1

CASES (PROPERTY 2nd set)

BACHRACH v SEIFERT (G.R. No. L-2659, October 12, 1950) ……………….… p.2
BACHRACH v TALISAY-SILAY (G.R. No. 35223, September 17, 1931) ……… p.5
BERNARDO v BATACLAN (G.R. No. L-44606, November 28, 1938) ………… p. 8
IGNACIO v HILARIO (G.R. No. L-175, April 30, 1946) ……………………….. p. 12
SARMIENTO v AGANA (G.R. No. L-57288, April 30, 1984) …..……………… p. 15
DEPRA v DUMLAO (G.R. No. L-32974, July 30, 1979) ……………………….. p. 18
TECHNOGAS PHIL v CA (G.R. No. 108894, February 10, 1997) ……………. P. 25
ORTIZ v KAYANAN (G.R. No. L-32974, July 30, 1979) ……………………….. p. 39
GEMINIANO v CA (G.R. No. 120303, July 24, 1996) …………………………… p. 51
PLEASANTVILLE DEV’T CORP v CA (G.R. No. 79688, February 1, 1996) ….. p. 57
FELICES v IRIOLA (G.R. No. 11269, February 28, 1958) ……………………. P. 67
PECSON v CA (G.R. No. 105360, May 25, 1993) …………………………………p. 69
SPOUSES NUGUID v CA (G.R. No. 151815, February 13, 2005) ……………… p. 73
COLEONGCO v REGALADO (G.R. No. L-4529, December 29, 1952) ……….. p. 82
REPUBLIC v CA (G.R. No. L-61647, October 12, 1984) ………………………… p. 89
GRANDE v CA (G.R. No. L-17652, June 30, 1962) ………………………………..p. 94
LUNOD v MENESES (G.R. No. 4223, August 19, 1908, supra ) ………………..p. 99
NAVARRO v. IAC (G.R. No. 68166, February 12, 1997) ………………………… p. 103
BAES v CA (G.R. No. 108065, July 6, 1993) ………………………………………..p. 117
BINALAY v MANALO (G.R. No. 92161, March 18, 1991) ………………………. P. 120
SIARI VALLEY ESTATES v LUCASAN (G.R. No. L-7046, August 31, 1955) …...p. 129
SANTOS v BERNABE (G.R. No. L-31163, November 6, 1929) ………………p. 134
 2

Kinds of Accession

BACHRACH v SEIFERT (G.R. No. L-2659, October 12, 1950)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-2659             October 12, 1950

In the matter of the testate estate of Emil Maurice Bachrach, deceased.

MARY McDONALD BACHRACH, petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositors-appellants.

Ross, Selph, Carrascoso and Janda for appellants.

Delgado and Flores for appellee.

OZAETA, J.:

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital

or part of the corpus of the estate, which pertains to the remainderman? That is the
question raised in the appeal.

The deceased E. M. Bachrach, who left no forced heir except his widow Mary
McDonald Bachrach, in his last will and testament made various legacies in cash and
willed the remainder of his estate as follows:

Sixth: It is my will and do herewith bequeath and devise to my beloved wife

Mary McDonald Bachrach for life all the fruits and usufruct of the remainder
of all my estate after payment of the legacies, bequests, and gifts provided for
above; and she may enjoy said usufruct and use or spend such fruits as she
may in any manner wish.

The will further provided that upon the death of Mary McDonald Bachrach, one-half
of the all his estate "shall be divided share and share alike by and between my legal
heirs, to the exclusion of my brothers."

The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big

Wedge Mining Co., Inc., received from the latter 54,000 shares representing 50 per
cent stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald
Bachrach, as usufructuary or life tenant of the estate, petitioned the lower court to
authorize the Peoples Bank and Trust Company as administrator of the estate of E.
 3

M. Bachrach, to her the said 54,000 share of stock dividend by endorsing and
delivering to her the corresponding certificate of stock, claiming that said dividend,
although paid out in the form of stock, is fruit or income and therefore belonged to
her as usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the
deceased, opposed said petition on the ground that the stock dividend in question
was not income but formed part of the capital and therefore belonged not to the
usufructuary but to the remainderman. And they have appealed from the order
granting the petition and overruling their objection.

While appellants admits that a cash dividend is an income, they contend that a stock
dividend is not, but merely represents an addition to the invested capital. The so-
called Massachusetts rule, which prevails in certain jurisdictions in the United States,
supports appellants' contention . It regards cash dividends, however large, as
income, and stock dividends, however made, as capital. (Minot vs. Paine, 99 Mass.,
101; 96 Am. Dec., 705.) It holds that a stock dividend is not in any true sense any true
sense any dividend at all since it involves no division or severance from the corporate
assets of the dividend; that it does not distribute property but simply dilutes the
shares as they existed before; and that it takes nothing from the property of the
corporation, and nothing to the interests of the shareholders.

On the other hand, so called Pennsylvania rule, which prevails in various other
jurisdictions in the United States, supports appellee's contention. This rule declares
that all earnings of the corporation made prior to the death of the testator
stockholder belong to the corpus of the estate, and that all earnings, when declared
as dividends in whatever form, made during the lifetime of the usufructuary or life
tenant. (Earp's Appeal, 28 Pa., 368.)

. . . It is clear that testator intent the remaindermen should have only the
corpus of the estate he left in trust, and that all dividends should go the life
tenants. It is true that profits realized are not dividends until declared by the
proper officials of the corporation, but distribution of profits, however made,
in dividends, and the form of the distribution is immaterial. (In
re Thompson's Estate, 262 Pa., 278; 105 Atl. 273, 274.)

In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky,
speaking thru its Chief Justice, said:

. . . Where a dividend, although declared in stock, is based upon the earnings

of the company, it is in reality, whether called by one name or another, the
income of the capital invested in it. It is but a mode of distributing the profit.
If it be not income, what is it? If it is, then it is rightfully and equitably the
property of the life tenant. If it be really profit, then he should have it, whether
paid in stock or money. A stock dividend proper is the issue of new shares paid
for by the transfer of a sum equal to their par value from the profits and loss
account to that representing capital stock; and really a corporation has no
right to a dividend, either in cash or stock, except from its earnings; and a
singular state of case — it seems to us, an unreasonable one — is presented if
the company, although it rests with it whether it will declare a dividend, can
bind the courts as to the proper ownership of it, and by the mode of payment
substitute its will for that of that of the testator, and favor the life tenants or
the remainder-men, as it may desire. It cannot, in reason, be considered that
 4

the testator contemplated such a result. The law regards substance, and not
form, and such a rule might result not only in a violation of the testator's
intention, but it would give the power to the corporation to beggar the life
tenants, who, in this case, are the wife and children of the testator, for the
benefit of the remainder-men, who may perhaps be unknown to the testator,
being unborn when the will was executed. We are unwilling to adopt a rule
which to us seems so arbitrary, and devoid of reason and justice. If the
dividend be in fact a profit, although declared in stock, it should be held to be
income. It has been so held in Pennsylvania and many other states, and we
think it the correct rule. Earp's Appeal, 28 Pa. St. 368; Cook, Stocks & S. sec.
554. . . .

We think the Pennsylvania rule is more in accord with our statutory laws than the
Massachusetts rule. Under section 16 of our Corporation Law, no corporation may
make or declare any dividend except from the surplus profits arising from its
business. Any dividend, therefore, whether cash or stock, represents surplus profits.
Article 471 of the Civil Code provides that the usufructuary shall be entitled to
receive all the natural, industrial, and civil fruits of the property in usufruct. And
articles 474 and 475 provide as follows:

ART. 474. Civil fruits are deemed to accrue day by day, and belong to the
usufructuary in proportion to the time the usufruct may last.

ART. 475. When a usufruct is created on the right to receive an income or

periodical revenue, either in money or fruits, or the interest on bonds or
securities payable to bearer, each matured payment shall be considered as the
proceeds or fruits such right.

When it consists of the enjoyment of the benefits arising from an interest in an

industrial or commercial enterprise, the profits of which are not distributed at
fixed periods, such profits shall have the same consideration.lawphil.net

In either case they shall be distributed as civil fruits, and shall be applied in
accordance with the rules prescribed by the next preceding article.

The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares
of stock dividend are civil fruits of the original investment. They represent profits,
and the delivery of the certificate of stock covering said dividend is equivalent to the
payment of said profits. Said shares may be sold independently of the original shares,
just as the offspring of a domestic animal may be sold independently of its mother.

The order appealed from, being in accordance with the above-quoted provisions of
the Civil Code, his hereby affirmed, with costs against the appellants.

Moran, C. J., Paras, Feria, Pablo, Bengzon, Tuason, Montemayor and Reyes, JJ.,
concur.
 5

BACHRACH v TALISAY-SILAY (G.R. No. 35223, September 17, 1931)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 35223           September 17, 1931

THE BACHRACH MOTOR CO., INC., plaintiff-appellee,

vs.
TALISAY-SILAY MILLING CO., ET AL., defendants-appellees.
THE PHILIPPINE NATIONAL BANK, intervenor-appellant.

