PHILIPPINE NATIONAL BANK, petitioner, vs.
GENEROSO DE JESUS, Petitioner went to this Court, via a petition for review, after the
represented by his Attorney-in-Fact, CHRISTIAN DE
JESUS, respondent.
DECISION
VITUG, J.:
Petitioner Philippine National Bank disputes the decision handed down
by the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No.
56001, entitled Generoso De Jesus, represented by his Attorney-in-Fact,
Christian De Jesus, versus Philippine National Bank. The assailed decision has
affirmed the judgment rendered by the Regional Trial Court, Branch 44, of
Mamburao, Occidental Mindoro, declaring respondent Generoso de Jesus as
being the true and lawful owner of the 124-square-meter portion of the land
covered by Transfer Certificate of Title (TCT) No. T-17197 and ordering
petitioner bank to vacate the premises, to deliver possession thereof to
respondent, and to remove the improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint
against petitioner before the Regional Trial Court of Occidental Mindoro for
recovery of ownership and possession, with damages, over the questioned
property. In his complaint, respondent stated that he had acquired a parcel
of land situated in Mamburao, Occidental Mindoro, with an area of 1,144
square meters covered by TCT No. T-17197, and that on 26 March 1993, he
had caused a verification survey of the property and discovered that the
northern portion of the lot was being encroached upon by a building of
petitioner to the extent of 124 square meters. Despite two letters of demand
sent by respondent, petitioner failed and refused to vacate the area.
Petitioner, in its answer, asserted that when it acquired the lot and the
building sometime in 1981 from then Mayor Bienvenido Ignacio, the
encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to
Ignacio) to petitioner at P100.00 per square meter which offer the latter
claimed to have accepted. The sale, however, did not materialize when,
without the knowledge and consent of petitioner, Mayor Ignacio later
mortgaged the lot to the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to
be the rightful owner of the disputed 124-square-meter portion of the lot and
ordering petitioner to surrender possession of the property to respondent
and to cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered
to be deleted the award to respondent of attorneys fees, as well as moral and
exemplary damages, and litigation expenses.
appellate court had denied the banks motion for reconsideration, here now
contending that -
1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A
BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN QUESTION;
2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN
FAVOR OF PNB THE PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND
THE RULING IN TECNOGAS PHILIPPINES MANUFACTURING CORP. VS. COURT
OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA 7.[1]
The Regional Trial Court and the Court of Appeals have both rejected the
idea that petitioner can be considered a builder in good faith. In the context
that such term is used in particular reference to Article 448, et seq., of the
Civil Code, a builder in good faith is one who, not being the owner of the land,
builds on that land believing himself to be its owner and unaware of any
defect in his title or mode of acquisition.
The various provisions of the Civil Code, pertinent to the subject, read:
Article 448. The owner of the land on which anything has been built, sown,
or planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such a 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.
Article 449. He who builds, plants, or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
Article 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or
that the planting or sowing be removed, in order to replace things in their
former condition at the expense of the person who built, planted or sowed;
or he may compel the builder or planter to pay the price of the land, and
the sower the proper rent.
A builder in good faith can, under the foregoing provisions, compel the
landowner to make a choice between appropriating the building by paying
the proper indemnity or obliging the builder to pay the price of the land. The
choice belongs to the owner of the land, a rule that accords with the principle
of accession, i.e., that the accessory follows the principal and not the other
way around.[2] Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He much choose one. He cannot, for instance,
compel the owner of the building to instead remove it from the land.[3] In
order, however, that the builder can invoke that accruing benefit and enjoy
his corresponding right to demand that a choice be made by the landowner,
he should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with
no technical meaning or statutory definition, and it encompasses, among
other things, an honest belief, the absence of malice and the absence of
design to defraud or to seek an unconscionable advantage. An individuals
personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of
intention, and freedom from knowledge of circumstances which ought to put
the holder upon inquiry.[4] The essence of good faith lies in an honest belief
in the validity of ones right, ignorance of a superior claim, and absence of
intention to overreach another.[5] Applied to possession, one is considered in
good faith if he is not aware that there exists in his title or mode of acquisition
any flaw which invalidates it.[6]
Given the findings of both the trial court and the appellate court, it
should be evident enough that petitioner would fall much too short from its
claim of good faith.Evidently, petitioner was quite aware, and indeed advised,
prior to its acquisition of the land and building from Ignacio that a part of the
building sold to it stood on the land not covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land
by Ignacio, has in actuality been part of the property transferred to
petitioner. Article 448, of the Civil Code refers to a piece of land whose
ownership is claimed by two or more parties, one of whom has built some
works (or sown or planted something) and not 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 otherwise for, elsewise stated, where the true owner
himself is the builder of works on his own land, the issue of good faith or
bad faith is entirely irrelevant. [7]
In fine, petitioner is not in a valid position to invoke the provisions of
Article 448 of the Civil Code. The Court commiserates with petitioner in its
present predicament; upon the other hand, respondent, too, is entitled to his
rights under the law, particularly after having long been deprived of the
enjoyment of his property. Nevertheless, the Court expresses hope that the
parties will still be able to come up with an arrangement that can be mutually
suitable and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No.
56001 is AFFIRMED. No costs.
SO ORDERED.
ROSENDO BALUCANAG, petitioner,
vs.
HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, respondents.
Alfredo C. Estrella for petitioner.
Pascual C. Garcia for respondents.
ESCOLIN, J.:
This petition for review of the decision of the Court of First Instance of
Manila in Civil Case No. 67503 calls for a determination of the respective
rights of the lessor and the lessee over the improvements introduced by the
latter in the leased premises.
Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot
located in Zamora Street, Pandacan, Manila, covered by Transfer Certificate
of Title No. 25664. On August 31, 1952, Mrs. Charvet leased said lot to
respondent Richard Stohner for a period of five [5] years at the monthly
rental of 2140.00, payable in advance within the first ten [10] days of each
month. The lease contract 1 provided, among others, that:
IV. The lessee may erect such buildings upon and make such
improvements to the leased land as he shag see fit. All such
buildings and improvements shall remain the property of
the lessee and he may remove them at any nine, it being
agreed, however, that should he not remove the said
buildings and improvements within a period of two months
after the expiration of this Agreement, the Lessor may
remove the said buildings and improvements or cause them
to be removed at the expense of the Lessee.
During the existence of the lease, Stohner made fillings on the land and
constructed a house thereon, said improvements being allegedly valued at
P35,000.00.
On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo
Balucanag.2
For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote
Stohner a letter demanding that he vacate the premises. 3 In reply thereto,
Stohner, also thru counsel, claimed that he was a builder in good faith of the
residential house erected in the land. He offered the following proposals for
a possible compromise, to wit:
[a] Mr. Stohner will purchase the said lot from your client
with the interest of 12% per annum on the value, or
[b] Your client Mr. Rosendo Balucanag will reimburse our
client in the total amount of P35,000.00 for the
improvements and construction he has made on the lot in
question.
As no agreement was reached, Balucanag instituted in the City Court of
Manila an ejectment suit against Stohner and, after due trial, the court
rendered a decision, the decretal portion of which reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is
hereby rendered, ordering the defendant to pay the
plaintiff the sum of P360.00 as back rentals from December,
1965 to August 1966 at the rate of P40.00 a month and to
vacate the premises. The defendant is further ordered to
pay the sum of P100.00 as Attomey's fees which is
considered reasonable within the premises.
On appeal, the Court of First Instance of Manila, Branch IX, presided by
respondent Judge Alberto J. Francisco, after conducting a trial de novo,
rendered a decision, setting aside the judgment of the city court and
dismissing the petitioner's complaint. Respondent judge held that Stohner
was a builder in good faith because he had constructed the residential
house with the consent of the original lessor, Mrs. Charvet, and also
because the latter, after the expiration of the lease contract on August 31,
1957, had neither sought Stohner's ejectment from the premises, nor the
removal of his house therefrom. Invoking Articles 448 and 546 of the Civil
Code. 4 respondent judge concluded that Stohner, being a builder in good
faith, cannot be ejected until he is reimbursed of the value of the
improvements.
Frustrated in his effort to have the decision reconsidered, Balucanag filed
the instant petition for review.
We find the petition impressed with merit. Paragraph IV of the lease
contract entered into by Stohner with Mrs. Charvet specifically provides
that "... such buildings and improvements shan remain the property of the
lessee and he may remove them at any time, it being agreed, however, that
should he not remove the said buildings and improvements within a period
of two months after the expiration of this Agreement, the Lessor may
remove the said buildings and improvements or cause them to be removed
at the expense of the Lessee." Respondent Stohner does not assail the
validity of this stipulation, Neither has he advanced any reason why he
should not be bound by it.
But even in the absence of said stipulation, respondent Stohner cannot be
considered a builder in good faith. Article 448 of the Civil Code, relied upon
by respondent judge, applies only to a case where one builds on land in the
belief that he is the owner thereof and it does not apply where one's only
interest in the land is that of a lessee under a rental contract. In the case at
bar, there is no dispute that the relation between Balucanag and Stohner is
that of lessor and lessee, the former being the successor in interest of the
original owner of the lot. As we ruled in Lopez, Inc. vs. Phil. and Eastern
Trading Co., Inc., 5 "... the principle of possessor in good faith refers only to a
party who occupies or possess property in the belief that he is the owner
thereof and said good faith ends only when he discovers a flaw in his title so
as to reasonably advise or inform him that after all he may not be the legal
owner of said property. It cannot apply to a lessee because as such lessee
he knows that he is not the owner of he leased premises. Neither can he
deny the ownership or title of his lessor. ... A lessee who introduces
improvements in the leased premises, does so at his own risk in the sense
that he cannot recover their value from the lessor, much less retain the
premises until such reimbursement. ..."
The law applicable to the case at bar is Article 1678 of the Civil Code, which
We quote:
Art. 1678. If the lessee makes, in good faith, useful
improvements which are suitable to the use for which the
lease is intended, without altering the form or substance of
the property leased, the lessor upon the termination of the
lease shall pay the lessee one-half of the value of the
improvements at the time. Should the lessor refuse to
reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary. ...
This article gives the lessor the option to appropriate the useful
improvements by paying one-half of their value, 6And the lessee cannot
compel the lessor to appropriate the improvements and make
reimbursement, for the lessee's right under the law is to remove the
improvements even if the leased premises may suffer damage thereby. But
he shall not cause any more damage upon the property than is necessary.
One last point. It appears that while the lease contract entered into by
Stohner and Mrs. Charvet had expired on August 31, 1957, he nevertheless
continued in possession of the premises with the acquiescence of Mrs.
Charvet and later, of Balucanag. An implied new lease or tacita
reconduccion was thus created between the parties, the period of which is
established by Article 1687 of the Civil Code thus:
Art. 1687. If the period for the lease has not been fixed, it is
understood to be from year to year, if the rent agreed upon
is annual; from month to month, if it is monthly: from week
to week, if the rent is weekly: and from day to day, if the
rent is to be paid daily. ...
Under the above article, the duration of the new lease must be deemed
from month to month, the agreed rental in the instant case being payable
on a monthly basis. The lessor may thus terminate the lease after each
month with due notice upon the lessee. After such notice, the lessee's right
to continue in possession ceases and his possession becomes one of
detainer. Furthermore, Stohner's failure to pay the stipulated rentals
entities petitioner to recover possession of the premises.
WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with
costs against respondent Stohner. The latter is ordered to vacate the
premises in question and to pay Rogelio Balucanag the rentals due from
March 1969 up to the time he surrenders the premises, at the rate of
P40.00 a month.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion, Jr., and Guerrero, JJ., concur.
De Castro, J., took no part.
Separate Opinions
ABAD SANTOS, J., concurring and dissenting:
I concur in setting aside the decision in Civil Case No. 67503 of the defunct
Court of First Instance of Manila; and in ordering the respondent Stohner to
pay the costs, to vacate the premises in question, and to pav the petitioner
the rentals due from March 1969 to the time he surrenders the premises at
the rate of P40.00 monthly. However, I cannot give my assent to that
portion of the judgment with respect to the house constructed by Stohner.
Stohner as a lessee is not a builder in good faith. This is elementary in
property law.
Article 1678 of the Civil Code concerning improvements made by the lessee
on the leased premises applies only in the absence of stipulation on the
matter between the lessor and the lessee. In the instant case theres such a
stipulation. A copy of the Lease Agreement which is found on page 13 of the
Rollo reads:
IV. The lessee may erect such buildings upor and make such
improvements to the leased land as he shall see fit. AR such
buildings and improvements shall remain the property of
the lessee and he may remove them at any nine, it being
agreed, however, that should he not remove the 96d
buildings and improvements within a period of two months
after the expiration of this Agreement, the Lessor may
remove the said buildings and improvements or cause them
to be removed at the expense of the Lessee.
The above-quoted stipulation has the force of law between the parties (Art.
1159, Civil Code) and supersedes Art. 1678 of the Civil Code. Accordingly,
the judgment with respect to the house which was constructed by Stohner
should be in line with the contract of lease.
G.R. No. 115814 May 26, 1995
PEDRO P. PECSON, petitioner,
vs.
COURT OF APPEALS, SPOUSES JUAN NUGUID and ERLINDA
NUGUID, respondents.
DAVIDE, JR., J.:
This petition for review on certiorari seeks to set aside the decision1 of the
Court of Appeals in CA-G.R. SP No. 32679 affirming in part the order 2 of the
Regional Trial Court (RTC) of Quezon City, Branch 101, in Civil Case No. Q-
41470.
The factual and procedural antecedents of this case as gathered from the
record are as follows:
Petitioner Pedro P. Pecson was the owner of a commercial lot located in
Kamias Street, Quezon City, on which he built a four-door two-storey
apartment building. For his failure to pay realty taxes amounting to twelve
thousand pesos (P12,000.00), the lot was sold at public auction by the city
Treasurer of Quezon City to Mamerto Nepomuceno who in turn sold it on
12 October 1983 to the private respondents, the spouses Juan Nuguid and
Erlinda Tan-Nuguid, for one hundred three thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q-
41470 before the RTC of Quezon City. In its decision of 8 February 1989, the
RTC dismissed the complaint, but as to the private respondents' claim that
the sale included the apartment building, it held that the issue concerning it
was "not a subject of the . . . litigation." In resolving the private
respondents' motion to reconsider this issue, the trial court held that there
was no legal basis for the contention that the apartment building was
included in the sale.3
Both parties then appealed the decision to the Court of Appeals. The case
was docketed as CA-G.R. CV No. 2931. In its decision of 30 April 1992,4 the
Court of Appeals affirmed in toto the assailed decision. It also agreed with
the trial court that the apartment building was not included in the auction
sale of the commercial lot. Thus:
Indeed, examining the record we are fully convinced that it
was only the land — without the apartment building —
which was sold at the auction sale, for plaintiff's failure to
pay the taxes due thereon. Thus, in the Certificate of Sale of
Delinquent Property To Purchaser (Exh. K, p. 352, Record)
the property subject of the auction sale at which Mamerto
Nepomuceno was the purchaser is referred to as Lot No. 21-
A, Block No. K-34, at Kamias, Barangay Piñahan, with an
area of 256.3 sq. m., with no mention whatsoever, of the
building thereon. The same description of the subject
property appears in the Final Notice To Exercise The Right of
Redemption (over subject property) dated September 14,
1981 (Exh. L, p. 353, Record) and in the Final Bill of Sale over
the same property dated April 19, 1982 (Exh. P, p. 357,
Record). Needless to say, as it was only the land without any
building which Nepomuceno had acquired at the auction
sale, it was also only that land without any building which
he could have legally sold to the Nuguids. Verily, in the Deed
of Absolute Sale of Registered Land executed by Mamerto
Nepomuceno in favor of the Nuguids on October 25, 1983
(Exh. U, p. 366, Record) it clearly appears that the property
subject of the sale for P103,000.00 was only the parcel of
land, Lot 21-A, Blk. K-34 containing an area of 256.3 sq.
meters, without any mention of any improvement, much
less any building thereon. (emphases supplied)
The petition to review the said decision was subsequently denied by this
Court.5 Entry of judgment was made on 23 June 1993.6
On November 1993, the private respondents filed with the trial court a
motion for delivery of possession of the lot and the apartment building,
citing article 546 of the Civil Code.7 Acting thereon, the trial court issued on
15 November 1993 the challenged order8 which reads as follows:
Submitted for resolution before this Court is an
uncontroverted [sic] for the Delivery of Possession filed by
defendants Erlinda Tan, Juan Nuguid, et al. considering that
despite personal service of the Order for plaintiff to file
within five (5) days his opposition to said motion, he did not
file any.
In support of defendant's motion, movant cites the law in
point as Article 546 of the Civil Code . . .
Movant agrees to comply with the provisions of the law
considering that plaintiff is a builder in good faith and he
has in fact, opted to pay the cost of the construction spent
by plaintiff. From the complaint itself the plaintiff stated
that the construction cost of the apartment is much more
than the lot, which apartment he constructed at a cost of
P53,000.00 in 1965 (par. 8 complaint). This amount of
P53,000.00 is what the movant is supposed to pay under
the law before a writ of possession placing him in
possession of both the lot and apartment would be issued.
However, the complaint alleges in paragraph 9 that three
doors of the apartment are being leased. This is further
confirmed by the affidavit of the movant presented in
support of the motion that said three doors are being
leased at a rental of P7,000.00 a month each. The movant
further alleges in his said affidavit that the present
commercial value of the lot is P10,000.00 per square meter
or P2,500,000.00 and the reasonable rental value of said lot
is no less than P21,000.00 per month.
The decision having become final as per Entry of Judgment
dated June 23, 1993 and from this date on, being the
uncontested owner of the property, the rents should be
paid to him instead of the plaintiff collecting them. From
June 23, 1993, the rents collected by plaintiff amounting to
more than P53,000.00 from tenants should be offset from
the rents due to the lot which according to movant's
affidavit is more than P21,000.00 a month.
WHEREFORE, finding merit in the Motion, the Court hereby
grants the following prayer that:
1. The movant shall reimburse plaintiff the
construction cost of P53,000.00.
 2. The payment of P53,000.00 as
reimbursement for the construction cost,
movant Juan Nuguid is hereby entitled to
immediate issuance of a writ of possession
over the Lot and improvements thereon.
3. The movant having been declared as the
uncontested owner of the Lot in question as
per Entry of Judgment of the Supreme
Court dated June 23, 1993, the plaintiff
should pay rent to the movant of no less
than P21,000.00 per month from said date
as this is the very same amount paid
monthly by the tenants occupying the lot.
4. The amount of P53,000.00 due from the
movant is hereby offset against the amount
of rents collected by the plaintiff from June
23, 1993, to September 23, 1993.
SO ORDERED.
The petitioner moved for the reconsideration of the order but it was not
acted upon by the trial court. Instead, on 18 November 1993, it issued a writ
of possession directing the deputy sheriff "to place said movant Juan Nuguid
in possession of subject property located at No. 79 Kamias Road, Quezon
City, with all the improvements thereon and to eject therefrom all
occupants therein, their agents, assignees, heirs and representatives."9
The petitioner then filed with the Court of Appeals a special civil action
for certiorari and prohibition assailing the order of 15 November 1993,
which was docketed as CA-G.R. SP No. 32679. 10 In its decision of 7 June
1994, the Court of Appeals affirmed in part the order of the trial court citing
Article 448 of the Civil Code. In disposing of the issues, it stated:
As earlier pointed out, private respondent opted to
appropriate the improvement introduced by petitioner on
the subject lot, giving rise to the right of petitioner to be
reimbursed of the cost of constructing said apartment
building, in accordance with Article 546 of the . . . Civil
Code, and of the right to retain the improvements until he is
reimbursed of the cost of the improvements, because,
basically, the right to retain the improvement while the
corresponding indemnity is not paid implies the tenancy or
possession in fact of the land on which they are built . . . [2
TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1992) p. 112].
With the facts extant and the settled principle as guides, we
agree with petitioner that respondent judge erred in
ordering that "the movant having been declared as the
uncontested owner of the lot in question as per Entry of
Judgment of the Supreme Court dated June 23, 1993, the
plaintiff should pay rent to the movant of no less than
P21,000 per month from said date as this is the very same
amount paid monthly by the tenants occupying the lot.
