did not enter the land under warrant or color of legal authority or with
intent to expropriate the same. In fact, it did not bother to notify the owners and wrongly assumed it had
the right to dig those tunnels under their property. Secondly, the "improvements" introduced by
petitioner, namely, the tunnels, in no way contributed to an increase in the value of the land. The trial
court, therefore, as affirmed by the CA, rightly computed the valuation of the property as of 1992, when
respondents discovered the construction of the huge underground tunnels beneath their lands and
petitioner confirmed the same and started negotiations for their purchase but no agreement could be
reached. 26
As to the amount of the valuation, the RTC and the CA both used as basis the value of the adjacent
property, Lot 1 (the property involved herein being Lots 2 and 3 of the same subdivision plan), which
was valued at P1,000 per sq. meter as of 1990, as sustained by this Court in Mangondato, thus:
DAEaTS
The Second Issue: Valuation
We now come to the issue of valuation.
The fair market value as held by the respondent Court, is the amount of P1,000.00 per square meter. In
an expropriation case where the principal issue is the determination of just compensation, as is the
case here, a trial before Commissioners is indispensable to allow the parties to present evidence on the
issue of just compensation. Inasmuch as the determination of just compensation in eminent domain
cases is a judicial function and factual findings of the Court of Appeals are conclusive on the parties
and reviewable only when the case falls within the recognized exceptions, which is not the situation
obtaining in this petition, we see no reason to disturb the factual findings as to valuation of the subject
property. As can be gleaned from the records, the court-and-the-parties-appointed commissioners did
not abuse their authority in evaluating the evidence submitted to them nor misappreciate the clear
preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court is not
grossly exorbitant. To quote: SHTaID
"Commissioner Ali comes from the Office of the Register of Deeds who may well be considered an
expert, with a general knowledge of the appraisal of real estate and the prevailing prices of land in the
vicinity of the land in question so that his opinion on the valuation of the property cannot be lightly
brushed aside.
"The prevailing market value of the land is only one of the determinants used by the commissioners'
report the other being as herein shown:
xxx xxx xxx
"Commissioner Doromal's report, recommending P300.00 per square meter, differs from the 2
commissioners only because his report was based on the valuation as of 1978 by the City Appraisal
Committee as clarified by the latter's chairman in response to NAPOCOR's general counsel's query."
In sum, we agree with the Court of Appeals that petitioner has failed to show why it should be granted
an exemption from the general rule in determining just compensation provided under Section 4 of Rule
67. On the contrary, private respondent has convinced us that, indeed, such general rule should in fact
be observed in this case. 27
Petitioner has not shown any error on the part of the CA in reaching such a valuation. Furthermore,
these are factual matters that are not within the ambit of the present review.
WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in C.A.-G.R. CV No.
57792 dated June 8, 2005 is AFFIRMED. SCEDAI























FIRST DIVISION
[G.R. No. L-57348. May 16, 1985.]
FRANCISCO DEPRA, plaintiff-appellee, vs. AGUSTIN DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Neil D. Hechanova for defendant-appellant.
D E C I S I O N
MELENCIO-HERRERA, J p:
This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of
Appeals, which the latter certified to this instance as involving pure questions of law.
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate
of Title No. T-3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an area
of approximately 8,870 square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot,
designated as Lot No. 683, with an approximate area of 231 sq. ms.
Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had
encroached on an area of thirty four (34) square meters of DEPRA's property. After the encroachment
was discovered in a relocation survey of DEPRA's lot made on November 2, 1972, his mother, Beatriz
Derla, after writing a demand letter asking DUMLAO to move back from his encroachment, filed an
action for Unlawful Detainer on February 6, 1973 against DUMLAO in the Municipal Court of
Dumangas, docketed as Civil Case No. I. Said complaint was later amended to include DEPRA as a
party plaintiff.
After trial the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448
of the Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:
Cdpr
"Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the
defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rent
to be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five (5)
days of the month the rent is due; and the lease shall commence on that day that this decision shall
have become final."
From the foregoing judgment, neither party appealed so that, if it were a valid judgment, it would have
ordinarily lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO
deposited such rentals with the Municipal Court.
On July 15, 1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court
of First Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was
the bone of contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but
alleged, in the main, that the present suit is barred by res judicata by virtue of the Decision of the
Municipal Court, which had become final and executory.
After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the
Stipulation of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the
assailed Order, decreeing:
"WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this
litigation is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is
owner as evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is entitled to possess the
same.
"Without pronouncement as to costs.
"SO ORDERED."
Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of the
Municipal Court was null and void ab initio because its jurisdiction is limited to the sole issue of
possession, whereas decisions affecting lease, which is an encumbrance on real property, may only be
rendered by Courts of First Instance.
Addressing ourselves to the issue of validity of the Decision of the Municipal Court, we hold the same to
be null and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7,
Rule 70, Rules of Court). 1 The Municipal Court overstepped its bounds when it imposed upon the
parties a situation of "forced lease", which like "forced co-ownership" is not favored in law. Furthermore,
a lease is an interest in real property, jurisdiction over which belongs to Courts of First Instance (now
Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3
Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operate
as res judicata to the subject complaint for Queting of Title. Besides, even if the Decision were valid, the
rule on res judicata would not apply due to difference in cause of action. In the Municipal Court, the
cause of action was the deprivation of possession, while in the action to quiet title, the cause of action
was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that
judgment in a detainer case "shall not bar an action between the same parties respecting title to the
land." 4
Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith.
Thus, LLpr
"8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal
Court of Dumangas, Iloilo involves the same subject matter in the present case, the Thirty-four (34)
square meters portion of land and built thereon in good faith is a portion of defendant's kitchen and has
been in the possession of the defendant since 1952 continuously up to the present; . . ." (Italics ours)
Consistent with the principles that our Court system, like any other, must be a dispute resolving
mechanism, we accord legal effect to the agreement of the parties, within the context of their mutual
concession and stipulation. They have, thereby, chosen a legal formula to resolve their dispute to
apply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in good
faith" as prescribed in Article 448. Hence, we shall refrain from further examining whether the factual
situations of DUMLAO and DEPRA conform to the juridical positions respectively defined law, for a
"builder in good faith" under Article 448, a "possessor in good faith" under Article 526 and a "landowner
in good faith" under Article 448.
In regards to builders in good faith, Article 448 of the Civil Code provides:
"ART. 448. The owner of the land on which anything has been built sown or planted in good
faith.
shall have the right.
to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in
articles 546 and 548, or
to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper
rent.
However, the builder or planter cannot be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms thereof." (Paragraphing
supplied)
Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of
DUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse
to pay for the encroaching part of the building, and to sell the encroached part of his land, 5 as he had
manifested before the Municipal Court. But that manifestation is not binding because it was made in a
void proceeding.
However, the good faith of DUMLAO. is part of the Stipulation of Facts in the Court of First Instance. It
was thus error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of
the disputed portion implying thereby that he is entitled to have the kitchen removed. He is entitled to
such removal only when, after having chosen to sell his encroached land, DUMLAO fails to pay for the
same. 6 In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused
to sell.
"The owner of the building erected in good faith on a land owned by another, is entitled to retain the
possession of the land until he is paid the value of his building, under article 453 (now Article 546). The
owner of the land, upon the other hand, has the option, under article 361 (now Article 448), either to pay
for the building or to sell his land to the owner of the building. But he cannot, as respondents here did
refuse both to pay for the building and to sell the land and compel the owner of the building to remove it
from the land where it erected. He is entitled to such remotion only when, after having chosen to sell his
land, the other party fails to pay for the same (italics ours).
"We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their
buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay
for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought
to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546)
of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946])."
A word anent the philosophy behind Article 448 of the Civil Code.
The original provision was found in Article 361 of the Spanish Civil Code, which provided:
"ART. 361. The owner of land on which anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the work, sowing or planting, after the payment of the
indemnity stated in Articles 453 and 454, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent."
As will be seen, the Article favors the owner of the land, by giving him one of the two options mentioned
in the Article. Some commentators have questioned the preference in favor of the owner of the land, but
Manresa's opinion is that the Article is just and fair. LLpr
". . . es justa la facultad que el codigo da al dueo del suelo en el articulo 361, en el caso de edificacion
o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario privilegio en favor
de la propiedad territorial. Entienden que impone el Codigo una pena al poseedor de buena fe; y como
advierte uno de los comentaristas aludidos, 'no se ve claro el por que de tal pena . . . al obligar al que
obro de buena fe a quedarse con el edificio o plantacion, previo el pago del terreno que ocupa, porque
si bien es verdad que cuando edifico o planto demostro con este hecho, que queria para si el edificio o
plantio, tambien lo es que el que edifico o planto de buena fe lo hizo en la erronea inteligencia de
creerse dueo del terreno. Posible es que, de saber lo contrario, y de tener noticia de que habia que
comprar y pagar el terreno, no se hubiera decidido a plantar ni a eddficar. La ley, obligandole a hacerlo,
fuerza su voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'. Asi podra
suceder; pero la realidad es que con ese hecho voluntario, aunque sea inocente, se ha eniquecido
torticeramente con perjuicio de otro a quien es justo indemnizarle.
"En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y equitativa, y
respetando en lo posible el principio que para la accesion se establece en el art. 358." 7
Our own Code Commission must have taken account of the objections to Article 361 of the Spanish
Civil Code. Hence, the Commission provided a modification thereof, and Article 448 of our Code has
been made to provide:
"ART. 448. The owner of the land on which has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof."
Additional benefits were extended to the builder but the landowner retained his options.
The fairness of the rules in Article 448 has also been explained as follows:
"Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the
owners, and it becomes necessary to protect the owner of the improvements without causing injustice
to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the
law has provided a just solution by giving the owner of the land the option to acquire the improvements
after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the
sower to pay for the proper rent. It is the owner of the land who is authorized to exercise the option,
because his right is older, and because, by the principle of accession, he is entitled to the ownership of
the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan
Chico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al vs. Ibaez [S.C.] 52 Off. Gaz.
217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050)." 8
WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered
remanded to the Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and
546 of the Civil Code, as follows:
1. The trial Court shall determine
a) the present fair price of DEPRA's 34 square meter-area of land;
b) the amount of the expenses spent by DUMLAO for the building of the kitchen;
c) the increase in value ("plus value") which the said area of 34 square meters may have
acquired by reason thereof, and
d) whether the value of said area of land is considerably more than that of the kitchen built
thereon.
2. After said amounts shall have been determined by competent evidence, the Regional Trial
Court shall render judgment, as follows:
a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his
option under the law (Article 448, Civil Code), whether to appropriate the kitchen a his own by paying to
DUMLAO either the amount of the expenses spent by DUMLAO for the building of the kitchen, or the
increase in value ("plus value") which the said area of 34 square meters may have acquired by reason
thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively paid by
DUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the other party
and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of the option by
tendering the amount to the Court in favor of the party entitled to receive it;
b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to
pay the price of the land but the latter rejects such purchase because, as found by the trial Court, the
value of the land is considerably more than that of the kitchen, DUMLAO shall give written notice of
such rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to sell
the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of
rejection within which to agree upon the terms of the lease, and give the Court formal written notice of
such agreement and its provisos. If no agreement is reached by the parties, the trial Court, within fifteen
(15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms
of the lease, provided that the monthly rental to be fixed by the Court shall not be less than Ten Pesos
(P10.00) per month, payable within the first five (5) days of each calendar month. The period for the
forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering
the long period of time since 1952 that DUMLAO has occupied the subject area. The rental thus fixed
shall be increased by ten percent (10%) for the second year of the forced lease. DUMLAO shall not
make any further constructions or improvements on the kitchen. Upon expiration of the two-year period,
or upon default by DUMLAO in the payment of rentals for two (2) consecutive months, DEPRA shall be
entitled to terminate the forced lease, to recover his land, and to have the kitchen removed by DUMLAO
or at the latter's expense. The rentals herein provided shall be tendered by DUMLAO to the Court for
payment to DEPRA, and such tender shall constitute evidence of whether or not compliance was made
within the period fixed by the Court. LLphil
c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per
month as reasonable compensation for the occupancy of DEPRA's land for the period counted from
1952, the year DUMLAO occupied the subject area, up to the commencement date of the forced lease
referred to in the preceding paragraph;
d) The periods to be fixed by the trial Court in its Decision shall be inextendible, and upon failure
of the party obliged to tender to the trial Court the amount due to the obligee, the party entitled to such
payment shall be entitled to an order of execution for the enforcement of payment of the amount due
and for compliance with such other acts as may be required by the prestation due the obligee.
No costs.
SO ORDERED.

















EN BANC
[G.R. No. L-2659. October 12, 1950.]
In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY MCDONALD
BACHRACH, petitioner-appellee, vs. SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-
appellants.
Ross, Selph, Carrascoso & Janda, for appellants.
Delgado & Flores, for appellee.
SYLLABUS
1. USUFRUCT; STOCK DIVIDED CONSIDERED CIVIL FRUIT AND BELONGS TO
USUFRUCTUARY. Under the Massachusetts rule, a stock dividend is considered part of the capital
and belongs to the remainderman; while under the Pennsylvania rule, all earnings of a corporation,
when declared as dividends in whatever form, made during the lifetime of the usufructuary, belong to
the latter.
2. ID.; ID. The Pennsylvania rule is more in accord with our statutory laws than the
Massachusetts rule. Under section 16 of our Corporation Law, no corporation may make or declare
from its business. Any dividend, therefore, whether cash or stock, represent surplus profits. Article 471
of the Civil Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and
civil fruits of the property in the usufruct. The stock dividend in question in this case is a civil fruit of the
original investment. The shares of stock issued in payment of said dividend may be sold independently
of the original shares just as the offspring of a domestic animal may be sold independently of its
mother.
D E C I S I O N
OZAETA, J p:
Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the
corpus of the estate, which pertains to the remainderman? That is the question raised in this appeal.
The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in
his last will and testament made various legacies in cash and willed the remainder of his estate as
follows:
"Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach
for life all the fruits and usufruct of the remainder of all my estate after payment of the legacies,
bequests, and gifts provided for above; and she may enjoy said usufruct and use or spend such fruits
as she may in any manner wish."
The will further provided that upon the death of Mary McDonald Bachrach, one-half of all his estate
"shall be divided share and share alike by and between my legal heirs, to the exclusion of my brothers."
The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge Mining Co.,
Inc., received from the latter 54,000 shares representing 50 per cent stock dividend on the said 108,000
shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life tenant of the estate,
petitioned the lower court to authorize the Peoples Bank and Trust Company, as administrator of the
estate of E. M. Bachrach, to transfer to her the said 54,000 shares of stock dividend by indorsing and
delivering to her the corresponding certificate of stock, claiming that said dividend, although paid out in
the form of stock, is fruit or income and therefore belonged to her as usufructuary or life tenant. Sophie
Siefert and Elisa Elianoff, legal heirs of the deceased, opposed said petition on the ground that the
stock dividend in question was not income but formed part of the capital and therefore belonged not to
the usufructuary but to the remainderman. And they have appealed from the order granting the petition
and overruling their objection.
While appellants admit that a cash dividend is an income, they contend that a stock dividend is not, but
merely represents an addition to the invested capital. The so-called Massachusetts rule, which prevails
in certain jurisdictions in the United States, supports appellants' contention. It regards cash dividends,
however large, as income, and stock dividends, however made, as capital. (Minot vs. Paine, 99 Mass.,
101; 96 Am. Dec., 705.) It holds that a stock dividend is not in any true sense any dividend at all since it
involves no division or severance from the corporate assets of the subject of the dividend; that it does
not distribute property but simply dilutes the shares as they existed before; and that it takes nothing
from the property of the corporation, and adds nothing to the interests of the shareholders.
On the other hand, the so-called Pennsylvania rule, which prevails in various other jurisdictions in the
United States, supports appellee's contention. This rule declares that all earnings of the corporation
made prior to the death of the testator stockholder belong to the corpus of the estate, and that all
earnings, when declared as dividends in whatever form, made during the lifetime of the usufructuary or
life tenant are income and belong to the usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)
". . . It is clear that testator intended the remaindermen should have only the corpus of the estate he left
in trust, and that all dividends should go to the life tenants. It is true that profits realized are not
dividends until declared by the proper officials of the corporation, but distribution of profits, however
made, is dividends, and the form of the distribution is immaterial." (In re Thompson's Estate, 262 Pa.,
278; 105 Atl. 273, 274.)
In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky, speaking thru its
Chief Justice, said:
". . . Where a dividend, although declared in stock, is based upon the earnings of the company, it is in
reality, whether called by one name or another, the income of the capital invested in it. It is but a mode
of distributing the profit. If it be not income, what is it? If it is, then it is rightfully and equitably the
property of the life tenant. If it be really profit, then he should have it, whether paid in stock or money. A
stock dividend proper is the issue of new shares paid for by the transfer of a sum equal to their par
value from the profit and loss account to that representing capital stock; and really a corporation has no
right to declare a dividend, either in cash or stock, except from its earnings; and a singular state of case
it seems to us, an unreasonable one is presented if the company, although it rests with it whether
it will declare a dividend, can bind the courts as to the proper ownership of it, and by the mode of
payment substitute its will for that of the testator, and favor the life tenants or the remainder-men, as it
may desire. It cannot, in reason, be considered that the testator contemplated such a result. The law
regards substance, and not form, and such a rule might result not only in a violation of the testator's
intention, but it would give the power to the corporation to beggar the life tenants, who, in this case, are
the wife and children of the testator, for the benefit of the remainder-men, who may perhaps be
unknown to the testator, being unborn when the will was executed. We are unwilling to adopt a rule
which to us seems so arbitrary, and devoid of reason and justice. If the dividend be in fact a profit,
although declared in stock, it should be held to be income. It has been so held in Pennsylvania and
many other states, and we think it the correct rule. Earp's Appeal, 28 Pa. St. 368; Cook, Stocks & S.
sec. 554. . . ."