Roman J. Lacson for intervenor-appellant.

Mariano Ezpeleta for plaintiff-appellee.
Nolan and Hernaez for defendants-appellees Talisay-Silay Milling Co. and Cesar
Ledesma.

ROMUALDEZ, J.:

This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc.,
against the Talisay-Silay Milling Co., Inc., for the delivery of the amount P13,850 or
promissory notes or other instruments or credit for that sum payable on June 30,
1930, as bonus in favor of Mariano Lacson Ledesma; the complaint further prays that
the sugar central be ordered to render an accounting of the amounts it owes Mariano
Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay the plaintiff a
sum sufficient to satisfy the judgment mentioned in the complaint, and that the sale
made by said Mariano Lacson Ledesma be declared null and void.

The Philippine National Bank filed a third party claim alleging a preferential right to
receive any amount which Mariano Lacson Ledesma might be entitled to from the
Talisay-Silay Milling Co. as bonus, because that would be civil fruits of the land
mortgaged to said bank by said debtor for the benefit of the central referred to, and
by virtue of a deed of assignment, and praying that said central be ordered to
delivered directly to the intervening bank said sum on account of the latter's credit
against the aforesaid Mariano Lacson Ledesma.

The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that
of Mariano Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he
had purchased it, and praying that it be absolved from the complaint and that the
proper party be named so that the remainder might be delivered.

Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a
reconsideration of the P7,500 which is a part of the credit referred to above,
answered praying that he be absolved from the complaint.
 6

The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that
its credit against Mariano Lacson Ledesma was prior and preferential to that of the
intervening bank, and praying that the latter's complaint be dismissed.

At the trial all the parties agreed to recognize and respect the sale made in favor of
Cesar Ledesma of the P7,500 part of the credit in question, for which reason the trial
court dismissed the complaint and cross-complaint against Cesar Ledesma
authorizing the defendant central to deliver to him the aforementioned sum of
P7,500. And upon conclusion of the hearing, the court held that the Bachrach Motor
Co., Inc., had a preferred right to receive the amount of P11,076.02 which was
Mariano Lacson Ledesma's bonus, and it ordered the defendant central to deliver
said sum to the plaintiff.

The Philippine National Bank appeals, assigning the following alleged errors as
committed by the trial court:

1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound
itself to pay the planters who had mortgaged their land to the Philippine
National Bank to secure the payment of the debt of said central to said bank is
not civil fruits of said land.

2. In not holding that said bonus became subject to the mortgage executed by
the defendant Mariano Lacson Ledesma to the Philippine National Bank to
secure the payment of his personal debt to said bank when it fell due.

3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on

March 7, 1930, by Mariano Lacson Ledesma to the Philippine National Bank
to be applied to the payment of his debt to said Philippine National Bank is
fraudulent.

4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the
Court of First Instance of Manila levied a valid attachment upon the bonus in
question.

5. In admitting and considering the supplementary complaint filed by the

Bachrach Motor Co., Inc., alleging as a cause of action the attachment of the
bonus in question which said Bachrach Motor Co., Inc., in civil case No. 31821
of the Court of First Instance of Manila levied after the filing of the original
complaint in this case, and after Mariano Lacson Ledesma in this case had
been declared in default.

6. In holding that the Bachrach Motor Co., Inc., has a preferential right to
receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02
which is in the possession of said corporation as the bonus to be paid to
Mariano Lacson Ledesma, and in ordering the Talisay-Silay Milling Co., Inc.,
to deliver said amount to the Bachrach Motor Co., Inc.

7. In not holding that the Philippine National Bank has a preferential right to
receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 held
by said corporation as Mariano Lacson Ledesma's bonus, and in not ordering
 7

said Talisay-Silay Milling Co., Inc., to deliver said amount to the Philippine
National Bank.

8. In not holding that the amended complaint and the supplementary

complaint of the Bachrach Motor Co., Inc., do not state facts sufficient to
constitute a cause of action in favor of the Bachrach Motor Co., Inc., and
against the Talisay-Silay Milling Co., Inc., or against the Philippine National
Bank.

The appellant bank bases its preferential right upon the contention that the bonus in
question is civil fruits of the lands which the owners had mortgaged for the benefit of
the central giving the bonus, and that, as civil fruits of said land, said bonus was
assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of the document
Exhibit 9 of said intervening institution, which admitted in its brief that "if the bonus
in question is not civil fruits or rent which became subject to the mortgage in favor of
the Philippine National Bank when Mariano Lacson Ledesma's personal obligation
fell due, the assignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not
because it is fraudulent, for there was no intent of fraud in executing the deed, but
that the cause or consideration of the assignment was erroneous, for it was based
upon the proposition that the bonus was civil fruits of the land mortgaged to the
Philippine National Bank." (P. 31.)

The fundamental question, then, submitted to our consideration is whether or not

the bonus in question is civil fruits.

This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay
Milling Co., Inc., was indebted to the Philippine National Bank. To secure the
payment of its debt, it succeeded in inducing its planters, among whom was Mariano
Lacson Ledesma, to mortgage their land to the creditor bank. And in order to
compensate those planters for the risk they were running with their property under
the mortgage, the aforesaid central, by a resolution passed on that same date, i.e.,
December 22, 1923, undertook to credit the owners of the plantation thus mortgaged
every year with a sum equal to two per centum of the debt secured according to
yearly balance, the payment of the bonus being made at once, or in part from time to
time, as soon as the central became free of its obligations to the aforesaid bank, and
of those contracted by virtue of the contract of supervision, and had funds which
might be so used, or as soon as it obtained from said bank authority to make such
payment. (Exhibits 5, 6; P.N.B.)

Article 355 of the Civil Code considers three things as civil fruits: First, the rents of
buildings; second, the proceeds from leases of lands; and, third, the income from
perpetual or life annuities, or other similar sources of revenue. It may be noted
that according to the context of the law, the phrase  "u otras
analogas" refers only to rent or income, for the
adjectives "otras" and "analogas" agree with the noun "rentas," as do
also the other adjectives "perpetuas" and "vitalicias." That is why we say
that by "civil fruits" the Civil Code understands one of three and only
three things, to wit: the rent of a building, the rent of land, and certain
kinds of income.
 8

As the bonus in question is not rent of a building or of land, the only meaning of
"civil fruits" left to be examined is that of "income."

Assuming that in broad juridical sense of the word "income" it might be said that the
bonus in question is "income" under article 355 of the Civil Code, it is obvious to
inquire whether it is derived from the land mortgaged by Mariano Lacson Ledesma
to the appellant bank for the benefit of the central; for it is not obtained from that
land but from something else, it is not civil fruits of that land, and the bank's
contention is untenable.

It is to be noted that the said bonus bears no immediate, but only a remote accidental
relation to the land mentioned, having been granted as compensation for the risk of
having subjected one's land to a lien in favor of the bank, for the benefit of the entity
granting said bonus. If this bonus be income or civil fruits of anything, it is income
arising from said risk, or, if one chooses, from Mariano Lacson Ledesma's generosity
in facing the danger for the protection of the central, but certainly it is not civil fruits
or income from the mortgaged property, which, as far as this case is concerned, has
nothing to do with it. Hence, the amount of the bonus, according to the resolution of
the central granting it, is not based upon the value, importance or any other
circumstance of the mortgaged property, but upon the total value of the debt thereby
secured, according to the annual balance, which is something quite distinct from and
independent of the property referred to.

Finding no merit in this appeal, the judgment appealed from is affirmed, without
express finding as to costs. So ordered.

Johnson, Street, Malcolm, Villamor, Ostrand, Villa-Real, and Imperial, JJ., concur.

Over Immovables

BERNARDO v BATACLAN (G.R. No. L-44606, November 28, 1938)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-44606             November 28, 1938

VICENTE STO. DOMINGO BERNARDO, plaintiff-appellant,

vs.
CATALINO BATACLAN, defendant-appellant.
 9

TORIBIO TEODORO, purchaser-appellee.

Pedro de Leon for plaintiff-appellant.

Angel H. Mojica and Francisco Lavides for defendant appellant.
Jose Y. Garde for appellee.

LAUREL, J.:

This is an appeal taken by both the plaintiff and the defendant from the order of
September 26, 1935, hereinabove referred to, of the Court of First Instance of Cavite
in Civil Case No. 2428.