We, however, agree with the finding of respondent judge
that the amount of P53,000.00 earlier admitted as the cost
of constructing the apartment building can be offset from
the amount of rents collected by petitioner from June 23,
1993 up to September 23, 1993 which was fixed at
P7,000.00 per month for each of the three doors. Our
underlying reason is that during the period of retention,
petitioner as such possessor and receiving the fruits from
the property, is obliged to account for such fruits, so that
the amount thereof may be deducted from the amount of
indemnity to be paid to him by the owner of the land, in line
with Mendoza vs. De Guzman, 52 Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that private respondents
have not yet indemnified petitioner with the cost of the
improvements, since Annex I shows that the Deputy Sheriff
has enforced the Writ of Possession and the premises have
been turned over to the possession of private respondents,
the quest of petitioner that he be restored in possession of
the premises is rendered moot and academic, although it is
but fair and just that private respondents pay petitioner the
construction cost of P53,000.00; and that petitioner be
ordered to account for any and all fruits of the
improvements received by him starting on June 23, 1993,
with the amount of P53,000.00 to be offset therefrom.
IT IS SO ORDERED.11
Aggrieved by the Court of Appeals' decision, the petitioner filed the instant
petition.
The parties agree that the petitioner was a builder in good faith of the
apartment building on the theory that he constructed it at the time when he
was still the owner of the lot, and that the key issue in this case is the
application of Articles 448 and 456 of the Civil Code.
The trial court and the Court of Appeals, as well as the parties, concerned
themselves with the application of Articles 448 and 546 of the Civil Code.
These articles read as follows:
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. (361a)
xxx xxx xxx
Art. 546. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain
the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in
good faith with the same right of retention, the person who
has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by
reason thereof. (453a)
By its clear language, Article 448 refers to a land whose ownership is
claimed by two or more parties, one of whom has built some works, or
sown or planted something. The building, sowing or planting may have been
made in good faith or in bad faith. The rule on good faith laid down in
Article 526 of the Civil Code shall be applied in determining whether a
builder, sower or planter had acted in good faith. 12
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 vs. Regalado: 13
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 works on his
own land, the issue of good faith or bad faith is entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the case at bar.
Nevertheless, we believe that the provision therein on indemnity may be
applied by analogy considering that the primary intent of Article 448 is to
avoid a state of forced co-ownership and that the parties, including the two
courts below, in the main agree that Articles 448 and 546 of the Civil Code
are applicable and indemnity for the improvements may be paid although
they differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the useful
improvements should be determined. The respondent court and the private
respondents espouse the belief that the cost of construction of the
apartment building in 1965, and not its current market value, is sufficient
reimbursement for necessary and useful improvements made by the
petitioner. This position is, however, not in consonance with previous
rulings of this Court in similar cases. In Javier vs. Concepcion, Jr., 14 this Court
pegged the value of the useful improvements consisting of various fruits,
bamboos, a house and camarin made of strong material based on the
market value of the said improvements. In Sarmiento vs. Agana, 15 despite
the finding that the useful improvement, a residential house, was built in
1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand
pesos(P10,000.00), the landowner was ordered to reimburse the builder in
the amount of forty thousand pesos (P40,000.00), the value of the house at
the time of the trial. In the same way, the landowner was required to pay
the "present value" of the house, a useful improvement, in the case of De
Guzman vs. De la Fuente, 16 cited by the petitioner.
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 17 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.
The trial court also erred in ordering the petitioner to pay monthly rentals
equal to the aggregate rentals paid by the lessees of the apartment building.
Since the private respondents have opted to appropriate the apartment
building, the petitioner is thus entitled to the possession and enjoyment of
the apartment building, until he is paid the proper indemnity, as well as of
the portion of the lot where the building has been constructed. This is so
because the right to retain the improvements while the corresponding
indemnity is not paid implies the tenancy or possession in fact of the land
on which it is built, planted or sown. 18 The petitioner not having been so
paid, he was entitled to retain ownership of the building and, necessarily,
the income therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial
court's determination of the indemnity, but also in ordering the petitioner
to account for the rentals of the apartment building from 23 June 1993 to
23 September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679
and the Order of 15 November 1993 of the Regional Trial Court, Branch 101,
Quezon City in Civil Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the
current market value of the apartment building on the lot. For this purpose,
the parties shall be allowed to adduce evidence on the current market value
of the apartment building. The value so determined shall be forthwith paid
by the private respondents to the petitioner otherwise the petitioner shall
be restored to the possession of the apartment building until payment of
the required indemnity.
No costs.
SO ORDERED.
G.R. No. L-175 April 30, 1946
DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,
vs.
ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD, Judge
of First Instance of Pangasinan, respondents.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondents.
MORAN, C.J.:
This is a petition for certiorari arising from a case in the Court of First
Instance of Pangasinan between the herein respondents Elias Hilario and his
wife Dionisia Dres as plaintiffs, and the herein petitioners Damian, Francisco
and Luis, surnamed Ignacio, as defendants, concerning the ownership of a
parcel of land, partly rice-land and partly residential. After the trial of the
case, the lower court, presided over by Hon. Alfonso Felix, rendered
judgment holding plaintiffs as the legal owners of the whole property but
conceding to defendants the ownership of the houses and granaries built by
them on the residential portion with the rights of a possessor in good faith,
in accordance with article 361 of the Civil Code. The dispositive part of the
decision, hub of this controversy, follows:
Wherefore, judgment is hereby rendered declaring:
(1) That the plaintiffs are the owners of the whole property
described in transfer certificate of title No. 12872 (Exhibit A) issued
in their name, and entitled to the possession of the same;
(2) That the defendants are entitled to hold the position of the
residential lot until after they are paid the actual market value of
their houses and granaries erected thereon, unless the plaintiffs
prefer to sell them said residential lot, in which case defendants
shall pay the plaintiffs the proportionate value of said residential lot
taking as a basis the price paid for the whole land according to
Exhibit B; and
(3) That upon defendant's failure to purchase the residential lot in
question, said defendants shall remove their houses and granaries
after this decision becomes final and within the period of sixty (60)
days from the date that the court is informed in writing of the
attitude of the parties in this respect.
No pronouncement is made as to damages and costs.
Once this decision becomes final, the plaintiffs and defendants may
appear again before this court for the purpose of determining their
respective rights under article 361 of the Civil Code, if they cannot
come to an extra-judicial settlement with regard to said rights.
Subsequently, in a motion filed in the same Court of First Instance but now
presided over by the herein respondent Judge Hon. Felipe Natividad, the
plaintiffs prayed for an order of execution alleging that since they chose
neither to pay defendants for the buildings nor to sell to them the
residential lot, said defendants should be ordered to remove the structure
at their own expense and to restore plaintiffs in the possession of said lot.
Defendants objected to this motion which, after hearing, was granted by
Judge Natividad. Hence, this petition by defendants praying for (a) a
restraint and annulment of the order of execution issued by Judge
Natividad; (b) an order to compel plaintiffs to pay them the sum of P2,000
for the buildings, or sell to them the residential lot for P45; or (c), a
rehearing of the case for a determination of the rights of the parties upon
failure of extra-judicial settlement.
The judgment rendered by Judge Felix is founded on articles 361 and 453 of
the Civil Code which are as follows:
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.
ART. 453. Necessary expenses shall be refunded to every possessor;
but only the possessor in good faith may retain the thing until such
expenses are made good to him.
Useful expenses shall be refunded to the possessor in good faith
with the same right of retention, the person who has defeated him
in the possession having the option of refunding the amount of the
expenses or paying the increase in value which the thing may have
acquired in consequence thereof.
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. The owner of the land, upon the
other hand, has the option, under article 361, 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 is 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. But this is
not the case before us.
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 not 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 and 453 of the Civil Code.
There is, however, in the decision of Judge Felix a question of procedure
which calls for the clarification, to avoid uncertainty and delay in the
disposition of cases. In that decision, the rights of both parties are well
defined under articles 361 and 453 of the Civil Code, but it fails to
determine the value of the buildings and of the lot where they are erected
as well as the periods of time within which the option may be exercised and
payment should be made, these particulars having been left for
determination apparently after the judgment has become final. This
procedure is erroneous, for after the judgment has become final, no
additions can be made thereto and nothing can be done therewith except
its execution. And execution cannot be had, the sheriff being ignorant as to
how, for how much, and within what time may the option be exercised, and
certainly no authority is vested in him to settle these matters which involve
exercise of judicial discretion. Thus the judgment rendered by Judge Felix
has never become final, it having left matters to be settled for its
completion in a subsequent proceeding, matters which remained unsettled
up to the time the petition is filed in the instant case.
For all the foregoing, the writ of execution issued by Judge Natividad is
hereby set aside and the lower court ordered to hold a hearing in the
principal case wherein it must determine the prices of the buildings and of
the residential lot where they are erected, as well as the period of time
within which the plaintiffs-respondents may exercise their option either to
pay for the buildings or to sell their land, and, in the last instance, the period
of time within which the defendants-petitioners may pay for the land, all
these periods to be counted from the date the judgment becomes
executory or unappealable. After such hearing, the court shall render a final
judgment according to the evidence presented by the parties.
The costs shall be paid by plaintiffs-respondents.
G.R. No. L-11084 April 29, 1961
ALEJANDRO QUEMUEL and RUPERTA SOLIS, plaintiffs- appellants,
vs.
ANGEL S. OLAES and JULIANA PRUDENTE, defendants-appellees.
Baldomero S. Luque for plaintiffs-appellants.
Jose P. Santillan for defendants-appellees.
PAREDES, J.:
Angel S. Olaes and his wife, Juliana Prudente, defendants-appellees herein,
were plaintiffs in another case (No 5442 of the CFI of Cavite), wherein
Alejandro Quemuel and his wife Ruperta Solis, plaintiffs-appellants herein
were defendants. In that case No. 5442, the Olaes spouses registered
owners of lot 1095 of the San Francisco de Malabon Estate, located in
Rosario, Cavite, sought the recover of the possession of the said lot and
rentals therefor, from the Quemuel spouses, who in their verified answer
admitted plaintiffs' ownership, but contended that their occupation was
gratuitous. On March 16, 1954, the trial court ordered Quemuel and his wife
to return the possession of lot 1095 to the Olaes spouses and to pay the
latter P20.00 a month from January, 1954, until they shall have vacated the
premises. Quemuel and his wife did not appeal from said decision which
became final on April 22, 1954. Thereafter, the Olaes spouses sought the
execution of the decision and to forestall ejectment, the Quemuel spouses,
filed on July 1, 1954, the present complaint, docketed as Civil Case No. 5518,
CFI of Cavite.
In the present complaint, the Quemuel spouses seek to reduce the monthly
rental of P20.00 fixed in Civil Case No. 5442, and to compel the Olaes
spouses to sell to them (Quemuels) the portion of the lot 1095 where their
house is erected. Respondents, the Olaes spouses, filed a motion to dismiss
dated July 9, 1954, alleging lack of cause of action, res adjudicata;
prescription, and the cause of action, if any, is barred by plaintiffs' failure to
set it up as a counter-claim in civil case No. 5442.
On September 17, 1954, the trial court dismissed the complaint, without
pronouncement as to costs.
An appeal was taken by plaintiffs to the Court of Appeals (Case No. CA-G.R.
No. 14837-R) which, by the agreement of the parties certified the case to
this Court. The ex parte petition filed by the plaintiffs-appellants in this
Court on August 9, 1956, asking that a writ of prohibition and injunction be
issued to the Provincial Sheriff of Cavite and the defendants-appellees,
enjoining them from demolishing the house of plaintiffs-appellants until
there is a final decision in said case No. 14837, by the Supreme Court, was
denied on August 14, 1956 by the latter court.
The lone assignment alleges that the trial court erred in dismissing the
complaint without trial on the merits and in not granting the reliefs prayed
for by the plaintiffs-appellants. Appellants stated in their brief that if there
will be trial on the merits, they would be entitled to a decision in their favor,
because they will establish by competent evidence the allegations in their
complaint. And on the claim that they were builders in good faith, they
based the right to buy the lot on which their house is built, upon the
decision of Belen Uy Tayao v. Rosario Yuseco, et al., G.R. No. T,8139, Oct.
24, 1955. It should be recalled at the outstart, that the trial court ordered
the dismissal of the complaint, which must have been granted in all or any
of the grounds therein alleged, to wit:
I. The Complaint states no cause of action. —
The first cause of action on the present complaint al alleges that in Civil Case
No. 5442, the trial court rendered the decision of March 16, 1954, ordering
the latter to vacate lot No. 1095 belonging to Olaes and his wife and to pay
them a monthly rental of P20.00 from January, 1954 until they shall have
vacated the premises; that plaintiff believe that the portion they are
occupying belonged to them; that they occupy only about one-half of the
lot; that considering the purchase price of the land, its assessed value and
the interest the price would have earned, the rental should not be more
than 7-½% or P5.60 monthly. Plaintiffs prayed that the rental be reduced to
P5.60 a month.
Assuming the truth of the above allegations, the same do not constitute a
cause of action. A cause of action presupposes a right of the plaintiff and a
violation of such right by the defendant. According to the complaint itself,
the rental of P20.00 monthly and the order to vacate, were provided in a
prior judgment (Civil Case No. 5442), which is final and its validity is not
assailed. There being no law that fixes the rental of the same land at 7½ of
the allowed market value, the plaintiffs have no right thereto or aright
which could be violated. The defendants are not compelling the plaintiffs to
rent the property but wanted them to vacate the premises (Civil Case No.
5442). If the rental determined by the trial court were excessive, the
plaintiffs are free to vacate the property. For plaintiffs to insist on
possessing the property and fixing the rentals themselves, would have no
legal sanction at all.
In the second cause of action of the present complaint, the plaintiffs allege:
That they actually occupy about 384 square meters or one-half of lot 1095;
of the said area they thought they own 256 square meters by inheritance
from Romualdo Solis, father of plaintiff, Ruperta Solis, who became the
owner thereof pursuant to a verbal extrajudicial partition made in 1924;
Agapita Solis who sold the entire lot 1095 to defendants, is a sister of
Romualdo Solis, and there was an error in the inclusion of the 256 square
meters in the Torrens Title and the sale; they acquired from Valentin Solis,
brother of both Romualdo and Agapita, a part of the portion occupied by
plaintiff's house and warehouse; their house has been there for almost 34
years and is worth P4,000; the defendants are rich, have a house and a lot
of their own, and will not suffer any material or sentimental damage if they
sell to the plaintiffs one-half of lot No. 1095; plaintiff offered to pay P960 for
the portion they are occupying or P1,920.00 for the whole lot.
On the assumption that the allegations of the second cause of action are
true, what would be the rights of the parties? The plaintiffs claim that their
second cause of action is based on Article 448 in connection with Art. 546,
of the new Civil Code. A cursory reading of these provisions, however, will
show that they are not applicable to plaintiffs' case. Under Article 448, the
right to appropriate the works or improvements or "to oblige the one who
built or planted to pay the price of the land belongs to the owner of the
land. The only right given to the builder in good faith is the right to
reimbursement for the improvements; the builder, cannot compel the
owner of the land to sell such land to the former. This is assuming that the
plaintiffs are builders in good faith. But the plaintiffs are not builders in
good faith. From the pleadings and the documentary evidence submitted, it
is indisputable that the land in question originally belonged to the
government as part of the Friar Lands Estate and the title thereto was in the
name of the government, until it was purchased by Agapita Solis who
applied, thru the Bureau of Lands, to purchase the land by installments. The
corresponding Sale Certificate No. 531, effective July 1, 1909 Exhibit 2) was
executed. In defendants' complaint (as plaintiffs in Civil Case No. 5442), they
alleged that they are the owners of lot 109'a and that defendants (plaintiffs
herein), "have been occupying southeastern half portion thereof, without
any right thereto, except the tolerance of plaintiffs" (defendants herein),
which were admitted expressly and under oath, in the answer of plaintiffs
herein. It would, therefore, appear that plaintiffs herein were not Unaware
of the flaw in their title, if any, and that their true relation with the herein
defendants was that of tenant and landlord, and that their rights are
governed by Article 1573 in relation to article 487 of the old Civil Code,
which reads as follows: —
Art. 1573. A lessee shall have with respect to useful a voluntary
improvements, the same right which are granted the usufructuaries.
Art. 487. The usufructuary may make on the property in usufruct
any improvements, useful or recreative, which may deem proper,
provided he does not change its form or substance, but he shall
have no right to be indemnified thereof. He may, however, remove
such improvements, should it possible to do so without injury to the
property.
From the above provisions, it can clearly be inferred that plaintiffs can not
compel the defendants to pay for the improvements the former made on
the property or to sell the latter's land. Plaintiffs' only right, is to remove
improvements, if it is possible to do so, without damage to the land.
It should be noted that article 448 of the new Civil Code, (equivalent to Art.
361 of the old Civil Code), relied upon by plaintiffs, is intended to apply only
to a case where one builds, or sows, or plants on land in which believes
himself to have a claim of title and not to land wherein one's interest is that
of tenant, under a rental co tract, which is the present case (Alburo v.
Villanueva, Phil. 277). The tenant cannot be said to be a builder in good faith
as he has no pretension to be owner (Rivera v. Trinidad, 48 Phil. 396; see
also 3 Manresa 4th Ed. pp. 215-216).
The trial court, therefore, did not commit any error in dismissing the two
causes of action.
II. The first cause of action, if any, is barred by prior judgment.
As plaintiffs in Civil Case No. 5442, the defendants al alleged in their
complaint that the reasonable rental value of the premises in question was
P20.00 a month (par. 5). In said case No. 5442, the matter of the rental was
in issue and the same was considered and decided by the trial court, which
ordered the defendants therein "to pay reasonable compensation of P20.00
a month beginning with January, 1954, until they shall have left the
premises". In the instant case, the parties are the identical parties in Civil
Case No. 5442; the same lot 1095 is the subject matter of both cases; the
same issue, namely, the amount of the rental is involved. Even assuming
that appellants have a cause of action, the doctrine of res judicata already
operates against them.
III. The second cause of action, if any, is barred by the statute of limitations.
As shown by the documentary evidence submitted with the defendant's
motion to dismiss, lot No. 1095 was purchased by Agapita Solis from the
Government on July 1, 1909. After full payment of the purchase price, T.C.T.
No. 10771 covering said lot was issued to said Agapita Solis on June 8,
1933,(Exhibits 1 and 2). Assuming that plaintiffs or their alleged
predecessor-in-interest, had a cause of action for claiming the ownership of
potion of said lot, such cause of action accrued at the latest, on June 8,
1933. The plaintiffs or their predecessors had ten (10) years from said date,
within which to file the corresponding action. They, however, filed the
instant complaint only on July 1, 1954, or more than 21 years, after the
accrual of the cause of action.
IV. The cause of action, if any, is barred by plaintiffs' failure to set it up as a
counterclaim in Civil Case No. 5442.
Whether the cause of action is for recovery of ownership or for an alleged
right to purchase the property, or for reimbursement for some
improvements, the herein plaintiffs as defendants in Civil Case No. 5442,
should have set it up as a counterclaim in said case, because same was
necessarily connected with, or arose out of the transactions involved in said
case No. 5442(Sec. 6, Rule 10, Rules of Court).
It is alleged that plaintiffs-appellants' complaint should not have been
dismissed without trial on the merits, because in the case of De Jesus, et al.
v. Belarmino, et al. G.R. No. L-6665, June 30, 1954; Off. Gaz. July 1954, p.
3064, it was held that "where the complaint was dismissed not because of
any evidence presented by the parties, or merits, but merely on a motion as
a result of a trial on the to dismiss filed by the defendants, the sufficiency of
the motion should be tested on the strength of the allegation of facts
contained in the complaint and no other", which has been interpreted to
apply to cases where the motion to dismiss is based solely on the ground of
lack of cause of action. Considering the fact that (1) In the case a bar,
documentary evidence and the records of the Civil Case No. 5442 were
presented and considered by the trial court; and (2) in the De Jesus case,
the only ground for dismissal was the lack of cause of action, while in the
present case, aside from said ground, plaintiffs allegation other grounds, the
said ruling finds no application.
IN VIEW HEREOF, we hereby affirm the order appealed from, with costs
against the plaintiffs-appellants.
G.R. No. L-57348 May 16, 1985
FRANCISCO DEPRA, plaintiff-appellee,
vs.