We think the Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule.
Under section 16 of our Corporation Law, no corporation may make or declare any dividend except
from the surplus profits arising from its business. Any dividend, therefore, whether cash or stock,
represents surplus profits. Article 471 of the Civil Code provides that the usufructuary shall be entitled
to receive all the natural, industrial, and civil fruits of the property in usufruct. And articles 474 and 475
provide as follows:
"ART. 474. Civil fruits are deemed to accrue day by day, and belong to the usufructuary in
proportion to the time the usufruct may last.
"ART. 475. When a usufruct is created on the right to receive an income or periodical revenue,
either in money or fruits, or the interest on bonds or securities payable to bearer, each matured
payment shall be considered as the proceeds or fruits of such right.
"When it consists of the enjoyment of the benefits arising from an interest in an industrial or commercial
enterprise, the profits of which are not distributed at fixed periods, such profits shall have the same
consideration.
"In either case they shall be distributed as civil fruits, and shall be applied in accordance with the rules
prescribed by the next preceding article."
The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend
are civil fruits of the original investment. They represent profits, and the delivery of the certificate of
stock covering said dividend is equivalent to the payment of said profits. Said shares may be sold
independently of the original shares, just as the offspring of a domestic animal may be sold
independently of its mother.
The order appealed from, being in accordance with the above-quoted provisions of the Civil Code, is
hereby affirmed, with costs against the appellants.
Moran, C.J., Paras, Feria, Pablo, Bengzon, Tuason, Montemayor and Reyes, JJ., concur.




EN BANC
[G.R. No. 35223. September 17, 1931.]
THE BACHRACH MOTOR CO., INC., plaintiff-appellee, vs. TALISAY- SILAY MILLING CO. ET AL.,
defendants-appellees. THE PHILIPPINE NATIONAL BANK, intervenor-appellant.
Ramon J. Lacson for intervenor-appellant.
Mariano Ezpeleta for plaintiff-appellee.
Nolan & Hernaez for defendants-appellees Talisay-Silay Milling Co. and Cesar Ledesma.
SYLLABUS
1. REAL PROPERTY; CIVIL FRUITS. The bonus which the Talisay-Silay Milling Co., Inc.,
had to pay the planters who had mortgaged their lands to the Philippine National Bank in order to
secure the payment of the company's debt to the bank, is not a civil fruit of the mortgaged property.
2. ID.; ID. Article 355 of the Civil Code considers three things as civil truths; (1) rents from
building, (2) proceeds from leases of lands, and (3) the income from perpetual or life annuities or similar
sources of revenue. The phrase "u otras analogas" used (in the original Spanish, art. 355, last
paragraph, Civil Code) in the following context: "Y el importe de las rentas perpetuas, vitalicias u otras
analogas," refers to "rentas," for the adjectives "otras" and "analogas" agree with the noun "rentas," as
do also the other adjectives "perpetuas" and "vitalicias."
D E C I S I O N
ROMUALDEZ, J p:
This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc. against the Talisay-Silay
Milling Co., Inc., for the delivery of the amount of P13,850 or promissory notes or other instruments of
credit for that sum payable on June 30, 1930, as bonus in favor of Mariano Lacson Ledesma; the
complaint further prays that the sugar central be ordered to render an accounting of the amounts it
owes Mariano Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay the plaintiff a sum
sufficient to satisfy the judgment mentioned in the complaint, and that the sale made by said Mariano
Lacson Ledesma be declared null and void.
The Philippine National Bank filed a third party claim alleging a preferential right to receive any amount
which Mariano Lacson Ledesma might be entitled to from the Talisay-Silay Milling Co. as bonus,
because that would be civil fruits of the land mortgaged to said bank by said debtor for the benefit of the
central referred to, and by virtue of a deed on assignment, and praying that said central be ordered to
deliver directly to the intervening bank said sum on account of the latter's credit against the aforesaid
Mariano Lacson Ledesma.
The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of Mariano Lacson
Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had purchased it, and praying that it
be absolved from the complaint and that the proper party be named so that the remainder might be
delivered.
Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith and for a consideration of
the P7,500 which is a part of the credit referred to above, answered praying that he be absolved from
the complaint.
The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its credit against
Mariano Lacson Ledesma was prior and preferential to that of the intervening bank, and praying that
the latter's complaints be dismissed.
At the trial all the parties agreed to recognize and respect the sale made in Favor of Cesar Ledesma of
the P7,500 part of the credit in question, for which reason the trial court dismissed the complaint and
cross-complaint against Cesar Ledesma authorizing the defendant central to deliver to him the
aforementioned sum of P7,500. And upon conclusion of the hearing, the court held that the Bachrach
Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was Mariano Lacson
Ledesma's bonus, and it ordered the defendant central to deliver said sum to the plaintiff.
The Philippine National Bank appeals, assigning the following alleged errors as committed by the trial
court:
"1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself to pay the
planters who had mortgaged their land to the Philippine National Bank to secure the payment of the
debt of said central to said bank is not civil fruits of said land.
"2. In not holding that said bonus became subject to the mortgage executed by the defendant
Mariano Lacson Ledesma to the Philippine National Bank to secure the payment of his personal debt to
said bank when it fell due.
"3. In holding that the assignment (Exhibit 9, P. N. B.) of said bonus made on March 7, 1930, by
Mariano Lacson Ledesma to the Philippine National Bank to be applied to the payment of his debt to
said Philippine National Bank is fraudulent.
"4. In holding that the Bachrach Motor Co., Inc., in civil case No. 31597 of the Court of First
Instance of Manila levied a valid attachment upon the bonus in question.
"5. In admitting and considering the supplementary complaint filed by the Bachrach Motor Co.,
Inc., alleging as a cause of action the attachment of the bonus in question which said Bachrach Motor
Co., Inc., in civil case No. 31821 of the Court of First Instance of Manila levied after the filing of the
original complaint in this case, and after Mariano Lacson Ledesma in this case had been declared in
default.
"6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive from the
Talisay-Silay Milling Co., Inc., the amount of P11,076.02 which is in the possession of said corporation
as the bonus to be paid to Mariano Lacson Ledesma, and in ordering the Talisay-Silay Milling Co., Inc.,
to deliver said amount to the Bachrach Motor Co., Inc.
"7. In not holding that the Philippine National Bank has a preferential right to receive from the
Talisay-Silay Milling Co., Inc., the amount of P11,076.02 held by said corporation as Mariano Lacson
Ledesma's bonus, and in not ordering said Talisay-Silay Milling Co., Inc., to deliver said amount to the
Philippine National Bank.
"8. In not holding that the amended complaint and the supplementary complaint of the Bachrach
Motor Co., Inc., do not state facts sufficient to constitute a cause of action in favor of the Bachrach
Motor Co., Inc., and against the Talisay-Silay Milling Co., Inc., or against the Philippine National Bank."
The appellant bank bases its preferential right upon the contention that the bonus in question is civil
fruits of the land which the owners had mortgaged for the benefit of the central giving the bonus, and
that, a civil fruits of said land, said bonus was assigned by Mariano Lacson Ledesma on March 7, 1930,
by virtue of the document Exhibit 9 of said intervening institution, which admitted in its brief that "if the
bonus in question is not civil fruits or rent which became subject to the mortgage in favor of the
Philippine National Bank when Mariano Lacson Ledesma's personal obligation fell due, the assignment
of March 7, 1930 (Exhibit 9, P. N. B.), is null and void, not because it is fraudulent, for there was no
intent of fraud in executing the deed, that the cause or consideration of the assignment was erroneous,
for it was based upon the proposition that the bonus was civil fruits of the land mortgaged to the
Philippine National Bank." (P. 31.)
The fundamental question, then, submitted to our consideration is whether or not the bonus in question
is civil fruits.
This is how that bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co., Inc.,
was indebted to the Philippine National Bank. To secure the payment of its debt, it succeeded in
inducing its planters, among whom was Mariano Lacson Ledesma, to mortgage their land to the
creditor bank. And in order to compensate those planters for the risk they were running with their
property under that mortgage, the aforesaid central, by a resolution passed on that same date, i.e.,
December 22, 1923, and amended on March 23, 1928, undertook to credit the owners of the plantation
thus mortgaged every year with a sum equal to two per centum of the debt secured according to the
yearly balance, the payment of the bonus being made at once, or in part from time to time, as soon as
the central became free of its obligations to the aforesaid bank, and of those contracted by virtue of the
contract of supervision, and had funds which might be so used, or as soon as it obtained from said
bank authority to make such payment. (Exhibits 5, 6; P. N. B.)
Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second,
the proceeds from leases of lands; and, third, the income from perpetual or life annuities, or other
similar sources of revenue. It may be noted that according to the context of the law, the phrase "u otras
analogas" refers only to rents or income, for the adjectives "otras" and "analogas" agree with the noun
"rentas," as do also the other adjectives "perpetuas" and "vitalicias." That is why we say that by "civil
fruits" the Civil Code understands one of three and only three things, to wit: the rent of a building, the
rent of land, and certain kinds of income. As the bonus in question is not the rent of a building or of
land, the only meaning of "civil fruits" left to be examined is that of "income."
Assuming that in the broad juridical sense of the word "income" it might be said that the bonus in
question is "income" under article 355 of the Civil Code, it is obvious to inquire whether it is derived
from the land mortgaged by Mariano Lacson Ledesma to the appellant bank for the benefit of the
central; for if it is not obtained from that land but from something else, it is not civil fruits of that land,
and the bank's contention is untenable.
It is to be noted that the said bonus bears no immediate, but only a remote and accidental relation to
the land mentioned, having been granted as compensation for the risk of having subjected one's land to
a lien in favor of the bank, for the benefit of the entity granting said bonus. If this bonus be income or
civil fruits of anything, it is income arising from said risk, or, if one chooses, from Mariano Lacson
Ledesma's generosity in facing the danger for the protection of the central, but certainly it is not civil
fruits or income from the mortgaged property, which, as far as this case is concerned, has nothing to do
with it. Hence, the amount of the bonus, according to the resolution of the central granting it, is not
based upon the value, importance or any other circumstance of the mortgaged property, but upon the
total value of the debt thereby secured, according to the annual balance, which is something quite
distinct from and independent of the property referred to.
Finding no merit in this appeal, the judgment appealed from is affirmed, without express finding as to
costs. So ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Villa-Real and Imperial, JJ., concur.

































































































EN BANC
[G.R. No. 23352. December 31, 1926.]
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD INC., plaintiff-appellee, vs. JUAN
M. POIZAT, ET AL, defendants. GABRIELA ANDREA DE COSTER, appellant.
Antonio M. Opisso for appellant.
Eusebio Orense and Fisher, DeWitt, Perkins & Brady for appellee.
SYLLABUS
1. WHEN MORTGAGE UNDER POWER OF ATTORNEY IS NULL AND VOID. When a wife
gave her husband a power of attorney to loan or borrow money, and "in her name, place and stead" to
mortgage her property, and where the husband negotiated a loan to himself and personally executed
and acknowledged a mortgage upon a real property which the wife owned in her own right and name at
the time of the marriage, and which was her paraphernal property at the time the mortgage was
executed, and where the mortgage was not signed by the wife or by her husband as agent or attorney
in fact for his wife, the mortgage was never executed by or for the wife, and as to her it is null and void.
2. WHEN ONE SIGNATURE IS NOT JOINT OR DUAL. Where the husband had a power of
attorney from his wife authorizing him to mortgage her property, and where he is personally a party to
the mortgage, and where he signed his name only to a mortgage on her property, and personally
acknowledged the mortgage in his own name, his personal, unqualified signature only, standing alone,
cannot be construed as the joint or dual Signature of both the husband and the wife, and is not binding
on the wife.
3 WHEN MORTGAGE IS VOID AS TO PARAPHERNAL PROPERTY OF WIFE AND VALID
AS TO CONJUGAL PROPERTY. Where a wife gave her husband a general power of attorney to
mortgage or convey her property, and where on November 2, 1912, the husband personally executed
and personally acknowledged a real mortgage on the property of the wife in which he is personally
named and made a party, and where the mortgage is void as to the wife for want of execution, and
where the mortgage recites "That the marriage of Don Juan M. Poizat and Doa Gabriela Andrea de
Coster being subsisting and undissolved, and with the object of constructing a new building over the
land hereinabove described, the aforesaid house with the six warehouses thereon constructed were
demolished and in their stead a building was erected, by permission of the department of engineering
and public works of this city issued November 10, 1902, said building being of strong material which,
together with the land, now forms only one piece of real estate, etc.; which property must be the subject
of a new registration in which it must appear that the land belongs in fee simple and in full ownership as
paraphernal property to the said Doa Gabriela Andrea de Coster and the new building thereon
constructed to the conjugal partnership of Don Juan M. Poizat and the said Doa Gabriela Andrea de
Coster, etc.," the mortgage is void as to the land belonging to the wife as to her paraphernal property,
and is binding upon the husband, and as such it is valid as to both the husband and the wife upon the
new building constructed on the land as the conjugal property of the husband and the wife.
4. WHEN DECREE AND SALE SHOULD BE SET ASIDE. Where in a suit against husband
and wife to foreclose a real mortgage on the property of the wife, which mortgage as to the wife was
void for want of execution, but in which a decree was rendered against both husband and wife, and
execution was issued, and her property was advertised for sale and sold to satisfy the judgment, and
where the wife later personally appeared and made timely objections to the rendition of the judgment
and the sale of her property, and to the confirmation of the sale, and moved to set them aside upon the
ground that as to her the mortgage and all of such proceedings were null and void, and where all of
such matters appear in the record, both the decree and the sale of her property, as to the wife, will be
vacated set aside, and declared null and void.
5. LAW OF AGENCY AS TO REAL PROPERTY. It is a general rule in the law of agency
that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its
face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent
only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent
describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own
name and has set his own. hand and seal to the mortgage. This is especially true where the agent
himself is a party to the instrument. However clearly the body of the mortgage may show and intend
that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of
his principal and as the act and deed of the principal, it is not valid as to the principal. (Mechem on
Agency, section 1093 et sequor.)
6. DISTINCTION BETWEEN CONTRACTS. Although by the language used in the body of a
simple contract to which the agent himself is not a party, the signature of the agent only may bind the
principal, that is not true as to a real mortgage to which the agent himself is personally a party. In such
a case, the signature of the agent only, standing alone, will not bind the principal, and that is especially
true where the agent does not acknowledge the mortgage for and on behalf of his principal.
7. WHEN BUILDING IS ACCESSORY TO THE LAND. Where a building on land is of much
less value than the land, the building is an accessory to the land.
8. WHEN PARTY IS ESTOPPED. Where a person takes and accepts a real mortgage, he is
bound by the recitals made in the instrument, and is estopped to deny the legal force and effect of such
recitals.
9. SPANISH NOTARIAL LAW REPEALED. Under the provisions of section 81 of Act No.
136, the Spanish Notarial Law and System of Conveyances was repealed by the enactment of a new
system of registration of land titles.
10. SECTION 127 OF ACT No. 496 CONSTRUED. Section 127 of Act No. 496 provides in
legal effect that where two or more persons are parties to a conveyance, that it must not only be signed
by ,or on behalf of all the parties, but that it should be acknowledged by or on behalf of all the parties.
STATEMENT
August 25, 1905, the appellant, with his consent, executed and in favor of her husband, Juan M. Poizat,
a general power of attorney, which, among other things, authorized him to do "in her name, place and
stead, and making use of her rights and actions," the following things:
"To loan or borrow any amount in cash or fungible things at the rate of interest, for the time, and under
the conditions he may deem convenient, collecting or paying the principal or the interest, when they
respectively should become due; executing and signing the corresponding public or private documents,
and making these transactions with or without mortgage, pledge or personal securities.
November 2, 1912, Juan M. Poizat applied for and obtained from the plaintiff a credit for the sum of
10,000 Pounds Sterling to be drawn on the "Banco Espanol del Rio de la Plata" in London not later than
January, 1913. Later, to secure the payment of the loan, he executed a mortgage upon the real
property of his wife, the material portions of which are as follows:
"This indenture entered into in the City of Manila, P. I., by and between Juan M. Poizat, merchant, of
legal age, married and residing in the City of Manila, in his own behalf and in his capacity also as
attorney in fact of his wife Doa Gabriela Andrea de Coster by virtue of the authority vested in him by
the power of attorney duly executed and acknowledged in this City of Manila, etc.
"First. That in the name of Doa Gabriela Andrea de Coster, wife of Don Juan M. Poizat, there is
registered on page 89 (back) of Book 3, temporary Binondo Section, property No. 685, inscription No.
3, Urban Property consisting of a house and six adjacent warehouses, all of strong material and
constructed upon her own land, said property being Nos. 5, 3, and 1 of Calle Urbiztondo, and No. 13 of
Calle Barraca in the District of Binondo in the City of Manila, etc.
"Second. That the marriage of Don Juan M. Poizat and Doa Gabriela Andrea de Coster being
subsisting and undissolved, and with the object of constructing a new building over the land
hereinabove described, the aforesaid house with the six warehouses thereon constructed were
demolished and in their stead a building was erected, by permission of the Department of Engineering
and Public Works of this City issued November 10, 1902, said building being of strong material which,
together with the land, now forms only one piece of real estate, etc.; which property must be the subject
of a new description [registration] in which it must appear that the land belongs in fee simple and in full
ownership as paraphernal property to the said Doa Gabriela Andrea de Coster and the new building
thereon constructed to the conjugal partnership of Don Juan M. Poizat and the said Doa Gabriela
Andrea de Coster, etc.