There is no controversy as to the facts. By a contract of sale executed from Pastor

Samonte and others ownership of a parcel of land of about 90 hectares situated in
sitio Balayunan, Silang, Cavite. To secure possession of the land from the vendors the
said plaintiff, on July 20, 1929, instituted Civil Case No. 1935 in the Court of First
Instance of Cavite. The trial court found for the plaintiff in a decision which was
affirmed by this Supreme Court on appeal (G.R. No. 33017).  1 When plaintiff entered
upon the premises, however, he found the defendant herein, Catalino Bataclan, who
appears to have been authorized by former owners, as far back as 1922, to clear the
land and make improvements thereon. As Bataclan was not a party in Case No. 1935,
plaintiff, on June 11, 1931, instituted against him, in the Court of First Instance of
Cavite, Civil Case No. 2428. In this case, plaintiff was declared owner but the
defendant was held to be a possessor in good faith, entitled to reimbursement in the
total sum of P1,642, for work done and improvements made. The dispositive part of
the decision reads:

Por las consideraciones expuestas, se declara al demandante Vicente Santo

Domingo Bernardo dueño con derecho a la posesion del terreno que se
describe en la demanda, y al demandado Catalino Bataclan con derecho a que
del demandante le pague la suma de P1,642 por gastos utiles hechos de buena
fe en el terreno, y por el cerco y ponos de coco y abaca existentes en el mismo,
y con derecho, ademas a retener la posesion del terreno hasta que se le pague
dicha cantidad. Al demandante puede optar, en el plazo de treinta dias, a
partir de la fecha en que fuere notificado de la presente, por pagar esa suma al
demandado, haciendo asi suyos el cerco y todas las plantaciones existentes en
el terreno, u obligar al demandado a pagarle el precio terreno, a razon de
trescientos pesos la hectarea. En el caso de que el demandante optara por que
el demandado le pagara el precio del terreno, el demandado efectuara el pago
en el plazo convenientes por las partes o que sera fijado por el Juzgado. Sin
costas.

Both parties appealed to this court (G. R. No. 37319). 2 The decision appealed from
was modified by allowing the defendant to recover compensation amounting to
P2,212 and by reducing the price at which the plaintiff could require the defendant to
purchase the land in question from P300 to P200 per hectare. Plaintiff was given by
this court 30 days from the date when the decision became final within which to
 10

exercise his option, either to sell the land to the defendant or to buy the
improvements from him. On January 9, 1934, the plaintiff manifested to the lower
court his desire "to require the defendant to pay him the value of the land at the rate
of P200 per hectare or a total price of P18,000 for the whole tract of land." The
defendant informed the lower court that he was unable to pay the land and, on
January 24, 1934, an order was issued giving the plaintiff 30 days within which to
pay the defendant the sum of P2,212 stating that, in the event of failure to make such
payment, the land would be ordered sold at public auction "Para hacer pago al
demandante de la suma de P2,212 y el remanente despues de deducidos los gastos
legales de la venta en publica subasta sera entregado al demandante." On February
21, 1934, plaintiff moved to reconsider the foregoing order so that he would have
preference over the defendant in the order of payment. The motion was denied on
March 1, 1934 but on March 16 following the court below, motu proprio modified its
order of January 24, "en el sentido de que el demandante tiene derecho preferente al
importe del terreno no se vendiere en publica subasta, a razon de P200 por
hectares y el remanente, si acaso lo hubiere se entregara al demandado en pago de
la cantidad de P2,212 por la limpieza del terreno y las mejoras introducidas en el
mismo por el citado demandado." On April 24, 1934, the court below, at the instance
of the plaintiff and without objection on the part of the defendant, ordered the sale of
the land in question at public auction. The land was sold on April 5, 1935 to Toribio
Teodoro, the highest bidder, for P8,000. In the certificate of sale issued to said
purchaser on the very day of sale, it was stated that the period of redemption of the
land sold was to expire on April 5, 1936. Upon petition of Toribio Teodoro the court
below ordered the provincial sheriff to issue another certificate not qualified by any
equity of redemption. This was complied with by the sheriff on July 30, 1935. On
September 18, 1935, Teodoro moved that he be placed in possession of the land
purchased by him. The motion was granted by order of September 26, 1935, the
dispositive part of which is as follows:

Por tanto, se ordena al Sheriff Provincial de Cavite ponga a Toribio Teodoro

en posesion del terreno comprado por el en subasta publica y por el cual se le
expidio certificado de venta definitiva, reservando al demandado su derecho
de ejercitar una accion ordinaria para reclamar del demandante la cantidad de
P2,212 a que tiene derecho por la limpieza y mejoras del terreno y cuya suma,
en justicia y equidad, debe ser descontada y deducida de la suma de P8,000
que ya ha recibido el demandante.

The Civil Code confirms certain time-honored principles of the law of property. One
of these is the principle of accession whereby the owner of property acquires not only
that which it produces but that which is united to it either naturally or artificially.
(Art. 353.) 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 (art. 358).
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 coownership" (vol.
3, 4th ed., p. 213), 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 (art. 361). 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
 11

entitled to the ownership of the accessory thing (3 Manresa, 4th ed., p. 213). In the
case before us, the plaintiff, as owner of the land, chose to require the defendant, as
owner of the improvements, to pay for the land.

The defendant states that he is a possessor in good faith and that the amount of
P2,212 to which he is entitled has not yet been paid to him. Therefore, he says, he has
a right to retain the land in accordance with the provisions of article 453 of the Civil
Code. We do not doubt the validity of the premises stated. "Considera la ley tan
saarada y legitima la deuda, que, hasta que sea pagada, no consiente que la cosa se
restituya all vencedor." (4 Manresa, 4th ed, p., 304.) We find, however, that the
defendant has lost his right of retention. In obedience to the decision of this court in
G.R. No. 37319, the plaintiff expressed his desire to require the defendant to pay for
the value of the land. The said defendant could have become owner of both land and
improvements and continued in possession thereof. But he said he could not pay and
the land was sold at public auction to Toribio Teodoro. The law, as we have already
said, requires no more than that the owner of the land should choose between
indemnifying the owner of the improvements or requiring the latter to pay for the
land. When he failed to pay for the land, the defendant herein lost his right of
retention.

The sale at public auction having been asked by the plaintiff himself (p. 22, bill of
exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro,
we find no reason to justify a rapture of the situation thus created between them, the
defendant-appellant not being entitled, after all, to recover from the plaintiff the sum
of P2,212. lawphi1.net

The judgment of the lower court is accordingly modified by eliminating therefrom

the reservation made in favor of the defendant-appellant to recover from the plaintiff
the sum of P2,212. In all the respects, the same is affirmed, without pronouncement
regarding costs. So ordered.

Avanceña, C.J., Villa-Real, Imperial and Diaz, JJ., concur.

Footnotes
1
 Promulgated December 6, 1930, not reported.
2
 Promulgated December 2, 1933 (59 Phil., 903).
 12

IGNACIO v HILARIO (G.R. No. L-175, April 30, 1946)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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
 13

(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
 14

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.

Ozaeta, Paras, Jaranilla, Feria, De Joya, Pablo, Perfecto, Hilado, Bengzon and
Briones, JJ., concur.
 15

SARMIENTO v AGANA (G.R. No. L-57288, April 30, 1984)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-57288 April 30, 1984

LEONILA SARMINETO, petitioner,
vs.
HON. ENRIQUE A. AGANA, District Judge, Court of First Instance of
Rizal, Seventh Judicial District, Branch XXVIII, Pasay City, and
SPOUSES ERNESTO VALENTINO and REBECCA LORENZO-
VALENTINO, respondents.

Mercedes M. Respicio for petitioner.

Romulo R. Bobadilla for private respondents.

MELENCIO-HERRERA, J.:ñé+.£ªwph!1

This Petition for certiorari questions a March 29, 1979 Decision rendered by the then
Court of First Instance of Pasay City. The Decision was one made on memoranda,
pursuant to the provisions of RA 6031, and it modified, on October 17, 1977, a
judgment of the then Municipal Court of Paranaque, Rizal, in an Ejectment suit
instituted by herein petitioner Leonila SARMIENTO against private respondents, the
spouses ERNESTO Valentino and Rebecca Lorenzo. For the facts, therefore, we have
to look to the evidence presented by the parties at the original level.

It appears that while ERNESTO was still courting his wife, the latter's mother had
told him the couple could build a RESIDENTIAL HOUSE on a lot of 145 sq. ms.,
being Lot D of a subdivision in Paranaque (the LAND, for short). In 1967, ERNESTO
did construct a RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to
P10,000.00. It was probably assumed that the wife's mother was the owner of the
LAND and that, eventually, it would somehow be transferred to the spouses.

It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs.
Jose C. Santo, Jr. who, on September 7 , 1974, sold the same to petitioner
 16

SARMIENTO. The following January 6, 1975, SARMIENTO asked ERNESTO and

wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the
evidentiary hearings before the Municipal Court, SARMIENTO submitted the deed of
sale of the LAND in her favor, which showed the price to be P15,000.00. On the
other hand, ERNESTO testified that the then cost of the RESIDENTIAL HOUSE
would be from P30,000.00 to P40,000.00. The figures were not questioned by
SARMIENTO.