AGUSTIN DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Veil D. Hechanova for defendant-appellant.
MELENCIO-HERRERA, J.:
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. T3087, 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 Depra
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 of Dumangas, docketed as Civil
Case No 1, Said complaint was later amended to include DEPRA as a party
plain. 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:
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 the day that this decision shall have
become final.
From the foregoing judgment, neither party appeal so that, ff 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 out selves 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). 1The Municipal Court over-stepped 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,
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; ... (Emphasis ours)
Consistent with the principle 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
appeal ply 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
by 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 rode.
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.
. . . es justa la facultad que el codigo da al dueno 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 dueno 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 edificar. 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
enriquecido 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 possible 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 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.
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. Ibanez [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
as his own by paying to DUMLAO either the amount of tile
expenses spent by DUMLAO f or 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.
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 Precision
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.

G.R. No. 95907 April 8, 1992
JOSE REYNANTE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE HON. VALENTIN CRUZ, as
Presiding Judge, Regional Trial Court of Bulacan, Branch VIII, and the HEIRS
OF LEONCIO CARLOS and DOLORES A. CARLOS, and HEIRS OF GORGONIO
CARLOS and CONCEPCION CARLOS, respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks the reversal of: a)
decision 1 of the Court of Appeals dated February 28, 1990 in CA-G.R. No.
1917 entitled "JOSE REYNANTE versus HON. VALENTIN CRUZ, Judge, RTC of
Malolos, Bulacan, and HEIRS OF LEONCIO AND DOLORES CARLOS, et al.",
affirming the decision 2 of the Regional Trial Court
of Malolos, Bulacan, Branch 8, Third Judicial Region which reversed the
decision 3 of the Municipal Trial Court of Meycauayan, Bulacan, Branch 1,
Third Judicial Region in Civil Case No. 1526 entitled "HEIRS OF LEONCIO
CARLOS & DOLORES A. CARLOS and HEIRS OF GORGONIO A. CARLOS &
CONCEPCION CARLOS versus JOSE REYNANTE: and b) the resolution denying
the motion for reconsideration.
The facts as culled from the records of the case are as follows:
More than 50 years ago, petitioner Jose Reynante was taken as tenant by
the late Don Cosme Carlos, owner and father-in-law of herein private
respondents, over a fishpond located at Barrio Liputan, Meycauayan,
Bulacan with an area of 188.711 square meters, more or less and covered
by Transfer Certificate of Title No. 25618, Land Registry of Bulacan.
During the tenancy, petitioner Jose Reynante constructed a nipa hut where
he and his family lived and took care of the nipa palms (sasahan) he had
planted on lots 1 and 2 covering an area of 5,096 square meters and 6,011
square meters respectively. These lots are located between the fishpond
covered by TCT No. 25618 and the Liputan (formerly Meycauayan) River.
Petitioner harvested and sold said nipa palms without interference and
prohibition from anybody. Neither did the late Don Cosme Carlos question
his right to plant the nipa palms near the fishpond or to harvest and
appropriate them as his own.
After the death of Don Cosme Carlos, his heirs (private respondents'
predecessors-in-interest) entered into a written agreement denominated as
"SINUMPAANG SALAYSAY NG PAGSASAULI NG KARAPATAN" dated
November 29, 1984 with petitioner Jose Reynante whereby the latter for
and in consideration of the sum of P200,000.00 turned over the fishpond he
was tenanting to the heirs of Don Cosme Carlos and surrendered all his
rights therein as caretaker or "bantay-kasama at tagapamahala" (Rollo, p.
77).
Pursuant to the said written agreement, petitioner surrendered the
fishpond and the two huts located therein to private respondents. Private
respondents thereafter leased the said fishpond to one Carlos de la Cruz.
Petitioner continued to live in the nipa hut constructed by him on lots 1 and
2 and to take care of the nipa palms he had planted therein.
On February 17, 1988, private respondents formally demanded that the
petitioner vacate said portion since according to them petitioner had
already been indemnified for the surrender of his rights as a tenant. Despite
receipt thereof, petitioner refused and failed to relinquish possession of lots
1 and 2.
Hence, on April 22, 1988, private respondents filed a complaint for forcible
entry with preliminary mandatory injunction against petitioner alleging that
the latter by means of strategy and stealth, took over the physical, actual
and material possession of lots 1 and 2 by residing in one of the kubos or
huts bordering the Liputan River and cutting off and/or disposing of
the sasa or nipa palms adjacent thereto.
On January 10, 1989, the trial court rendered its decision dismissing the
complaint and finding that petitioner had been in prior possession of lots 1
and 2.
Private respondents appealed to the Regional Trial Court and on August 8,
1989 it rendered its decision, the dispositive portion of which reads as
follows:
WHEREFORE, this Court renders judgment in favor of the
plaintiffs and against defendant and hereby reverses the
decision of the Court a quo. Accordingly, the defendant is
ordered to restore possession of that piece of land
particularly described and defined as Lots 1 & 2 of the land
survey conducted by Geodetic Engineer Restituto Buan on
March 2, 1983, together with the sasa or nipa palms
planted thereon. No pronouncement as to attorney's fees.
Each party shall bear their respective costs of the suit.
SO ORDERED. (Rollo, p. 55; Decision, p. 4).
From said decision, petitioner filed with the Court of Appeals a petition for
review (Rollo, p. 30; Annex "A"). On February 28, 1990, the Court of Appeals
rendered its decision, the dispositive portion of which reads as follows:
 WHEREFORE, the decision of the court a quo, being
consistent with law and jurisprudence, is hereby
AFFIRMED in toto. The instant petition seeking to issue a
restraining order is hereby denied.
SO ORDERED. (Rollo, p. 30; Decision, p. 3).
On November 5, 1990, the Court of Appeals denied the motion for
reconsideration filed by petitioner (Rollo, p. 35; Annex "B").
Hence, this petition.
In its resolution dated May 6, 1991, the Second Division of this court gave
due course to the petition and required both parties to file their respective
memoranda (Rollo, p. 93).
The main issues to be resolved in this case are: a) who between the
petitioner and private respondents has prior physical possession of lots 1
and 2; and b) whether or not the disputed lots belong to private
respondents as a result of accretion.
An action for forcible entry is merely a quieting process and actual title to
the property is never determined. A party who can prove prior possession
can recover such possession even against the owner himself. Whatever may
be the character of his prior possession, if he has in his favor priority in time,
he has the security that entitles him to remain on the property until he is
lawfully ejected by a person having a better right by accion
publiciana or accion reivindicatoria (German Management & Services, Inc. v.
Court of Appeals, G.R. No. 76216, September 14, 1989, 177 SCRA 495, 498,
499). On the other hand, if a plaintiff cannot prove prior physical
possession, he has no right of action for forcible entry and detainer even if
he should be the owner of the property (Lizo v. Carandang, 73 Phil. 469
[1942]).
Hence, the Court of Appeals could not legally restore private respondents'
possession over lots 1 and 2 simply because petitioner has clearly proven
that he had prior possession over lots 1 and 2.
The evidence on record shows that petitioner was in possession of the
questioned lots for more than 50 years. It is undisputed that he was the
caretaker of the fishpond owned by the late Don Cosme Carlos for more
than 50 years and that he constructed a nipa hut adjacent to the fishpond
and planted nipa palms therein. This fact is bolstered by the "SINUMPAANG
SALAYSAY" executed by Epifanio Lucero (Records, p. 66), Apolonio D. Morte
(Records, p. 101) and Carling Dumalay (Records, p. 103), all of whom are
disinterested parties with no motive to falsify that can be attributed to
them, except their desire to tell the truth.
Moreover, an ocular inspection was conducted by the trial court dated
December 2, 1988 which was attended by the parties and their respective
counsels and the court observed the following:
The Court viewed the location and the distance of the
constructed nipa hut and the subject "sasahan" which
appears exists (sic) long ago, planted and stands (sic)
adjacent to the fishpond and the dikes which serves (sic) as
passage way of water river of lot 1 and lot 2. During the
course of the hearing, both counsel observed muniment of
title embedded on the ground which is located at the inner
side of the "pilapil" separating the fishpond from the
subject "sasa" plant with a height of 20 to 25 feet from
water level and during the ocular inspection it was judicially
observed that the controversial premises is beyond the
titled property of the plaintiffs but situated along the
Liputan, Meycauayan River it being a part of the public
domain. (Rollo, p. 51; Decision, p. 12).
On the other hand, private respondents based their claim of possession
over lots 1 and 2 simply on the written agreement signed by petitioner
whereby the latter surrendered his rights over the fishpond.
Evidently, the trial court did not err when it ruled that:
An examination of the document signed by the defendant
(Exhibit "B"), shows that what was surrendered to the
plaintiffs was the fishpond and not the "sasahan" or the
land on which he constructed his hut where he now lives.
That is a completely different agreement in which a tenant
would return a farm or a fishpond to his landlord in return
for the amount that the landlord would pay to him as a
disturbance compensation. There is nothing that indicates
that the tenant was giving other matters not mentioned in a
document like Exhibit "B". Moreover, when the plaintiffs
leased the fishpond to Mr. Carlos de La Cruz there was no
mention that the lease included the hut constructed by the
defendant and the nipa palms planted by him (Exhibit "1"),
a circumstance that gives the impression that the nipa hut
and the nipa palms were not included in the lease to Mr. de
la Cruz, which may not belong to the plaintiffs. (Rollo, p. 49;
Decision, p. 9).
With regard to the second issue, it must be noted that the disputed lots
involved in this case are not included in Transfer Certificate of Title No.
25618 as per verification made by the Forest Management Bureau,
Department of Environment and Natural Resources. That tract of land
situated at Barrio Liputan, Meycauayan, Bulacan containing an area of
1.1107 hectares as described in the plan prepared and surveyed by Geodetic
Engineer Restituto Buan for Jose Reynante falls within Alienable and
Disposable Land (for fishpond development) under Project No. 15 per
B.F.L.C. Map No. 3122 dated May 8, 1987 (Rollo, p. 31; Decision, p. 2).
The respondent Court of Appeals ruled that lots 1 and 2 were created by
alluvial formation and hence the property of private respondents pursuant
to Article 457 of the New Civil Code, to wit:
Art. 457. To the owners of lands adjoining the banks of
rivers belong the accretion which they gradually receive
from the effects of the current of the waters.
Accretion benefits a riparian owner when the following requisites are
present: (1) that the deposit be gradual and imperceptible; (2) that it
resulted from the effects of the current of the water; and (c) that the land
where accretion takes place is adjacent to the bank of a river (Republic v.
Court of Appeals, G.R. No. L-61647, October 12, 1984, 132 SCRA 514, cited
in Agustin v. Intermediate Appellate Court, G.R. Nos. 66075-76, July 5, 1990,
187 SCRA 218).
Granting without conceding that lots 1 and 2 were created by alluvial
formation and while it is true that accretions which the banks of rivers may
gradually receive from the effect of the current become the property of the
owner of the banks, such accretion to registered land does not preclude
acquisition of the additional area by another person through prescription.
This Court ruled in the case of Ignacio Grande, et al. v. Hon. Court of
Appeals, et al., G.R. No. L-17652, June 30, 1962, 115 Phil. 521 that:
An accretion does not automatically become registered land
just because the lot which receives such accretion is
covered by a Torrens Title. Ownership of a piece of land is
one thing; registration under the Torrens system of that
ownership is another. Ownership over the accretion
received by the land adjoining a river is governed by the
Civil Code. Imprescriptibility of registered land is provided in
the registration law. Registration under the Land
Registration and Cadastral Act does not vest or give title to
the land, but merely confirms and, thereafter, protects the
title already possessed by the owner, making it
imprescriptible by occupation of third parties. But to obtain
this protection, the land must be placed under the
operation of the registration laws, wherein certain judicial
procedures have beenprovided.
Assuming private respondents had acquired the alluvial deposit (the lot in
question), by accretion, still their failure to register said accretion for a
period of fifty (50) years subjected said accretion to acquisition through
prescription by third persons.
It is undisputed that petitioner has been in possession of the subject lots for
more than fifty (50) years and unless private respondents can show a better
title over the subject lots, petitioner's possession over the property must be
respected.
PREMISES CONSIDERED, the decision of the respondent Court of Appeals
dated February 28, 1990 is REVERSED and SET ASIDE and the decision of the
Municipal Trial Court of Meycauayan, Bulacan, Branch I, is hereby
REINSTATED.
SO ORDERED.
G.R. No. 170923 January 20, 2009
SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and JOSE
MARCEL E. PANLILIO,Petitioners,
vs.
NAYONG PILIPINO FOUNDATION, Respondent.
DECISION
PUNO, C.J.:
On appeal are the Court of Appeals’ (CA’s) October 4, 2005 Decision1 in CA-
G.R. SP No. 74631 and December 22, 2005 Resolution,2 reversing the
November 29, 2002 Decision3 of the Regional Trial Court (RTC) of Pasay City
in Civil Case No. 02-0133. The RTC modified the Decision4 of the
Metropolitan Trial Court (MeTC) of Pasay City which ruled against
petitioners and ordered them to vacate the premises and pay their arrears.
The RTC declared petitioners as builders in good faith and upheld their right
to indemnity.
The facts are as follows:
Respondent Nayong Pilipino Foundation, a government-owned and
controlled corporation, is the owner of a parcel of land in Pasay City, known
as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc.
(PVHI), formerly called Sulo sa Nayon, Inc., is a domestic corporation duly
organized and existing under Philippine laws. Petitioner Jose Marcel E.
Panlilio is its Senior Executive Vice President.
On June 1, 1975, respondent leased a portion of the Nayong Pilipino
Complex, consisting of 36,289 square meters, to petitioner Sulo sa Nayon,
Inc. for the construction and operation of a hotel building, to be known as
the Philippine Village Hotel. The lease was for an initial period of 21 years,
or until May 1996. It is renewable for a period of 25 years under the same
terms and conditions upon due notice in writing to respondent of the
intention to renew at least 6 months before its expiration. Thus, on March
7, 1995, petitioners sent respondent a letter notifying the latter of their
intention to renew the contract for another 25 years. On July 4, 1995, the
parties executed a Voluntary Addendum to the Lease Agreement. The
addendum was signed by petitioner Jose Marcel E. Panlilio in his official
capacity as Senior Executive Vice President of the PVHI and by Chairman
Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to the
renewal of the contract for another 25 years, or until 2021. Under the new
agreement, petitioner PVHI was bound to pay the monthly rental on a per
square meter basis at the rate of ₱20.00 per square meter, which shall be
subject to an increase of 20% at the end of every 3-year period. At the time
of the renewal of the lease contract, the monthly rental amounted to
₱725,780.00.
Beginning January 2001, petitioners defaulted in the payment of their
monthly rental. Respondent repeatedly demanded petitioners to pay the
arrears and vacate the premises. The last demand letter was sent on March
26, 2001.
On September 5, 2001, respondent filed a complaint for unlawful detainer
before the MeTC of Pasay City. The complaint was docketed as Civil Case
No. 708-01. Respondent computed the arrears of petitioners in the amount
of twenty-six million one hundred eighty-three thousand two hundred
twenty-five pesos and fourteen centavos (₱26,183,225.14), as of July 31,
2001.
On February 26, 2002, the MeTC rendered its decision in favor of
respondent. It ruled, thus:
. . . . The court is convinced by the evidence that indeed, defendants
defaulted in the payment of their rentals. It is basic that the lessee is obliged
to pay the price of the lease according to the terms stipulated (Art. 1657,
Civil Code). Upon the failure of the lessee to pay the stipulated rentals, the
lessor may eject (sic) and treat the lease as rescinded and sue to eject the
lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of
rentals, the lessor may rescind the lease, recover the back rentals and
recover possession of the leased premises. . .
xxx
. . . . Improvements made by a lessee such as the defendants herein on
leased premises are not valid reasons for their retention thereof. The
Supreme Court has occasion to address a similar issue in which it ruled that:
"The fact that petitioners allegedly made repairs on the premises in
question is not a reason for them to retain the possession of the premises.
There is no provision of law which grants the lessee a right of retention over
the leased premises on that ground. Article 448 of the Civil Code, in relation
to Article 546, which provides for full reimbursement of useful
improvements and retention of the premises until reimbursement is made,
applies only to a possessor in good faith, i.e., one who builds on a land in
the belief that he is the owner thereof. This right of retention does not
apply to a mere lessee, like the petitioners, otherwise, it would always be in
his power to "improve" his landlord out of the latter’s property (Jose L. Chua
and Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No. 109840,
January 21, 1999)."
Although the Contract of Lease stipulates that the building and all the
improvements in the leased premises belong to the defendants herein, such
will not defeat the right of the plaintiff to its property as the defendants
failed to pay their rentals in violation of the terms of the contract. At most,
defendants can only invoke [their] right under Article 1678 of the New Civil
Code which grants them the right to be reimbursed one-half of the value of
the building upon the termination of the lease, or, in the alternative, to
remove the improvements if the lessor refuses to make reimbursement.
The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
Nayong Pilipino Foundation, and against the defendant Philippine Village
Hotel, Inc[.], and all persons claiming rights under it, ordering the latter to:
1. VACATE the subject premises and surrender possession thereof
to plaintiff;
2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX
MILLION ONE HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED
TWENTY FIVE PESOS AND 14/100 (P26,183,225.14) incurred as of
July 31, 2001;
3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE
THOUSAND SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per
month starting from August 2001 and every month thereafter by
way of reasonable compensation for the use and occupation of the
premises;
4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by
way of attorney’s fees[; and]
5. PAY the costs of suit.
The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed
for lack of cause of action. The said defendant’s counterclaim however is
likewise dismissed as the complaint does not appear to be frivolous or
maliciously instituted.
SO ORDERED.5
Petitioners appealed to the RTC which modified the ruling of the MeTC. It
held that:
. . . it is clear and undisputed that appellants-lessees were expressly
required to construct a first-class hotel with complete facilities. The
appellants were also unequivocally declared in the Lease Agreement as the
owner of the improvements so constructed. They were even explicitly
allowed to use the improvements and building as security or collateral on
loans and credit accommodations that the Lessee may secure for the
purpose of financing the construction of the building and other
improvements (Section 2; pars. "A" to "B," Lease Agreement). Moreover, a
time frame was setforth (sic) with respect to the duration of the lease
initially for 21 years and renewable for another 25 years in order to enable
the appellants-lessees to recoup their huge money investments relative to
the construction and maintenance of the improvements.
xxx
Considering therefore, the elements of permanency of the construction and
substantial value of the improvements as well as the undispute[d]
ownership over the land improvements, these, immensely engender the
application of Art. 448 of the Civil Code. The only remaining and most
crucial issue to be resolved is whether or not the appellants as builders have
acted in good faith in order for Art. 448 in relation to Art. 546 of the Civil
Code may apply with respect to their rights over improvements.
xxx
. . . it is undeniable that the improvement of the hotel building of appellants
(sic) PVHI was constructed with the written consent and knowledge of
appellee. In fact, it was precisely the primary purpose for which they
entered into an agreement. Thus, it could not be denied that appellants
were builders in good faith.
Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil
Code, plaintiff-appellee has the sole option or choice, either to appropriate
the building, upon payment of proper indemnity consonant to Art. 546 or
compel the appellants to purchase the land whereon the building was
erected. Until such time that plaintiff-appellee has elected an option or
choice, it has no right of removal or demolition against appellants unless
after having selected a compulsory sale, appellants fail to pay for the land
(Ignacio vs. Hilario; 76 Phil. 605). This, however, is without prejudice from
the parties agreeing to adjust their rights in some other way as they may
mutually deem fit and proper.