"Third. That the Philippine Sugar Estates Development Company, Ltd., having granted to Don Juan M.
Poizat a credit of Ten Thousand Pounds Sterling with a mortgage upon the real property above
described, etc.
"(a) That the Philippine Sugar Estates Development Company, Ltd., hereby grants Don Juan M.
Poizat a credit in the amount of Ten Thousand Pounds Sterling which the said Mr. Poizat may use
within the entire month of January of the coming year, 1913, upon the bank established in the City of
London, England, known as 'Banco Espaol del Rio de la Plata,' which shall be duly advised, so as to
place upon the credit of Mr. Poizat the said amount of Ten Thousand Pounds Sterling, after executing
the necessary receipt therefor.
"(c) That Don Juan M. Poizat personally binds himself and also binds his principal Doa Gabriela
Andrea de Coster to pay the Philippine Sugar Estates Development Company, Ltd., for the said amount
of Ten Thousand Pounds Sterling at the yearly interest of 9 per cent which shall be paid at the end of
each quarter, etc.
"(d) Don Juan M. Poizat also binds himself personally and his principal Doa Gabriela Andrea de
Coster to return to the Philippine Sugar Estates Development Company, Ltd., the amount of Ten
Thousand Pounds Sterling within four years from the date that the said Mr. Poizat shall receive the
aforesaid sum as evidenced by the receipt that he shall issue to the 'Banco Espanol del Rio de la Plata.'
"(e) As security for the payment of the said credit, in the case Mr. Poizat should receive the
money, together with its interest the said Mr. Poizat in the dual capacity that he represents hereby
constitutes a voluntary especial mortgage upon the Philippine Sugar Estates Development Company,
Ltd., of the urban property above described, etc.
"(f) Don Juan M. Poizat in the capacity above mentioned binds himself, should he receive the
amount of the credit, and while he may not return the said amount of Ten Thousand Pounds Sterling to
the Philippine Sugar Estates Development Company, Ltd., to insure against fire the mortgaged property
in an amount not less than One Hundred Thousand Pesos, etc.
"Fourth. Don Buenaventura Campa in the capacity that he holds hereby accepts this indenture in the
form, manner, and condition executed by Don Juan M. Poizat by himself personally and in
representation of his wife Doa Gabriela Andrea de Coster, in favor of the Philippine Sugar Estates
Development Company, Ltd.
"In witness whereof, we have signed these presents in Manila, this November 2, 1912.
(Sgd.) "JUAN M. POIZAT
"THE PHILIPPINE SUGAR ESTATES
DEVELOPMENT COMPANY, LTD.
"The President
"BUENAVENTURA CAMPA
"Signed in the presence of:
(Sgd.) "MANUEL SAPSANO
"JOSE SANTOS

"UNITED STATES OF AMERICA
"PHILIPPINE ISLANDS
"CITY OF MANILA
"In the City of Manila P. I., this November 2, 1912, before me Enrique Barrera y Caldes, a Notary Public
for said city, personally appeared before me Don Juan M. Poizat and Don Buenaventura Campa, whom
I know to be the persons who executed the foregoing document and acknowledged same before me as
an act of their free will and deed; the first exhibited to me his certificate of registry No. 14237, issued in
Manila, February 6, 1912, the second did not exhibit any cedula, being over sixty years old; this
document bears No. 495, entered on page 80 of my Notarial registry.
"Before me:
(Sgd.) "Dr. ENRIQUE BARRERA Y CALDES
[NOTARIAL SEAL] "Notary Public
"Up to the 31st of December, 1912"

For failure to pay the loan, on November 12, 1923, the plaintiff brought an action against the
defendants, to foreclose the mortgage. In this action, the summons was served upon the defendant
Juan M. Poizat only, who employed the services of Antonio A. Sanz to represent the defendants. The
attorneys filed a general appearance for all of them, and later an answer in the nature of a general
denial.
February 18, 1924, when the case was called for trial, Jose Galan y Blanco in open court admitted all of
the allegations made in the complaint, and consented that judgment should be rendered as prayed for.
Later, Juan M. Poizat personally, for himself and his codefendants, filed an exception to the judgment,
and moved for a new trial, which was denied March 31, 1924.
August 22, 1924, execution was issued directing the sale of the mortgaged property to satisfy the
judgment.
September 18, 1924, the property, which had an assessed value of P342,685, was sold to the plaintiff
for the sum of P100,000.
September 23, 1924, and for the first time, the appellant personally appeared by her present attorney,
and objected to the confirmation of the sale, among other things, upon the following grounds: That the
mortgage in question was illegally executed, and is null and void, because the agent of this defendant
was not authorized to execute it. That there was no consideration. That the plaintiff, with full knowledge
that J. M. Poizat was acting beyond the scope of his authority, filed this action to subject the property of
this defendant to the payment of the debt which, as to appellant, was not a valid contract. That the
judgment was rendered by confession when the plaintiff and J. M. Poizat knew that Poizat was not
authorized to confess judgment, and that the proceeding was a constructive fraud. That at the time the
action was filed and the judgment rendered, this defendant was absent from the Philippine Islands, and
had no knowledge of the execution of the mortgage. That after the judgment of foreclosure became
final and the order of the sale of the property was made, that this defendant for the first time learned
that the mortgage contract was tainted with fraud, and that she first knew and learned of such things on
the 11th of September. 1924. That J. M. Poizat was not authorized to bind her property to secure the
payment of his personal debts. That the plaintiff knew that the agent of the defendant was not
authorized to bind her or her property. That the mortgage was executed to secure a loan of 10,000
Pounds, which was not made to this defendant or for her benefit, but was made to him personally and
for the personal use and benefit of J. M. Poizat.
Among other things, the mortgage in question, marked Exhibit B, was introduced in evidence, and
made a part of the record.
All of such objections to the confirmation of the sale were overruled, from which Gabriela Andrea de
Coster appealed and assigns the following errors:
"I. The lower court erred in finding that Juan M. Poizat was, under the power of attorney which
he had from Gabriela Andrea de Coster, authorized to mortgage her paraphernal property as security
for a loan made to him personally by the Philippine Sugar Estates Development Co., Ltd.;
"II. The lower court erred in not finding that under the power of attorney, Juan M. Poizat had no
authority to make Gabriela Andrea de Coster jointly liable with him for a loan of 10,000 Pounds made
by the Philippine Sugar Estates Development Co., Ltd., to him;
"III. The lower court erred in not finding that the Philippine Sugar Estates Development Co., Ltd.,
had knowledge and notice of the lack of authority of Juan M. Poizat to execute the mortgage deed
Exhibit A of the plaintiff;
"IV. The lower court erred in holding that Gabriela Andrea de Coster was duly summoned in this
case; and in holding that Attorney Jose Galan y Blanco could lawfully represent her or could, without
proof of express authority, confess judgment against Gabriela Andrea de Coster;
"V. The court erred in holding that the judgment in this case has become final and res judicata;
"VI. The court erred in approving the judicial sale made by the sheriff at an inadequate price;
"VII. The lower court erred in not declaring these proceedings, the judgment and the sale null and
void.
D E C I S I O N
JOHNS, J p:
For the reasons stated in the decision of this court in the Bank of the Philippine Islands vs. De Coster
(47 Phil., 594), the alleged service of the summons in the foreclosure suit upon the appellant was null
and void. In fact, it was made on J. M. Poizat only, and there is no claim or pretense that any service of
summons was ever made upon her. After service was made upon him, the attorneys in question
entered their appearance for all of the defendants in the action, including the appellant upon whom no
service was ever made, and filed an answer for them. Later, in open court, it was agreed that judgment
should be entered for the plaintiff as prayed for in its complaint.
The appellant contends that the appearance made by the attorneys for her was collusive and
fraudulent, and that it was made without her authority, and there may be some truth in that contention. It
is very apparent that the attorneys made no effort to protect or defend her legal rights, but under our
view of the case, that question is not material to this decision.
The storm center of this case is the legal force and effect of the real mortgage in question, by whom
and for whom it was executed, and upon whom is it binding, and whether or not it is null and void as to
the appellant.
It is admitted that the appellant gave her husband, J. M. Poizat, the power of attorney in question, and
that it is in writing and speaks for itself. If the mortgage was legally executed by her attorney in fact for
her and in her name as her act and deed, it would be legal and binding upon her and her property. If not
so executed, it is null and void.
It appears upon the face of the instrument that J. M. Poizat, as the husband of the wife, was personally
a party to the mortgage, and that he was the only person who signed the mortgage. It does not appear
from his signature that he signed it for his wife or as her agent or attorney in fact, and there is nothing in
his signature that would indicate that in the signing of it by him, he intended that his signature should
bind his wife. It also appears from the acknowledgment of the instrument that he executed it as his
personal act and deed only, and there is nothing to show that he acknowledged it as the agent or
attorney in fact of his wife, or as her act and deed.
The mortgage recites that it was entered into by and between Juan M. Poizat in his own behalf and as
attorney in fact of his wife. That the record title of the mortgaged property is registered in the name of
his wife, Doa Gabriela Andrea de Coster. That they were legally married, and that the marriage
between them has never been dissolved. That with the object of constructing a new building on the
land, the six warehouses thereon were demolished, and that a new building was erected. That the
property is the subject of a new registration in which it must be made to appear that the land belongs in
fee simple and in full ownership as the paraphernal property of the wife, and that the new building
thereon is the property of the conjugal partnership. "That the Philippine Sugar Estates Development
Company, Ltd., having granted to Don Juan M. Poizat a credit of 10,000 Pounds Sterling with the
mortgage upon the real property above described," that the Development Company "hereby grants Don
Juan M. Poizat a credit in the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use,
etc." That should he personally or on behalf of his wife use the credit he acknowledges, that he and his
principal are indebted to the Development Company in the sum of 10,000 Pounds Sterling which "they
deem to have received as a loan from the said commercial entity." That he binds himself and his wife to
pay that amount with a yearly interest of 9 per cent, payable quarterly. That as security for the payment
of said credit in the case Mr. Poizat should receive the money at any time, with its interest, "the said Mr.
Poizat in the dual capacity that he represents hereby constitutes a voluntary especial mortgage." That
Don Juan M. Poizat "in the capacity above mentioned binds himself, should he receive the amount of
the credit."
It thus appears that at the time the power of attorney and the mortgage were executed, Don Juan M.
Poizat and Gabriela Andrea de Coster were husband and wife, and that the real property upon which
the mortgage was executed was her sole property before her marriage, and that it was her paraphernal
property at the time the mortgage was executed, and that the new building constructed on the land was
the property of the conjugal partnership.
The instrument further recites that the Development Company "hereby grants Don Juan M. Poizat a
credit in the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use within the entire
month of January of the coming year, 1913." In other words, it appears upon the face of the mortgage
that the loan was made to the husband with authority to use the money for his sole use and benefit.
With or without a power of attorney, the signature of the husband would be necessary to make the
instrument a valid mortgage upon the property of the wife, even though she personally signed the
mortgage.
It is contended that the instrument upon its face shows that its purpose and intent was to bind the wife.
But it also shows upon its face that the credit was granted to Don Juan M. Poizat which he might use
within the "entire month of January."
Any authority which he had to bind his wife should be confined and limited to his power of attorney.
Giving to it the very broadest construction, he would not have any authority to mortgage her property,
unless the mortgage was executed for her "and in her name, place or stead," and as her act and deed.
The mortgage in question was not so executed. It was signed by Don Juan M. Poizat in his own proper
person, and by him only, and it was acknowledged by him in his personal capacity, and there is nothing
in either the signature or acknowledgment which shows or tends to show that it was executed for or on
behalf of his wife or "in her name, place or stead."
It is contended that the instrument shows upon its face that it was intended to make the wife liable for
his debt, and to mortgage her property to secure its payment, and that his personal signature should
legally be construed as the joint or dual signature of both the husband and that of the wife as her agent.
That is to say, construing the recitals in the mortgage and the instrument as a whole, his lone personal
signature should be construed in a double capacity and binding equally and alike both upon the
husband and the wife. No authority has been cited, and none will ever be found to sustain such a
construction.
As the husband of the wife, his signature was necessary to make the mortgage valid. In other words, to
make it valid, it should have been signed by the husband in his own proper person and by him as
attorney in fact for his wife, and it should have been executed by both husband and wife, and should
have been so acknowledged.
There is no principle of law by which a person can become liable on a real mortgage which she never
executed either in person or by attorney in fact. It should be noted that this is a mortgage upon real
property, the title to which cannot be divested except by sale on execution or the formalities of a will or
deed. For such reasons, the law requires that a power of attorney to mortgage or sell real property
should be executed with all of the formalities required in a deed. For the same reason that the personal
signature of Poizat, standing alone, would not convey the title of his wife in her own real property, such
a signature would not bind her as a mortgagor in real property, the title to which was in her name.
We make this broad assertion that upon the facts shown in the record, no authority will ever be found to
hold the wife liable on a mortgage of her real property which was executed in the form and manner in
which the mortgage in question was executed.
The real question involved is fully discussed in Mechem on Agency, volume 1, page 784, in which the
author says:
"It is to be observed that the question here is not how authority to execute sealed instruments is to be
conferred, but how such an authority is to be executed. It is assumed that the agent was authorized to
bind his principal, but the question is, has he done so."
That is the question here.
Upon that point, there is a full discussion in the following sections, and numerous authorities are cited:
"SEC. 1093. Deed by agent must purport to be made and sealed in the name of the principal.
It is a general rule in the law of agency that in order to bind the principal by a deed executed by an
agent, the deed must upon its face purport to be made, signed and sealed in the name of the principal.
If, on the contrary, though the agent describes himself as 'agent,' or though he add the word 'agent' to
his name, the words of grant, covenant and the like, purport upon the face of the instrument to be his,
and the seal purports to be his seal, the deed will bind the agent if any one and not the principal.
"SEC. 1101. Whose deed is a given deed How question determined. In determining
whether a given deed is the deed of the principal, regard may be had, First, to the party named as
grantor. Is the deed stated to be made by the principal or by some other person? Secondly, to the
granting clause. Is the principal or the agent the person who purports to make the grant? Thirdly, to the
covenants, if any. Are these the covenants of the principal? Fourthly, to the testimonium clause. Who is
it who is to set his name and seal in testimony of the grant? Is it the principal or the agent? And Fifthly.
to the signature and seal. Whose signature and seal are these? Are they those of the principal or of the
agent?
"If upon such an analysis the deed does not upon its face purport to be the deed of the principal, made,
signed, sealed and delivered in his name and as his deed, it cannot take effect as such.
"SEC. 1102. Not enough to make deed the principal's that the agent is described as such. It
is not enough merely that the agent was in fact authorized to make the deed, if he has not acted in the
name of the principal. Nor is it ordinarily sufficient that he describes himself in the deed as acting by
virtue of a power of attorney or otherwise, or for or in behalf, or as attorney, of the principal, or as a
committee, or as trustee of a corporation, etc.; for these expressions are usually but descriptio
personae, and if, in fact, he has acted in his own name and set his own hand and seal, the causes of
action thereon accrue to and against him personally and not to or against the principal, despite these
recitals.
"SEC. 1103. Not principal's deed where agent appears as grantor and signer. Neither can the
deed ordinarily be deemed to be the deed of the principal where the agent is the one who is named as
the grantor or maker, and he is also the one who signs and seals it. . .
"SEC. 1108. . . . But however clearly the body of the deed may show an intent that it shall be the
act of the principal, yet unless it is executed by his attorney for him, it is not his deed, but the deed of
the attorney or of no one. The most usual and approved form of executing a deed by attorney is by his
writing the name of the principal and adding 'by A B his attorney' or 'by his attorney A B.' . . ."
That is good law. Applying it to the facts, under his power of attorney, Don Juan M. Poizat may have
had authority to borrow money and mortgage the real property of his wife, but the law specifies how and
in what manner it must be done, and the stubborn fact remains that, as to the transaction in question,
that power was never exercised. The mortgage in question was executed by him and him only, and for
such reason, it is not binding upon the wife, and as to her, it is null and void.
It follows that the whole decree against her and her paraphernal property and the sale of that property
to satisfy the mortgage are null and void, and that any title she may have had in or to her paraphernal
property remains and is now vested in the wife as fully and as absolutely as if the mortgage had never
been executed, the decree rendered or the property sold. As to Don Juan M. Poizat, the decree is valid
and binding, and remains in full force and effect.
It is an undisputed fact, which appears in the mortgage itself, that the land in question was the
paraphernal property of the wife, but after the marriage, the old buildings on the property were torn
down and a new building constructed and, in the absence of evidence to the contrary, it must be
presumed that the new building is conjugal property of the husband and wife (Civil Code, art. 1404). As
such, it is subject to the debts of the conjugal partnership for the payment or security of which the
husband has the power to mortgage or otherwise encumber the property (Civil Code, art. 1413).
It is very probable that this particular question was not fully presented to or considered by the lower
court.
The mortgage as to the paraphernal property of the wife is declared null and void ab initio, and as to her
personally, the decree is declared null and void, and as to her paraphernal property, the sale is set
aside and vacated, and held for naught, leaving it free and clear from the mortgage, decree and sale,
and in the same condition as if the mortgage had never been executed, with costs in favor of the
appellant. So ordered.
Johnson, Malcolm, Ostrand and Romualdez, J., concur.




















































































THIRD DIVISION
[G.R. No. 175399. October 27, 2009.]