The Municipal Court found that private respondents had built the RESIDENTIAL
HOUSE in good faith, and, disregarding the testimony of ERNESTO, that it had a
value of P20,000.00. It then ordered ERNESTO and wife to vacate the LAND after
SARMIENTO has paid them the mentioned sum of P20,000.00.

The Ejectment suit was elevated to the Court of First Instance of Pasay where, after
the submission of memoranda, said Court rendered a modifying Decision under
Article 448 of the Civil Code. SARMIENTO was required, within 60 days, to exercise
the option to reimburse ERNESTO and wife the sum of 40,000.00 as the value of the
RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for
P25,000.00. SARMIENTO did not exercise any of the two options within the
indicated period, and ERNESTO was then allowed to deposit the sum of P25,000.00
with the Court as the purchase price for the LAND. This is the hub of the controversy.
SARMIENTO then instituted the instant certiorari proceedings.

We agree that ERNESTO and wife were builders in good faith in view of the peculiar
circumstances under which they had constructed the RESIDENTIAL HOUSE. As far
as they knew, the LAND was owned by ERNESTO's mother-in-law who, having
stated they could build on the property, could reasonably be expected to later on give
them the LAND.

In regards to builders in good faith, Article 448 of the Code provides:têñ.£îhqwâ£

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)
 17

The value of the LAND, purchased for P15,000.00 on September 7, 1974, could not
have been very much more than that amount during the following January when
ERNESTO and wife were asked to vacate. However, ERNESTO and wife have not
questioned the P25,000.00 valuation determined by the Court of First Instance.

In regards to the valuation of the RESIDENTIAL HOUSE, the only evidence

presented was the testimony of ERNESTO that its worth at the time of the trial
should be from P30,000.00 to P40,000.00. The Municipal Court chose to assess its
value at P20,000.00, or below the minimum testified by ERNESTO, while the Court
of First Instance chose the maximum of P40,000.00. In the latter case, it cannot be
said that the Court of First Instance had abused its discretion.

The challenged decision of respondent Court, based on valuations of P25,000.00 for

the LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed as not
supported by the evidence. The provision for the exercise by petitioner SARMIENTO
of either the option to indemnify private respondents in the amount of P40,000.00,
or the option to allow private respondents to purchase the LAND at P25,000.00, in
our opinion, was a correct decision.têñ.£îhqwâ£

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 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. (Emphasis 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]).

WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without

pronouncement as to costs.

SO ORDERED.1äwphï1.ñët

Teehankee (Chairman), Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
 18

DEPRA v DUMLAO G.R. No. L-57348 May 16, 1985

FRANCISCO DEPRA, Plaintiff-Appellee, vs. AGUSTIN DUMLAO, Defendant-

Appellant.

Roberto D. Dineros for plaintiff-appellee.chanrobles virtual law library

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 chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law
library

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
 19

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.chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

Without pronouncement as to costs.chanroblesvirtualawlibrarychanrobles virtual

law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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). 1 The 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
 20

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 chanrobles
virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

In regards to builders in good faith, Article 448 of the Civil Code

provides: chanrobles virtual law library

ART. 448. The owner of the land on which anything has been built sown or planted
in good faith,

shall have the right chanrobles virtual law library

to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or chanrobles virtual law library

to oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.chanroblesvirtualawlibrary chanrobles virtual law library

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
 21

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.chanroblesvirtualawlibrary chanrobles virtual law library

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).chanroblesvirtualawlibrary chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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
 22

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, chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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
 23

proceedings consistent with Articles 448 and 546 of the Civil Code, as
follows: chanrobles virtual law library

1. The trial Court shall determine

a) the present fair price of DEPRA's 34 square meter area of land; chanrobles virtual
law library

b) the amount of the expenses spent by DUMLAO for the building of the
kitchen; chanrobles virtual law library

c) the increase in value ("plus value") which the said area of 34 square meters may
have acquired by reason thereof, and chanrobles virtual law library

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; chanrobles virtual law library

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
 24

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.chanroblesvirtualawlibrary chanrobles virtual law library

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; chanrobles virtual law library

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, chanrobles virtual law library

SO ORDERED.

Teehankee, Actg. C.J., Plana, Relova, De la Fuente and Alampay, JJ.,

concur.chanroblesvirtualawlibrary chanrobles virtual law library

Gutierrez, Jr., * J., took no part.chanroblesvirtualawlibrary chanrobles virtual law

library

Endnotes:

1 "Rule 70

Forcible Entry and Detainer

"Sec. 7. Judgment conclusive only on possession; not conclusive in actions involving

title or ownership. The judgment rendered in an action for forcible entry or detainer
shall be effective with respect to the possession only and in no wise bind the title or
affect the ownership of the land or building. Such judgment shall not bar an action
between the same parties respecting title to the land or building, nor shall it be held
conclusive of the facts therein found in a case between the same parties upon a
different cause of action not involving possession."

2 "Sec. 44. Original jurisdiction. ...chanrobles virtual law library

(b) In all civil actions which involve the title to, or possession of real property, or any
interest therein, or the legality of any tax, impose or assessment, except actions of
forcible entry into and detainer on lands or buildings, original jurisdiction of which is
conferred by this Act upon city and municipal courts; "
 25

3 "Sec. 19. Jurisdiction in civil ease ...chanrobles virtual law library

(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands
or buildings, original jurisdiction over which is conferred upon Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts;

4 Supra.

5 Ignacio vs. Hilario, 76 Phil. 605 (1946).chanrobles virtual law library

6 Ibid.chanrobles virtual law library

7 3 Manresa, 7th Ed., pp. 300-301.chanrobles virtual law library

8 II Tolentino, Civil Code of the Philippines, 1963 ed., p. 97.chanrobles virtual law
library

* Mr. Justice Hugo E. Gutierrez, Jr. took no part, having been one of the two
members of a Court of Appeals' Division of Five Justices who dissented from the
majority opinion certifying this case to this Court.

TECHNOGAS PHIL v CA (G.R. No. 108894, February 10, 1997)

TECNOGAS PHILIPPINES MANUFACTURING

CORPORATION, Petitioner, v. COURT OF APPEALS (FORMER SPECIAL
SEVENTEENTH DIVISION) and EDUARDO UY, Respondents.

De Jesus Paguio and Manimtim for Petitioner.

M.R. Pamaran Law Offices for Private Respondent.

Acebes Del Carmen Cinco & Cordova for Private Respondent.

SYLLABUS

1. CIVIL LAW; PROPERTY; POSSESSION; GOOD FAITH, PRESUMED. — When

petitioner purchased the land from Pariz Industries, the buildings and other
structures were already in existence. The record is not clear as to who actually built
those structures, but it may well be assumed that petitioner’s predecessor-in-interest,
Pariz Industries, did so. Article 527 of the Civil Code presumes good faith, and since
no proof exists to show that the encroachment over a narrow, needle-shaped portion
of private respondent’s land was done in bad faith by the builder of the encroaching
structures, the latter should be presumed to have built them in good faith. It is
presumed that possession continues to be enjoyed in the same character in which it
 26

was acquired, until the contrary is proved. Good faith consists in the belief of the
builder that the land he is building on is his, and his ignorance of any defect or flaw
in his title. Hence, such good faith, by law passed on to Pariz’s successor, petitioner
in this case. Further," (w)here one derives title to property from another, the act,
declaration, or omission of the latter, while holding the title, in relation to the
property, is evidence against the former." And possession acquired in good faith does
not lose this character except in case and from the moment facts exist which show
that the possessor is not unaware that he possesses the thing improperly or
wrongfully. The good faith ceases from the moment defects in the title are made
known to the possessor, by extraneous evidence or by suit for recovery of the
property by the true owner.

2. ID.; ID.; OWNERSHIP; RIGHT OF ACCESSION; IMMOVABLE PROPERTY;

BUILDER IN GOOD FAITH CAN COMPEL THE LANDOWNER TO EXERCISE HIS
OPTION UNDER ART. 448; APPLICABLE TO BUYER IN GOOD FAITH. — The
builder in good faith under Article 448 of the Civil Code, instead of being outrightly
ejected from the land, can compel the landowner to make a choice between the two
options: (1) to appropriate the building by paying the indemnity required by law, or
(2) sell the land to the builder. The landowner cannot refuse to exercise either option
and compel instead the owner of the building to remove it from the land. The same
benefit can be invoked by petitioner who is not the builder of the offending structures
but possesses them in good faith as buyer. Petitioner is deemed to have stepped into
the shoes of the seller in regard to all rights of ownership over the immovable sold,
including the right to compel the private respondent to exercise either of the two
options provided under Article 448 of the Civil Code.