The dispositive portion of the decision of the RTC reads as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered
modifying the decision of [the] MTC, Branch 45 of Pasay City rendered on
February 26, 2002 as follows:
1. Ordering plaintiff-appellee to submit within thirty (30) days from
receipt of a copy of this decision a written manifestation of the
option or choice it selected, i.e., to appropriate the improvements
upon payment of proper indemnity or compulsory sale of the land
whereon the hotel building of PVHI and related improvements or
facilities were erected;
2. Directing the plaintiff-appellee to desist and/or refrain from doing
acts in the furtherance or exercise of its rights and demolition
against appellants unless and after having selected the option of
compulsory sale and appellants failed to pay [and] purchase the
land within a reasonable time or at such time as this court will
direct;
3. Ordering defendants-appellants to pay plaintiff-appellee [their]
arrears in rent incurred as of July 31, 2001 in the amount of
P26,183,225.14;
4. Ordering defendants-appellants to pay to plaintiff-appellee the
unpaid monthly rentals for the use and occupation of the premises
pending this appeal from July to November 2002 only at
P725,780.00 per month;
5. The fourth and fifth directives in the dispositive portion of the
trial court’s decision including that the last paragraph thereof JME
Panlilio’s complaint is hereby affirmed;
6. The parties are directed to adjust their respective rights in the
interest of justice as they may deem fit and proper if necessary.
SO ORDERED.6
Respondent appealed to the CA which held that the RTC erroneously
applied the rules on accession, as found in Articles 448 and 546 of the Civil
Code when it held that petitioners were builders in good faith and, thus,
have the right to indemnity. The CA held:
By and large, respondents are admittedly mere lessees of the subject
premises and as such, cannot validly claim that they are builders in good
faith in order to solicit the application of Articles 448 and 546 of the Civil
Code in their favor. As it is, it is glaring error on the part of the RTC to apply
the aforesaid legal provisions on the supposition that the improvements,
which are of substantial value, had been introduced on the leased premises
with the permission of the petitioner. To grant the respondents the right of
retention and reimbursement as builders in good faith merely because of
the valuable and substantial improvements that they introduced to the
leased premises plainly contravenes the law and settled jurisprudential
doctrines and would, as stated, allow the lessee to easily "improve" the
lessor out of its property.
. . . . Introduction of valuable improvements on the leased premises does
not strip the petitioner of its right to avail of recourses under the law and
the lease contract itself in case of breach thereof. Neither does it deprive
the petitioner of its right under Article 1678 to exercise its option to acquire
the improvements or to let the respondents remove the same.
Petitioners’ Motion for Reconsideration was denied.
Hence, this appeal.7
Petitioners assign the following errors:
I premises, since such demand is a jurisdictional requisite. We reiterate the
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR IN NOT HOLDING THAT PETITIONERS WERE BUILDERS IN GOOD
FAITH OVER THE SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH
THEY HAD INTRODUCED ON THE SUBJECT PROPERTY, THUS COMPELLING
THE APPLICATION OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO
ARTICLE 546 OF THE SAME CODE, INSTEAD OF ARTICLE 1678 OF THE CIVIL
CODE.
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS REVERSIBLE
ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE CONTRACT
GOVERNS THE RELATIONSHIP OF THE PARTIES AND CONSEQUENTLY THE
PARTIES MAY BE CONSIDERED TO HAVE IMPLIEDLY WAIVED THE
APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE TO THE INSTANT CASE.
III
ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN
GOOD FAITH, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR WHEN IT OVERLOOKED THE FACT THAT RESPONDENT
ALSO ACTED IN BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD
BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES, THUS BOTH
PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.
IV
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE
INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546
OF THE SAME CODE WOULD NOT ONLY WREAK HAVOC AND CAUSE
SUBSTANTIAL INJURY TO THE RIGHTS AND INTERESTS OF PETITIONER
PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT NAYONG PILIPINO
FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER ONLY SLIGHT OR
INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO WOULD CONSTITUTE
UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT EXPENSE
AND GRAVE PREJUDICE OF PETITIONERS.
V
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR IN NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE
JURISDICTION OVER THE UNLAWFUL DETAINER CASE FOR NON-
COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE
OF A NOTICE TO VACATE UPON PETITIONERS.8
First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did
not acquire jurisdiction to hear and decide the ejectment case because they
never received any demand from respondent to pay rentals and vacate the
ruling of the MeTC, RTC and CA. Contrary to the claim of petitioners,
documentary evidence proved that a demand letter dated March 26, 2001
was sent by respondent through registered mail to petitioners, requesting
them "to pay the rental arrears or else it will be constrained to file the
appropriate legal action and possess the leased premises."
Further, petitioners’ argument that the demand letter is "inadequate"
because it contained no demand to vacate the leased premises does not
persuade. We have ruled that:
. . . . The word "vacate" is not a talismanic word that must be employed in
all notices. The alternatives in this case are clear cut. The tenants must pay
rentals which are fixed and which became payable in the past, failing which
they must move out. There can be no other interpretation of the notice
given to them. Hence, when the petitioners demanded that either he pays
₱18,000 in five days or a case of ejectment would be filed against him, he
was placed on notice to move out if he does not pay. There was, in effect, a
notice or demand to vacate.9
In the case at bar, the language of the demand letter is plain and simple:
respondent demanded payment of the rental arrears amounting to
₱26,183,225.14 within ten days from receipt by petitioners, or respondent
will be constrained to file an appropriate legal action against petitioners to
recover the said amount. The demand letter further stated that respondent
will possess the leased premises in case of petitioners’ failure to pay the
rental arrears within ten days. Thus, it is clear that the demand letter is
intended as a notice to petitioners to pay the rental arrears, and a notice to
vacate the premises in case of failure of petitioners to perform their
obligation to pay.
Second, we resolve the main issue of whether the rules on accession, as
found in Articles 448 and 546 of the Civil Code, apply to the instant case.
Article 448 and Article 546 provide:
Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall
pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
Art. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has been
reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with
the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have acquired by reason
thereof.
We uphold the ruling of the CA.
The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply only to a case where
one builds, plants, or sows on land in which he believes himself to have a
claim of title,10 and not to lands where the only interest of the builder,
planter or sower is that of a holder, such as a tenant.11
In the case at bar, petitioners have no adverse claim or title to the land. In
fact, as lessees, they recognize that the respondent is the owner of the land.
What petitioners insist is that because of the improvements, which are of
substantial value, that they have introduced on the leased premises with
the permission of respondent, they should be considered builders in good
faith who have the right to retain possession of the property until
reimbursement by respondent.
We affirm the ruling of the CA that introduction of valuable improvements
on the leased premises does not give the petitioners the right of retention
and reimbursement which rightfully belongs to a builder in good faith.
Otherwise, such a situation would allow the lessee to easily "improve" the
lessor out of its property. We reiterate the doctrine that a lessee is neither a
builder in good faith nor in bad faith12 that would call for the application of
Articles 448 and 546 of the Civil Code. His rights are governed by Article
1678 of the Civil Code, which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form
or substance of the property leased, the lessor upon the termination of the
lease shall pay the lessee one-half of the value of the improvements at that
time. Should the lessor refuse to reimburse said amount, the lessee may
remove the improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more impairment upon
the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose to
retain them by paying their value at the time the lease is extinguished.
Under Article 1678, the lessor has the option of paying one-half of the value
of the improvements which the lessee made in good faith, which are
suitable for the use for which the lease is intended, and which have not
altered the form and substance of the land. On the other hand, the lessee
may remove the improvements should the lessor refuse to reimburse.
Petitioners argue that to apply Article 1678 to their case would result to
sheer injustice, as it would amount to giving away the hotel and its other
structures at virtually bargain prices. They allege that the value of the hotel
and its appurtenant facilities amounts to more than two billion pesos, while
the monetary claim of respondent against them only amounts to a little
more than twenty six-million pesos. Thus, they contend that it is the lease
contract that governs the relationship of the parties, and consequently, the
parties may be considered to have impliedly waived the application of
Article 1678.
We cannot sustain this line of argument by petitioners. Basic is the doctrine
that laws are deemed incorporated in each and every contract. Existing laws
always form part of any contract. Further, the lease contract in the case at
bar shows no special kind of agreement between the parties as to how to
proceed in cases of default or breach of the contract. Petitioners maintain
that the lease contract contains a default provision which does not give
respondent the right to appropriate the improvements nor evict petitioners
in cases of cancellation or termination of the contract due to default or
breach of its terms. They cite paragraph 10 of the lease contract, which
provides that:
10. DEFAULT. - . . . Default shall automatically take place upon the failure of
the LESSEE to pay or perform its obligation during the time fixed herein for
such obligations without necessity of demand, or, if no time is fixed, after 90
days from the receipt of notice or demand from the LESSOR. . .
In case of cancellation or termination of this contract due to the default or
breach of its terms, the LESSEE will pay all reasonable attorney’s fees, costs
and expenses of litigation that may be incurred by the LESSOR in enforcing
its rights under this contract or any of its provisions, as well as all unpaid
rents, fees, charges, taxes, assessment and others which the LESSOR may be
entitled to.
Petitioners assert that respondent committed a breach of the lease contract
when it filed the ejectment suit against them. However, we find nothing in
the above quoted provision that prohibits respondent to proceed the way it
did in enforcing its rights as lessor. It can rightfully file for ejectment to evict
petitioners, as it did before the court a quo.
IN VIEW WHEREOF, petitioners’ appeal is DENIED. The October 4, 2005
Decision of the Court of Appeals in CA-G.R. SP No. 74631 and its December
22, 2005 Resolution are AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. L-25462 February 21, 1980
MARIANO FLOREZA, petitioner,
vs.
MARIA D. de EVANGELISTA and SERGIO EVANGELISTA, respondents.
R.D. Hipolito & B. P. Fabir for petitioner.
E.G. Tanjuatco & Associates for respondents.
MELENCIO-HERRERA, J:
This is a Petition for Review on certiorari of the Decision of the Court of
Appeals (CA-G.R. No. 23516-R) promulgated on November 4, 1965, entitled
"Maria de Evangelista and Sergio Evangelists, (now the respondents) vs.
Mariano Floreza (petitioner herein)," reversing the judgment of the Court of
First Instance of Rizal rendered on July 17, 1957, and instead ordering
petitioner to vacate respondents' residential lot, to remove his house at his
own expenses and to pay rental from May 5, 1956.
Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and
son, (the EVANGELISTAS, for short) are the owners of a residential lot
located at Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms.,
assessed at P410.00. In May 1945, the EVANGELISTAS borrowed from
FLOREZA the amount of P100.00. On or about November 1945, with the
consent of the EVANGELISTAS, FLOREZA occupied the above residential lot
and built thereon a house of light materials (barong- barong) without any
agreement as to payment for the use of said residential lot owing to the fact
that the EVANGELISTAS has then a standing loan of P100.00 in favor of
FLOREZA. 1
On the following dates, the EVANGELISTAS again borrowed the indicated
amounts: September 16, 1946 — P100.00; 2 August 17, 1947 —
P200,00; 3 January 30, 1949 — P200.00; 4 April 1, 1949 — P140.00, 5 or a
total of P740.00 including the first loan. The last three items are evidenced
by private documents stating that the residential lot stands as security
therefor and that the amounts covered thereunder are payable within six
years from date, without mention of interest. The document executed on
September 16, 1946 stated specifically that the loan was without interest
"walang anumang patubo."
On January 10, 1949, FLOREZA demolished this house of light materials and
in its place constructed one of strong materials assessed in his name at
P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no rental as
before. 6
On August 1, 1949, the EVANGELISTAS, for and in consideration of
P1,000.00 representing the total outstanding loan of P740.00 plus P260.00
in cash, sold their residential lot to FLOREZA, with a right to repurchase
within a period of 6 years from date, or up to August 1, 1955, as evidenced
by a notarial document, Exh. B, registered under Act 3344 on December 6,
1949, as Inscription No. 2147. 7
On January 2, 1955, or seven months before the expiry of the repurchase
period, the EVANGELISTAS paid in full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their counsel, wrote
FLOREZA a letter 8 asking him to vacate the premises as they wanted to
make use of their residential lot besides the fact that FLOREZA had already
been given by them more than one year within which to move his house to
another site. On May 4, 1956, the EVANGELISTAS made a formal written
demand to vacate, within five days from notice, explaining that they had
already fully paid the consideration for the repurchase of the lot. 9 FLOREZA
refused to vacate unless he was first reimbursed the value of his house.
Hence, the filing of this Complaint on May 18, 1956 by the EVANGELISTAS.
The EVANGELISTAS prayed that: 1) they be declared the owners of the
house of strong materials built by FLOREZA on their residential lot, without
payment of indemnity; or, in the alternative to order FLOREZA to remove
said house; 2) that FLOREZA pay them the sum of P10.00 per month as the
reasonable value for the use and occupation of the same from January 2,
1955 (the date the repurchase price was paid) until FLOREZA removes the
house and delivers the lot to them; and 3) to declare the transaction
between them and FLOREZA as one of mortgage and not of pacto de retro.
In his Answer, FLOREZA admitted the repurchase but controverted by
stating that he would execute a deed of repurchase and leave the premises
upon payment to him of the reasonable value of the house worth
P7,000.00.
In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined
that the question of whether the transaction between the parties is one of
mortgage or pacto de retro is no longer material as the indebtedness of
P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid.
And, applying Article 448 of the Civil Code, 10 it rendered a decision
dispositively decreeing:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court
hereby renders judgment granting the plaintiffs the right to
elect, as owners of the land, to purchase the house built, on
the said lot in question by the defendant for P2,500 or to
sell their said land to e defendant for P1,500. In the event
that the plaintiffs shall decide not to purchase the house in
question the defendant should be allowed to remain in
plaintiffs' premises by, paying a monthly rental of P10.00
which is the reasonable value for the use of the same per
month as alleged by plaintiffs in their complaint. The Court
also orders the defendant to pay a monthly rental of P10.00
for the use of the land in question from May 18, 1956, the
date of the commencement of this action. The counterclaim
of the defendant is hereby ordered dismissed. Without
pronouncement as to costs.
SO ORDERED. 11
Both parties appealed to the Court of Appeals.
On November 4, 1965, the Court of Appeals concluded that Article 448 of
the Civil Code, supra, was inapplicable; that FLOREZA was not entitled to
reimbursement for his house but that he could remove the same at his
expense; and accordingly rendered judgment thus:
WHEREFORE, judgment is hereby rendered: (1) adjudging
the defendant-appellant Mariano Floreza to vacate
plaintiffs' residential lot described in the complaint and to
pay rental of P10.00 a month from May 5, 1956, until he
(defendant) shall have vacated the premises; (2) ordering
defendant to remove his house from the land in question
within 30 days from the time this decision becomes final
and executory; (3) ordering the Register of Deeds of Rizal to
cancel inscription No. 2147, Page 210, Vol. 36, in the
Registration Book under Act 3344 upon payment of his
lawful fees; and (4) taxing the costs in both instances
against defendant-appellant Mariano Floreza. 12
Hence, this Petition for Review on certiorari by FLOREZA, seeking a reversal
of the aforestated judgment and ascribing the following errors:
1) That the Court of Appeals erred in holding that petitioner
Floreza was a builder in bad faith without likewise holding
that respondents as owners of the land in dispute, were
likewise in bad faith and therefore both parties should in
accordance with Art. 453 of the New Civil Code be
considered as having acted in good faith.
2) That the Court of Appeals erred in completely ignoring
the issue raised on appeal as to whether or not respondents
as owners of the questioned lot, were in bad faith in the
sense that they had knowledge of and acquiseced to the
construction of the house of petitioner on their lot.
3) That the Court of Appeals erred in not applying Art. 448
of the New Civil Code in the adjudication of the rights of
petitioner and respondent.
4) That the Court of Appeals erred in declaring that
petitioner is not entitled to reimbursement for the value of
his house and that he should instead remove the same at
his expense.
5) That the Court of Appeals erred in adjudging petitioner to
vacate respondents' lot in question and to pay rentals
commencing from May 5, 1956, until he shall have vacated
the premises, notwithstanding that petitioner is entitled
under Arts. 448 and 546 of the New Civil Code, to retention
without payment of rental while the corresponding
indemnity of his house had not been paid.
6) That the Court of Appeals erred in taxing costs against
petitioner.
7) That the Court of Appeals erred in not awarding
petitioner's counterclaim.
During the pendency of this appeal, petitioner Maria D. de Evangelista died
and was ordered substituted by her son, petitioner Sergio, as her legal
representative, in a Resolution dated May 14, 1976.
On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating
that FLOREZA had since died and that his heirs had voluntarily vacated the
residential lot in question. The date FLOREZA passed away and the date his
heirs had voluntarily vacated the property has not been stated. Required to
comment, "petitioner (represented by his heirs)", through counsel,
confirmed his death and the removal of the house and manifested that
thereby the question of reimbursement had moot and academic. He
objected to the dismissal of the case, however, on the ground that the issue
of rentals still pends. On January 21, 1980, complying with a Resolution of
'his Court, the EVANGELISTAS clarified that the dismissal they were praying
for was not of the entire case but only of this Petition for Review
on Certiorari.
We are not in agreement that the question of reimbursement of the value
of the improvement erected on the subject property has become moot.
Petitioner's right of retention of subject property until he is reimbursed for
the value of his house, as he had demanded, is inextricably linked with the
question of rentals. For if petitioner has the right to indemnity, he has the
right of retention and no rentals need be paid. Conversely, if no right of
retention exists, damages in the form of rentals for the continued use and
occupation of the property should be allowed.
We uphold the Court of Appeals in its conclusion that Article 448 of the Civil
Code is inapplicable to the factual milieu herein. Said codal provision applies
only when the builder, planter, or sower believes he had the right so to
build, plant or sow because he thinks he owns the land or believes himself
to have a claim of title. 13 In this case, petitioner makes no pretensions of
ownership whatsoever.
Petitioner concedes that he was a builder in bad faith but maintains that'
the EVANGELISTAS should also be held in bad faith, so that both of them
being in bad faith, Article 453 of the Civil Code 14 should apply. By the same
token, however, that Article 448 of the same Code is not applicable, neither
is Article 453 under the ambiance of this case.
Would petitioner, as vendee a retro, then be entitled to the rights granted iii
Article 1616 of the Civil Code (Art. 1518 of the old Code)? To quote:
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.
The question again calls for a negative answer. It should be noted that
petitioner did not construct his house as a vendee a retro. The house had
already been constructed as far back as 1949 (1945 for the house of light
materials) even before the pacto de retro sale in 1949. Petitioner incurred
no useful expense, therefore, after that sale. The house was already there at
the tolerance of the EVANGELISTAS in consideration of the several loans
extended to them. Since petitioner cannot be classified as a builder in good
faith within the purview of Article 448 of the Civil Code, nor as a vendee a
retro, who made useful improvements during the lifetime of the pacto de
retro, petitioner has no right to reimbursement of the value of the house
which he had erected on the residential lot of the EVANGELISTAS, much less
to retention of the premises until he is reimbursed.The rights of petitioner
are more akin to those of a usufructuary who, under Article 579 of the Civil
(Art. 487 of the old Code), may make on the property useful improvements
but with no right to be indemnified therefor. He may, however, remove
such improvements should it be possible to do so without damage to the
property: For if the improvements made by the usufructuary were subject
to indemnity, we would have a dangerous and unjust situation in which the
usufructuary could dispose of the owner's funds by compelling him to pay
for improvements which perhaps he would not have made. 15
We come now to the issue of rentals. It is clear that from the date that the
redemption price had been paid by the EVANGELISTAS on January 2, 1955,
petitioner's right to the use of the residential lot without charge had ceased.
Having retained the property although a redemption had been made, he
should be held liable for damages in the form of rentals for the continued
use of the subject residential lot16 at the rate of P10.00 monthly from
January 3, 1955, and not merely from the date of demand on May 4, 1956,
as held by the Court of Appeals, until the house was removed and the
property vacated by petitioner or his heirs.
WHEREFORE, the judgment appealed from is hereby affirmed, with the
modification that payment of rentals by the heir, of Mariano Floreza, who
are hereby ordered substituted for him, shall commence on January 3, 1955
until the date that the residential lot in question was vacated.
Costs against petitioner.
G.R. No. L-35648 February 27, 1987
PERSHING TAN QUETO, petitioner,
vs.
COURT OF APPEALS, JUAN POMBUENA and RESTITUTA TACALINAR
GUANGCO DE POMBUENA, respondents.