OPHELIA L. TUATIS, petitioner, vs. SPOUSES ELISEO ESCOL and VISMINDA ESCOL;
HONORABLE COURT OF APPEALS, 22ND DIVISION, CAGAYAN DE ORO CITY; REGIONAL
TRIAL COURT, BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE; and THE SHERIFF OF
RTC, BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE, respondents.
DECISION
CHICO-NAZARIO, J p:
This Petition for Certiorari and Mandamus 1 under Rule 65 of the Rules of Court seeks the annulment
of the following Resolutions of the Court of Appeals in CA-G.R. SP No. 00737-MIN: (a) Resolution 2
dated 10 February 2006 dismissing the Petition for Certiorari, Prohibition and Mandamus with Prayer
for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction of herein
petitioner Ophelia L. Tuatis (Tuatis); (b) Resolution 3 dated 25 July 2006 denying Tuatis' Motion for
Reconsideration of the Resolution dated 10 February 2006; and (c) Resolution 4 dated 9 October 2006
denying Tuatis' Motion for Leave to File a Second Motion for Reconsideration. The instant Petition
further prays for the annulment of the Order 5 dated 26 September 2005 of the Regional Trial Court
(RTC) of Sindangan, Zamboanga del Norte, Branch 11, in Civil Case No. S-618, ordering the Sheriff to
immediately serve the Writ of Execution issued on 7 March 2002. IDCScA
The dispute arose from the following factual and procedural antecedents:
On 18 June 1996, Tuatis filed a Complaint for Specific Performance with Damages 6 against herein
respondent Visminda Escol (Visminda) before the RTC, docketed as Civil Case No. S-618.
Tuatis alleged in her Complaint that sometime in November 1989, Visminda, as seller, and Tuatis, as
buyer, entered into a Deed of Sale of a Part of a Registered Land by Installment 7 (Deed of Sale by
Installment). The subject matter of said Deed was a piece of real property situated in Poblacion,
Sindangan, Zamboanga del Norte and more particularly described as "[a] part of a registered land
being known as Lot No. 251, Pls-66 covered under OCT [Original Certificate of Title] No. P-5421; . . .
with an area of THREE HUNDRED (300) square meters, more or less" (subject property).
The significant portions of the Deed of Sale by Installment stated:
That for and in consideration of the sum of TEN THOUSAND PESOS (P10,000.00), Philippine
currency, the SELLER [Visminda] 8 hereby SELLS to the BUYER [Tuatis], the above-described parcel
of land under the following terms and conditions:
1. That the BUYER [Tuatis] shall pay to the SELLER [Visminda] the amount of THREE
THOUSAND PESOS (P3,000.00), as downpayment; CDISAc
2. That the BUYER [Tuatis] shall pay to the SELLER [Visminda] the amount of FOUR
THOUSAND PESOS (P4,000.00), on or before December 31, 1989;
3. That the remaining balance of THREE THOUSAND PESOS (P3,000.00) shall be paid by the
BUYER [Tuatis] to the SELLER [Visminda] on or before January 31, 1990;
4. That failure of the BUYER [Tuatis] to pay the remaining balance within the period of three
months from the period stipulated above, then the BUYER [Tuatis] shall return the land subject of this
contract to the SELLER [Visminda] and the SELLER [Visminda] [shall] likewise return all the amount
paid by the BUYER [Tuatis]. 9
Tuatis claimed that of the entire purchase price of P10,000.00, she had paid Visminda P3,000.00 as
downpayment. The exact date of said payment was not, however, specified. Subsequently, Tuatis paid
P3,000.00 as installment on 19 December 1989, and another P1,000.00 installment on 17 February
1990. Tuatis averred that she paid Visminda the remaining P3,000.00 on 27 February 1990 in the
presence of Eric Selda (Eric), a clerk in the law office of one Atty. Alanixon Selda. In support of this
averment, Tuatis attached to her Complaint a certification 10 executed by Eric on 27 May 1996.
SATDHE
In the meantime, Tuatis already took possession of the subject property and constructed a residential
building thereon.
In 1996, Tuatis requested Visminda to sign a prepared absolute deed of sale covering the subject
property, but the latter refused, contending that the purchase price had not yet been fully paid. The
parties tried to amicably settle the case before the Lupon Barangay, to no avail. 11
Tuatis contended that Visminda failed and refused to sign the absolute deed of sale without any valid
reason. Thus, Tuatis prayed that the RTC order Visminda to do all acts for the consummation of the
contract sale, sign the absolute deed of sale and pay damages, as well as attorney's fees.
In her Answer, 12 Visminda countered that, except for the P3,000.00 downpayment and P1,000.00
installment paid by Tuatis on 19 December 1989 and 17 February 1990, 13 respectively, Tuatis made
no other payment to Visminda. Despite repeated verbal demands, Tuatis failed to comply with the
conditions that she and Visminda agreed upon in the Deed of Sale by Installment for the payment of the
balance of the purchase price for the subject property. Visminda asked that the RTC dismiss Tuatis'
Complaint, or in the alternative, order Tuatis to return the subject property to Visminda after Visminda's
reimbursement of the P4,000.00 she had received from Tuatis.
After trial, the RTC rendered a Decision 14 on 29 April 1999 in Civil Case No. S-618 in Visminda's
favor. The RTC concluded: IScaAE
Under the facts and circumstances, the evidence for [Tuatis] has not established by satisfactory proof
as to (sic) her compliance with the terms and conditions setforth (sic) in [the Deed of Sale by
Installment] . . . .
xxx xxx xxx
In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment,
such payment, as we said, is a positive suspensive condition, the failure of which is not a breach,
casual or serious, but simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force . . . .
xxx xxx xxx
As the contract . . . is clear and unmistakable and the terms employed therein have not been shown to
belie or otherwise fail to express the true intention of the parties, and that the deed has not been
assailed on the ground of mutual mistake which would require its reformation, [the] same should be
given its full force and effect.
EVIDENCE (sic) at hand points of no full payment of the price, hence No. 4 of the stipulation applies[,]
which provides:
"That failure (sic) of the Buyer [Tuatis] to pay the remaining balance within the period of three months
from the period stipulated above, then the Buyer [Tuatis] shall return the land subject of this Contract to
the Seller [Visminda] and the Seller [Visminda] [shall] likewise return all the (sic) amount paid by the
Buyer [Tuatis]." DcCASI
This stipulation is the law between the [Buyer] and [Seller], and should be complied with in good faith . .
. .
[Tuatis] constructed the building . . . in bad faith for, (sic) she had knowledge of the fact that the Seller
[Visminda] is still the absolute owner of the subject land. There was bad faith also on the part of
[Visminda] in accordance with the express provisions of Article 454 [of the New Civil Code] 15 since
[she] allowed [Tuatis] to construct the building . . . without any opposition on [her] part and so occupy it.
The rights of the parties must, therefore, be determined as if they both had acted in bad faith. Their
rights in such cases are governed by Article 448 of the New Civil Code of the Philippines. 16
The RTC decreed the dismissal of Tuatis' Complaint for lack of merit, the return by Tuatis of physical
possession of the subject property to Visminda, and the return by Visminda of the P4,000.00 she
received from Tuatis.
Tuatis filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 65037. In a Resolution
17 dated 29 August 2000, however, the appellate court dismissed the appeal for failure of Tuatis to
serve and file her appellant's brief within the second extended period for the same. An Entry of
Judgment 18 was made in CA-G.R. CV No. 65037 on 29 September 2000, as a result of which, the
appealed RTC Decision dated 29 April 1999 in Civil Case No. S-618 became final and executory.
SCaEcD
Visminda filed a Motion for Issuance of a Writ of Execution 19 before the RTC on 14 January 2002. The
RTC granted Visminda's Motion in a Resolution dated 21 February 2002, and issued the Writ of
Execution 20 on 7 March 2002.
Tuatis thereafter filed before the RTC on 22 April 2002 a Motion to Exercise Right under Article 448 of
the Civil Code of the Philippines. 21 Tuatis moved that the RTC issue an order allowing her to buy the
subject property from Visminda. While Tuatis indeed had the obligation to pay the price of the subject
property, she opined that such should not be imposed if the value of the said property was considerably
more than the value of the building constructed thereon by Tuatis. Tuatis alleged that the building she
constructed was valued at P502,073.00, 22 but the market value of the entire piece of land measuring
4.0144 hectares, of which the subject property measuring 300 square meters formed a part, was only
about P27,000.00. 23 Tuatis maintained that she then had the right to choose between being
indemnified for the value of her residential building or buying from Visminda the parcel of land subject of
the case. Tuatis stated that she was opting to exercise the second option.
On 20 December 2004, Visminda deposited the amount of P4,000.00 to the office of the Clerk of Court
of the RTC, pursuant to the Decision of the trial court dated 29 April 1999. 24
In the intervening time, the Writ of Execution issued on 7 March 2002 was yet to be served or
implemented by the Sheriff. This prompted Visminda to write a letter to the Office of the Court
Administrator (OCA) to complain about the said delay. The OCA endorsed the letter to the RTC.
DaACIH
On 26 September 2005, the RTC issued an Order 25 directing the Sheriff to immediately serve or
enforce the Writ of Execution previously issued in Civil Case No. S-618, and to make a report and/or
return on the action taken thereon within a period of fifteen (15) days from receipt of the order.
On 10 October 2005, Tuatis filed before the RTC a Motion for Reconsideration 26 of the Order dated 26
September 2005, praying that the same be set aside in view of the pendency of her previous Motion to
Exercise Right under Article 448 of the Civil Code of the Philippines. However, before the RTC could
rule upon Tuatis' Motion for Reconsideration, the Sheriff enforced the Writ of Execution on 27 October
2005 and submitted his Return to the RTC on 2 November 2005, reporting that the subject writ was fully
satisfied.
Tuatis immediately filed with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus
with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, 27
which was docketed as CA-G.R. No. 00737-MIN. Tuatis sought in said Petition the annulment of the
RTC Order dated 26 September 2005, as well as the issuance of an order commanding the RTC and
the Sheriff to desist from undertaking any further proceedings in Civil Case No. S-618, and an order
directing the RTC to determine the rights of the parties under Article 448 of the Civil Code.
In a Resolution 28 dated 10 February 2006, the Court of Appeals dismissed outright Tuatis' Petition for
failure to completely pay the required docket fees, to attach a certified true or authenticated copy of the
assailed RTC Order dated 26 September 2005, and to indicate the place of issue of her counsel's IBP
and PTR Official Receipts. AcSCaI
Tuatis filed a Motion for Reconsideration 29 of the Resolution dated 10 February 2006, but said Motion
was denied by the appellate court in another Resolution dated 25 July 2006 on the ground that Tuatis
had not taken any action to rectify the infirmities of her Petition.
Tuatis subsequently filed a Motion for Leave to File a Second Motion for Reconsideration, 30 but it was
similarly denied by the Court of Appeals in a Resolution dated 9 October 2006, as Section 2, Rule 52
31 of the Rules of Court proscribes the filing of a second motion for reconsideration.
Hence, Tuatis filed the instant Petition, principally arguing that Article 448 of the Civil Code must be
applied to the situation between her and Visminda.
According to Tuatis, grave abuse of discretion, amounting to lack or excess of their jurisdiction, was
committed by the RTC in issuing the Order dated 26 September 2005, and by the Sheriff in enforcing
the Writ of Execution on 27 October 2005. Tuatis insists that the Motion for Reconsideration of the
Order dated 26 September 2005 that she filed on 10 October 2005 legally prevented the execution of
the RTC Decision dated 29 April 1999, since the rights of the parties to the case had yet to be
determined pursuant to Article 448 of the Civil Code. 32 Tuatis reiterates that the building she
constructed is valued at P502,073.00, per assessment of the Municipal Assessor of Sindangan,
Zamboanga del Norte; while the entire piece of land, which includes the subject property, has a market
value of only about P27,000.00, based on Tax Declaration No. 12464 issued in the year 2000. 33 Such
being the case, Tuatis posits that she is entitled to buy the land at a price to be determined by the Court
or, alternatively, she is willing to sell her house to Visminda in the amount of P502,073.00. CScTED
In addition, Tuatis attributes grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the Court of Appeals for dismissing outright her Petition for Certiorari, Prohibition and Mandamus
with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,
and subsequently denying her Motion for Reconsideration and Motion for Leave to File a Second
Motion for Reconsideration.
The Court grants the present Petition but for reasons other than those proffered by Tuatis.
Procedural deficiencies of Tuatis'
Petition before the Court of Appeals
It is true that Tuatis committed several procedural faux pas that would have, ordinarily, warranted the
dismissal of her Petition in CA-G.R. No. 00737-MIN before the Court of Appeals.
In its Resolution dated 10 February 2006, the Court of Appeals dismissed outright the Petition for
Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction filed by Tuatis for failure to comply with the following requirements
for such a petition: (a) to completely pay the required docket fees, (b) to attach a certified true or
authenticated copy of the assailed RTC Order dated 26 September 2005, and (c) to indicate the place
of issue of her counsel's IBP and PTR Official Receipts. CcSTHI
Section 3, Rule 46 of the Rules of Court lays down the requirements for original cases filed before the
Court of Appeals and the effect of non-compliance therewith, relevant portions of which are reproduced
below:
SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. . . . .
xxx xxx xxx
It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the
respondent with the original copy intended for the court indicated as such by the petitioner, and shall be
accompanied by a clearly legible duplicate original or certified true copy of the judgment, order,
resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and
other documents relevant or pertinent thereto. The certification shall be accomplished by the proper
clerk of court or by his duly authorized representative, or by the proper officer of the court, tribunal,
agency or office involved or by his duly authorized representative. The other requisite number of copies
of the petition shall be accompanied by clearly legible plain copies of all documents attached to the
original.
xxx xxx xxx
The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and deposit
the amount of P500.00 for costs at the time of the filing of the petition. ACaDTH
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground
for the dismissal of the petition. (Emphases ours.)
The sound reason behind the policy of the Court in requiring the attachment to the petition for certiorari,
prohibition, mandamus, or quo warranto of a clearly legible duplicate original or certified true copy of the
assailed judgment or order, is to ensure that the said copy submitted for review is a faithful reproduction
of the original, so that the reviewing court would have a definitive basis in its determination of whether
the court, body, or tribunal which rendered the assailed judgment or order committed grave abuse of
discretion. 34 Also, the Court has consistently held that payment of docket fees within the prescribed
period is jurisdictional and is necessary for the perfection of an appeal. 35
Indeed, the last paragraph of Section 3, Rule 46 states that non-compliance with any of the
requirements stated therein shall constitute sufficient ground for the dismissal of the petition. However,
the Court, in several cases, 36 also declared that said provision must not be taken to mean that the
petition shall be automatically dismissed in every instance of non-compliance. The power conferred
upon the Court of Appeals to dismiss an appeal, or even an original action, as in this case, is
discretionary and not merely ministerial. With that affirmation comes the caution that such discretion
must be a sound one, to be exercised in accordance with the tenets of justice and fair play, having in
mind the circumstances obtaining in each case. 37 DTSaHI
It must be borne in mind that the rules of procedure are intended to promote, rather than frustrate, the
ends of justice, and while the swift unclogging of court dockets is a laudable objective, it, nevertheless,
must not be met at the expense of substantial justice. Technical and procedural rules are intended to
help secure, not suppress, the cause of justice; and a deviation from the rigid enforcement of the rules
may be allowed to attain that prime objective for, after all, the dispensation of justice is the core reason
for the existence of courts. 38
Hence, technicalities must be avoided. The law abhors technicalities that impede the cause of justice.
The court's primary duty is to render or dispense justice. A litigation is not a game of technicalities.
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper
office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. Litigations must be decided on their merits and not on technicality. Every
party-litigant must be afforded the amplest opportunity for the proper and just determination of his
cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical
grounds is frowned upon where the policy of the court is to encourage hearings of appeals on their
merits and the rules of procedure ought not to be applied in a very rigid, technical sense; rules of
procedure are used only to help secure, not override, substantial justice. It is a far better and more
prudent course of action for the court to excuse a technical lapse and afford the parties a review of the
case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a
grave injustice to the parties, giving a false impression of speedy disposal of cases while actually
resulting in more delay, if not a miscarriage, of justice. 39 HDIATS
In this case, the Court finds that the Court of Appeals committed grave abuse of discretion in focusing
on the procedural deficiencies of Tuatis' Petition and completely turning a blind eye to the merits of the
same. The peculiar circumstances of the present case and the interest of substantial justice justify the
setting aside, pro hac vice, of the procedural defects of Tuatis' Petition in CA-G.R. No. 00737-MIN.
Perusal of the RTC Decision dated
29 April 1999
The RTC, in the body of its Decision dated 29 April 1999 in Civil Case No. S-618, found that Tuatis
breached the conditions stipulated in the Deed of Sale by Installment between her and Visminda; but
since both Tuatis and Visminda were guilty of bad faith, "[t]heir rights in such cases are governed by
Article 448 of the New Civil Code of the Philippines". 40
Article 448 of the Civil Code, referred to by the RTC, provides:
ART. 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price
of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof. (Emphases supplied.) HAEIac
According to the aforequoted provision, the landowner can choose between appropriating the building
by paying the proper indemnity for the same, as provided for in Articles 546 41 and 548 42 of the Civil
Code; or obliging the builder to pay the price of the land, unless its value is considerably more than that
of the structures, in which case the builder in good faith shall pay reasonable rent. 43
The Court notes, however, that the RTC, in the dispositive portion of its 29 April 1999 Decision, which
exactly reads
WHEREFORE, premises studiedly considered, judgment is hereby rendered as follows:
(1) DISMISSING the Complaint for lack of merit;
(2) ORDERING [Tuatis] to return the physical possession of the land in question to [Visminda];
and,
(3) ORDERING [Visminda] to return the P4,000.00 she received as evidenced by Exhibit "B" and
Exhibit "C" 44 to [Tuatis]. 45
utterly failed to make an adjudication on the rights of Tuatis and Visminda under Article 448 of the Civil
Code. It would seem that the decretal part of said RTC judgment was limited to implementing the
following paragraph in the Deed of Sale by Installment: IEAacS
4. That failure of the BUYER [Tuatis] to pay the remaining balance within the period of three
months from the period stipulated above, then the BUYER [Tuatis] shall return the land subject of this
contract to the SELLER [Visminda] and the SELLER [Visminda] [shall] likewise return all the amount
paid by the BUYER [Tuatis]. 46
without considering the effects of Article 448 of the Civil Code.