3. ID.; ID.; ID.; ID.; ID.; ID.; ID. — Petitioner did not lose its rights under Article 448
of the Civil Code on the basis merely of the fact that some years after acquiring the
property in good faith, it learned about — and aptly recognized — the right of private
respondent to a portion of the land occupied by its building. The supervening
awareness of the encroachment by petitioner does not militate against its right to
claim the status of a builder in good faith. In fact, a judicious reading of said Article
448 will readily show that the landowner’s exercise of his option can only take place
after the builder shall have come to know of the intrusion — in short, when both
parties shall have become aware of it. Only then will the occasion for exercising the
option arise, for it is only then that both parties will have been aware that a problem
exists in regard to their property rights.

4. ID.; ID.; ID.; ID.; ID.; ARTICLE 148; APPLICATION IN CASE AT BAR;
ATTORNEY’S FEES, AWARD OF, UNWARRANTED. — In line with the case of
Depra v. Dumlao, this case will have to be remanded to the trial court for further
proceedings to fully implement the mandate of Art. 448. It is a rule of procedure for
the Supreme Court to strive to settle the entire controversy in a single proceeding
leaving no root or branch to bear the seeds of future litigation. Petitioner, however,
must also pay the rent for the property occupied by its building as prescribed by
respondent Court from October 4, 1979, but only up to the date private respondent
serves notice of its option upon petitioner and the trial court; that is, if such option is
for private respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the obligation to pay rent.
The rent should however continue if the option chosen is compulsory sale, but only
up to the actual transfer of ownership. The award of attorney’s fees by respondent
 27

Court against petitioner is unwarranted since the action appears to have been filed in
good faith. Besides, there should be no penalty on the right to litigate.

DECISION

PANGANIBAN, J.:

The parties in this case are owners of adjoining lots in Parañaque, Metro Manila. It
was discovered in a survey that a portion of a building of petitioner, which was
presumably constructed by its predecessor-in-interest, encroached on a portion of
the lot owned by private Respondent. What are the rights and obligations of the
parties? Is petitioner considered a builder in bad faith because, as held by
respondent Court, he is "presumed to know the metes and bounds of his property as
described in his certificate of title" ? Does petitioner succeed into the good faith or
bad faith of his predecessor-in-interest which presumably constructed the building?

These are the questions raised in the petition for review of the Decision 1 dated
August 28, 1992, in CA-G.R. CV No. 28293 of respondent Court 2 where the
disposition reads: 3

"WHEREFORE, premises considered, the Decision of the Regional Trial Court is

hereby reversed and set aside and another one entered —

1. Dismissing the complaint for lack of cause of action;

2. Ordering Tecnogas to pay the sum of P2,000.00 per month as reasonable rental
from October 4, 1979 until appellee vacates the land;

3. To remove the structures and surrounding walls on the encroached area;

4. Ordering appellee to pay the value of the land occupied by the two-storey building;

5. Ordering appellee to pay the sum of P20,000.00 for and as attorney’s fees;

6. Costs against appellee."cralaw virtua1aw library

Acting on the motions for reconsideration of both petitioner and private respondent,
respondent Court ordered the deletion of paragraph 4 of the dispositive portion in an
Amended Decision dated February 9, 1993, as follows: 4

"WHEREFORE, premises considered, our decision of August 28, 1992 is hereby

modified deleting paragraph 4 of the dispositive portion of our decision which
reads:chanrob1es virtual 1aw library

‘4. Ordering appellee to pay the value of the land occupied by the two-storey
building.’

The motion for reconsideration of appellee is hereby DENIED for lack of

 28

merit."cralaw virtua1aw library

The foregoing Amended Decision is also challenged in the instant petition.

The Facts

The facts are not disputed. Respondent Court merely reproduced the factual findings
of the trial court, as follows: 5

"That plaintiff (herein petitioner) which is a corporation duly organized and existing
under and by virtue of Philippine laws is the registered owner of a parcel of land
situated in Barrio San Dionisio, Parañaque, Metro Manila known as Lot 4331-A
(should be 4531-A) of Lot 4531 of the Cadastral Survey of Parañaque, Metro Manila,
covered by Transfer Certificate of Title No. 409316 of the Registry of Deeds of the
Province of Rizal; that said land was purchased by plaintiff from Pariz Industries,
Inc. in 1970, together with all the buildings and improvements including the wall
existing thereon; that the defendant (herein private respondent) is the registered
owner of a parcel of land known as Lot No. 4531-B of Lot 4531 of the Cadastral
Survey of Parañaque, LRC (GLRO) Rec. No. 19645 covered by Transfer Certificate of
Title No. 279838, of the Registry of Deeds for the Province of Rizal; that said land
which adjoins plaintiff’s land was purchased by defendant from a certain Enrile
Antonio also in 1970; that in 1971, defendant purchased another lot also adjoining
plaintiff’s land from a certain Miguel Rodriguez and the same was registered in
defendant’s name under Transfer Certificate of Title No. 31390, of the Registry of
Deeds for the Province of Rizal; that portions of the buildings and wall bought by
plaintiff together with the land from Pariz Industries are occupying a portion of
defendant’s adjoining land; that upon learning of the encroachment or occupation by
its buildings and wall of a portion of defendant’s land, plaintiff offered to buy from
defendant that particular portion of defendant’s land occupied by portions of its
buildings and wall with an area of 770 square meters, more or less, but defendant,
however, refused the offer. In 1973, the parties entered into a private agreement
before a certain Col. Rosales in Malacañang, wherein plaintiff agreed to demolish the
wall at the back portion of its land thus giving to defendant possession of a portion of
his land previously enclosed by plaintiff’s wall; that defendant later filed a complaint
before the office of Municipal Engineer of Parañaque, Metro Manila as well as before
the Office of the Provincial Fiscal of Rizal against plaintiff in connection with the
encroachment or occupation by plaintiff’s buildings and walls of a portion of its land
but said complaint did not prosper; that defendant dug or caused to be dug a canal
along plaintiff’s wall, a portion of which collapsed in June, 1980, and led to the filing
by plaintiff of the supplemental complaint in the above-entitled case and a separate
criminal complaint for malicious mischief against defendant and his wife which
ultimately resulted into the conviction in court of defendant’s wife for the crime of
malicious mischief; that while trial of the case was in progress, plaintiff filed in Court
a formal proposal for settlement of the case but said proposal, however, was ignored
by defendant."cralaw virtua1aw library

After trial on the merits, the Regional Trial Court 6 of Pasay City, Branch 117, in Civil
Case No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of
petitioner who was the plaintiff therein. The dispositive portion reads: 7
 29

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against

defendant and ordering the latter to sell to plaintiff that portion of land owned by
him and occupied by portions of plaintiff’s buildings and wall at the price of
P2,000.00 per square meter and to pay the former:chanrob1es virtual 1aw library

1. The sum of P44,000.00 to compensate for the losses in materials and properties
incurred by plaintiff through thievery as a result of the destruction of its wall;

2. The sum of P7,500.00 as and by way of attorney’s fees; and

3. The costs of this suit."cralaw virtua1aw library

Appeal was duly interposed with respondent Court, which as previously stated,
reversed and set aside the decision of the Regional Trial Court and rendered the
assailed Decision and Amended Decision. Hence, this recourse under Rule 45 of the
Rules of Court.

The Issues

The petition raises the following issues: 8

"(A)

Whether or not the respondent Court of Appeals erred in holding the petitioner a
builder in bad faith because it is ‘presumed to know the metes and bounds of his
property.’

(B)

Whether or not the respondent Court of Appeals erred when it used the amicable
settlement between the petitioner and the private respondent, where both parties
agreed to the demolition of the rear portion of the fence, as estoppel amounting to
recognition by petitioner of respondent’s right over his property including the
portions of the land where the other structures and the building stand, which were
not included in the settlement.

(C)

Whether or not the respondent Court of Appeals erred in ordering the removal of the
‘structures and surrounding walls on the encroached area’ and in withdrawing its
earlier ruling in its August 28, 1992 decision for the petitioner ‘to pay for the value of
the land occupied’ by the building, only because the private respondent has
‘manifested its choice to demolish’ it despite the absence of compulsory sale where
the builder fails to pay for the land, and which ‘choice’ private respondent
deliberately deleted from its September 1, 1980 answer to the supplemental
complaint in the Regional Trial Court."cralaw virtua1aw library

In its Memorandum, petitioner poses the following issues:jgc:chanrobles.com.ph

"A.
 30

The time when to determine the good faith of the builder under Article 448 of the
New Civil Code, is reckoned during the period when it was actually being built; and
in a case where no evidence was presented nor introduced as to the good faith or bad
faith of the builder at that time, as in this case, he must be presumed to be a ‘builder
in good faith,’ since ‘bad faith cannot be presumed.’ 9

B.

In a specific ‘boundary overlap situation’ which involves a builder in good faith, as in

this case, it is now well settled that the lot owner, who builds on the adjacent lot is
not charged with ‘constructive notice’ of the technical metes and bounds contained in
their torrens titles to determine the exact and precise extent of his boundary
perimeter. 10

C.