RESOLUTION
PARAS, J.:
This is a Motion for Reconsideration of the decision dated May 16,1983 of
this Court * in the above-entitled case, asking for the reversal of said
decision on the following grounds:
1. Decison erred in disregarding the fact that Lot No. 304-B
was registered in the name of the husband, Juan
Pombuena, as per OCT. No. 0-1160 issued pursuant to the
November 22, 1938 Decision (Exhibit 3) of the Cadastral
Court in Cadastral Case No. 12, G.L.R.O. Cad. Rec. No. 1638,
and that petitioner had the right to rely on said OCT;
2. The Decision erred in misinterpreting the admission in the
Answer of petitioner to the complaint in the unlawful
detainer Case No. 448 (City Court of Ozamiz City) as his
admission that Lot 304-B is the paraphernal property of the
wife, Restituta Tacalinar;
3. The Decision erred in reforming the Contract of Sale (Exh.
B) of Lot 304-B from Basilides Tacalinar (mother) to the
respondent, Restituta Tacalinar Guangco de Pombuena,
from a sale to a conveyance of the share of
the wife Restituta Tacalinar (daughter) in
the future hereditary estate of her parents;
4. The Decision erred in over-looking that the barter
agreement is an onerous contract of exchange, whereby
private respondents-spouses received valuable
consideration, concessions and other benefits therefor and
in concluding that 'the barter agreement has no effect;
5. The Decision erred in disregarding the fact that petitioner
constructed his concrete building on Lot No. 304-B in good
faith relying OCT No. 0-1160, after the dismissal of the
ejectment case and only after the execution of said barter
agreement;
6. The Decision erred in confusing the conclusion of law that
petitioner is a builder in bad faith with a finding of fact. The
rule is that questions of law are reviewable on appeal or by
certiorari. Moreover, the rule on finding of fact is subject to
well-settled exceptions. (pp. 257-258, Rollo)
It wig be recalled that the undisputed relevant facts indicate:
(1) that Restituta Tacalinar Guanaco de Pombuena
(RESTITUTA, for short) received the questioned lot (no. 304-
B), of the Cadastre Survey of the Municipality of Centro,
Mizamis Occidental, either as a purported donation or by
way of purchase on (February 11, 1927) (with P50.00) as the
alleged consideration thereof;
(2) that the transaction took place during her mother's
lifetime, her father having predeceased the mother;
(3) that the donation or sale was consummated while
RESTITUTA was already married to her husband Juan
Pombuena (JUAN, for short);
(4) that on January 22, 1935, JUAN filed for himself and his
supposed co-owner RESTITUTA an application for a Torrens
Title over the land;
(5) that under date of November 22, 1938 a decision was
promulgated in GLRC No. 1638 (Cadastral Case No. 12)
pronouncing JUAN ('married to RESTITUTA') as the owner of
the land;
(6) that on September 22, 1949 a contract of lease over the
lot was entered into between Pershing Tan Queto (TAN
QUETO, for short, the herein petitioner) and RESTITUTA
(with the consent of her husband JUAN) for a period of ten
(10) years;
(7) that on December 27, 1960 RESTITUTA sued TAN QUETO
for unlawful detainer (the lease contract having expired)
before the Municipal Court of Ozamis City;
(8) that as a consequence of the cadastral case, an Original
Certificate of Title (Exh. 10) was issued in JUAN's name
("married to RESTITUTA") on April 22, 1962;
(9) that the unlawful detainer case was won by the spouses
in the Municipal Court; but on appeal in the Court of First
Instance, the entire case was DISMISSED because of an
understanding (barter) whereby TAN QUETO became the
owner of the disputed lot, and the spouses RESTITUTA and
JUAN in turn became the owners of a parcel of land (with
the house constructed thereon) previously owned (that is,
before the barter) by TAN QUETO;
 (10) that after the barter agreement dated October 10,
1962 between JUAN and TAN QUETO, the latter constructed
(See p. 257, Rollo, Vol. II) on the disputed land a concrete
building, without any objection on the part of RESTITUTA;
(11) that later, RESTITUTA sued both JUAN and TAN QUETO
for reconveyance of the title over the registered but
disputed lot, for annulment of the barter, and for recovery
of the land with damages.
The two principal issues are clearly the following:
(1) Is the questioned lot paraphernal or conjugal?
(2) In having constructed the building on the lot, should TAN QUETO be
regarded as a builder in good faith (and hence entitled to reimbursement)
or a builder in bad faith (with no right to reimbursement)?
The finding by both the Court of First Instance and the Court of Appeals that
the disputed lot is paraphernal and that TAN QUETO is a builder in bad faith
were regarded by Us in Our assailed decision as findings of facts and thus
ordinarily conclusive on Us. Assuming they are factual findings, still if they
are erroneous inferences from certain facts, they cannot bind this Court.
A second hard look at the circumstances of the case has constrained Us to
rule as follows:
(1) The land is conjugal, not paraphernal. How was ownership transferred, if
at all, from her mother to RESTITUTA? The oral donation of the lot cannot
be a valid donation interviews because it was not executed in a public
instrument (Art. 749, Civil Code), nor as a valid donation mortis causa for
the formalities of a will were not complied with. The allegation that the
transfer was a conveyance to RESTITUTA of her hereditary share in the
estate of her mother (or parents) cannot be sustained for the contractual
transmission of future inheritance is generally prohibited.
The fact is ownership was acquired by both JUAN and RESTITUTA by
tradition (delivery) as a consequence of the contract of sale (See Art. 712,
Civil Code) with P50.00 (then a considerable amount) as the cause or
consideration of the transaction. The lot is therefore conjugal, having been
acquired by the spouses thru onerous title (the money used being
presumably conjugal there being no proof that RESTITUTA had paraphernal
funds of her own). The contention that the sale was fictitious or simulated
(and therefore void) is bankrupt. Firstly, there was a valid consideration
therefor. Secondly, assuming that there had indeed been a simulation, the
parties thereto cannot use said simulation to prejudice a stranger to said
stratagem (like petitioner herein).
One nagging question has been posed. But did not TAN QUETO admit in his
Answer that RESTITUTA was the owner of the lot. This is not so. He admitted
RESTITUTA was an owner" (not the owner) of the lot, and this is true, for
she was a co-owner (with JUAN, and therefore "an owner. " Surely, there is
no admission of RESTITUTA's exclusive ownership. And yet this is the basis
of the trial court's conclusion that the lot was indeed paraphernal.
(2) Was Tan Queto a possessor and builder in good faith or in bad faith?
Even assuming that despite registration of the lot as conjugal, Tan Queto
nursed the belief that the lot was actually RESTITUTA's (making him in bad
faith), still RESTITUTA's failure to prohibit him from building despite her
knowledge that construction was actually being done, makes her also in bad
faith. The net resultant of mutual bad faith would entitle TAN QUETO to the
rights of a builder in good faith (Art. 448, Civil Code), ergo, reimbursement
should be given him if RESTITUTA decides to appropriate the building for
herself (Art. 448, Civil Code).
However, as already previously intimated, TAN QUETO having bartered his
own lot and small house with the questioned lot with JUAN (who has been
adverted to by a court decision and by the OCT a conjugal owner) may be
said to be the OWNER-POSSESSOR of the lot. Certainly he is not merely a
possessor or builder in good faith (this phrase presupposes ownership
in another); much less is he a builder in bad faith. He is a builder-possessor
jus possidendi because he is the OWNER himself. Please note that the
Chapter on Possession (jus possesionis, not jus possidendi) in the Civil Code
refers to a possessor other than the owner. Please note further that the
difference between a builder (or possessor) in good faith and one in bad
faith is that the former is NOT AWARE of the defect or flaw in his title or
mode of acquisition while the latter is AWARE of such defect or flaw (Art.
526, Civil Code). But in either case there is a flaw or defect. In the case of
TAN QUETO there is no such flaw or defect because it is he himself (not
somebody else) who is the owner of the property.
WHEREFORE, Our decision promulgated on May 16,1983 is hereby SET
ASIDE, and a new one is hereby rendered declaring the questioned lot
together with the building thereone, as TAN QUETO's exclusive property. No
costs..
SO ORDERED.
MARIA TORBELA, represented by her G.R. No. 140528
heirs, namely: EULOGIO TOSINO,
husband and children: CLARO,
MAXIMINO, CORNELIO, OLIVIA and
CALIXTA, all surnamed TOSINO,
APOLONIA TOSINO VDA. DE RAMIREZ
and JULITA TOSINO DEAN; PEDRO G.R. No. 140553
TORBELA, represented by his heirs,
namely: JOSE and DIONISIO, both Present:
surnamed TORBELA; EUFROSINA BANCO FILIPINO SAVINGS AND
TORBELA ROSARIO, represented by MORTGAGE BANK, CORONA, C.J.,
her heirs, namely: ESTEBAN T. Respondent. Chairperson,
ROSARIO, MANUEL T. ROSARIO, LEONARDO-DE CASTRO,
ROMULO T. ROSARIO and ANDREA BERSAMIN,
ROSARIO-HADUCA; LEONILA DEL CASTILLO, and
TORBELA TAMIN; FERNANDO VILLARAMA, JR., JJ.
TORBELA, represented by his heirs,
namely: SERGIO T. TORBELA, Promulgated:
EUTROPIA T. VELASCO, PILAR T.
ZULUETA, CANDIDO T. TORBELA, December 7, 2011
FLORENTINA T. TORBELA and x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
PANTALEON T. TORBELA; DOLORES
TORBELA TABLADA; LEONORA
TORBELA AGUSTIN, represented by DECISION
her heirs, namely: PATRICIO,
SEGUNDO, CONSUELO and FELIX, all
surnamed AGUSTIN; and SEVERINA LEONARDO-DE CASTRO, J.:
TORBELA ILDEFONSO,
Petitioners,
Presently before the Court are two consolidated Petitions for Review
- versus - on Certiorari under Rule 45 of the Rules of Court, both assailing the
SPOUSES ANDRES Decision[1] dated June 29, 1999 and Resolution[2] dated October 22, 1999 of
T. ROSARIOand LENA DUQUE- the Court of Appeals in CA-G.R. CV No. 39770.
ROSARIO and BANCO FILIPINO
SAVINGS AND MORTGAGE BANK,
Respondents. The petitioners in G.R. No. 140528 are siblings Maria Torbela,[3] Pedro
x-----------------------x Torbela,[4] Eufrosina Torbela Rosario,[5] Leonila Torbela Tamin, Fernando
LENA DUQUE-ROSARIO,
Torbela,[6]Dolores Torbela Tablada, Leonora Torbela Agustin,[7] and Severina
Petitioner,
Torbela Ildefonso (Torbela siblings).

The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario),

- versus - who was married to, but now legally separated from, Dr. Andres T. Rosario
(Dr. Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the
nephew of the other Torbela siblings.
The controversy began with a parcel of land, with an area of 374 square
meters, located in Urdaneta City, Pangasinan (Lot No. 356-A). It was originally
part of a larger parcel of land, known as Lot No. 356 of the Cadastral Survey
of Urdaneta, measuring 749 square meters, and covered by Original
Certificate of Title (OCT) No. 16676,[8] in the name of Valeriano Semilla
(Valeriano), married to Potenciana Acosta. Under unexplained
circumstances, Valeriano gave Lot No. 356-A to his sister Marta Semilla,
married to Eugenio Torbela (spouses Torbela). Upon the deaths of the
spouses Torbela, Lot No. 356-A was adjudicated in equal shares among their
children, the Torbela siblings, by virtue of a Deed of Extrajudicial
Partition[9] dated December 3, 1962.
On December 12, 1964, the Torbela siblings executed a Deed of Absolute
Quitclaim[10] over Lot No. 356-A in favor of Dr. Rosario. According to the said
Deed, the Torbela siblings for and in consideration of the sum of NINE PESOS
(P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T.
Rosario, that undivided portion of THREE HUNDRED SEVENTY-FOUR square
meters of that parcel of land embraced in Original Certificate of Title No.
16676 of the land records of Pangasinan x x x.[11] Four days later,
on December 16, 1964, OCT No. 16676 in Valerianos name was partially
cancelled as to Lot No. 356-A and TCT No. 52751[12] was issued in Dr. Rosarios
name covering the said property.
Another Deed of Absolute Quitclaim[13] was subsequently executed on
December 28, 1964, this time by Dr. Rosario, acknowledging that he only
borrowed Lot No. 356-A from the Torbela siblings and was already returning
the same to the latter for P1.00. The Deed stated:
That for and in consideration of the sum of one peso
(P1.00), Philippine Currency and the fact that I only
borrowed the above described parcel of land from MARIA
TORBELA, married to Eulogio Tosino, EUFROSINA TORBELA,
married to Pedro Rosario, PEDRO TORBELA, married to Petra
Pagador, LEONILA TORBELA, married to Fortunato Tamen,
FERNANDO TORBELA, married to Victoriana Tablada,
DOLORES TORBELA, widow, LEONORA TORBELA, married to
Matias Agustin and SEVERINA TORBELA, married to Jorge
Ildefonso, x x x by these presents do hereby cede, transfer
and convey by way of this ABSOLUTE QUITCLAIM unto the
said Maria, Eufrosina, Pedro, Leonila, Fernando, Dolores,
Leonora and Severina, all surnamed Torbela the parcel of
land described above.[14](Emphasis ours.)
The aforequoted Deed was notarized, but was not immediately annotated on
TCT No. 52751.
Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from
the Development Bank of the Philippines (DBP) on February 21, 1965 in the
sum of P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The
mortgage was annotated on TCT No. 52751 on September 21, 1965 as Entry
No. 243537.[15] Dr. Rosario used the proceeds of the loan for the construction
of improvements on Lot No. 356-A.
On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of
Adverse Claim,[16] on behalf of the Torbela siblings. Cornelio deposed in said
Affidavit:
3. That ANDRES T. ROSARIO later quitclaimed his
rights in favor of the former owners by virtue of a Deed of
Absolute Quitclaim which he executed before Notary Public
 Banaga, and entered in his Notarial Registry as Dec. No. 43;
Page No. 9; Book No. I; Series of 1964;
4. That it is the desire of the parties, my aforestated
kins, to register ownership over the above-described
property or to perfect their title over the same but their Deed
could not be registered because the registered owner now,
ANDRES T. ROSARIO mortgaged the property with the
DEVELOPMENT BANK OF THE PHILIPPINES, on September 21,
1965, and for which reason, the Title is still impounded and
held by the said bank;
and the rest to Mrs. Andrea Rosario-Haduca, Dr. Rosarios sister, who
operated the Rose Inn Hotel and Restaurant.
Dr. Rosario was able to fully pay his loan from DBP. Under Entry No.
520197 on TCT No. 52751[20] dated March 6, 1981, the mortgage appearing
under Entry No. 243537 was cancelled per the Cancellation and Discharge of
Mortgage executed by DBP in favor of Dr. Rosario and ratified before a notary
public on July 11, 1980.

5. That pending payment of the obligation with the
DEVELOPMENT BANK OF THE PHILIPPINES or redemption of
the Title from said bank, I, CORNELIO T. TOSINO, in behalf of
my mother MARIA TORBELA-TOSINO, and my Aunts
EUFROSINA TORBELA, LEONILA TORBELA-TAMEN, DOLORES
TORBELA, LEONORA TORBELA-AGUSTIN, SEVERINA
TORBELA-ILDEFONSO, and my Uncles PEDRO TORBELA and
FERNANDO, also surnamed TORBELA, I request the Register
of Deeds of Pangasinan to annotate their adverse claim at the
back of Transfer Certificate of Title No. 52751, based on the
annexed document, Deed of Absolute Quitclaim by ANDRES
T. ROSARIO, dated December 28, 1964, marked as Annex A
and made a part of this Affidavit, and it is also requested that
the DEVELOPMENT BANK OF THE PHILIPPINES be informed
accordingly.[17]
In the meantime, Dr. Rosario acquired another loan from the
Philippine National Bank (PNB) sometime in 1979-1981. Records do not
reveal though the original amount of the loan from PNB, but the loan
agreement was amended on March 5, 1981 and the loan amount was
increased to P450,000.00. The loan was secured by mortgages constituted on
the following properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr.
Rosarios name; (2) Lot No. 4489, with an area of 1,862 square meters, located
in Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-
8-C-2-B-2-A, with an area of 1,001 square meters, located in Nancayasan,
Urdaneta, Pangasinan, covered by TCT No. 104189.[21] The amended loan
agreement and mortgage on Lot No. 356-A was annotated on TCT No. 52751
on March 6, 1981 as Entry No. 520099.[22]

The very next day, on May 17, 1967, the Torbela siblings had
Five days later, on March 11, 1981, another annotation, Entry No.
Cornelios Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosarios
520469,[23] was made on TCT No. 52751, canceling the adverse claim on Lot
Deed of Absolute Quitclaim dated December 28, 1964 annotated on TCT No.
No. 356-A under Entry Nos. 274471-274472, on the basis of the Cancellation
52751 as Entry Nos. 274471[18] and 274472,[19] respectively.
and Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry
No. 520469 consisted of both stamped and handwritten portions, and exactly
The construction of a four-storey building on Lot No. 356-A was eventually
reads:
completed. The building was initially used as a hospital, but was later
converted to a commercial building. Part of the building was leased to PT&T;
 Entry No. 520469. Cancellation of Adverse Claim executed
by Andres Rosario in favor of same. The
incumbrance/mortgage appearing under Entry No. 274471-
72 is now cancelled as per Cancellation and Discharge of
Mortgage Ratified before Notary Public Mauro G.
Meris on March 5, 1981: Doc. No. 215; Page No. 44; Book
No. 1; Series Of 1981.
Lingayen, Pangasinan, 3-11, 19981
[Signed: Pedro dela Cruz]
Register of Deeds [24]
On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario
(spouses Rosario), acquired a third loan in the amount of P1,200,000.00 from
Banco Filipino Savings and Mortgage Bank (Banco Filipino). To secure said
loan, the spouses Rosario again constituted mortgages on Lot No. 356-A, Lot
No. 4489, and Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was
[25]
annotated on TCT No. 52751 as Entry No. 533283 on December 18,
1981. Since the construction of a two-storey commercial building on Lot No.
5-F-8-C-2-B-2-A was still incomplete, the loan value thereof as collateral was
deducted from the approved loan amount. Thus, the spouses Rosario could
only avail of the maximum loan amount of P830,064.00 from Banco Filipino.
Because Banco Filipino paid the balance of Dr. Rosarios loan from
PNB, the mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry
No. 533478[26] on TCT No. 52751 dated December 23, 1981.
On February 13, 1986, the Torbela siblings filed before the Regional Trial
Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership
and possession of Lot No. 356-A, plus damages, against the spouses Rosario,
which was docketed as Civil Case No. U-4359. On the same day, Entry Nos.
593493 and 593494 were made on TCT No. 52751 that read as follows:
Entry No. 593494 Complaint Civil Case No. U-4359 (For:
Recovery of Ownership and Possession and Damages. (Sup.
Paper).
Entry No. 593493 Notice of Lis Pendens The parcel of land
described in this title is subject to Lis Pendens executed by
Liliosa B. Rosario, CLAO, Trial Attorney dated February 13,
1986. Filed to TCT No. 52751
February 13, 1986-1986 February 13 3:30 p.m.
(SGD.) PACIFICO M. BRAGANZA
Register of Deeds[27]
The spouses Rosario afterwards failed to pay their loan from Banco
Filipino. As of April 2, 1987, the spouses Rosarios outstanding principal
obligation and penalty charges amounted to P743,296.82 and P151,524.00,
respectively.[28]
Banco Filipino extrajudicially foreclosed the mortgages on Lot No.
356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction
on April 2, 1987, Banco Filipino was the lone bidder for the three foreclosed
properties for the price of P1,372,387.04. The Certificate of Sale[29] dated
April 2, 1987, in favor of Banco Filipino, was annotated on TCT No. 52751 on
April 14, 1987 as Entry No. 610623.[30]
On December 9, 1987, the Torbela siblings filed before the RTC their
Amended Complaint,[31] impleading Banco Filipino as additional defendant in
Civil Case No. U-4359 and praying that the spouses Rosario be ordered to
redeem Lot No. 356-A from Banco Filipino.
 The spouses Rosario instituted before the RTC on March 4, 1988 a
case for annulment of extrajudicial foreclosure and damages, with prayer for
a writ of preliminary injunction and temporary restraining order, against
Banco Filipino, the Provincial Ex Officio Sheriff and his Deputy, and the
Register of Deeds of Pangasinan. The case was docketed as Civil Case No. U-
4667. Another notice of lis pendens was annotated on TCT No. 52751
on March 10, 1988 as Entry No. 627059, viz:
Entry No. 627059 Lis Pendens Dr. Andres T. Rosario
and Lena Duque Rosario, Plaintiff versus Banco Filipino, et.
al. Civil Case No. U-4667 or Annulment of ExtraJudicial
Foreclosure of Real Estate Mortgage The parcel of land
described in this title is subject to Notice of Lis Pendens
subscribed and sworn to before Notary Public Mauro G.