It was this apparent incompleteness of the fallo of the RTC Decision dated 29 April 1999 that resulted in
the present controversy, and that this Court is compelled to address for a just and complete settlement
of the rights of the parties herein.
Finality of the RTC Decision dated
19 April 1999
The Court has not lost sight of the fact that the RTC Decision dated 29 April 1999 in Civil Case No. S-
618 already became final and executory in view of the dismissal by the appellate court of Tuatis' appeal
in CA-G.R. CV No. 650307 and the entry of judgment made on 29 September 2000.
Nothing is more settled in law than that when a final judgment is executory, it thereby becomes
immutable and unalterable. The judgment may no longer be modified in any respect, even if the
modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the court rendering it or by the
highest Court of the land. The doctrine is founded on considerations of public policy and sound practice
that, at the risk of occasional errors, judgments must become final at some definite point in time. The
only recognized exceptions are the corrections of clerical errors or the making of the so-called nunc pro
tunc entries, in which case there is no prejudice to any party, and, of course, where the judgment is
void. 47 cDCHaS
Equally well-settled is the rule that the operative part in every decision is the dispositive portion or the
fallo, and where there is conflict between the fallo and the body of the decision, the fallo controls. This
rule rests on the theory that the fallo is the final order, while the opinion in the body is merely a
statement, ordering nothing. 48
Jurisprudence also provides, however, that where there is an ambiguity caused by an omission or a
mistake in the dispositive portion of the decision, the Court may clarify such an ambiguity by an
amendment even after the judgment has become final. In doing so, the Court may resort to the
pleadings filed by the parties and the findings of fact and the conclusions of law expressed in the text or
body of the decision. 49 Therefore, even after the RTC Decision dated 29 April 1999 had already
become final and executory, this Court cannot be precluded from making the necessary amendment
thereof, so that the fallo will conform to the body of the said decision.
If the Court does not act upon the instant Petition, Tuatis loses ownership over the building she
constructed, and in which she has been residing, allegedly worth P502,073.00, without any
recompense therefor whatsoever; while Visminda, by returning Tuatis' previous payments totaling
P4,000.00, not just recovers the subject property, but gains the entire building without paying indemnity
for the same. Hence, the decision of the Court to give due course to the Petition at bar, despite the
finality of the RTC Decision dated 29 April 1999, should not be viewed as a denigration of the doctrine
of immutability of final judgments, but a recognition of the equally sacrosanct doctrine that a person
should not be allowed to profit or enrich himself inequitably at another's expense. aDSTIC
Furthermore, the Court emphasizes that it is not even changing or reversing any of the findings of fact
and law of the RTC in its Decision dated 29 April 1999. This Court is still bound by said RTC judgment
insofar as it found that Tuatis failed to fully pay for the price of the subject property; but since both
Tuatis and Visminda were in bad faith, Article 448 of the Civil Code would govern their rights. The Court
herein is simply clarifying or completing the obviously deficient decretal portion of the decision, so that
said portion could effectively order the implementation of the actual ruling of the RTC, as clearly laid
down in the rationale of the same decision.
Applying Article 448 and other
related provisions of the Civil Code
Taking into consideration the provisions of the Deed of Sale by Installment and Article 448 of the Civil
Code, Visminda has the following options:
Under the first option, Visminda may appropriate for herself the building on the subject property after
indemnifying Tuatis for the necessary 50 and useful expenses 51 the latter incurred for said building, as
provided in Article 546 of the Civil Code.
It is worthy to mention that in Pecson v. Court of Appeals, 52 the Court pronounced that the amount to
be refunded to the builder under Article 546 of the Civil Code should be the current market value of the
improvement, thus: SaAcHE
The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In
this regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila [40 Phil.
717 (1920)] that the said provision was formulated in trying to adjust the rights of the owner and
possessor in good faith of a piece of land, to administer complete justice to both of them in such a way
as neither one nor the other may enrich himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the improvements which should be made the basis of
reimbursement. A contrary ruling would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount.
Consequently, the parties should therefore be allowed to adduce evidence on the present market value
of the apartment building upon which the trial court should base its finding as to the amount of
reimbursement to be paid by the landowner. (Emphasis ours.)
Until Visminda appropriately indemnifies Tuatis for the building constructed by the latter, Tuatis may
retain possession of the building and the subject property.
Under the second option, Visminda may choose not to appropriate the building and, instead, oblige
Tuatis to pay the present or current fair value of the land. 53 The P10,000.00 price of the subject
property, as stated in the Deed of Sale on Installment executed in November 1989, shall no longer
apply, since Visminda will be obliging Tuatis to pay for the price of the land in the exercise of
Visminda's rights under Article 448 of the Civil Code, and not under the said Deed. Tuatis' obligation will
then be statutory, and not contractual, arising only when Visminda has chosen her option under Article
448 of the Civil Code. cDTACE
Still under the second option, if the present or current value of the land, the subject property herein,
turns out to be considerably more than that of the building built thereon, Tuatis cannot be obliged to pay
for the subject property, but she must pay Visminda reasonable rent for the same. Visminda and Tuatis
must agree on the terms of the lease; otherwise, the court will fix the terms.
Necessarily, the RTC should conduct additional proceedings before ordering the execution of the
judgment in Civil Case No. S-618. Initially, the RTC should determine which of the aforementioned
options Visminda will choose. Subsequently, the RTC should ascertain: (a) under the first option, the
amount of indemnification Visminda must pay Tuatis; or (b) under the second option, the value of the
subject property vis--vis that of the building, and depending thereon, the price of, or the reasonable
rent for, the subject property, which Tuatis must pay Visminda.
The Court highlights that the options under Article 448 are available to Visminda, as the owner of the
subject property. There is no basis for Tuatis' demand that, since the value of the building she
constructed is considerably higher than the subject property, she may choose between buying the
subject property from Visminda and selling the building to Visminda for P502,073.00. Again, the choice
of options is for Visminda, not Tuatis, to make. And, depending on Visminda's choice, Tuatis' rights as a
builder under Article 448 are limited to the following: (a) under the first option, a right to retain the
building and subject property until Visminda pays proper indemnity; and (b) under the second option, a
right not to be obliged to pay for the price of the subject property, if it is considerably higher than the
value of the building, in which case, she can only be obliged to pay reasonable rent for the same.
CHaDIT
The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord
with the principle of accession, i.e., that the accessory follows the principal and not the other way
around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. 54 The
landowner cannot refuse to exercise either option and compel instead the owner of the building to
remove it from the land. 55
The raison d'etre for this provision has been enunciated thus: Where the builder, planter or sower has
acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect
the owner of the improvements without causing injustice to the owner of the land. In view of the
impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving
the owner of the land the option to acquire the improvements after payment of the proper indemnity, or
to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to
exercise either option. It is the owner of the land who is authorized to exercise the option, because his
right is older, and because, by the principle of accession, he is entitled to the ownership of the
accessory thing. 56
Visminda's Motion for Issuance of Writ of Execution cannot be deemed as an expression of her choice
to recover possession of the subject property under the first option, since the options under Article 448
of the Civil Code and their respective consequences were also not clearly presented to her by the 19
April 1999 Decision of the RTC. She must then be given the opportunity to make a choice between the
options available to her after being duly informed herein of her rights and obligations under both.
HTcDEa
As a final note, the directives given by the Court to the trial court in Depra v. Dumlao 57 may prove
useful as guidelines to the RTC herein in ensuring that the additional proceedings for the final
settlement of the rights of the parties under Article 448 of the Civil Code shall be conducted as
thoroughly and promptly as possible.
WHEREFORE, premises considered, the Court:
(1) GRANTS the instant Petition;
(2) ANNULS AND SETS ASIDE (a) the Resolution dated 21 February 2002 of the Regional Trial
Court of Sindangan, Zamboanga del Norte, Branch 11, ordering the issuance of a writ for the execution
of the Decision dated 19 April 1999 of the said trial court in Civil Case No. S-618; (b) the Writ of
Execution issued on 7 March 2002; and (c) the actions undertaken by the Sheriff to enforce the said
Writ of Execution;
(3) DIRECTS the Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11, to
conduct further proceedings to determine with deliberate dispatch: (a) the facts essential to the proper
application of Article 448 of the Civil Code, and (b) respondent Visminda Escol's choice of option under
the same provision; and ESAHca
(4) Further DIRECTS the Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11,
to undertake the implementation of respondent Visminda Escol's choice of option under Article 448 of
the Civil Code, as soon as possible.
No costs.
SO ORDERED.















































FIRST DIVISION
[G.R. No. 165907. July 27, 2009.]
SPS. DOMINADOR R. NARVAEZ and LILIA W. NARVAEZ, petitioners, vs. SPS. ROSE OGAS
ALCISO and ANTONIO ALCISO, respondents.
DECISION
CARPIO, J p:
The Case
This is a petition 1 for review on certiorari under Rule 45 of the Rules of Court. The petition challenges
the 29 October 2004 Decision 2 of the Court of Appeals in CA-G.R. CV No. 63757. The Court of
Appeals affirmed with modification the 6 April 1998 Decision 3 of the Regional Trial Court (RTC),
Judicial Region 1, Branch 8, La Trinidad, Benguet, in Civil Case No. 84-CV-0094. SacDIE
The Facts
Larry A. Ogas (Ogas) owned a 1,329-square meter parcel of land situated in Pico, La Trinidad,
Benguet. The property was covered by Transfer Certificate of Title (TCT) No. T-1068, and a portion was
subject to a 30-year lease agreement 4 with Esso Standard Eastern, Inc. Ogas sold the property to his
daughter Rose O. Alciso (Alciso). TCT No T-1068 was cancelled and TCT No. T-12422 5 was issued in
the name of Alciso.
On 25 August 1979, Alciso entered into a Deed of Sale with Right to Repurchase, 6 selling the property
to Jaime Sansano (Sansano) for P10,000. Alciso later repurchased the property from Sansano and, on
28 March 1980, she entered into another Deed of Absolute Sale, 7 this time selling the property to
Celso S. Bate (Bate) for P50,000. The Deed stated that:
The SELLER warrants that her title to and ownership of the property herein conveyed are free from all
liens and encumbrances except those as appear on the face of the title, specifically, that lease over the
said property in favor of ESSO STANDARD EASTERN, INC., the rights over which as a lessor the
SELLER likewise hereby transfers in full to the buyer. 8 cHECAS
TCT No. T-12422 was cancelled and TCT No. T-16066 9 was issued in the name of Bate. On 14
August 1981, Bate entered into a Deed of Sale of Realty, 10 selling the property to the spouses
Dominador R. Narvaez and Lilia W. Narvaez (Spouses Narvaez) for P80,000. TCT No. T-16066 was
cancelled and TCT No. T-16528 11 was issued in the name of the Spouses Narvaez. In 1982, the
Spouses Narvaez built a commercial building on the property amounting to P300,000.
Alciso demanded that a stipulation be included in the 14 August 1981 Deed of Sale of Realty allowing
her to repurchase the property from the Spouses Narvaez. In compliance with Alciso's demand, the
Deed stated that, "The SELLER (Bate) carries over the manifested intent of the original SELLER of the
property (Alciso) to buy back the same at a price under such conditions as the present BUYERS
(Spouses Narvaez) may impose." The Spouses Narvaez furnished Alciso with a copy of the Deed.
Alciso alleged that she informed the Spouses Narvaez that she wanted to repurchase the property. The
Spouses Narvaez demanded P300,000, but Alciso was willing to pay only P150,000. Alciso and the
Spouses Narvaez failed to reach an agreement on the repurchase price. DaTICE
In a Complaint 12 dated 15 June 1984 and filed with the RTC, Alciso prayed that (1) the 25 August
1979 Deed of Sale with Right to Repurchase, the 28 March 1980 Deed of Absolute Sale, and the 14
August 1981 Deed of Sale of Realty be annulled; (2) the Register of Deeds be ordered to cancel TCT
Nos. T-16066 and T-16528; (3) the Spouses Narvaez be ordered to reconvey the property; and (4)
Sansano, Bate, and the Spouses Narvaez be ordered to pay damages, attorney's fees and expenses of
litigation. Alciso claimed that the intention of the parties was to enter into a contract of real estate
mortgage and not a contract of sale with right of repurchase. She stated that:
[C]ontrary to the clear intention and agreement of the parties, particularly the plaintiffs herein, defendant
JAIME SANSANO, taking advantage of the good faith and financial predicament and difficulties of
plaintiffs at the time, caused to be prepared and induced with insidous [sic] words and machinations,
prevailed upon plaintiff to sign a contract denominated as "Sale With Right to Repurchase", instead of
Deed of Real Estate Mortgage as was the clear intention and agreement of the parties.
xxx xxx xxx
Defendant JAIME SANSANO caused to be prepared a contract denominated as DEED OF ABSOLUTE
SALE, covering the lot in question, contrary to the clear intention and understanding of plaintiff who was
inveigled into signing said contract under the impression that what she was executing was a real estate
mortgage. 13 ESCcaT
The RTC's Ruling
In its 6 April 1998 Decision, the RTC held that (1) the 25 August 1979 Deed of Sale with Right to
Repurchase became functus officio when Alciso repurchased the property; (2) the action to annul the
28 March 1980 Deed of Absolute Sale had prescribed; (3) Alciso had no legal personality to annul the
14 August 1981 Deed of Sale of Realty; (4) the 14 August 1981 Deed of Sale of Realty contained a
stipulation pour autrui in favor of Alciso Alciso could repurchase the property; (5) Alciso
communicated to the Spouses Narvaez her acceptance of the favor contained in the stipulation pour
autrui; (6) the repurchase price was P80,000; (7) Alciso could either appropriate the commercial
building after payment of the indemnity equivalent to one-half of its market value when constructed or
sell the land to the Spouses Narvaez; and (8) Alciso was entitled to P100,000 attorney's fees and
P20,000 nominal damages.
The Spouses Narvaez appealed to the Court of Appeals. In their Appellants Brief 14 dated 21
November 2000, the Spouses Narvaez claimed that (1) the 14 August 1981 Deed of Sale of Realty did
not contain a stipulation pour autrui not all requisites were present; (2) the RTC erred in setting the
repurchase price at P80,000; (3) they were purchasers for value and in good faith; and (4) they were
builders in good faith. IACDaS
The Court of Appeals' Ruling
In its 29 October 2004 Decision, the Court of Appeals held that (1) the 14 August 1981 Deed of Sale of
Realty contained a stipulation pour autrui; (2) Alciso accepted the favor contained in the stipulation pour
autrui; (3) the RTC erred in setting the repurchase price at P80,000; (4) the 14 August 1981 Deed of
Sale of Realty involved a contract of sale with right of repurchase and not real estate mortgage; (5) the
Spouses Narvaez were builders in good faith; and (6) Alciso could either appropriate the commercial
building after payment of the indemnity or oblige the Spouses Narvaez to pay the price of the land,
unless the price was considerably more than that of the building. The Court of Appeals remanded the
case to the RTC for determination of the property's reasonable repurchase price.
The Issue
The Spouses Narvaez elevated the case to the Court. In their Petition dated 15 December 2004, the
Spouses Narvaez claimed that Alciso did not communicate her acceptance of the favor contained in the
stipulation pour autrui; thus, she could not repurchase the property. CDaSAE
The Court's Ruling
The petition is unmeritorious.
Article 1311, paragraph 2, of the Civil Code states the rule on stipulations pour autrui:
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit
or interest of a person is not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person.
In Limitless Potentials, Inc. v. Quilala, 15 the Court laid down the requisites of a stipulation pour autrui:
(1) there is a stipulation in favor of a third person; (2) the stipulation is a part, not the whole, of the
contract; (3) the contracting parties clearly and deliberately conferred a favor to the third person the
favor is not an incidental benefit; (4) the favor is unconditional and uncompensated; (5) the third person
communicated his or her acceptance of the favor before its revocation; and (6) the contracting parties
do not represent, or are not authorized by, the third party. HIcTDE
All the requisites are present in the instant case: (1) there is a stipulation in favor of Alciso; (2) the
stipulation is a part, not the whole, of the contract; (3) Bate and the Spouses Narvaez clearly and
deliberately conferred a favor to Alciso; (4) the favor is unconditional and uncompensated; (5) Alciso
communicated her acceptance of the favor before its revocation she demanded that a stipulation be
included in the 14 August 1981 Deed of Sale of Realty allowing her to repurchase the property from the
Spouses Narvaez, and she informed the Spouses Narvaez that she wanted to repurchase the property;
and (6) Bate and the Spouses Narvaez did not represent, and were not authorized by, Alciso.
The Spouses Narvaez claim that Alciso did not communicate her acceptance of the favor. They state
that:
A perusal of the provision of the Deed of Sale of Realty between Celso Bate and the spouses
Dominador R. Narvaez and Lilia W. Narvaez (Annex "B") which clearly provides that "the third person"
(Rose O. Alciso) must have communicated her acceptance to the obligors (spouses Dominador R.