The respondent court’s citation of the twin cases of Tuason & Co. v. Lumanlan and
Tuason & Co. v. Macalindong is not the ‘judicial authority’ for a boundary dispute
situation between adjacent torrens titled lot owners, as the facts of the present case
do not fall within nor square with the involved principle of a dissimilar case. 11

D.

Quite contrary to respondent Uy’s reasoning, petitioner Tecnogas continues to be a

builder in good faith, even if it subsequently built/repaired the walls/other
permanent structures thereon while the case a quo was pending and even while
respondent sent the petitioner many letters/filed cases thereon. 12

D. (E.)

The amicable settlement between the parties should be interpreted as a contract and
enforced only in accordance with its explicit terms, and not over and beyond that
agreed upon; because the courts do not have the power to create a contract nor
expand its scope. 13

E. (F.)

As a general rule, although the landowner has the option to choose between: (1)
‘buying the building built in good faith’, or (2) ‘selling the portion of his land on
which stands the building’ under Article 448 of the Civil Code; the first option is not
absolute, because an exception thereto, once it would be impractical for the
landowner to choose to exercise the first alternative, i.e. buy that portion of the house
standing on his land, for the whole building might be rendered useless. The workable
solution is for him to select the second alternative, namely, to sell to the builder that
part of his land on which was constructed a portion of the house." 14

Private respondent, on the other hand, argues that the petition is "suffering from the
following flaws: 15

1. It did not give the exact citations of cases decided by the Honorable Supreme Court
 31

that allegedly contradicts the ruling of the Hon. Court of Appeals based on the
doctrine laid down in Tuason v. Lumanlan case citing also Tuason v. Macalindong
case (Supra).

2. Assuming that the doctrine in the alleged Co Tao v. Chico case is contradictory to
the doctrine in Tuason v. Lumanlan and Tuason v. Macalindong, the two cases being
more current, the same should prevail."cralaw virtua1aw library

Further, private respondent contends that the following "unmistakably" point to the
bad faith of petitioner: (1) private respondent’s purchase of the two lots, "was ahead
of the purchase by petitioner of the building and lot from Pariz Industries" ; (2) the
declaration of the General Manager of Tecnogas that the sale between petitioner and
Pariz Industries "was not registered" because of some problems with China Banking
Corporation; and (3) the Deed of Sale in favor of petitioner was registered in its name
only in "the month of May 1973." 16

The Court’s Ruling

The petition should be granted.

Good Faith or Bad Faith

Respondent Court, citing the cases of J. M. Tuason & Co., Inc. v. Vda. de Lumanlan
17 and J. M. Tuason or Co., Inc. v. Macalindong, 18 ruled that petitioner "cannot be
considered in good faith" because as a land owner, it is "presumed to know the metes
and bounds of his own property, specially if the same are reflected in a properly
issued certificate of title. One who erroneously builds on the adjoining lot should be
considered a builder in (b)ad (f)aith, there being presumptive knowledge of the
Torrens title, the area, and the extent of the boundaries."
19chanroblesvirtuallawlibrary:red

We disagree with respondent Court. The two cases it relied upon do not support its
main pronouncement that a registered owner of land has presumptive knowledge of
the metes and bounds of its own land, and is therefore in bad faith if he mistakenly
builds on an adjoining land. Aside from the fact that those cases had factual
moorings radically different from those obtaining here, there is nothing in those
cases which would suggest, however remotely, that bad faith is imputable to a
registered owner of land when a part of his building encroaches upon a neighbor’s
land, simply because he is supposedly presumed to know the boundaries of his land
as described in his certificate of title. No such doctrinal statement could have been
made in those cases because such issue was not before the Supreme Court. Quite the
contrary, we have rejected such a theory in Co Tao v. Chico, 20 where we held that
unless one is versed in the science of surveying, "no one can determine the precise
extent or location of his property by merely examining his paper title."cralaw
virtua1aw library

There is no question that when petitioner purchased the land from Pariz Industries,
the buildings and other structures were already in existence. The record is not clear
as to who actually built those structures, but it may well be assumed that petitioner’s
predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code
 32

presumes good faith, and since no proof exists to show that the encroachment over a
narrow, needle-shaped portion of private respondent’s land was done in bad faith by
the builder of the encroaching structures, the latter should be presumed to have built
them in good faith. 21 It is presumed that possession continues to be enjoyed in the
same character in which it was acquired, until the contrary is proved. 22 Good faith
consists in the belief of the builder that the land he is building on is his, and his
ignorance of any defect or flaw in his title. 23 Hence, such good faith, by law, passed
on to Pariz’s successor, petitioner in this case. Further," (w)here one derives title to
property from another, the act, declaration, or omission of the latter, while holding
the title, in relation to the property, is evidence against the former." 24 And
possession acquired in good faith does not lose this character except in case and from
the moment facts exist which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully. 25 The good faith ceases from the
moment defects in the title are made known to the possessor, by extraneous evidence
or by suit for recovery of the property by the true owner. 26

Recall that the encroachment in the present case was caused by a very slight
deviation of the erected wall (as fence) which was supposed to run in a straight line
from point 9 to point 1 of petitioner’s lot. It was an error which, in the context of the
attendant facts, was consistent with good faith. Consequently, the builder, if sued by
the aggrieved landowner for recovery of possession, could have invoked the
provisions of Art. 448 of the Civil Code, which reads:jgc:chanrobles.com.ph

"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."cralaw
virtua1aw library

The obvious benefit to the builder under this article is that, instead of being
outrightly ejected from the land, he can compel the landowner to make a choice
between the two options: (1) to appropriate the building by paying the indemnity
required by law, or (2) sell the land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of the building to remove it from
the land. 27

The question, however, is whether the same benefit can be invoked by petitioner
who, as earlier stated, is not the builder of the offending structures but possesses
them as buyer.

We answer such question in the affirmative.

In the first place, there is no sufficient showing that petitioner was aware of the
encroachment at the time it acquired the property from Pariz Industries. We agree
with the trial court that various factors in evidence adequately show petitioner’s lack
of awareness thereof. In any case, contrary proof has not overthrown the
 33

presumption of good faith under Article 527 of the Civil Code, as already stated,
taken together with the disputable presumptions of the law on evidence. These
presumptions state, under Section 3 (a) of Rule 131 of the Rules of Court, that the
person is innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that the
law has been obeyed. In fact, private respondent Eduardo Uy himself was unaware of
such intrusion into his property until after 1971 when he hired a surveyor, following
his purchase of another adjoining lot, to survey all his newly acquired lots. Upon
being apprised of the encroachment, petitioner immediately offered to buy the area
occupied by its building — a species of conduct consistent with good faith.

In the second place, upon delivery of the property by Pariz Industries, as seller, to the
petitioner, as buyer, the latter acquired ownership of the property. Consequently and
as earlier discussed, petitioner is deemed to have stepped into the shoes of the seller
in regard to all rights of ownership over the immovable sold, including the right to
compel the private respondent to exercise either of the two options provided under
Article 448 of the Civil Code.

Estoppel

Respondent Court ruled that the amicable settlement entered into between petitioner
and private respondent estops the former from questioning the private respondent’s
"right" over the disputed property. It held that by undertaking to demolish the fence
under said settlement, petitioner recognized private respondent’s right over the
property, and "cannot later on compel" private respondent "to sell to it the land
since" private respondent "is under no obligation to sell." 28

We do not agree. Petitioner cannot be held in estoppel for entering into the amicable
settlement, the pertinent portions of which read: 29

"That the parties hereto have agreed that the rear portion of the fence that separates
the property of the complainant and respondent shall be demolished up to the back
of the building housing the machineries which demolision (sic) shall be undertaken
by the complainant at anytime.

That the fence which serve(s) as a wall housing the electroplating machineries shall
not be demolished in the mean time which portion shall be subject to negotiation by
herein parties."cralaw virtua1aw library

From the foregoing, it is clear that petitioner agreed only to the demolition of a
portion of the wall separating the adjoining properties of the parties — i.e. "up to the
back of the building housing the machineries." But that portion of the fence which
served as the wall housing the electro-plating machineries was not to be demolished.
Rather, it was to "be subject to negotiation by herein parties." The settlement may
have recognized the ownership of private respondent but such admission cannot be
equated with bad faith. Petitioner was only trying to avoid a litigation, one reason for
entering into an amicable settlement.

As was ruled in Osmeña v. Commission on Audit, 30

"A compromise is a bilateral act or transaction that is expressly acknowledged as a

juridical agreement by the Civil Code and is therein dealt with in some detail.’A
 34

compromise,’ declares Article 2208 of said Code, ‘is a contract whereby the parties,
by making reciprocal concessions, avoid a litigation or put an end to one already
commenced.’

x       x       x

The Civil Code not only defines and authorizes compromises, it in fact encourages
them in civil actions. Art. 2029 states that ‘The Court shall endeavor to persuade the
litigants in a civil case to agree upon some fair compromise.’ . . ."cralaw virtua1aw
library

In the context of the established facts, we hold that petitioner did not lose its rights
under Article 448 of the Civil Code on the basis merely of the fact that some years
after acquiring the property in good faith, it learned about — and aptly recognized —
the right of private respondent to a portion of the land occupied by its building. The
supervening awareness of the encroachment by petitioner does not militate against
its right to claim the status of a builder in good faith. In fact, a judicious reading of
said Article 448 will readily show that the landowner’s exercise of his option can only
take place after the builder shall have come to know of the intrusion — in short, when
both parties shall have become aware of it. Only then will the occasion for exercising
the option arise, for it is only then that both parties will have been aware that a
problem exists in regard to their property rights.