Meris, as Doc. No. 21; Page No. 5; Book 111; S-1988. March
7, 1988-1988 March 10, 1:00 p.m.
(SGD.) RUFINO M. MORENO, SR.
Register of Deeds[32]
The Torbela siblings intervened in Civil Case No. U-4667. Eventually,
on October 17, 1990, the RTC issued an Order[33] dismissing without prejudice
Civil Case No. U-4667 due to the spouses Rosarios failure to prosecute.
Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from
Banco Filipino, but their efforts were unsuccessful. Upon the expiration of the
one-year redemption period in April 1988, the Certificate of Final Sale[34] and
Affidavit of Consolidation[35] covering all three foreclosed properties were
executed on May 24, 1988 and May 25, 1988, respectively.
On June 7, 1988, new certificates of title were issued in the name of
Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and
TCT No. 165813 for Lot No. 356-A .[36]
The Torbela siblings thereafter filed before the RTC on August 29,
1988 a Complaint[37] for annulment of the Certificate of Final Sale dated May
24, 1988, judicial cancelation of TCT No. 165813, and damages, against Banco
Filipino, the Ex Officio Provincial Sheriff, and the Register of Deeds of
Pangasinan, which was docketed as Civil Case No. U-4733.
On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City
a Petition for the issuance of a writ of possession. In said Petition, docketed
as Pet. Case No. U-822, Banco Filipino prayed that a writ of possession be
issued in its favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the
improvements thereon, and the spouses Rosario and other persons presently
in possession of said properties be directed to abide by said writ.
The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet.
Case No. U-822. The Decision[38] on these three cases was promulgated
on January 15, 1992, the dispositive portion of which reads:
WHEREFORE, judgment is rendered:
1. Declaring the real estate mortgage over
Lot 356-A covered by TCT 52751 executed by Spouses Andres
Rosario in favor of Banco Filipino, legal and valid;
2. Declaring the sheriffs sale dated April 2,
1987 over Lot 356-A covered by TCT 52751 and subsequent
final Deed of Sale dated May 14, 1988 over Lot 356-A covered
by TCT No. 52751 legal and valid;
 3. Declaring Banco Filipino the owner
of Lot 356-A covered by TCT No. 52751 (now TCT 165813);
4. Banco Filipino is entitled to a Writ of
Possession over Lot 356-A together with the improvements
thereon (Rose Inn Building). The Branch Clerk of Court is
hereby ordered to issue a writ of possession in favor of Banco
Filipino;
5. [The Torbela siblings] are hereby
ordered to render accounting to Banco Filipino the rental
they received from tenants of Rose Inn Building from May
14, 1988;
6. [The Torbela siblings] are hereby
ordered to pay Banco Filipino the sum of P20,000.00 as
attorneys fees;
7. Banco Filipino is hereby ordered to give
[the Torbela siblings] the right of first refusal over Lot 356-
A. The Register of Deeds is hereby ordered to annotate the
right of [the Torbela siblings] at the back of TCT No. 165813
after payment of the required fees;
8. Dr. Rosario and Lena Rosario are hereby
ordered to reimburse [the Torbela siblings] the market value
of Lot 356-A as of December, 1964 minus payments made by
the former;
9. Dismissing the complaint of [the Torbela
siblings] against Banco Filipino, Pedro Habon and Rufino
Moreno in Civil Case No. U-4733; and against Banco Filipino
in Civil Case No. U-4359.[39]
[40]
The RTC released an Amended Decision dated January 29, 1992,
adding the following paragraph to the dispositive:
Banco Filipino is entitled to a Writ of Possession over
Lot-5-F-8-C-2-[B]-2-A of the subdivision plan (LRC) Psd-
122471, covered by Transfer Certificate of Title 104189 of the
Registry of Deeds of Pangasinan[.][41]
The Torbela siblings and Dr. Rosario appealed the foregoing RTC
judgment before the Court of Appeals. Their appeal was docketed as CA-G.R.
CV No. 39770.
In its Decision[42] dated June 29, 1999, the Court of Appeals decreed:
WHEREFORE, foregoing considered, the appealed
decision is hereby AFFIRMED with modification. Items No. 6
and 7 of the appealed decision are DELETED.Item No. 8 is
modified requiring [Dr. Rosario] to pay [the Torbela siblings]
actual damages, in the amount of P1,200,000.00 with 6% per
annum interest from finality of this decision until fully
paid. [Dr. Rosario] is further ORDERED to pay [the Torbela
siblings] the amount of P300,000.00 as moral
damages; P200,000.00 as exemplary damages
and P100,000.00 as attorneys fees.
Costs against [Dr. Rosario].[43]
The Court of Appeals, in a Resolution[44] dated October 22, 1999,
denied the separate Motions for Reconsideration of the Torbela siblings and
Dr. Rosario.
The Torbela siblings come before this Court via the Petition for
Review in G.R. No. 140528, with the following assignment of errors:
First Issue and Assignment of Error:
 THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE REGISTRATION OF
THE DEED OF ABSOLUTE QUITCLAIM EXECUTED BY
[DR. ANDRES T. ROSARIO] IN FAVOR OF THE
[TORBELA SIBLINGS] DATED DECEMBER 28, 1964
AND THE REGISTRATION OF THE NOTICE OF
ADVERSE CLAIM EXECUTED BY THE [TORBELA
SIBLINGS], SERVE AS THE OPERATIVE ACT TO
CONVEY OR AFFECT THE LAND AND IMPROVEMENTS
THEREOF IN SO FAR AS THIRD PERSONS ARE
CONCERNED.
Second Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE SUBJECT PROPERTY
COVERED BY T.C.T. NO. 52751 IS CLEAN AND FREE,
DESPITE OF THE ANNOTATION OF ENCUMBRANCES
OF THE NOTICE OF ADVERSE CLAIM AND THE DEED
OF ABSOLUTE QUITCLAIM APPEARING AT THE BACK
THEREOF AS ENTRY NOS. 274471 AND 274472,
RESPECTIVELY.
Third Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE NOTICE OF ADVERSE
CLAIM OF THE [TORBELA SIBLINGS] UNDER ENTRY
NO. 274471 WAS VALIDLY CANCELLED BY THE
REGISTER OF DEEDS, IN THE ABSENCE OF A PETITION
DULY FILED IN COURT FOR ITS CANCELLATION.
Fourth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK IS A
MORTGAGEE IN GOOD FAITH.
Fifth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE FILING OF A CIVIL
CASE NO. U-4359 ON DECEMBER 9, 1987,
IMPLEADING RESPONDENT BANCO FILIPINO AS
ADDITIONAL PARTY DEFENDANT, TOLL OR SUSPEND
THE RUNNING OF THE ONE YEAR PERIOD OF
REDEMPTION.
Sixth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE OWNERSHIP OVER
THE SUBJECT PROPERTY WAS PREMATURELY
CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.
Seventh Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE SUBJECT PROPERTY IS
AT LEAST WORTH P1,200,000.00.[45]
The Torbela siblings ask of this Court:
WHEREFORE, in the light of the foregoing
considerations, the [Torbela siblings] most respectfully pray
that the questioned DECISION promulgated on June 29, 1999
(Annex A, Petition) and the RESOLUTION dated October 22,
1999 (Annex B, Petition) be REVERSED and SET ASIDE, and/or
further MODIFIED in favor of the [Torbela siblings], and
another DECISION issue ordering, among other reliefs, the
respondent Banco Filipino to reconvey back Lot No. 356-A,
covered by T.C.T. No. 52751, in favor of the [Torbela siblings]
who are the actual owners of the same.
 The [Torbela siblings] likewise pray for such other
reliefs and further remedies as may be deemed just and
equitable under the premises.[46]
Duque-Rosario, now legally separated from Dr. Rosario, avers in her
Petition for Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-
2-B-2-A were registered in her name, and she was unlawfully deprived of
ownership of said properties because of the following errors of the Court of
Appeals:
A binding upon this Court, since this Court is not a trier of facts and
THE HON. COURT OF APPEALS PATENTLY ERRED IN NOT
FINDING THAT THE PERIOD TO REDEEM THE PROPERTY HAS
NOT COMMENCED, HENCE, THE CERTIFICATE OF SALE, THE
CONSOLIDATION OF OWNERSHIP BY [BANCO FILIPINO], ARE
NULL AND VOID.
B discretion; (3) when the finding is grounded entirely on
THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO
RULE THAT THE FILING OF THE COMPLAINT BEFORE THE
COURT A QUO BY THE [TORBELA SIBLINGS] HAD ALREADY
BEEN PRESCRIBED.[47]
Duque-Rosario prays that the appealed decision of the Court of
Appeals be reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-
C-2-B-2-A be freed from all obligations and encumbrances and returned to
her.
Review of findings of fact by
the RTC and the Court of
Appeals warranted.
A disquisition of the issues raised and/or errors assigned in the
Petitions at bar unavoidably requires a re-evaluation of the facts and
evidence presented by the parties in the court a quo.
In Republic v. Heirs of Julia Ramos,[48] the Court summed up the rules
governing the power of review of the Court:
Ordinarily, this Court will not review, much less reverse,
the factual findings of the Court of Appeals, especially where such
findings coincide with those of the trial court. The findings of
facts of the Court of Appeals are, as a general rule, conclusive and
does not routinely undertake the re-examination of the evidence
presented by the contending parties during the trial of the case.
The above rule, however, is subject to a number of
exceptions, such as (1) when the inference made is manifestly
mistaken, absurd or impossible; (2) when there is grave abuse of
speculations, surmises, or conjectures; (4) when the judgment of
the Court of Appeals is based on misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both parties; (7)
when the findings of the Court of Appeals are contrary to those of
the trial court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when the
Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would
justify a different conclusion; and (10) when the findings of fact of
the Court of Appeals are premised on the absence of evidence and
are contradicted by the evidence on record.[49]
 As the succeeding discussion will bear out, the first, fourth, and ninth
exceptions are extant in these case.
Barangay conciliation was
not a pre-requisite to the
institution of Civil Case No.
U-4359.
Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the Torbela
siblings for recovery of ownership and possession of Lot No. 356-A, plus
damages, should have been dismissed by the RTC because of the failure of
the Torbela siblings to comply with the prior requirement of submitting the
dispute to barangay conciliation.
The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986,
when Presidential Decree No. 1508, Establishing a System of Amicably
Settling Disputes at the Barangay Level, was still in effect.[50] Pertinent
provisions of said issuance read:
Section 2. Subject matters for amicable
settlement. The Lupon of each barangay shall have authority
to bring together the parties actually residing in the same
city or municipality for amicable settlement of all disputes
except:
1. Where one party is the government, or any
subdivision or instrumentality thereof;
2. Where one party is a public officer or employee,
and the dispute relates to the performance
of his official functions;
3. Offenses punishable by imprisonment exceeding
30 days, or a fine exceeding P200.00;
4. Offenses where there is no private offended party;
5. Such other classes of disputes which the Prime
Minister may in the interest of justice
determine upon recommendation of the
Minister of Justice and the Minister of Local
Government.
Section 3. Venue. Disputes between or among
persons actually residing in the same barangay shall be
brought for amicable settlement before the Lupon of said
barangay. Those involving actual residents of different
barangays within the same city or municipality shall be
brought in the barangay where the respondent or any of the
respondents actually resides, at the election of the
complainant. However, all disputes which involved real
property or any interest therein shall be brought in the
barangay where the real property or any part thereof is
situated.
The Lupon shall have no authority over disputes:
1. involving parties who actually reside in barangays
of different cities or municipalities, except
where such barangays adjoin each other;
and
2. involving real property located in different
municipalities.
xxxx
Section 6. Conciliation, pre-condition to filing of
complaint. No complaint, petition, action or proceeding
involving any matter within the authority of the Lupon as
provided in Section 2 hereof shall be filed or instituted in
court or any other government office for adjudication unless
there has been a confrontation of the parties before the
Lupon Chairman or the Pangkat and no conciliation or
settlement has been reached as certified by the Lupon
Secretary or the Pangkat Secretary, attested by the Lupon or
Pangkat Chairman, or unless the settlement has been
repudiated. x x x. (Emphases supplied.)
The Court gave the following elucidation on the jurisdiction of the
Lupong Tagapayapa in Tavora v. Hon. Veloso[51]:
 The foregoing provisions are quite clear. Section 2
specifies the conditions under which the Lupon of a barangay
shall have authority to bring together the disputants for
amicable settlement of their dispute: The parties must be
actually residing in the same city or municipality. At the same
time, Section 3 while reiterating that the disputants must be
actually residing in the same barangay or in different
barangays within the same city or municipality
unequivocably declares that the Lupon shall have no
authority over disputes involving parties who actually reside
in barangays of different cities or municipalities, except
where such barangays adjoin each other.
Thus, by express statutory inclusion and exclusion,
the Lupon shall have no jurisdiction over disputes where
the parties are not actual residents of the same city or
municipality, except where the barangays in which they
actually reside adjoin each other.
It is true that immediately after specifying the
barangay whose Lupon shall take cognizance of a given
dispute, Sec. 3 of PD 1508 adds:
"However, all disputes which involve
real property or any interest therein shall be
brought in the barangay where the real
property or any part thereof is situated."
Actually, however, this added sentence is just an
ordinary proviso and should operate as such.
The operation of a proviso, as a rule, should be
limited to its normal function, which is to restrict or vary the
operation of the principal clause, rather than expand its
scope, in the absence of a clear indication to the contrary.
The natural and appropriate office
of a proviso is . . . to except something from
the enacting clause; to limit, restrict, or
qualify the statute in whole or in part; or to
exclude from the scope of the statute that
which otherwise would be within its terms.
(73 Am Jur 2d 467.)
Therefore, the quoted proviso should simply be
deemed to restrict or vary the rule on venue prescribed in
the principal clauses of the first paragraph of Section 3,
thus: Although venue is generally determined by the
residence of the parties, disputes involving real property
shall be brought in the barangay where the real property or
any part thereof is situated, notwithstanding that the
parties reside elsewhere within the same
city/municipality.[52] (Emphases supplied.)
The original parties in Civil Case No. U-4359 (the Torbela siblings and the
spouses Rosario) do not reside in the same barangay, or in different
barangays within the same city or municipality, or in different barangays of
different cities or municipalities but are adjoining each other. Some of them
reside outside Pangasinan and even outside of the country altogether. The
Torbela siblings reside separately in Barangay Macalong, Urdaneta,
Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil,
Laguna; Chicago, United States of America; and Canada. The spouses Rosario
are residents of Calle Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly,
the Lupon had no jurisdiction over the dispute and barangay conciliation was
not a pre-condition for the filing of Civil Case No. U-4359.
The Court now looks into the merits of Civil Case No. U-4359.
There was an express trust
between the Torbela
siblings and Dr. Rosario.
 There is no dispute that the Torbela sibling inherited the title to Lot
No. 356-A from their parents, the Torbela spouses, who, in turn, acquired the
same from the first registered owner of Lot No. 356-A, Valeriano.
Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim
on December 12, 1964 in which they transferred and conveyed Lot No. 356-
A to Dr. Rosario for the consideration of P9.00. However, the Torbela siblings
explained that they only executed the Deed as an accommodation so that Dr.
Rosario could have Lot No. 356-A registered in his name and use said property
to secure a loan from DBP, the proceeds of which would be used for building
a hospital on Lot No. 356-A a claim supported by testimonial and
documentary evidence, and borne out by the sequence of events
immediately following the execution by the Torbela siblings of said
Deed. On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was
already issued in Dr. Rosarios name. On December 28, 1964, Dr. Rosario
executed his own Deed of Absolute Quitclaim, in which he expressly
acknowledged that he only borrowed Lot No. 356-A and was transferring and
conveying the same back to the Torbela siblings for the consideration
of P1.00. On February 21, 1965, Dr. Rosarios loan in the amount
of P70,200.00, secured by a mortgage on Lot No. 356-A, was approved by
DBP. Soon thereafter, construction of a hospital building started on Lot No.
356-A.
Among the notable evidence presented by the Torbela siblings is the
testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent
personal interest in the present case. Atty. Alcantara, when she was still a
boarder at the house of Eufrosina Torbela Rosario (Dr. Rosarios mother), was
consulted by the Torbela siblings as regards the extrajudicial partition of Lot
No. 356-A. She also witnessed the execution of the two Deeds of Absolute
Quitclaim by the Torbela siblings and Dr. Rosario.
In contrast, Dr. Rosario presented TCT No. 52751, issued in his name,
to prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of
Appeals,[53] the Court made a clear distinction between title and the
certificate of title:
The certificate referred to is that document issued by the
Register of Deeds known as the Transfer Certificate of Title
(TCT). By title, the law refers to ownership which is
represented by that document. Petitioner apparently
confuses certificate with title. Placing a parcel of land under
the mantle of the Torrens system does not mean that
ownership thereof can no longer be disputed. Ownership is
different from a certificate of title. The TCT is only the best
proof of ownership of a piece of land. Besides, the certificate
cannot always be considered as conclusive evidence of
ownership. Mere issuance of the certificate of title in the
name of any person does not foreclose the possibility that
the real property may be under co-ownership with persons
not named in the certificate or that the registrant may only
be a trustee or that other parties may have acquired
interest subsequent to the issuance of the certificate of
title. To repeat, registration is not the equivalent of title, but
is only the best evidence thereof. Title as a concept of
ownership should not be confused with the certificate of
title as evidence of such ownership although both are
interchangeably used. x x x.[54] (Emphases supplied.)
Registration does not vest title; it is merely the evidence of such title.
Land registration laws do not give the holder any better title than what he
actually has.[55] Consequently, Dr. Rosario must still prove herein his
acquisition of title to Lot No. 356-A, apart from his submission of TCT No.
52751 in his name.
 Dr. Rosario testified that he obtained Lot No. 356-A after paying the
Torbela siblings P25,000.00, pursuant to a verbal agreement with the
latter. The Court though observes that Dr. Rosarios testimony on the
execution and existence of the verbal agreement with the Torbela siblings
lacks significant details (such as the names of the parties present, dates,
places, etc.) and is not corroborated by independent evidence.
In addition, Dr. Rosario acknowledged the execution of the two
Deeds of Absolute Quitclaim dated December 12, 1964 and December 28,
1964, even affirming his own signature on the latter Deed. The Parol Evidence
Rule provides that when the terms of the agreement have been reduced into
writing, it is considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no evidence of such
terms other than the contents of the written agreement.[56] Dr. Rosario may
not modify, explain, or add to the terms in the two written Deeds of Absolute
Quitclaim since he did not put in issue in his pleadings (1) an intrinsic
ambiguity, mistake, or imperfection in the Deeds; (2) failure of the Deeds to
express the true intent and the agreement of the parties thereto; (3) the
validity of the Deeds; or (4) the existence of other terms agreed to by the
Torbela siblings and Dr. Rosario after the execution of the Deeds.[57]
Even if the Court considers Dr. Rosarios testimony on his alleged
verbal agreement with the Torbela siblings, the Court finds the same
unsatisfactory. Dr. Rosario averred that the two Deeds were executed only
because he was planning to secure loan from the Development Bank of the
Philippines and Philippine National Bank and the bank needed absolute
quitclaim[.][58] While Dr. Rosarios explanation makes sense for the first Deed
of Absolute Quitclaim dated December 12, 1964 executed by the Torbela
siblings (which transferred Lot No. 356-A to Dr. Rosario for P9.00.00), the
same could not be said for the second Deed of Absolute Quitclaim dated
December 28, 1964 executed by Dr. Rosario. In fact, Dr. Rosarios Deed of
Absolute Quitclaim (in which he admitted that he only borrowed Lot No. 356-
A and was transferring the same to the Torbela siblings for P1.00.00) would
actually work against the approval of Dr. Rosarios loan by the banks. Since Dr.