Narvaez and Lilia W. Narvaez) before its revocation was not complied with. The acceptance is at best
by mere inference. ScHAIT
xxx xxx xxx
Petitioner Narvaez clearly stated that while the contract (Deed of Sale of Realty, Annex "D") contained
an [sic] stipulation in favor of a third person (Rose O. Alciso), she did not demand its fulfillment and
communicate her acceptance to the obligors before its revocation.
xxx xxx xxx
We maintain that the stipulation aforequoted is not a stipulation pour autrui. Let the following be
emphasized:
1. While the contract contained a stipulation in favor of a third person (Rose Alciso) she did not
demand its fulfillment and she never communicated her acceptance to the obligors (Spouses Narvaez)
before its revocation (Uy Tam vs. Leonard, 30 Phil. 471; Coquia vs. Fieldmen's Insurance Co., Inc., 26
SCRA 178)
2. Granting arguendo that the stipulation is a pour autrui yet in the three meetings Rose Alciso
had with Mrs. Narvaez she never demanded fulfillment of the alleged stipulation pour autrui and, what is
worse, she did not communicate her acceptance to the obligors before it is revoked. 16 aDATHC
A petition for review on certiorari under Rule 45 of the Rules of Court should include only questions of
law questions of fact are not reviewable. A question of law exists when the doubt centers on what
the law is on a certain set of facts, while a question of fact exists when the doubt centers on the truth or
falsity of the alleged facts. There is a question of law if the issue raised is capable of being resolved
without need of reviewing the probative value of the evidence. Once the issue invites a review of the
evidence, the question is one of fact. 17
Whether Alciso communicated to the Spouses Narvaez her acceptance of the favor contained in the
stipulation pour autrui is a question of fact. It is not reviewable.
The factual findings of the trial court, especially when affirmed by the Court of Appeals, are binding on
the Court. 18 In its 6 April 1998 Decision, the RTC found that Alciso communicated to the Spouses
Narvaez her acceptance of the favor contained in the stipulation pour autrui. The RTC stated that:
Rose Alciso communicated her acceptance of such favorable stipulation when she went to see
defendant Lillia [sic] Narvaez in their house. Under the foregoing circumstances, there is no question
that plaintiff Rose Alciso can maintain her instant action for the enforcement and/or fulfillment of the
aforestated stipulation in her favor to by [sic] back the property in question. 19 (Emphasis supplied)
CSTDEH
In Florentino v. Encarnacion, Sr., 20 the Court held that the acceptance may be made at any time
before the favorable stipulation is revoked and that the acceptance may be in any form it does not
have to be formal or express but may be implied. During the trial, Alciso testified that she informed the
Spouses Narvaez that she wanted to repurchase the property:
Q What was your proposal to Mrs. Narvaez by way of settlement?
A I tried to go to her and asked her if I could redeem the property and Mrs. Narvaez told me
why not, you could redeem the property but not our price.
xxx xxx xxx
Q Now, when you went back to her, what if any did you propose to her or tell her, Madam
witness?
A I just asked for the redemption for the property, sir and she just told me wa [sic] the price that
I could only redeem the property.
Q Three Hundred thousand pesos? CDHSac
A Yes, Sir.
Q Did you make any counter proposal?
A Yes, for the third time I want [sic] back again your Honor . . . 21
The exceptions to the rule that the factual findings of the trial court are binding on the Court are (1)
when there is grave abuse of discretion; (2) when the findings are grounded on speculations; (3) when
the inference made is manifestly mistaken; (4) when the judgment of the Court of Appeals is based on a
misapprehension of facts; (5) when the factual findings are conflicting; (6) when the Court of Appeals
went beyond the issues of the case and its findings are contrary to the admissions of the parties; (7)
when the Court of Appeals overlooked undisputed facts which, if properly considered, would justify a
different conclusion; (8) when the findings of the Court of Appeals are contrary to those of the trial court;
(9) when the facts set forth by the petitioners are not disputed by the respondents; and (10) when the
findings of the Court of Appeals are premised on the absence of evidence and are contradicted by the
evidence on record. 22 The Spouses Narvaez did not show that the instant case falls under any of the
exceptions. ACIEaH
In its 29 October 2004 Decision, the Court of Appeals held that Bate and the Spouses Narvaez entered
into a sale with right of repurchase and that, applying Article 448 of the Civil Code, Alciso could either
appropriate the commercial building after payment of the indemnity or oblige the Spouses Narvaez to
pay the price of the land, unless the price was considerably more than that of the building. Article 448
states:
Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or the trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof.
The Court of Appeals stated that: SIcTAC
[T]he contract between defendants-appellants Bate and Narvaez spouses is a contract of sale with a
stipulation granting plaintiffs-appellees the right to repurchase the property at a reasonable price. Being
the absolute owners of the property in question, defendants-appellants Narvaez spouses have the
undisputed right to use, enjoy and build thereon.
Having built the improvement on the land they own and registered in their names, they are likened to
builders in good faith and their rights over the improvement shall be governed by Article 448 of the Civil
Code which provides:
ART. 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price
of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than that of the building or tress. * In such case, he shall
pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the
court shall fix the terms thereof. HDcaAI
Applying said Article, plaintiffs-appellees, after repurchasing the land, will have the following options:
(1) to appropriate for themselves the building upon payment of its value to defendants-appellants
Narvaez spouses; OR
(2) to compel the defendants-appellants Narvaez spouses to buy the land, unless the value of
thereof [sic] be considerably more than that of the building, in which case, said spouses may lease the
land instead. The parties shall agree upon the terms of the lease and in case of disagreement, the
courts shall fix the terms thereof. 23
The Court disagrees.
The rule is that only errors specifically assigned and properly argued in the appellant's brief will be
considered, except jurisdictional and clerical errors. 24 However, the Court is clothed with ample
authority to review matters not assigned as errors if their consideration is necessary in arriving at a just
decision. 25 ISCHET
Article 448 is inapplicable in cases involving contracts of sale with right of repurchase it is
inapplicable when the owner of the land is the builder, sower, or planter. In Pecson v. Court of Appeals,
26 the Court held that:
Article 448 does not apply to a case where the owner of the land is the builder, sower, or planter who
then later loses ownership of the land by sale or donation. This Court said so in Coleongco v.
Regalado:
Article 361 of the old Civil Code is not applicable in this case, for Regalado constructed the house on
his own land before he sold said land to Coleongco. Article 361 applies only in cases where a person
constructs a building on the land of another in good or in bad faith, as the case may be. It does not
apply to a case where a person constructs a building on his own land, for then there can be no question
as to good or bad faith on the part of the builder.
Elsewise stated, where the true owner himself is the builder of the works on his own land, the issue of
good faith or bad faith is entirely irrelevant. (Emphasis supplied) HcSaAD
Article 448 is inapplicable in the present case because the Spouses Narvaez built the commercial
building on the land that they own. Besides, to compel them to buy the land, which they own, would be
absurd.
As the Court of Appeals correctly observed, the terms of the 14 August 1981 Deed of Sale of Realty
show that Bate and the Spouses Narvaez entered into a sale with right of repurchase, where Bate
transferred his right of repurchase to Alciso. The Deed states that, "The SELLER (Bate) carries over the
manifested intent of the original SELLER of the property (Alciso) to buy back the same at a price under
such conditions as the present BUYERS (Spouses Narvaez) may impose." Article 1601 of the Civil
Code states that, "Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other
stipulations which may have been agreed upon." In Gallar v. Husain, 27 the Court held that "the right of
repurchase may be exercised only by the vendor in whom the right is recognized by contract or by any
person to whom the right may have been transferred."
In a sale with right of repurchase, the applicable provisions are Articles 1606 and 1616 of the Civil
Code, not Article 448. Articles 1606 and 1616 state: aTDcAH
Art. 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four
years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final
judgment was rendered in a civil action on the basis that the contract was a true sale with right to
repurchase.
Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the
price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold. aCcEHS
Under Article 1616, Alciso may exercise her right of redemption by paying the Spouses Narvaez (1) the
price of the sale, (2) the expenses of the contract, (3) legitimate payments made by reason of the sale,
and (4) the necessary and useful expenses made on the thing sold. In the present case, the cost of the
building constitutes a useful expense. Useful expenses include improvements which augment the value
of the land. 28
Under the first paragraph of Article 1606, Alciso had four years from 14 August 1981 to repurchase the
property since there was no express agreement as to the period when the right can be exercised.
Tender of payment of the repurchase price is necessary in the exercise of the right of redemption.
Tender of payment is the seller's manifestation of his or her desire to repurchase the property with the
offer of immediate performance. 29
Alciso's intimation to the Spouses Narvaez that she wanted to repurchase the property was insufficient.
To have effectively exercised her right of repurchase, Alciso should have tendered payment. In Lee v.
Court of Appeals, 30 the Court held that:
The rule that tender of payment of the repurchase price is necessary to exercise the right of redemption
finds support in civil law. Article 1616 of the Civil Code of the Philippines . . . furnishes the guide, to wit:
"The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of
the sale . . ." cDAITS
Thus, in the case of Angao vs. Clavano, 17 Phil. 152, it was held that "it is not sufficient for the vendor
to intimate or to state to the vendee that the former desires to redeem the thing sold, but he must
immediately thereupon offer to repay the price . . ." Likewise, in several other cases decided by the
Supreme Court (Fructo vs. Fuentes, 15 Phil. 362; Retes vs. Suelto, 20 Phil. 394; Rosales vs. Reyes, et
al., 25 Phil. 495; Canuto vs. Mariano, 37 Phil. 840; De la Cruz, et al. vs. Resurreccion, et al., 98 Phil.
975; and other cases) where the right to repurchase was held to have been properly exercised, there
was a definite finding of tender of payment having been made by the vendor. (Emphasis supplied.)
Nevertheless, under the third paragraph of Article 1606, Alciso has 30 days from the finality of this
Decision to exercise her right of repurchase. In Laserna v. Javier, 31 the Court held that:
The new Civil Code in Article 1606, thereof gives the vendors a retro "the right to repurchase within
thirty days from the time final judgment was rendered in a civil action, on the basis that the contract was
a true sale with the right to repurchase." This provision has been construed to mean that "after the
courts have decided by a final or executory judgment that the contract was a pacto de retro and not a
mortgage, the vendor (whose claim as mortgagor had definitely been rejected) may still have the
privilege of repurchasing within 30 days." (Perez, et al. vs. Zulueta, 106 Phil., 264.) ECSHAD
The third paragraph of Article 1606 allows sellers, who considered the transaction they entered into as
mortgage, to repurchase the property within 30 days from the time they are bound by the judgment
finding the transaction to be one of sale with right of repurchase.
WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 29 October 2004 Decision of
the Court of Appeals in CA-G.R. CV No. 63757 with MODIFICATION. Respondent Rose O. Alciso may
exercise her right of redemption by paying the petitioners Spouses Dominador R. Narvaez and Lilia W.
Narvaez (1) the price of the sale, (2) the expenses of the contract, (3) legitimate payments made by
reason of the sale, and (4) the necessary and useful expenses made on the subject property. The Court
DIRECTS the Regional Trial Court, Judicial Region 1, Branch 8, La Trinidad, Benguet, to determine the
amounts of the expenses of the contract, the legitimate expenses made by reason of the sale, and the
necessary and useful expenses made on the subject property. After such determination, respondent
Rose O. Alciso shall have 30 days to pay the amounts to petitioners Spouses Dominador R. Narvaez
and Lilia W. Narvaez.
SO ORDERED.








































SECOND DIVISION
[G.R. No. 168800. April 16, 2009.]
NEW REGENT SOURCES, INC., petitioner, vs. TEOFILO VICTOR TANJUATCO, JR., and VICENTE
CUEVAS, * respondents.
DECISION
QUISUMBING, J p:
Petitioner through counsel prays for the reversal of the Orders dated February 12, 2005 1 and July 1,
2005 2 of the Regional Trial Court (RTC) of Calamba City, Branch 37, in Civil Case No. 2662-98-C. The
RTC had granted the demurrer to evidence filed by respondent Tanjuatco, and then denied petitioner's
motion for reconsideration. CADacT
The facts, as culled from the records, are as follows:
Petitioner New Regent Sources, Inc. (NRSI) filed a Complaint 3 for Rescission/Declaration of Nullity of
Contract, Reconveyance and Damages against respondent Tanjuatco and the Register of Deeds of
Calamba before the RTC of Calamba, Laguna, Branch 37. NRSI alleged that in 1994, it authorized
Vicente P. Cuevas III, its Chairman and President, to apply on its behalf, for the acquisition of two
parcels of land by virtue of its right of accretion. Cuevas purportedly applied for the lots in his name by
paying P82,400.38 to the Bureau of Lands. On January 2, 1995, Cuevas and his wife executed a Voting
Trust Agreement 4 over their shares of stock in the corporation. Then, pending approval of the
application with the Bureau of Lands, Cuevas assigned his right to Tanjuatco for the sum of P85,000. 5
On March 12, 1996, the Director of Lands released an Order, 6 which approved the transfer of rights
from Cuevas to Tanjuatco. Transfer Certificates of Title Nos. T-369406 7 and T-369407 8 were then
issued in the name of Tanjuatco.
In his Answer with Counterclaim, 9 Tanjuatco advanced the affirmative defense that the complaint
stated no cause of action against him. According to Tanjuatco, it was Cuevas who was alleged to have
defrauded the corporation. He averred further that the complaint did not charge him with knowledge of
the agreement between Cuevas and NRSI. SDTcAH
Upon Tanjuatco's motion, the trial court conducted a preliminary hearing on the affirmative defense, but
denied the motion to dismiss, and ordered petitioner to amend its complaint and implead Cuevas as a
defendant. 10
Summons was served on respondent Cuevas through publication, 11 but he was later declared in
default for failure to file an answer. 12
After NRSI completed presenting evidence, Tanjuatco filed a Demurrer to Evidence, 13 which the RTC
granted in an Order dated February 12, 2005. In dismissing NRSI's complaint, 14 the RTC cited the
Order of the Director of Lands and certain insufficiencies in the allegations in the complaint. The trial
court further held that Tanjuatco is an innocent purchaser for value.
NRSI moved for reconsideration, but it was denied by the trial court in an Order dated July 1, 2005,
thus: IESDCH
WHEREFORE, the Motion for Reconsideration filed by the plaintiff on May 3, 2005 is DENIED for lack
of merit.
SO ORDERED. 15
Hence, NRSI filed the instant petition for review on certiorari, raising the following issues:
I.
WHETHER OR NOT THE ALLEGED INSUFFICIENCY OF THE ALLEGATIONS IN THE COMPLAINT
MAY BE USED AS A BASIS TO DISMISS THE SAME BY WAY OF A DEMURRER TO EVIDENCE;
2009juris
II.
WHETHER OR NOT A COMPLAINT MAY BE DISMISSED ON DEMURRER TO EVIDENCE BASED
ON A DOCUMENT NOT PROPERLY IDENTIFIED, MARKED AND OFFERED IN EVIDENCE. 16
TaDSCA
In a nutshell, the issue for our determination is whether the trial court erred in dismissing the case on
demurrer to evidence.
NRSI argues that the supposed insufficiency of allegations in the complaint did not justify its dismissal
on demurrer to evidence. It contends that a dismissal on demurrer to evidence should be grounded on
insufficiency of evidence presented at trial. NRSI contends that the sufficiency of its allegations was
affirmed when the trial court denied the motion to dismiss. It likewise asserts that the RTC erred in
declaring Tanjuatco a buyer in good faith. It stressed that the Order of the Director of Lands, as the
basis for such finding, was not formally offered in evidence. Hence, it should not have been considered
by the trial court in accordance with Section 34, 17 Rule 132 of the Rules of Court.
Tanjuatco, for his part, maintains that NRSI failed to make a case for reconveyance against him. He
insists that the complaint stated no cause of action, and the evidence presented established, rather
than refuted, that he was an innocent purchaser. Tanjuatco adds that the RTC's denial of the motion to
dismiss, and admission of evidence negated NRSI's claim that it relied on the complaint alone to decide
the case. Lastly, Tanjuatco argues that the Order of the Director of Lands was a matter of judicial
notice. Thus, under Section 1, 18 Rule 129 of the Rules of Court, there was no need to identify, mark,
and offer it in evidence. TSIDaH
After serious consideration, we find the instant petition utterly without merit.
In its petition, NRSI questions the trial court's dismissal of its complaint upon a demurrer to evidence
and invites a calibration of the evidence on record to determine the sufficiency of the factual basis for
the trial court's order. This factual analysis, however, would involve questions of fact which are
improper in a petition for review under Rule 45 of the Rules of Court. It is well established that in an
appeal by certiorari, only questions of law may be reviewed. 19 A question of law exists when there is
doubt or difference as to what the law is on a certain state of facts. A question of fact exists if the doubt
centers on the truth or falsity of the alleged facts. 20 There is a question of law when the issue does not
call for an examination of the probative value of evidence presented, the truth or falsehood of facts
being admitted, and the doubt concerns the correct application of law and jurisprudence on the matter.
21 Otherwise, there is a question of fact. Since it raises essentially questions of fact, the instant petition
must be denied.