Options of Private Respondent

What then is the applicable provision in this case which private respondent may
invoke as his remedy: Article 448 or Article 450 31 of the Civil Code?

In view of the good faith of both petitioner and private respondent, their rights and
obligations are to be governed by Art. 448. The essential fairness of this codal
provision has been pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing
Manresa and applicable precedents, in the case of Depra v. Dumlao, 32 to
wit:jgc:chanrobles.com.ph

"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
impracticality 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 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 v. Bataclan, 37 Off. Gaz. 1382; Co Tao v. Chan Chico, G. R.
No. 49167, April 30, 1949; Article applied; see Cabral, Et. Al. v. Ibañez [S.C.] 52 Off.
Gaz. 217; Marfori v. Velasco, [C.A.] 52 Off. Gaz. 2050)."cralaw virtua1aw library

The private respondent’s insistence on the removal of the encroaching structures as

the proper remedy, which respondent Court sustained in its assailed Decisions, is
thus legally flawed. This is not one of the remedies bestowed upon him by law. It
 35

would be available only if and when he chooses to compel the petitioner to buy the
land at a reasonable price but the latter fails to pay such price. 33 This has not taken
place. Hence, his options are limited to: (1) appropriating the encroaching portion of
petitioner’s building after payment of proper indemnity, or (2) obliging the latter to
buy the lot occupied by the structure. He cannot exercise a remedy of his own liking.

Neither is petitioner’s prayer that private respondent be ordered to sell the land 34
the proper remedy. While that was dubbed as the "more workable solution in Grana
and Torralba v. The Court of Appeals, Et Al., 35 it was not the relief granted in that
case as the landowners were directed to exercise "within 30 days from this decision
their option to either buy the portion of the petitioners’ house on their land or sell to
said petitioners the portion of their land on which it stands." 36 Moreover, in Grana
and Torralba, the area involved was only 87 square meters while this case involves
520 square meters 37 . In line with the case of Depra v. Dumlao, 38 this case will
have to be remanded to the trial court for further proceedings to fully implement the
mandate of Art. 448. It is a rule of procedure for the Supreme Court to strive to settle
the entire controversy in a single proceeding leaving no root or branch to bear the
seeds of future litigation. 39

Petitioner, however, must also pay the rent for the property occupied by its building
as prescribed by respondent Court from October 4, 1979, but only up to the date
private respondent serves notice of its option upon petitioner and the trial court; that
is, if such option is for private respondent to appropriate the encroaching structure.
In such event, petitioner would have a right of retention which negates the obligation
to pay rent. 40 The rent should however continue if the option chosen is compulsory
sale, but only up to the actual transfer of ownership.

The award of attorney’s fees by respondent Court against petitioner is unwarranted

since the action appears to have been filed in good faith. Besides, there should be no
penalty on the right to litigate. 41

WHEREFORE, premises considered, the petition is hereby GRANTED and the

assailed Decision and the Amended Decision are REVERSED and SET ASIDE. In
accordance with the case of Depra v. Dumlao, 42 this case is REMANDED to the
Regional Trial Court of Pasay City, Branch 117, for further proceedings consistent
with Articles 448 and 546 43 of the Civil Code, as follows:chanroblesvirtuallawlibrary

1. The trial court shall determine:chanrob1es virtual 1aw library

a) the present fair price of private respondent’s 520 square-meter area of land;

b) the increase in value ("plus value") which the said area of 520 square meters may
have acquired by reason of the existence of the portion of the building on the area;

c) the fair market value of the encroaching portion of the building; and

d) whether the value of said area of land is considerably more than the fair market
value of the portion of the building thereon.

2. After said amounts shall have been determined by competent evidence, the
regional trial court shall render judgment as follows:chanrob1es virtual 1aw library
 36

a) The private respondent shall be granted a period of fifteen (15) days within which
to exercise his option under the law (Article 448, Civil Code), whether to appropriate
the portion of the building as his own by paying to petitioner its fair market value, or
to oblige petitioner to pay the price of said area. The amounts to be respectively paid
by petitioner and private respondent, 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 trial
court in favor of the party entitled to receive it;

b) If private respondent exercises the option to oblige petitioner 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 portion of the building,
petitioner shall give written notice of such rejection to private respondent and to the
trial court within fifteen (15) days from notice of private respondent’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 trial court formal written notice of the 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 two thousand pesos (P2,000.00) 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 1970 that petitioner has occupied the subject area. The rental thus fixed
shall be increased by ten percent (10%) for the second year of the forced lease.
Petitioner shall not make any further constructions or improvements on the building.
Upon expiration of the two-year period, or upon default by petitioner in the payment
of rentals for two (2) consecutive months, private respondent shall be entitled to
terminate the forced lease, to recover his land, and to have the portion of the building
removed by petitioner or at latter’s expense. The rentals herein provided shall be
tendered by petitioner to the trial court for payment to private respondent, and such
tender shall constitute evidence of whether or not compliance was made within the
period fixed by the said court.

c) In any event, petitioner shall pay private respondent an amount computed at two
thousand pesos (P2,000.00) per month as reasonable compensation for the
occupancy of private respondent’s land for the period counted from October 4, 1979,
up to the date private respondent serves notice of its option to appropriate the
encroaching structures, otherwise up to the actual transfer of ownership to petitioner
or, in case a forced lease has to be imposed, up to the commencement date of the
forced lease referred to in the preceding paragraph;

d) The periods to be fixed by the trial court in its decision shall be non-extendible,
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.
 37

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Endnotes:

1. Rollo, pp. 10-17.

2. Special Seventeenth Division composed of J. Antonio M. Martinez, ponente, and

JJ. Serafin V.C. Guingona and Salome A. Montoya, concurring.

3. Rollo, pp. 16-17.

4. Ibid., pp. 20-21.

5. Ibid., pp. 11-12.

6. Presided by Judge Leonardo M. Rivera.

7. Rollo, p. 10.

8. Ibid., pp. 106-107.

9. Ibid., p. 392.

10. Ibid., p. 399.

11. Ibid., p. 402.

12 Ibid., p. 410.

13. Ibid., p. 416.

14. Ibid., p. 423.

15. Ibid., p. 247.

16. Ibid., pp. 253-255.

17. 23 SCRA 230, April 26, 1968.

18. 6 SCRA 938, December 29, 1962.

19. Rollo, p. 14.

20. 83 Phil. 543 (1949).

21. U.S. v. Rapiñan, 1 Phil. 294, 296 (1902); City of Manila v. del Rosario, 5 Phil. 277,
231 (1905); Gabriel , Et. Al. v. Bartolome, Et Al., 7 Phil. 699, 706 (1907); Sideco v.
 38

Pascua, 13 Phil. 342, 344 (1909); Arriola v. Gomez De la Serna, 14 Phil. 627, 629
(1909); Cea v. Villanueva, 18 Phil. 538, 542 (1911); Bondad v. Bondad, 34 Phil. 232,
233 (1916); Serra v. National Bank, 45 Phil. 907 (1924); Escritor v. Intermediate
Appellate Court, 155 SCRA 577, 583, November 12, 1987.

22. Article 529 of the Civil Code.

23. Pleasantville Development Corporation v. Court of Appeals, 253 SCRA 10, 18,
February 1, 1996.

24. Robleza v. Court of Appeals, 174 SCRA 354, 365, June 28, 1989 citing Section 28,
Rule 130, Rules of Court.

25. Article 528 of the Civil Code.

26 Ortiz v. Kayanan, 92 SCRA 146, 159, July 30, 1979 citing Article 528, Civil Code.

27. Ignacio v. Hilario, 76 Phil. 605 (1946); Sarmiento v. Agana, 129 SCRA 122, April
30, 1984.

28. Rollo, p. 14.

29. Original Records, p. 179.

30. 238 SCRA 463, 470-471, November 29, 1994.

31. 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.

32. 136 SCRA 475, 483, May 16, 1985.

33. Ignacio v. Hilario, supra. In Sarmiento v. Agana (129 SCRA 122, 126, April 30,
1984), it was held that:jgc:chanrobles.com.ph

"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 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."cralaw virtua1aw library

34. Rollo, pp. 423-426.

35. 109 Phil. 260, 264 (1960).

 39

36. at p. 265.