Rosarios Deed of Absolute Quitclaim dated December 28, 1964 is a
declaration against his self-interest, it must be taken as favoring the
truthfulness of the contents of said Deed.[59]
It can also be said that Dr. Rosario is estopped from claiming or
asserting ownership over Lot No. 356-A based on his Deed of Absolute
Quitclaim dated December 28, 1964. Dr. Rosario's admission in the said Deed
that he merely borrowed Lot No. 356-A is deemed conclusive upon
him. Under Article 1431 of the Civil Code, [t]hrough estoppel an admission or
representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon.[60] That
admission cannot now be denied by Dr. Rosario as against the Torbela
siblings, the latter having relied upon his representation.
Considering the foregoing, the Court agrees with the RTC and the
Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the
Torbela siblings.
Trust is the right to the beneficial enjoyment of property, the legal
title to which is vested in another. It is a fiduciary relationship that obliges the
trustee to deal with the property for the benefit of the beneficiary. Trust
relations between parties may either be express or implied. An express trust
is created by the intention of the trustor or of the parties, while an implied
trust comes into being by operation of law.[61]
Express trusts are created by direct and positive acts of the parties,
by some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust. Under Article 1444 of the Civil Code, Dr. Rosario stating in his Deed of Absolute Quitclaim that he was already
[n]o particular words are required for the creation of an express trust, it being returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained
[62]
sufficient that a trust is clearly intended. It is possible to create a trust registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario kept
without using the word trust or trustee. Conversely, the mere fact that these possession of said property, together with the improvements thereon.
words are used does not necessarily indicate an intention to create a
trust. The question in each case is whether the trustor manifested an
intention to create the kind of relationship which to lawyers is known as The right of the Torbela
trust. It is immaterial whether or not he knows that the relationship which he siblings to recover Lot No.
356-A has not yet
intends to create is called a trust, and whether or not he knows the precise prescribed.
characteristics of the relationship which is called a trust.[63] The Court extensively discussed the prescriptive period for express
trusts in the Heirs of Maximo Labanon v. Heirs of Constancio Labanon,[65] to
In Tamayo v. Callejo,[64] the Court recognized that a trust may have a wit:
constructive or implied nature in the beginning, but the registered owners
subsequent express acknowledgement in a public document of a previous On the issue of prescription, we had the opportunity
sale of the property to another party, had the effect of imparting to the to rule in Bueno v. Reyes that unrepudiated written express
trusts are imprescriptible:
aforementioned trust the nature of an express trust. The same situation
exists in this case. When Dr. Rosario was able to register Lot No. 356-A in his While there are some decisions
name under TCT No. 52751 on December 16, 1964, an implied trust was which hold that an action upon a trust is
imprescriptible, without distinguishing
initially established between him and the Torbela siblings under Article 1451 between express and implied trusts, the
of the Civil Code, which provides: better rule, as laid down by this Court in
other decisions, is that prescription does
supervene where the trust is merely an
ART. 1451. When land passes by succession to any
implied one. The reason has been expressed
person and he causes the legal title to be put in the name of
by Justice J.B.L. Reyes in J.M. Tuason and Co.,
another, a trust is established by implication of law for the
Inc. vs. Magdangal, 4 SCRA 84, 88, as
benefit of the true owner.
follows:

Under Section 40 of
Dr. Rosarios execution of the Deed of Absolute Quitclaim the old Code of Civil
on December 28, 1964, containing his express admission that he only Procedure, all actions for
recovery of real property
borrowed Lot No. 356-A from the Torbela siblings, eventually transformed
prescribed in 10 years,
the nature of the trust to an express one. The express trust continued despite excepting only actions
 based on continuing or known to the beneficiary or cestui que trust. For this reason, the old Code of
subsisting trusts that were
considered by section 38 as Civil Procedure (Act 190) declared that the rules on adverse possession do
imprescriptible. As held in not apply to continuing and subsisting (i.e., unrepudiated) trusts. In an
the case of Diaz v. Gorricho, express trust, the delay of the beneficiary is directly attributable to the
L-11229, March 29, 1958,
however, the continuing or trustee who undertakes to hold the property for the former, or who is linked
subsisting trusts to the beneficiary by confidential or fiduciary relations. The trustee's
contemplated in section 38 possession is, therefore, not adverse to the beneficiary, until and unless the
of the Code of Civil
Procedure referred only to latter is made aware that the trust has been repudiated.[68]
express unrepudiated
trusts, and did not include Dr. Rosario argues that he is deemed to have repudiated the trust on
constructive trusts (that are
imposed by law) where no December 16, 1964, when he registered Lot No. 356-A in his name under TCT
fiduciary relation exists and No. 52751, so when on February 13, 1986, the Torbela siblings instituted
the trustee does not
before the RTC Civil Case No. U-4359, for the recovery of ownership and
recognize the trust at all.
possession of Lot No. 356-A from the spouses Rosario, over 21 years had
This principle was amplified in Escay v. Court of passed. Civil Case No. U-4359 was already barred by prescription, as well as
Appeals this way: Express trusts prescribe 10 years from the
laches.
repudiation of the trust (Manuel Diaz, et al. vs. Carmen
Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil
Procedure). The Court already rejected a similar argument in Ringor v. Ringor[69] for the
following reasons:
In the more recent case of Secuya v. De Selma, we
again ruled that the prescriptive period for the enforcement
of an express trust of ten (10) years starts upon the A trustee who obtains a Torrens title over a property held
repudiation of the trust by the trustee.[66] in trust for him by another cannot repudiate the trust by
relying on the registration. A Torrens Certificate of Title in
Joses name did not vest ownership of the land upon him.
The Torrens system does not create or vest title. It only
To apply the 10-year prescriptive period, which would bar a
confirms and records title already existing and vested. It does
beneficiarys action to recover in an express trust, the repudiation of the trust not protect a usurper from the true
must be proven by clear and convincing evidence and made known to the owner. The Torrens system was not intended to foment
betrayal in the performance of a trust. It does not permit one
beneficiary.[67] The express trust disables the trustee from acquiring for his
to enrich himself at the expense of another. Where one does
own benefit the property committed to his management or custody, at least not have a rightful claim to the property, the Torrens system
while he does not openly repudiate the trust, and makes such repudiation of registration can confirm or record nothing.Petitioners
cannot rely on the registration of the lands in Joses name nor
 in the name of the Heirs of Jose M. Ringor, Inc., for the wrong
result they seek. For Jose could not repudiate a trust by
relying on a Torrens title he held in trust for his co-heirs. The
beneficiaries are entitled to enforce the trust,
notwithstanding the irrevocability of the Torrens title. The
intended trust must be sustained.[70] (Emphasis supplied.)
In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose
Labiste,[71] the Court refused to apply prescription and laches and reiterated
that:
[P]rescription and laches will run only from the time the
express trust is repudiated. The Court has held that for
acquisitive prescription to bar the action of the beneficiary
against the trustee in an express trust for the recovery of the
property held in trust it must be shown that: (a) the trustee
has performed unequivocal acts of repudiation amounting to
an ouster of the cestui que trust; (b) such positive acts of
repudiation have been made known to the cestui que trust,
and (c) the evidence thereon is clear and
conclusive. Respondents cannot rely on the fact that
the Torrens title was issued in the name of Epifanio and the
other heirs of Jose. It has been held that a trustee who
obtains a Torrens title over property held in trust by him for
another cannot repudiate the trust by relying on the
registration. The rule requires a clear repudiation of the trust
duly communicated to the beneficiary. The only act that can
be construed as repudiation was when respondents filed the
petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause
of action has not yet prescribed, laches cannot be attributed
to them.[72] (Emphasis supplied.)
It is clear that under the foregoing jurisprudence, the registration of
Lot No. 356-A by Dr. Rosario in his name under TCT No. 52751 on December
16, 1964 is not the repudiation that would have caused the 10-year
prescriptive period for the enforcement of an express trust to run.
The Court of Appeals held that Dr. Rosario repudiated the express
trust when he acquired another loan from PNB and constituted a second
mortgage on Lot No. 356-A sometime in 1979, which, unlike the first
mortgage to DBP in 1965, was without the knowledge and/or consent of the
Torbela siblings.
The Court only concurs in part with the Court of Appeals on this
matter.
For repudiation of an express trust to be effective, the unequivocal
act of repudiation had to be made known to the Torbela siblings as the cestuis
que trustand must be proven by clear and conclusive evidence. A scrutiny of
TCT No. 52751 reveals the following inscription:
Entry No. 520099
Amendment of the mortgage in favor of PNB inscribed under
Entry No. 490658 in the sense that the consideration thereof
has been increased to PHILIPPINE PESOS Four Hundred Fifty
Thousand Pesos only (P450,000.00) and to secure any and all
negotiations with PNB, whether contracted before, during or
after the date of this instrument, acknowledged before
Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198,
Page No. 41, Book No. 11, Series of 1985.
Date of Instrument March 5, 1981
Date of Inscription March 6, 1981[73]
Although according to Entry No. 520099, the original loan and
mortgage agreement of Lot No. 356-A between Dr. Rosario and PNB was
previously inscribed as Entry No. 490658, Entry No. 490658 does not actually
appear on TCT No. 52751 and, thus, it cannot be used as the reckoning date
for the start of the prescriptive period.
The Torbela siblings can only be charged with knowledge of the
mortgage of Lot No. 356-A to PNB on March 6, 1981 when the amended loan
and mortgage agreement was registered on TCT No. 52751 as Entry No.
520099. Entry No. 520099 is constructive notice to the whole
world[74] that Lot No. 356-A was mortgaged by Dr. Rosario to PNB as security
for a loan, the amount of which was increased to P450,000.00. Hence, Dr.
Rosario is deemed to have effectively repudiated the express trust between
him and the Torbela siblings on March 6, 1981, on which day, the prescriptive
period for the enforcement of the express trust by the Torbela siblings began
to run.
From March 6, 1981, when the amended loan and mortgage
agreement was registered on TCT No. 52751, to February 13, 1986, when
the Torbela siblings instituted before the RTC Civil Case No. U-4359 against
the spouses Rosario, only about five years had passed. The Torbela siblings
were able to institute Civil Case No. U-4359 well before the lapse of the 10-
year prescriptive period for the enforcement of their express trust with Dr.
Rosario.
Civil Case No. U-4359 is likewise not barred by laches. Laches means
the failure or neglect, for an unreasonable and unexplained length of time, to
do that which by exercising due diligence could or should have been done
earlier. It is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. As the Court explained in the preceding
paragraphs, the Torbela siblings instituted Civil Case No. U-4359 five years
after Dr. Rosarios repudiation of the express trust, still within the 10-year
prescriptive period for enforcement of such trusts. This does not constitute
an unreasonable delay in asserting one's right. A delay within the prescriptive
period is sanctioned by law and is not considered to be a delay that would
bar relief. Laches apply only in the absence of a statutory prescriptive
period.[75]
Banco Filipino is not a
mortgagee and buyer in
good faith.
Having determined that the Torbela siblings are the true owners and
Dr. Rosario merely the trustee of Lot No. 356-A, the Court is next faced with
the issue of whether or not the Torbela siblings may still recover Lot No. 356-
A considering that Dr. Rosario had already mortgaged Lot No. 356-A to Banco
Filipino, and upon Dr. Rosarios default on his loan obligations, Banco Filipino
foreclosed the mortgage, acquired Lot No. 356-A as the highest bidder at the
foreclosure sale, and consolidated title in its name under TCT No.
165813. The resolution of this issue depends on the answer to the question
of whether or not Banco Filipino was a mortgagee in good faith.
Under Article 2085 of the Civil Code, one of the essential requisites
of the contract of mortgage is that the mortgagor should be the absolute
owner of the property to be mortgaged; otherwise, the mortgage is
considered null and void. However, an exception to this rule is the doctrine
of mortgagee in good faith. Under this doctrine, even if the mortgagor is not
the owner of the mortgaged property, the mortgage contract and any
foreclosure sale arising therefrom are given effect by reason of public
policy. This principle is based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title, as buyers or mortgagees,
are not required to go beyond what appears on the face of the title. This is
the same rule that underlies the principle of innocent purchasers for
value.The prevailing jurisprudence is that a mortgagee has a right to rely in
good faith on the certificate of title of the mortgagor to the property given as
security and in the absence of any sign that might arouse suspicion, has no
obligation to undertake further investigation. Hence, even if the mortgagor is
not the rightful owner of, or does not have a valid title to, the mortgaged
property, the mortgagee in good faith is, nonetheless, entitled to
protection.[76]
On one hand, the Torbela siblings aver that Banco Filipino is not a
mortgagee in good faith because as early as May 17, 1967, they had already
annotated Cornelios Adverse Claim dated May 16, 1967 and Dr. Rosarios
Deed of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as
Entry Nos. 274471-274472, respectively.
On the other hand, Banco Filipino asseverates that it is a mortgagee
in good faith because per Section 70 of Presidential Decree No. 1529,
otherwise known as the Property Registration Decree, the notice of adverse
claim, registered on May 17, 1967 by the Torbela siblings under Entry Nos.
274471-274472 on TCT No. 52751, already lapsed after 30 days or on June
16, 1967. Additionally, there was an express cancellation of Entry Nos.
274471-274472 by Entry No. 520469 dated March 11, 1981. So when Banco
Filipino approved Dr. Rosarios loan for P1,200,000.00 and constituted a
mortgage on Lot No. 356-A (together with two other properties) on
December 8, 1981, the only other encumbrance on TCT No. 52751 was Entry
No. 520099 dated March 6, 1981, i.e., the amended loan and mortgage
agreement between Dr. Rosario and PNB (which was eventually cancelled
after it was paid off with part of the proceeds from Dr. Rosarios loan from
Banco Filipino). Hence, Banco Filipino was not aware that the Torbela siblings
adverse claim on Lot No. 356-A still subsisted.
The Court finds that Banco Filipino is not a mortgagee in good
faith. Entry Nos. 274471-274472 were not validly cancelled, and the improper
cancellation should have been apparent to Banco Filipino and aroused
suspicion in said bank of some defect in Dr. Rosarios title.
The purpose of annotating the adverse claim on the title of the
disputed land is to apprise third persons that there is a controversy over the
ownership of the land and to preserve and protect the right of the adverse
claimant during the pendency of the controversy. It is a notice to third
persons that any transaction regarding the disputed land is subject to the
outcome of the dispute.[77]
Adverse claims were previously governed by Section 110 of Act No.
496, otherwise known as the Land Registration Act, quoted in full below:
ADVERSE CLAIM
SEC. 110. Whoever claims any part or interest in registered
land adverse to the registered owner, arising subsequent to
the date of the original registration, may, if no other
provision is made in this Act for registering the same, make a
statement in writing setting forth fully his alleged right or
interest, and how or under whom acquired, and a reference
to the volume and page of the certificate of title of the
registered owner, and a description of the land in which the
right or interest is claimed.
The statement shall be signed and sworn to, and shall state
the adverse claimants residence, and designate a place at
which all notices may be served upon him. This statement
shall be entitled to registration as an adverse claim, and the
 court, upon a petition of any party in interest, shall grant a
speedy hearing upon the question of the validity of such
adverse claim and shall enter such decree therein as justice
and equity may require. If the claim is adjudged to be invalid,
the registration shall be cancelled.If in any case the court
after notice and hearing shall find that a claim thus registered
was frivolous or vexatious, it may tax the adverse claimant
double or treble costs in its discretion.
Construing the aforequoted provision, the Court stressed in Ty Sin Tei
v. Lee Dy Piao[78] that [t]he validity or efficaciousness of the [adverse] claim x
x x may only be determined by the Court upon petition by an interested party,
in which event, the Court shall order the immediate hearing thereof and
make the proper adjudication as justice and equity may warrant. And it is
ONLY when such claim is found unmeritorious that the registration thereof
may be cancelled. The Court likewise pointed out in the same case that while
a notice of lis pendens may be cancelled in a number of ways, the same is not
true in a registered adverse claim, for it may be cancelled only in one
instance, i.e., after the claim is adjudged invalid or unmeritorious by the Court
x x x; and if any of the registrations should be considered unnecessary or
superfluous, it would be the notice of lis pendens and not the annotation of
the adverse claim which is more permanent and cannot be cancelled without
adequate hearing and proper disposition of the claim.
With the enactment of the Property Registration Decree on June 11,
1978, Section 70 thereof now applies to adverse claims:
SEC. 70. Adverse claim. Whoever claims any part or
interest in registered land adverse to the registered owner,
arising subsequent to the date of the original registrations,
may, if no other provision is made in this Decree for
registering the same, make a statement in writing setting
forth fully his alleged right, or interest, and how or under
whom acquired, a reference to the number of the certificate
of title of the registered owner, the name of the registered
owner, and a description of the land in which the right or
interest is claimed.
The statement shall be signed and sworn to, and
shall state the adverse claimants residence, and a place at
which all notices may be served upon him. This statement
shall be entitled to registration as an adverse claim on the
certificate of title. The adverse claim shall be effective for a
period of thirty days from the date of registration.After the
lapse of said period, the annotation of adverse claim may
be cancelled upon filing of a verified petition therefor by the
party in interest: Provided, however, that after cancellation,
no second adverse claim based on the same ground shall be
registered by the same claimant.
Before the lapse of thirty days aforesaid, any party
in interest may file a petition in the Court of First Instance
where the land is situated for the cancellation of the
adverse claim, and the court shall grant a speedy hearing
upon the question of the validity of such adverse claim, and
shall render judgment as may be just and equitable. If the
adverse claim is adjudged to be invalid, the registration
thereof shall be ordered cancelled. If, in any case, the court,
after notice and hearing, shall find that the adverse claim
thus registered was frivolous, it may fine the claimant in an
amount not less than one thousand pesos nor more than five
thousand pesos, in its discretion. Before the lapse of thirty
days, the claimant may withdraw his adverse claim by filing
with the Register of Deeds a sworn petition to that effect.
(Emphases supplied.)
In Sajonas v. Court of Appeals,[79]the Court squarely interpreted
Section 70 of the Property Registration Decree, particularly, the new 30-day
period not previously found in Section 110 of the Land Registration Act, thus:
 In construing the law aforesaid, care should be taken
that every part thereof be given effect and a construction
that could render a provision inoperative should be avoided,
and inconsistent provisions should be reconciled whenever
possible as parts of a harmonious whole. For taken in
solitude, a word or phrase might easily convey a meaning
quite different from the one actually intended and evident
when a word or phrase is considered with those with which
it is associated. In ascertaining the period of effectivity of an
inscription of adverse claim, we must read the law in its
entirety. Sentence three, paragraph two of Section 70 of P.D.
1529 provides:
The adverse claim shall be effective
for a period of thirty days from the date of
registration.
At first blush, the provision in question would seem
to restrict the effectivity of the adverse claim to thirty days.
But the above provision cannot and should not be treated
separately, but should be read in relation to the sentence
following, which reads:
After the lapse of said period, the
annotation of adverse claim may be
cancelled upon filing of a verified petition
therefor by the party in interest.
If the rationale of the law was for the adverse claim
to ipso facto lose force and effect after the lapse of thirty
days, then it would not have been necessary to include the
foregoing caveat to clarify and complete the rule. For then,
no adverse claim need be cancelled. If it has been
automatically terminated by mere lapse of time, the law
would not have required the party in interest to do a useless
act.
A statute's clauses and phrases must not be taken
separately, but in its relation to the statute's totality. Each
statute must, in fact, be construed as to harmonize it with
the pre-existing body of laws. Unless clearly repugnant,
provisions of statutes must be reconciled. The printed pages
of the published Act, its history, origin, and its purposes may
be examined by the courts in their construction. x x x.
xxxx
Construing the provision as a whole would reconcile
the apparent inconsistency between the portions of the law
such that the provision on cancellation of adverse claim by
verified petition would serve to qualify the provision on the
effectivity period. The law, taken together, simply means
that the cancellation of the adverse claim is still necessary
to render it ineffective, otherwise, the inscription will
remain annotated and shall continue as a lien upon the
property. For if the adverse claim has already ceased to be
effective upon the lapse of said period, its cancellation is no
longer necessary and the process of cancellation would be
a useless ceremony.