In any event, we find that based on the examination of the evidence at hand, we are in agreement that
the trial court correctly dismissed NRSI's complaint on demurrer to evidence. EIAaDC
Petitioner filed a complaint for rescission/declaration of nullity of contract, reconveyance and damages
against respondents. An action for reconveyance is one that seeks to transfer property, wrongfully
registered by another, to its rightful and legal owner. 22 In an action for reconveyance, the certificate of
title is respected as incontrovertible. What is sought instead is the transfer of the property, specifically
the title thereof, which has been wrongfully or erroneously registered in another person's name, to its
rightful and legal owner, or to one with a better right. 23
To warrant a reconveyance of the land, the following requisites must concur: (1) the action must be
brought in the name of a person claiming ownership or dominical right over the land registered in the
name of the defendant; (2) the registration of the land in the name of the defendant was procured
through fraud 24 or other illegal means; 25 (3) the property has not yet passed to an innocent
purchaser for value; 26 and (4) the action is filed after the certificate of title had already become final
and incontrovertible 27 but within four years from the discovery of the fraud, 28 or not later than 10
years in the case of an implied trust. 29 Petitioner failed to show the presence of these requisites.
cEAIHa
Primarily, NRSI anchors its claim over the lands subjects of this case on the right of accretion. It
submitted in evidence, titles 30 to four parcels of land, which allegedly adjoin the lots in the name of
Tanjuatco. 2009juris
But it must be stressed that accretion as a mode of acquiring property under Article 457 31 of the Civil
Code requires the concurrence of the following requisites: (1) that the deposition of soil or sediment be
gradual and imperceptible; (2) that it be the result of the action of the waters of the river; and (3) that the
land where accretion takes place is adjacent to the banks of rivers. 32 Thus, it is not enough to be a
riparian owner in order to enjoy the benefits of accretion. One who claims the right of accretion must
show by preponderant evidence that he has met all the conditions provided by law. Petitioner has
notably failed in this regard as it did not offer any evidence to prove that it has satisfied the foregoing
requisites. TCacIE
Further, it is undisputed that Tanjuatco derived his title to the lands from Original Certificate of Title
(OCT) No. 245 registered in the name of the Republic of the Philippines. Said parcels of land formed
part of the Dried San Juan River Bed, 33 which under Article 502 (1) 34 of the Civil Code rightly
pertains to the public dominion. The Certification 35 issued by Forester III Emiliano S. Leviste confirms
that said lands were verified to be within the Alienable and Disposable Project No. 11-B of Calamba,
Laguna per BFD LC Map No. 3004, certified and declared as such on September 28, 1981. Clearly, the
Republic is the entity which had every right to transfer ownership thereof to respondent.
Next, petitioner sought to establish fraudulent registration of the land in the name of Tanjuatco. NRSI
presented before the trial court a copy of the Voting Trust Agreement which the spouses Cuevas
executed in favor of Pauline Co. However, nothing in said agreement indicates that NRSI empowered
Cuevas to apply for the registration of the subject lots on its behalf. HETDAa
Neither did petitioner adduce evidence to prove that Cuevas was its President and Chairman. Even
assuming that Cuevas was the president of NRSI, his powers are confined only to those vested upon
him by the board of directors or fixed in the by-laws. 36 In truth, petitioner could have easily presented
its by-laws or a corporate resolution 37 to show Cuevas's authority to buy the lands on its behalf. But it
did not.
Petitioner disagrees with the trial court's finding that Tanjuatco was a buyer in good faith. It contends
that the March 12, 1996 Order of the Director of Lands which declared that the lots covered by TCT
Nos. T-369406 and T-369407 were free from claims and conflicts when Cuevas assigned his rights
thereon to Tanjuatco. But petitioner's claim is untenable because respondents did not formally offer
said order in evidence. Lastly, petitioner makes an issue regarding the "below-fair market value"
consideration which Tanjuatco paid Cuevas for the assignment of his rights to the lots. But it draws
unconvincing conclusions therefrom that do not serve to persuade us of its claims.
We note that Tanjuatco filed a demurrer to evidence before the RTC. By its nature, a demurrer to
evidence is filed after the plaintiff has completed the presentation of his evidence but before the
defendant offers evidence in his defense. Thus, the Rules provide that if the defendant's motion is
denied, he shall have the right to present evidence. However, if the defendant's motion is granted but
on appeal the order of dismissal is reversed, he shall be deemed to have waived the right to present
evidence. 38 It is understandable, therefore, why the respondent was unable to formally offer in
evidence the Order of the Director of Lands, or any evidence for that matter. TCaSAH
More importantly, petitioner introduced in evidence TCT Nos. T-369406 and T-369407 in the name of
respondent Tanjuatco. These titles bear a certification that Tanjuatco's titles were derived from OCT
No. 245 in the name of no less than the Republic of the Philippines. Hence, we cannot validly and fairly
rule that in relying upon said title, Tanjuatco acted in bad faith. A person dealing with registered land
may safely rely upon the correctness of the certificate of title issued therefor and the law will in no way
oblige him to go behind the certificate to determine the condition of the property. 39 This applies even
more particularly when the seller happens to be the Republic, against which, no improper motive can be
ascribed. The law, no doubt, considers Tanjuatco an innocent purchaser for value. An innocent
purchaser for value is one who buys the property of another, without notice that some other person has
a right or interest in such property and pays the full price for the same, at the time of such purchase or
before he has notice of the claims or interest of some other person in the property. 40 STECAc
As regards the consideration which Tanjuatco paid Cuevas for the assignment of rights to the lands,
suffice it to state that the assignment merely vested upon Tanjuatco all of Cuevas's intangible claims,
rights and interests over the properties and not the properties themselves. At the time of the
assignment, the lots were still the subjects of a pending sales application before the Bureau of Lands.
For, it was not until May 24, 1996, that titles were issued in Tanjuatco's name. The assignment not
being a sale of real property, it was not surprising that Cuevas demanded from Tanjuatco only P85,000
for the transfer of rights.
From all the foregoing, it is plain and apparent that NRSI failed to substantiate its claim of entitlement to
ownership of the lands in Tanjuatco's name. The trial court, therefore, correctly dismissed petitioner's
complaint for reconveyance.
WHEREFORE, the petition is DENIED. The Orders dated February 12, 2005 and July 1, 2005 of the
Regional Trial Court of Calamba City, Branch 37, in Civil Case No. 2662-98-C are AFFIRMED. Costs
against petitioner. aSIDCT
SO ORDERED.
































































SECOND DIVISION
[G.R. No. 40399. February 6, 1990.]
MARCELINO C. AGNE, FELIX ORIANE, AGATON TAGANAS, HILARIO ESCORPIZO, ISABELO
MAURICIO, HEIRS OF ROMAN DAMASO, NAMELY: JORGE DAMASO and ALEJANDRO
DAMASO, HEIRS OF FRANCISCO RAMOS, NAMELY: ENCARNACION R. LEANO and DOMINGA
R. MEDRANO, HEIRS OF SABINA GELACIO AGAPITO, NAMELY: SERAPIO AGAPITO, and
NICOLASA AGAPITO, FELISA DICCION AGNE, ESTANISLAO GOROSPE, LIBRADO BADUA,
NICOLAS VILLANUEVA, HEIRS OF CARLOS PALADO, NAMELY: FORTUNATA PALADO and
ISABELITA PALADO, PRIMITIVO TAGANAS, PANFILO SOINGCO, BERNARDO PALATTAO,
MARCELINO S. SANTOS and PAULINO D. AGNE, JR. (Minor), represented by his mother FELISA
DICCION AGNE, petitioners, vs. THE DIRECTOR OF LANDS, PRESENTACION AGPOON
GASCON, JOAQUIN GASCON and HON. ROSALIO C. SEGUNDO, Presiding Judge, Court of First
Instance of Pangasinan, Branch V, respondents.
[G.R. No. 72255. February 6, 1990.]
MARCELINO C. AGNE, FELIX ORIANE, AGATON TAGANAS (deceased), represented by
FLORENTINO C. TAGANAS, FELISA DICCION AGNE, HILARIO ESCORPIZO, NICOLAS
VILLANUEVA, ISABELO MAURICIO, ESTANISLAO GOROSPE (deceased), represented by
ELIZABETH G. BADUA and SILVINA G. VALERIO, LIBRADO BADUA, JOSE ALSISTO, SERAPIO
AGAPITO, NICOLASA AGAPITO, JORGE DAMASO, ALEJANDRO DAMASO, ENCARNACION
RAMOS, DOMINGA RAMOS and CARLOS PALADO, petitioners, vs. HON. INTERMEDIATE
APPELLATE COURT, PRESENTACION AGPOON GASCON and JOAQUIN GASCON,
respondents.
Espiritu Taganas for petitioners.
Adriatico T. Bruno for private respondents.
D E C I S I O N
REGALADO, J p:
Before us are two separate petitions for review on certiorari of the order of the defunct Court of First
Instance of Pangasinan, Branch V, in Civil Case No. 2649, entitled "Marcelino Agne, et al. vs. The
Director of Lands, et al.," dismissing the complaint filed by herein petitioners in said case; 1 and the
decision of the then Intermediate Appellate Court in AC-G.R. CV No. 60388-R, entitled "Presentacion
Agpoon Gascon vs. Marcelino C. Agne, et al.," promulgated on January 30, 1985, affirming in toto the
decision of the trial court in favor of herein private respondents, 2 which cases are docketed herein as
G.R. No. L-40399 and G.R. No. 72255, respectively.
These two petitions, arising from the same facts and involving the same parties and common questions
of law, were ordered consolidated in our resolution of August 9, 1989. LLjur
As found by respondent court and disclosed by the records, the land subject matter of this case was
originally covered by Free Patent No. 23263 issued on April 17, 1937 in the name of Herminigildo
Agpoon. On May 21, 1937, pursuant to the said patent, the Register of Deeds of Pangasinan issued to
said Herminigildo Agpoon Original Certificate of Title No. 2370. 3 Presentacion Agpoon Gascon
inherited the said parcel of land upon the death of her father, Herminigildo, and was issued Transfer
Certificate of Title No. 32209 on April 6, 1960. Respondent Presentacion declared the said land for
taxation purposes in her name under Tax Declaration No. 11506 and taxes were paid thereon in her
name. 4
On April 13, 1971, private respondent spouses filed Civil Case No. U-2286 in the then Court of First
Instance of Pangasinan for recovery of possession and damages against petitioners. Their complaint
states that they are the registered owners under the aforesaid Transfer Certificate of Title No. 32209 of
the parcel of land situated in Barrio Bantog, Asingan, Pangasinan which is now in the possession of
petitioners; that during the Japanese occupation, petitioners, taking advantage of the abnormal
conditions then obtaining, took possession of said land by means of fraud, stealth, strategy and
intimidation; that private respondents repeatedly demanded the surrender of the physical possession of
said property but the latter refused. 5
Petitioners, in answer to said complaint, alleged that the land in question was formerly a part of the river
bed of the Agno-Chico River; that in the year 1920, a big flood occurred which caused the said river to
change its course and abandon its original bed; that by virtue of the provisions of Article 370 of the
Spanish Civil Code which was then the law in force, petitioners, by operation of law, became the
owners by accession or accretion of the respective aliquot parts of said river bed bordering their
properties; that since 1920, they and their predecessors in interest occupied and exercised dominion
openly and adversely over said portion of the abandoned river bed in question abutting their respective
riparian lands continuously up to the present to the exclusion of all other persons, particularly
Herminigildo Agpoon; that they have introduced improvements thereon by constructing irrigation canals
and planting trees and agricultural crops thereon 6 and converted the land into a productive area.
In their joint stipulation of facts, the parties agreed as follows:
"1. That the parties admit the identity and area of the land in question, which forms part of the
river bed of the Agno-Chico River, and further admit that the said river bed was abandoned as a result
of a flood in 1920 and opened a new bed. The location and course of the aforesaid abandoned river
bed as well as the relative position of the lands bordering the same can be gleaned from Cadastral
Survey Plan of Asingan, Pangasinan, Street No. 49 thereof, as approved by the Director of Lands on
October 12, 1912, a photostat copy of which is hereto attached and made an integral part hereof as
Annex 'A'.
"2. That the parties admit that the defendants are the riparian owners of the area in question and
further admit that the defendants are in possession thereof but that each of them is in possession only
of an aliquot part of the said area proportionate to the length of their respective lands. (As amended).
"3. That the parties likewise admit that a Free Patent No. 23263 the name of Herminigildo
Agpoon covering the area in question was issued on April 17, 1937 and that they admit O.C.T. No.
2370 of the Register of Deeds of Pangasinan covering the same parcel of land was issued to the same
Herminigildo Agpoon on May 21, 1937, a photostat copy of said O.C.T. is hereto attached as Annex 'B'.
"4. That the parties admit that the property in controversy is now covered by T.C.T. No. 32209 in
the name of Presentacion Agpoon Gascon and by Tax Declaration No. 11506 in the name of said
Presentacion Agpoon Gascon, a photostat reproduction of said T.C.T. No. and Tax Declaration are
hereto attached and marked as Annexes 'C' and 'F', respectively." 7
On March 6, 1974, while the above-mentioned case was still pending, petitioners filed a complaint
against the respondents Director of Lands and spouses Agpoon with the former Court of First Instance
of Pangasinan for annulment of title, reconveyance of and/or action to clear title to a parcel of land,
which action was docketed as Civil Case No. U-2649. Petitioners alleged in their said complaint that the
land in question, which was formerly a portion of the bed of Agno-Chico river which was abandoned as
a result of the big flood in 1920, belongs to them pursuant to the provision of Article 370 of the old Civil
Code; that it was only on April 13, 1971, when respondent spouses filed a complaint against them, that
they found out that the said land was granted by the Government to Herminigildo Agpoon under Free
Patent No. 23263, pursuant to which Original Certificate of Title No. 2370 was issued in the latter's
name; and that the said patent and subsequent titles issued pursuant thereto are null and void since the
said land, an abandoned river bed, is of private ownership and, therefore, cannot be the subject of a
public land grant. 8
On June 21, 1974, the trial court rendered a decision in Civil Case No. U-2286, the dispositive part of
which reads as follows:
"WHEREFORE, IN VIEW OF ALL THE FOREGOING, the Court renders judgment:
1. Ordering the defendants to surrender to the plaintiffs the physical possession of the land in
question described in paragraph 3 of the amended complaint;
2. Ordering the defendants to pay jointly and severally to the plaintiff the produce of the land in
question in the total sum of P5,000.00 per year from the date of the filing of the present action at the
rate of 6% interest per annum until fully paid;
3. Ordering the defendants to pay jointly and severally the amount of P800.00 representing
attorney's fees;
4. And to pay the costs.
SO ORDERED." 9
Not satisfied with said decision, petitioners appealed to respondent court. As earlier stated, on January
30, 1985 the former Intermediate Appellate Court affirmed in toto in AC-G.R. CV No. 60388-R the said
decision of the court a quo, 10 and with the denial of petitioner's motion for reconsideration, 11 the case
came up to us as G.R. No. 72255.
On June 24, 1974, the aforesaid Court of First Instance of Pangasinan, acting on the motion to dismiss
filed by respondents Director of Lands and spouses Agpoon, issued an order dismissing Civil Case No.
U-2649 for annulment of title by merely citing the statement in the case of Antonio, et al. vs. Barroga, et
al. 12 that an action to annul a free patent many years after it had become final and indefeasible states
no cause of action. 13 Petitioners' motion for the reconsideration of said order was denied on
September 11, 1974, 14 hence the recourse to us in G.R. No. L-40399.
In these petitions, petitioners raise the following issues:
1. Whether or not the lower court is justified in dismissing the complaint by simply invoking the
ruling in the aforestated case of Antonio although the facts and circumstances set forth in the complaint
show that the land in question was private land under Article 370 of the old Civil Code and that the
subsequent derivative certificates of title in question were null and void ab initio because the said land
was not within the authority of the government to dispose of in favor of any party and must be ordered
annulled, cancelled or rescinded; 15
2. Whether or not the trial court and the former Intermediate Appellate Court were justified in not
basing their judgments on the judicial admissions of private respondents in the stipulation of facts of the
parties, since such admissions have the legal force and effect of precluding private respondents from
disputing such admission;
3. Whether or not respondent court can presume that private respondents or their predecessor
had prior possession of the land in dispute in the light of provisions of law which oblige them to prove
such possession, as well as the stipulated facts and other facts and circumstances on record showing
that private respondents or their predecessor were not in actual occupancy of the said land, and without
appreciating the evidence put up by petitioners to prove their prior possession thereof;
4. Whether or not respondent court was justified in its application of Section 41 of the Code of
Civil Procedure in favor of private respondents, although the private respondents did not invoke said
law in this case and did not adduce any evidence or proof that all the essential requisites of acquisitive
prescription under the said law were present in their favor;
5. Whether or not the Government had the right to convey by way of free patent to any party the
land in dispute which belonged to the riparian owners as decreed by Article 370 of the old Civil Code,
the law then in force, and despite the fact that the patentee herein never occupied the said land during
the period prescribed by Act No. 2874; and 6. Whether or not private respondents are guilty of laches
for not having attempted to file suit to recover the land in dispute during an interval of 50 or 30 years.
16
The issues and arguments raised by the proponents in these petitions are well taken.
We agree with petitioners that the lower court erred in ordering the dismissal of Civil Case No. U-2649.
The aforesaid case of Antonio relied upon by the lower court in its dismissal order is not controlling. In
that case, the complaint was dismissed for failure to state a cause of action, not only because of the
delay in the filing of the complaint but specifically since the ground relied upon by the plaintiff therein,
that is, that the land was previously covered by a titulo real, even if true, would not warrant the
annulment of the free patent and the subsequent original certificate of title issued to defendant. Thus:
"It is true that by filing the application for a free patent Borroga impliedly admitted either the invalidity or
insufficiency of Titulo Real No. 12479 issued in the name of his predecessor in interest on July 22,
1894, but neither the allegation made in his answer that his aforesaid predecessor in interest was the
absolute owner of the property covered by said Titulo Real nor his implied admission of the latter's
invalidity or insufficiency are grounds for the annulment of the free patent and original certificate of title
in question. Evidently, it was Barroga's privilege to rely or not to rely upon his claim of private ownership
in favor of his predecessor in interest and of whatever the latter's Titulo Real was worth. He decided not
to rely upon them and to consider that the property covered by the Titulo Real was still part of the public
domain. Acting accordingly he applied for a free patent and was successful. It must be borne in mind
that the Titulo Real was not an indefeasible title and that its holder still had to prove that he had
possessed the land covered by it without interruption during a period of ten years by virtue of a good
title and in good faith (Royal Decree of June 25, 1880). We may well presume that Barroga felt that he
had no sufficient evidence to prove this, for which reason he decided to acquire the land as part of the
public domain."
In the case at bar, the facts alleged in the complaint, which are deemed hypothetically admitted upon
the filing of the motion to dismiss, constitute a sufficient cause of action against private respondents.
Petitioners in their complaint in Civil Case No. U-2649 alleged, among others, that the disputed area
was formerly an abandoned river bed formed due to natural causes in 1920; that the riparian owners of
the lands abutting said abandoned river bed were the plaintiffs and/or their predecessors in interest;
that since then and up to the present, they have been occupying and cultivating aliquot portions of the
said land proportionate to the respective lengths of their riparian lands; that they are the real and lawful
owners of the said land as decreed by Article 370 of the old Civil Code, the law then in force; that since
the said area was a private land, the same could not have been the subject matter of an application for
free patent; and that all these facts were known to the private respondents and their predecessor in
interest. Cdpr
If the said averments are true, and the factual recitals thereon have been admitted in the stipulation of
facts hereinbefore quoted, then the land in question was and is of private ownership and, therefore,
beyond the jurisdiction of the Director of Lands. The free patent and subsequent title issued pursuant
thereto are null and void. The indefeasibility and imprescriptibility of a Torrens title issued pursuant to a
patent may be invoked only when the land involved originally formed part of the public domain. If it was
a private land, the patent and certificate of title issued upon the patent are a nullity. 17
The rule on the incontrovertibility of a certificate of title upon the expiration of one year, after the entry of
the decree, pursuant to the provisions of the Land Registration Act, does not apply where an action for
the cancellation of a patent and a certificate of title issued pursuant thereto is instituted on the ground
that they are null and void because the Bureau of Lands had no jurisdiction to issue them at all, the land
in question having been withdrawn from the public domain prior to the subsequent award of the patent
and the grant of a certificate of title to another person. Such an action is different from a review of the
decree of title on the ground of fraud. 18
Although a period of one year has already expired from the time a certificate of title was issued
pursuant to a public grant, said title does not become incontrovertible but is null and void if the property
covered thereby is originally of private ownership, and an action to annul the same does not prescribe.
19 Moreover, since herein petitioners are in possession of the land in dispute, an action to quiet title is
imprescriptible. 20 Their action for reconveyance which, in effect, seeks to quiet title to property in one's
possession is imprescriptible. Their undisturbed possession for a number of years gave them a
continuing right to seek the aid of a court of equity to determine the nature of the adverse claims of a
third party and the effect on her title. 21 As held in Caragay-Layno vs. Court of Appeals, et al., 22 an
adverse claimant of a registered land, undisturbed in his possession thereof for a period of more than
fifty years and not knowing that the land he actually occupied had been registered in the name of
another, is not precluded from filing an action for reconveyance which, in effect, seeks to quiet title to
property as against the registered owner who was relying upon a Torrens title which could have been
fraudulently acquired. To such adverse claimant, the remedy of an action to quiet title is imprescriptible.
In actions for reconveyance of property predicated on the fact that the conveyance complained of was
void ab initio, a claim of prescription of the action would be unavailing. 23
The resolution of the other assigned errors hinges on the issue of who, as between the riparian owner
presently in possession and the registered owner by virtue of a free patent, has a better right over the
abandoned river bed in dispute.
We rule in favor of petitioners.
The claim of ownership of herein petitioners is based on the old Civil Code, the law then in force, which
provides:
"The beds of rivers which remain abandoned because the course of the water has naturally changed
belong to the owners of the riparian lands throughout their respective lengths. If the abandoned bed
divided estates belonging to different owners, the new dividing line shall run at equal distance
therefrom." 24
It is thus clear under this provision that once the river bed has been abandoned, the riparian owners
become the owners of the abandoned bed to the extent provided by this article. The acquisition of
ownership is automatic. 25 There need be no act on the part of the riparian owners to subject the
accession to their ownership, as it is subject thereto ipso jure from the moment the mode of acquisition
becomes evident, without the need of any formal act of acquisition. 26 Such abandoned river bed had
fallen to the private ownership of the owner of the riparian land even without any formal act of his will
and any unauthorized occupant thereof will be considered as a trespasser. The right in re to the
principal is likewise a right in re to the accessory, as it is a mode of acquisition provided by law, as the
result of the right of accretion. Since the accessory follows the nature of the principal, there need not be
any tendency to the thing or manifestation of the purpose to subject it to our ownership, as it is subject
thereto ipso jure from the moment the mode of acquisition becomes evident. 27
The right of the owner of land to additions thereto by accretion has been said to rest in the law of
nature, and to be analogous to the right of the owner of a tree to its fruits, and the owner of flocks and
herds to their natural increase. 28 Petitioners herein became owners of aliquot portions of said
abandoned river bed as early as 1920, when the Agno River changed its course, without the necessity
of any action or exercise of possession on their part, it being an admitted fact that the land in dispute,
prior to its registration, was an abandoned bed of the Agno River and that petitioners are the riparian
owners of the lands adjoining the said bed.
The failure of herein petitioners to register the accretion in their names and declare it for purposes of
taxation did not divest it of its character as a private property. Although we take cognizance of the rule
that an accretion to registered land is not automatically registered and therefore not entitled or subject
to the protection of imprescriptibility enjoyed by registered property under the Torrens system. 29 The
said rule is not applicable to this case since the title claimed by private respondents is not based on
acquisitive prescription but is anchored on a public grant from the Government, which presupposes that
it was inceptively a public land. Ownership over the accession is governed by the Civil Code.
Imprescriptibility of registered land is a concern of the Land Registration Act.
Under the provisions of Act No. 2874 pursuant to which the title of private respondents' predecessor in
interest was issued, the President of the Philippines or his alter ego, the Director of Lands, has no
authority to grant a free patent for land that has ceased to be a public land and has passed to private
ownership, and a title so issued is null and void. 30 The nullity arises, not from the fraud or deceit, but
from the fact that the land is not under the jurisdiction of the Bureau of Lands. 31 The jurisdiction of the
Director of Lands is limited only to public lands and does not cover lands privately owned. 32 The
purpose of the Legislature in adopting the former Public Land Act, Act No. 2874, was and is to limit its
application to lands of the public domain, and lands held in private ownership are not included therein
and are not affected in any manner whatsoever thereby. Land held in freehold or fee title, or of private
ownership, constitute no part of the public domain and cannot possibly come within the purview of said
Act No. 2874, inasmuch as the "subject" of such freehold or private land is not embraced in any manner
in the title of the Act 33 and the same are excluded from the provisions or text thereof. prLL
We reiterate that private ownership of land is not affected by the issuance of a free patent over the
same land because the Public Land Act applies only to lands of the public domain. 34 Only public land
may be disposed of by the Director of Lands. 35 Since as early as 1920, the land in dispute was
already under the private ownership of herein petitioners and no longer a part of the lands of the public
domain, the same could not have been the subject matter of a free patent. The patentee and his
successors in interest acquired no right or title to the said land. Necessarily, Free Patent No. 23263
issued to Herminigildo Agpoon is null and void and the subsequent titles issued pursuant thereto cannot
become final and indefeasible. Hence, we ruled in Director of Lands vs. Sisican, et al. 36 that if at the
time the free patents were issued in 1953 the land covered therein were already private property of
another and, therefore, not part of the disposable land of the public domain, then applicants patentees
acquired no right or title to the land.
Now, a certificate of title fraudulently secured is null and void ab initio if the fraud consisted in
misrepresenting that the land is part of the public domain, although it is not. As earlier stated, the nullity
arises, not from the fraud or deceit but, from the fact that the land is not under the jurisdiction of the
Bureau of Lands. 37 Being null and void, the free patent granted and the subsequent titles produce no
legal effects whatsoever. Quod nullum est, nullum producit effectum. 38
A free patent which purports to convey land to which the Government did not have any title at the time
of its issuance does not vest any title in the patentee as against the true owner. 39 The Court has
previously held that the Land Registration Act and the Cadastral Act do not give anybody who resorts to
the provisions thereof a better title than what he really and lawfully has.
" . . . The Land Registration Act as well as the Cadastral Act protects only the holders of a title in good
faith and does not permit its provisions to be used as a shield for the commission of fraud, or that one
should enrich himself at the expense of another (Gustilo vs. Maravilla, 48 Phil. 838). The above-stated
Acts do not give anybody, who resorts to the provisions thereof, a better title than he really and lawfully
has. If he happened to obtain it by mistake or to secure, to the prejudice of his neighbor, more land than
he really owns, with or without bad faith on his part, the certificate of title, which may have been issued
to him under the circumstances, may and should be cancelled or corrected (Legarda and Prieto vs.
Saleeby, 31 Phil., 590). . . . ." 40
We have, therefore, to arrive at the unavoidable conclusion that the title of herein petitioners over the
land in dispute is superior to the title of the registered owner which is a total nullity. The long and
continued possession of petitioners under a valid claim of title cannot be defeated by the claim of a
registered owner whose title is defective from the beginning. cdrep
The quality of conclusiveness of a Torrens title is not available for use to perpetrate fraud and
chicanery. To paraphrase from Angeles vs. Samia, supra, the Land Registration Act does not create or
vest title. It only confirms and records title already existing and vested. It does not protect a usurper
from the true owner. It cannot be a shield for the commission of fraud. It does not permit one to enrich
himself at the expense of another. Stated elsewise, the Torrens system was not established as a
means for the acquisition of title to private land. It is intended merely to confirm and register the title
which one may already have on the land. Where the applicant possesses no title or ownership over the
parcel of land, he cannot acquire one under the Torrens system of registration. 41 Resort to the
provisions of the Land Registration Act does not give one a better title than he really and lawfully has.
42 Registration does not vest title. It is not a mode of acquiring property. It is merely evidence of such
title over a particular property. It does not give the holder any better title than what he actually has,
especially if the registration was done in bad faith. The effect is that it is as if no registration was made
at all. 43
Moreover, the failure of herein private respondents to assert their claim over the disputed property for
almost thirty 30 years constitute laches 44 and bars an action to recover the same. 45 The registered
owners' right to recover possession of the property and title thereto from petitioners has, by long
inaction or inexcusable neglect, been converted into a stale demand. 46
Considering that petitioners were well within their rights in taking possession of the lot in question, the
findings of respondent court that herein petitioners took advantage of the infirmities and weakness of
the preceding claimant, Herminigildo Agpoon, in taking possession of said land during the Japanese
occupation is neither tenable in law nor sustained by preponderant evidence in fact.
Where the evidence show that the plaintiff is the true owner of the land subject of the free patent and
title granted to another and that the defendant and his predecessor in interest were never in possession
thereof, the Court, in the exercise of its equity jurisdiction and without ordering the cancellation of said
title issued upon the patent, may direct the defendant registered owner to reconvey the property to the
plaintiff. 47 Further, if the determinative facts are before the Court and it is in a position to finally
resolve the dispute, the expeditious administration of justice will be subserved by such a resolution and
thereby obviate the needless protracted proceedings consequent to the remand of the case of the trial
court. 48 On these considerations, as well as the fact that these cases have been pending for a long
period of time, we see no need for remanding Civil Case No. 2649 for further proceedings, and we hold
that the facts and the ends of justice in this case require the reconveyance by private respondents to
petitioners of the disputed lot.
WHEREFORE, the assailed decision of respondent court in its AC-G.R. CV No. 60388-R and the
questioned order of dismissal of the trial court in its Civil Case No. 2649 are hereby REVERSED and
SET ASIDE and judgment is hereby rendered ORDERING private respondents to reconvey the
aforesaid parcel of land to petitioners. prcd
SO ORDERED.



















FIRST DIVISION
[G.R. No. 18771. March 26, 1923.]
NICOLAS PANLILIO, EUTIQUIANO CUYUGAN, and SIXTO TIMBOL, plaintiffs-appellants, vs.
ATILANO MERCADO, CIRIACO PIMPING, MANUEL REYES, and TELESFORO MARTINEZ,
defendants-appellants.
Aurelio Pineda and Gibbs, McDonough & Johnson for plaintiffs-appellants.
Perfecto J. Salas Rodriquez, Vicente s. de Villa, and Elias Canapy for defendants-appellants.
SYLLABUS
1. PUBLIC WATER COURSES; CHANGE OF COURSE; ABANDONMENT. The bed of a
public stream is of public ownership and in the event of a change in the course of the stream, its former
bed cannot be regarded as definitely abandoned and the public divested of its ownership therein until
there is some indication of an intention on the part of the Government to acquiesce in the change of the
course of the stream.
2. ID.; ID. As the result of a flood a certain public stream changed its course leaving a portion
of its bed dry. As soon thereafter as practicable steps were taken under the direction of Government
functionaries to bring the stream back into its former course and work was continued until interrupted by
the present action. Held: That under these circumstances there was no abandonment of the old bed;
that the public was not divested of its ownership thereof and that the stream might properly be brought
back to its former course.
D E C I S I O N
OSTRAND, J p:
This is a petition for a writ of injunction to restrain the defendants from entering upon certain lands
situated in the municipality of Mexico, Province of Pampanga, and from disturbing the plaintiffs in their
peaceful possession of the same. The plaintiffs also pray for damages for trespass on the land.
The defendant's answer denies generally the allegations of the petition. The defendants Reyes and
Martinez alleged by law way of special defense that the former is the district engineer; that the latter is
the Commander of the Constabulary of the Province of Pampanga; that in their relations to the matter in
controversy they have been acting in their official capacity; and that they therefore have no interest in
the litigation. The defendant Mercado and Pimping set up a counterclaim for P40,000, alleging that the
plaintiffs, by placing bamboo stakes in the River Abacan, caused it to change its course, thus invading
said defendants' lands and causing damages in the sum mentioned.
The court absolved the defendants from the complaint and the plaintiffs from the counterclaim, without
cost, From this judgment all of the parties appeal.
It appears from the evidence that the plaintiffs are the owners of various parcels of land in the
municipality of Mexico, Province of Pampanga, more particularly described in plaintiffs' amended
complaint. From 1911 until August, 1919, the parcels of land belonging to the plaintiffs were divided by
a small river known as the Estero Abacan. The defendants Atilano Mercado and Ciriaco Pimping are
the owners of various parcels of land which, previously to the month of August, 1919, were situated to
the east of the land of the plaintiffs and were not touched by the Abacan River.
In the month mentioned, a very heavy flood occurred in the Abacan River and when the flood subsided,
the river no longer flowed in the channel through the lands of the plaintiffs but had opened a new
course for itself through the lands of the defendants where it still continues to flow. This new course
was the course of the river previous to the year 1911. It may be noted that in the years 1916 and 1917
a cadastral survey was made of the district where the lands of both the plaintiffs and the defendants are
situated and that upon the plans of that survey the then course of the river is excluded from the
cadaster and set apart as a public stream.
After the termination of the 1919 rainy season and early in the year 1920, a complaint was made to the
provincial board of the Province of Pampanga by various land owners, including the defendants Atilano
Mercado and Ciriaco Pimping, setting forth that the new course of the river was destroying their land
and rendering it useless and asking that the river be returned to its former channel. The complaint was
endorsed to the district engineer and on June 10, 1920, the defendants Atilano Mercado and Ciriaco
Pimping, accompanied by the defendant district engineer, Manuel Reyes, proceeded to the point where
the river had first begun to change its course, and after locating this point upon the cadastral plan,
proceeded with laborers of the defendants Atilano Mercado and Ciriaco Pimping to excavate the old
bed of the river for the Purpose of causing the river to return to this bed. As a consequence, this action
was instituted on June 25, 1920.
The facts stated are not disputed and the law of the case present, in our opinion, no serious difficulty.
Article 370 of the Civil Code reads:
"Los cauces de los rios, que quedan abandonados por variar naturalmente el curso de las aguas,
pertenecen a los duenos de los terranos en toda la longitud respectiva a cada uno. Si el abandonado
separada heredades de distintos duenos, la nueva linea divisoria correra equidistante de unas y otras."
Relying on the provisions of this article, the plaintiffs maintain that the old bed of the river Abacan
became ipso facto absolutely abandoned upon the river varying its course in 1919. Examining the
provisions in question it is apparent that while the abandonment of the bed may be the consequence of
the riving changing its course, it is not necessarily the action of the river itself which is the only and final
determining factor in such abandonment. In the case of a public stream, the bed is of public ownership
and the public cannot be considered absolutely divested of this ownership until there is some indication
of an intention of the part of the Government to acquiesce in the change in the course of the stream.
That the Government is not compelled to stand idly by and let nature take its course is clearly indicated
by article 372 of the Civil Code, (See also discussion in Manresa's Commentaries on the civil Code, vol.
3, 253, 254.)
In the present case the river is a public stream; its bed is of public ownership and was definitely located
and determined in the cadastral survey. As soon as practicable after the river changed its course, steps
were taken under the direction of the Government functionaries to bring it back into its old course and
work was continued until interrupted by the present action. This certainly does not indicate
abandonment on the part of the Government.
As to the defendants' claim for damages, we agree with the trial court that while the evidence
undoubtedly shows that the plaintiffs placed bamboo stakes across the river and that the stakes may
have caused an accumulation of sand or sediment which in turn may have contributed to the change in
the course of the river, such evidenced falls short of showing that this was the primary cause of the
change and of the damage to the defendants' property.
The judgment appealed from is affirmed, without cost in this instance. So ordered.
Araullo, C.J., Street, Malcolm, Avancea, Villamor, Johns, and Romualdez, JJ., concur.