It should be noted that the law employs the phrase
"may be cancelled," which obviously indicates, as inherent in
its decision making power, that the court may or may not
order the cancellation of an adverse claim, notwithstanding
such provision limiting the effectivity of an adverse claim for
thirty days from the date of registration. The court cannot be
bound by such period as it would be inconsistent with the
very authority vested in it. A fortiori, the limitation on the
period of effectivity is immaterial in determining the validity
or invalidity of an adverse claim which is the principal issue
to be decided in the court hearing. It will therefore depend
upon the evidence at a proper hearing for the court to
determine whether it will order the cancellation of the
adverse claim or not.
To interpret the effectivity period of the adverse
claim as absolute and without qualification limited to thirty
days defeats the very purpose for which the statute provides
for the remedy of an inscription of adverse claim, as the
annotation of an adverse claim is a measure designed to
 protect the interest of a person over a piece of real property
where the registration of such interest or right is not
otherwise provided for by the Land Registration Act or Act
496 (now P.D. 1529 or the Property Registration Decree), and
serves as a warning to third parties dealing with said property
that someone is claiming an interest or the same or a better
right than the registered owner thereof.
The reason why the law provides for a hearing
where the validity of the adverse claim is to be threshed out
is to afford the adverse claimant an opportunity to be
heard, providing a venue where the propriety of his claimed
interest can be established or revoked, all for the purpose
of determining at last the existence of any encumbrance on
the title arising from such adverse claim. This is in line with
the provision immediately following:
Provided, however, that after
cancellation, no second adverse claim shall
be registered by the same claimant.
Should the adverse claimant fail to sustain his
interest in the property, the adverse claimant will be
precluded from registering a second adverse claim based on
the same ground.
It was held that validity or efficaciousness of the
claim may only be determined by the Court upon petition by
an interested party, in which event, the Court shall order the
immediate hearing thereof and make the proper
adjudication as justice and equity may warrant. And it is only
when such claim is found unmeritorious that the registration
of the adverse claim may be cancelled, thereby protecting
the interest of the adverse claimant and giving notice and
warning to third parties.[80] (Emphases supplied.)
Whether under Section 110 of the Land Registration Act or Section
70 of the Property Registration Decree, notice of adverse claim can only be
cancelled after a party in interest files a petition for cancellation before the
RTC wherein the property is located, and the RTC conducts a hearing and
determines the said claim to be invalid or unmeritorious.
No petition for cancellation has been filed and no hearing has been
conducted herein to determine the validity or merit of the adverse claim of
the Torbela siblings. Entry No. 520469 cancelled the adverse claim of the
Torbela siblings, annotated as Entry Nos. 274471-774472, upon the
presentation by Dr. Rosario of a mere Cancellation and Discharge of
Mortgage.
Regardless of whether or not the Register of Deeds should have
inscribed Entry No. 520469 on TCT No. 52751, Banco Filipino could not invoke
said inscription in support of its claim of good faith. There were several things
amiss in Entry No. 520469 which should have already aroused suspicions in
Banco Filipino, and compelled the bank to look beyond TCT No. 52751 and
inquire into Dr. Rosarios title. First, Entry No. 520469 does not mention any
court order as basis for the cancellation of the adverse claim. Second, the
adverse claim was not a mortgage which could be cancelled with Dr. Rosarios
Cancellation and Discharge of Mortgage. And third, the adverse claim was
against Dr. Rosario, yet it was cancelled based on a document also executed
by Dr. Rosario.
It is a well-settled rule that a purchaser or mortgagee cannot close
his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in
the title of the vendor or mortgagor. His mere refusal to believe that such
defect exists, or his willful closing of his eyes to the possibility of the existence
of a defect in the vendor's or mortgagor's title, will not make him an innocent
purchaser or mortgagee for value, if it afterwards develops that the title was
in fact defective, and it appears that he had such notice of the defects as
would have led to its discovery had he acted with the measure of precaution
[81]
which may be required of a prudent man in a like situation.
While the defective cancellation of Entry Nos. 274471-274472 by
Entry No. 520469 might not be evident to a private individual, the same
should have been apparent to Banco Filipino. Banco Filipino is not an ordinary
mortgagee, but is a mortgagee-bank, whose business is impressed with public
[82]
interest. In fact, in one case, the Court explicitly declared that the rule that
persons dealing with registered lands can rely solely on the certificate of title
does not apply to banks. In another case,[83] the Court adjudged that unlike
private individuals, a bank is expected to exercise greater care and prudence
in its dealings, including those involving registered lands. A banking
institution is expected to exercise due diligence before entering into a
mortgage contract. The ascertainment of the status or condition of a
property offered to it as security for a loan must be a standard and
indispensable part of its operations.
Banco Filipino cannot be deemed a mortgagee in good faith, much
less a purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence,
the right of the Torbela siblings over Lot No. 356-A is superior over that of
Banco Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings
are entitled to a reconveyance of said property even from Banco Filipino.
Nonetheless, the failure of Banco Filipino to comply with the due
diligence requirement was not the result of a dishonest purpose, some moral
obliquity, or breach of a known duty for some interest or ill will that partakes
of fraud that would justify damages.[84]
Given the reconveyance of Lot No. 356-A to the Torbela siblings,
there is no more need to address issues concerning redemption, annulment
of the foreclosure sale and certificate of sale (subject matter of Civil Case No.
U-4733), or issuance of a writ of possession in favor of Banco Filipino (subject
matter of Pet. Case No. U-822) insofar as Lot No. 356-A is concerned. Such
would only be superfluous. Banco Filipino, however, is not left without any
recourse should the foreclosure and sale of the two other mortgaged
properties be insufficient to cover Dr. Rosarios loan, for the bank may still
bring a proper suit against Dr. Rosario to collect the unpaid balance.
The rules on accession shall
govern the improvements
on Lot No. 356-A and the
rents thereof.
The accessory follows the principal. The right of accession is recognized under
Article 440 of the Civil Code which states that [t]he ownership of property
gives the right by accession to everything which is produced thereby, or which
is incorporated or attached thereto, either naturally or artificially.
There is no question that Dr. Rosario is the builder of the
improvements on Lot No. 356-A. The Torbela siblings themselves alleged that
they allowed Dr. Rosario to register Lot No. 356-A in his name so he could
obtain a loan from DBP, using said parcel of land as security; and with the
proceeds of the loan, Dr. Rosario had a building constructed on Lot No. 356-
A, initially used as a hospital, and then later for other commercial
purposes. Dr. Rosario supervised the construction of the building, which
began in 1965; fully liquidated the loan from DBP; and maintained and
administered the building, as well as collected the rental income therefrom,
until the Torbela siblings instituted Civil Case No. U-4359 before the RTC
on February 13, 1986.
When it comes to the improvements on Lot No. 356-A, both the
Torbela siblings (as landowners) and Dr. Rosario (as builder) are deemed in
bad faith. The Torbela siblings were aware of the construction of a building
by Dr. Rosario on Lot No. 356-A, while Dr. Rosario proceeded with the said
construction despite his knowledge that Lot No. 356-A belonged to the
Torbela siblings. This is the case contemplated under Article 453 of the Civil
Code, which reads:
ART. 453. If there was bad faith, not only on the part
of the person who built, planted or sowed on the land of
another, but also on the part of the owner of such land, the
rights of one and the other shall be the same as though both
had acted in good faith.
It is understood that there is bad faith on the part of
the landowner whenever the act was done with his
knowledge and without opposition on his part. (Emphasis
supplied.)
When both the landowner and the builder are in good faith, the following
rules govern:
ART. 448. The owner of the land on which anything
has been built, sown or planted in good faith, shall have the
right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to
buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent,
if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
ART. 546. Necessary expenses shall be refunded to
every possessor; but only the possessor in good faith may
retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the
possessor in good faith with the same right of retention, the
person who has defeated him in the possession having the
option of refunding the amount of the expenses or of paying
the increase in value which the thing may have acquired by
reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure
shall not be refunded to the possessor in good faith; but he
may remove the ornaments with which he has embellished
the principal thing if it suffers no injury thereby, and if his
successor in the possession does not prefer to refund the
amount expended.
Whatever is built, planted, or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the
land. Where, however, the planter, builder, 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 what Manresa
calls a state of "forced co-ownership," the law has provided a just and
equitable solution by giving the owner of the land the option to acquire the
improvements after payment of the proper indemnity or to oblige the builder
or planter to pay for the land and the sower to pay the proper rent. It is the
owner of the land who is allowed 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.[85]
The landowner has to make a choice between appropriating the building by
paying the proper indemnity or obliging the builder to pay the price of the
land. But even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He must choose one. He cannot, for instance,
compel the owner of the building to remove the building from the land
without first exercising either option. It is only if the owner chooses to sell his
land, and the builder or planter fails to purchase it where its value is not more
than the value of the improvements, that the owner may remove the
improvements from the land. The owner is entitled to such remotion only
when, after having chosen to sell his land, the other party fails to pay for the
same.[86]
This case then must be remanded to the RTC for the determination
of matters necessary for the proper application of Article 448, in relation to
Article 546, of the Civil Code. Such matters include the option that the
Torbela siblings will choose; the amount of indemnity that they will pay if they
decide to appropriate the improvements on Lot No. 356-A; the value of Lot
No. 356-A if they prefer to sell it to Dr. Rosario; or the reasonable rent if they
opt to sell Lot No. 356-A to Dr. Rosario but the value of the land is
considerably more than the improvements. The determination made by the
Court of Appeals in its Decision dated June 29, 1999 that the current value of
Lot No. 356-A is P1,200,000.00 is not supported by any evidence on record.
Should the Torbela siblings choose to appropriate the improvements on Lot
No. 356-A, the following ruling of the Court in Pecson v. Court of Appeals[87] is
relevant in the determination of the amount of indemnity under Article 546
of the Civil Code:
Article 546 does not specifically state how the value
of the useful improvements should be determined. The
respondent court and the private respondents espouse the
belief that the cost of construction of the apartment building
in 1965, and not its current market value, is sufficient
reimbursement for necessary and useful improvements
made by the petitioner. This position is, however, not in
consonance with previous rulings of this Court in similar
cases. In Javier vs. Concepcion, Jr., this Court pegged the
value of the useful improvements consisting of various fruits,
bamboos, a house and camarin made of strong material
based on the market value of the said
improvements. In Sarmiento vs. Agana, despite the finding
that the useful improvement, a residential house, was built
in 1967 at a cost of between eight thousand pesos
(P8,000.00) to ten thousand pesos (P10,000.00), the
landowner was ordered to reimburse the builder in the
amount of forty thousand pesos (P40,000.00), the value of
the house at the time of the trial. In the same way, the
landowner was required to pay the "present value" of the
house, a useful improvement, in the case of De Guzman vs.
De la Fuente, cited by the petitioner.
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 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.[88] (Emphases supplied.)
Still following the rules of accession, civil fruits, such as rents, belong to the
owner of the building.[89] Thus, Dr. Rosario has a right to the rents of the
improvements on Lot No. 356-A and is under no obligation to render an
accounting of the same to anyone. In fact, it is the Torbela siblings who are
required to account for the rents they had collected from the lessees of the
commercial building and turn over any balance to Dr. Rosario. Dr. Rosarios
right to the rents of the improvements on Lot No. 356-A shall continue until
the Torbela siblings have chosen their option under Article 448 of the Civil
Code. And in case the Torbela siblings decide to appropriate the
improvements, Dr. Rosario shall have the right to retain said improvements,
as well as the rents thereof, until the indemnity for the same has been paid.[90]
Dr. Rosario is liable for
damages to the Torbela
siblings.
The Court of Appeals ordered Dr. Rosario to pay the Torbela
siblings P300,000.00 as moral damages; P200,000.00 as exemplary damages;
and P100,000.00 as attorneys fees.
Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully aware
that he only held Lot No. 356-A in trust for the Torbela siblings, he mortgaged
said property to PNB and Banco Filipino absent the consent of the Torbela
siblings, and caused the irregular cancellation of the Torbela siblings adverse
claim on TCT No. 52751. Irrefragably, Dr. Rosarios betrayal had caused the
Torbela siblings (which included Dr. Rosarios own mother, Eufrosina Torbela
Rosario) mental anguish, serious anxiety, and wounded feelings. Resultantly,
the award of moral damages is justified, but the amount thereof is reduced
to P200,000.00.
In addition to the moral damages, exemplary damages may also be imposed
given that Dr. Rosarios wrongful acts were accompanied by bad
faith. However, judicial discretion granted to the courts in the assessment of
damages must always be exercised with balanced restraint and measured
objectivity. The circumstances of the case call for a reduction of the award of
exemplary damages to P100,000.00.
As regards attorney's fees, they may be awarded when the
defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest. Because of Dr. Rosarios
acts, the Torbela siblings were constrained to institute several cases against
Dr. Rosario and his spouse, Duque-Rosario, as well as Banco Filipino, which
had lasted for more than 25 years. Consequently, the Torbela siblings are
entitled to an award of attorney's fees and the amount of P100,000.00 may
be considered rational, fair, and reasonable.
Banco Filipino is entitled to
a writ of possession for Lot
No. 5-F-8-C-2-B-2-A.
The Court emphasizes that Pet. Case No. U-822, instituted by Banco
Filipino for the issuance of a writ of possession before the RTC of Urdaneta,
included only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the
third property mortgaged to secure Dr. Rosarios loan from Banco Filipino, is
located in Dagupan City, Pangasinan, and the petition for issuance of a writ
of possession for the same should be separately filed with the RTC of Dagupan
City). Since the Court has already granted herein the reconveyance of Lot No.
356-A from Banco Filipino to the Torbela siblings, the writ of possession now on the date it was made: April 14, 1987 according to Banco Filipino and April
pertains only to Lot No. 5-F-8-C-2-B-2-A.
15, 1987 as maintained by Duque-Rosario. Even if the Court concedes that
the Certificate of Sale was annotated on TCT No. 104189 on the later
To recall, the Court of Appeals affirmed the issuance by the RTC of a
writ of possession in favor of Banco Filipino. Dr. Rosario no longer appealed date, April 15, 1987, the one-year redemption period already expired
from said judgment of the appellate court. Already legally separated from Dr. on April 14, 1988.[92] The Certificate of Final Sale and Affidavit of
Rosario, Duque-Rosario alone challenges the writ of possession before this Consolidation were executed more than a month thereafter, on May 24,
Court through her Petition in G.R. No. 140553.
1988 and May 25, 1988, respectively, and were clearly not premature.
It is true that the rule on redemption is liberally construed in favor of
Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A
had been registered in her name under TCT No. 104189. Yet, without a copy the original owner of the property. The policy of the law is to aid rather than
of TCT No. 104189 on record, the Court cannot give much credence to Duque- to defeat him in the exercise of his right of redemption.[93] However, the
Rosarios claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the liberal interpretation of the rule on redemption is inapplicable herein as
question of whether Lot No. 5-F-8-C-2-B-2-A was the paraphernal property of
neither Duque-Rosario nor Dr. Rosario had made any attempt to redeem Lot
Duque-Rosario or the conjugal property of the spouses Rosario would not
No. 5-F-8-C-2-B-2-A. Duque-Rosario could only rely on the efforts of the
alter the outcome of Duque-Rosarios Petition.
Torbela siblings at redemption, which were unsuccessful. While the Torbela
siblings made several offers to redeem Lot No. 356-A, as well as the two other
The following facts are undisputed: Banco Filipino extrajudicially foreclosed
properties mortgaged by Dr. Rosario, they did not make any valid tender of
the mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other
the redemption price to effect a valid redemption. The general rule in
properties after Dr. Rosario defaulted on the payment of his loan; Banco
redemption is that it is not sufficient that a person offering to redeem
Filipino was the highest bidder for all three properties at the foreclosure sale
manifests his desire to do so. The statement of intention must be
on April 2, 1987; the Certificate of Sale dated April 2, 1987 was registered in
accompanied by an actual and simultaneous tender of payment. The
April 1987; and based on the Certificate of Final Sale dated May 24, 1988 and
redemption price should either be fully offered in legal tender or else validly
Affidavit of Consolidation dated May 25, 1988, the Register of Deeds
consigned in court. Only by such means can the auction winner be assured
cancelled TCT No. 104189 and issued TCT No. 165812 in the name of Banco
that the offer to redeem is being made in good faith.[94] In case of
Filipino for Lot No. 5-F-8-C-2-B-2-A on June 7, 1988.
disagreement over the redemption price, the redemptioner may preserve his
right of redemption through judicial action, which in every case, must be filed
The Court has consistently ruled that the one-year redemption period should
within the one-year period of redemption. The filing of the court action to
be counted not from the date of foreclosure sale, but from the time the
enforce redemption, being equivalent to a formal offer to redeem, would
certificate of sale is registered with the Registry of Deeds.[91] No copy of TCT
have the effect of preserving his redemptive rights and freezing the
No. 104189 can be found in the records of this case, but the fact of annotation
expiration of the one-year period.[95] But no such action was instituted by the
of the Certificate of Sale thereon was admitted by the parties, only differing
Torbela siblings or either of the spouses Rosario.

Duque-Rosario also cannot bar the issuance of the writ of possession
over Lot No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the
pendency of Civil Case No. U-4359, the Torbela siblings action for recovery of
ownership and possession and damages, which supposedly tolled the period
for redemption of the foreclosed properties. Without belaboring the issue of
Civil Case No. U-4359 suspending the redemption period, the Court simply
points out to Duque-Rosario that Civil Case No. U-4359 involved Lot No. 356-
A only, and the legal consequences of the institution, pendency, and
resolution of Civil Case No. U-4359 apply to Lot No. 356-A alone.
Equally unpersuasive is Duque-Rosarios argument that the writ of
possession over Lot No. 5-F-8-C-2-B-2-A should not be issued given the
defects in the conduct of the foreclosure sale (i.e., lack of personal notice to
Duque-Rosario) and consolidation of title (i.e., failure to provide Duque-
Rosario with copies of the Certificate of Final Sale).
The right of the purchaser to the possession of the foreclosed
property becomes absolute upon the expiration of the redemption
period. The basis of this right to possession is the purchaser's ownership of
the property. After the consolidation of title in the buyer's name for failure
of the mortgagor to redeem, the writ of possession becomes a matter of right
and its issuance to a purchaser in an extrajudicial foreclosure is merely a
ministerial function.[96]
The judge with whom an application for a writ of possession is filed
need not look into the validity of the mortgage or the manner of its
foreclosure. Any question regarding the validity of the mortgage or its
foreclosure cannot be a legal ground for the refusal to issue a writ of
possession. Regardless of whether or not there is a pending suit for the
annulment of the mortgage or the foreclosure itself, the purchaser is entitled
to a writ of possession, without prejudice, of course, to the eventual outcome
of the pending annulment case. The issuance of a writ of possession in favor
of the purchaser in a foreclosure sale is a ministerial act and does not entail
the exercise of discretion.[97]
WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in
G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in
G.R. No. 140553 is DENIED for lack of merit. The Decision dated June 29,
1999 of the Court of Appeals in CA-G.R. CV No. 39770, which affirmed with
modification the Amended Decision dated January 29, 1992 of the RTC in Civil
Case Nos. U-4359 and U-4733 and Pet. Case No. U-822, is AFFIRMED WITH
MODIFICATIONS, to now read as follows:
(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela
siblings;
(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT
No. 165813 in the name of Banco Filipino and to issue a new certificate of
title in the name of the Torbela siblings for Lot No. 356-A;
(3) The case is REMANDED to the RTC for further proceedings to
determine the facts essential to the proper application of Articles 448 and
546 of the Civil Code, particularly: (a) the present fair market value of Lot No.
356-A; (b) the present fair market value of the improvements thereon; (c) the
option of the Torbela siblings to appropriate the improvements on Lot No.
356-A or require Dr. Rosario to purchase Lot No. 356-A; and (d) in the event
that the Torbela siblings choose to require Dr. Rosario to purchase Lot No.
356-A but the value thereof is considerably more than the improvements,
then the reasonable rent of Lot No. 356-A to be paid by Dr. Rosario to the
Torbela siblings;

(4) The Torbela siblings are DIRECTED to submit an accounting of the

rents of the improvements on Lot No. 356-A which they had received and to
turn over any balance thereof to Dr. Rosario;

(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00

as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as
attorneys fees; and
(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-
2-B-2-A, covered by TCT No. 165812. The RTC Branch Clerk of Court
is ORDERED to issue a writ of possession for the said property in favor of
Banco Filipino.

SO ORDERED.