37. In view of the compromise agreement, the encroaching wall was torn down. As
explained in private respondent’s Memorandum, the area encroached by petitioner’s
building is only 520 square meters, no longer the original 770 referred to in the
statement of facts narrated by the two lower courts. (Rollo, p. 467).

38. Supra.

39. Heirs of Crisanta Y . Gabriel-Almoradie v. Court of Appeals, 229 SCRA 15, 29,
January 4, 1994.

40. Grana v. Court of Appeals, supra.

41. Castillo v. Court of Appeals, 205 SCRA 529, 537, January 27, 1992, citing Ilocos
Norte Electric Company v. Court of Appeals, 179 SCRA 5, November 6, 1989 and
Espiritu v. Court of Appeals, 137 SCRA 50, June 19, 1985.

42. Supra, at pp. 483-486.

43. Article 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.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-32974 July 30, 1979

BARTOLOME ORTIZ, petitioner,
vs.
HON. UNION C. KAYANAN, in his capacity as Judge of the Court of First
Instance of Quezon, Branch IV; ELEUTERIO ZAMORA, QUIRINO
COMINTAN, VICENTE FERRO, AND GREGORIO
PAMISARAN, respondents.

Salonga, Ordoñ;ez, Yap, Sicat & Associates and Salvador, Ulgado & Carbon for
petitioner.

Jose A. Cusi for private respondents.

 40

ANTONIO, J.:1äwphï1.ñët

Petition for certiorari and Prohibition with Preliminary Injunction to nullify the
Order of respondent Judge directing the execution of the final judgment in Civil Case
No. C-90, entitled "Bartolome Ortiz vs. Secretary of Agriculture and Natural
Resources, et al.," and the Writ of Execution issued to implement said Order,
allegedly for being inconsistent with the judgment sought to be enforced.

Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or
annulment of the decision of the Secretary of Agriculture and Natural Resources,
giving preference to the sales applications of private respondents Quirino Comintan
and Eleuterio Zamora over Lot No. 5785, PLS-45, located at Barrio Cabuluan,
Calauag, Quezon.

The factual background of the case, as found by respondent Court, is as follows:têñ.

£îhqwâ£

... The lot in controversy was formerly the subject of Homestead

Application No. 122417 of Martin Dolorico II, plaintiff's ward who died
on August 20, 1931; that since then it was plaintiff who continued the
cultivation and possession of the property, without however filing any
application to acquire title thereon; that in the Homestead Application
No. 122417, Martin Dolorico II named his uncle, Martin Dolorico I as
his heir and successor in interest, so that in 1951 Martin Dolorico I
executed an affidavit relinquishing his rights over the property in favor
of defendants Quirino Comintan and Eleuterio Zamora, his grandson
and son-in-law, respectively, and requested the Director of Lands to
cancel the homestead application; that on the strength of the affidavit,
Homestead Application No. 122417 was cancelled and thereafter,
defendants Comintan and Zamora filed their respective sales
applications Nos. 8433 and 9258; that plaintiff filed his protest on
November 26, 1951 alleging that he should be given preference to
purchase the lot inasmuch as he is the actual occupant and has been in
continuous possession of the same since 1931; and inspite of plaintiff's
opposition, "Portion A" of the property was sold at public auction
wherein defendant Comintan was the only bidder; that on June 8, 1957,
investigation was conducted on plaintiff's protest by Assistant Public
Lands Inspector Serapion Bauzon who submitted his report to the
Regional Land Officer, and who in turn rendered a decision on April 9,
1958, dismissing plaintiff's claim and giving due course to defendants'
sales applications on the ground that the relinquishment of the
homestead rights of Martin Dolorico I in favor of Comintan and
Zamora is proper, the former having been designated as successor in
interest of the original homestead applicant and that because plaintiff
failed to participate in the public auction, he is forever barred to claim
the property; that plaintiff filed a motion for reconsideration of this
 41

decision which was denied by the Director of Lands in his order dated
June 10, 1959; that, finally, on appeal to the Secretary of Agriculture
and Natural Resources, the decision rendered by the Regional Land
Officer was affirmed in toto. 1

On March 22, 1966, respondent Court rendered judgment in the afore-mentioned

civil case, the dispositive portion of which reads as follows:têñ.£îhqwâ£

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is

hereby rendered awarding Lot No. 5785-A of PLS-45, (Calauag Public
Land Subdivision) one-half portion of the property in litigation located
at Bo. Cabuluan, Calauag, Quezon, in favor of defendant QUIRINO
COMINTAN, being the successful bidder in the public auction
conducted by the bureau of Lands on April 18, 1955, and hereby giving
due course to the Sales Application No. 9258 of defendant Eleuterio
Zamora over the other half, Lot No. 5785-B of PLS-45, Calauag, without
prejudice to the right of plaintiff BARTOLOME ORTIZ to participate in
the public bidding of the same to be announced by the Bureau of Lands,
Manila. However, should plaintiff Bartolome Ortiz be not declared the
successful bidder thereof, defendants Quirino Comintan and Eleuterio
Zamora are ordered to reimburse jointly said plaintiff the
improvements he has introduced on the whole property in the amount
of THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO
(P13,632.00) PESOS, the latter having the right to retain the property
until after he has been fully paid therefor, without interest since he
enjoys the fruits of the property in question, with prejudice and with
costs again the plaintiff.2

Plaintiff appealed the decision to the Court of Appeals.

Two (2) years after the rendition of the judgment by the court a quo, while the case
was pending appeal and upon petition of private respondents Quirino Comintan and
Eleuterio Zamora, respondent Court appointed respondent Vicente Ferro, Clerk of
Court, as Receiver to collect tolls on a portion of the property used as a diversion
road. On August 19, 1969, the Court of Appeals issued a Resolution annulling the
Order appointing the Receiver. Subsequently, on February 19, 1970, the Appellate
Court affirmed the decision of the trial court. A petition for review on certiorari of the
decision of the Court of Appeals was denied by this Court on April 6, 1970. At this
point, private respondents filed a petition for appointment of a new receiver with the
court a quo. This petition was granted and the receiver was reappointed. Petitioner
sought the annulment of this Order with the Court of Appeals, but said Court ruled
that its decision had already become final and that the records of the case were to be
remanded to the trial court.

Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition
and mandamus with preliminary injunction before this Court, 3 praying for the
annulment of the Order reappointing the Receiver. On July 13, 1970, the petition was
dismissed by this Court on the ground of insufficient showing of grave abuse of
discretion.
 42

II

The judgment having become final and executory private respondents filed a motion
for the execution of the same, praying as follows:têñ.£îhqwâ£

WHEREFORE, it is respectfully prayed of this Honorable Court to

order the issuance of a writ of execution in accordance with the
judgment of this Honorable Court, confirmed by the Court of Appeals
and the Supreme Court, commanding any lawful officer to deliver to
defendants Comintan and Zamora the land subject of the decision in
this case but allowing defendants to file a bond in such amount as this
Honorable Court may fix, in lieu of the P13,632.00 required to be paid
to plaintiff, conditioned that after the accounting of the tools collected
by plaintiff, there is still an amount due and payable to said plaintiff,
then if such amount is not paid on demand, including the legal
interests, said bond shall be held answerable.

Ordering further the plaintiff to render an accounting of the tolls he

collected from March of 1967 to December 31, 1968 and from
September 1969 to March 31, 1970, and deliver said tolls collected to
the receiver and if judgment is already executed, then to Quirino
Comintan and Eleuterio Zamora; and,

Finally, to condemn plaintiff to pay moral damages for withholding the

tools which belong to your movant in an amount this Court may deem
just in the premises.4

Acting upon the foregoing motion, respondent Judge issued an Order, dated
September 23, 1970, stating, among others, the following: têñ.£îhqwâ£

The records further disclosed that from March 1967 to December 31,
1968, piaintiff Bartolome Ortiz collected tolls on a portion of the
propertv in question wherein he has not introduced anv improvement
particularlv on Lot No. 5785-A; PLS-45 awarded to defendant Quirino
Comintan, thru which vehicular traffic was detoured or diverted, and
again from September 1969 to March 31, 1970, the plaintiff resumed
the collection of tools on the same portion without rendering any
accounting on said tolls to the Receiver, who, was reappointed after
submitting the required bond and specifically authorized only to collect
tolls leaving the harvesting of the improvements to the plaintiff.

xxx xxx xxx

ln virtue of he findings of this Court as contained in the dispositive

portion of its decision, the defendants are jointly obligated to pay the
plaintiff in the amount of P13,632.00 as reasonable value of the
improvements he introduced on the whole property in question, and
that he has the right of retention until fully paid. It can be gleaned from
the motion of the defendants that if plaintiff submits an accounting of
the tolls he collected during the periods above alluded to, their damages
 43

of about P25,000.00 can more than offset their obligation of

P13,362.00 in favor of the plaintiff, thereafter the possession of the
land be delivered to the defendants since the decision of the Supreme
Court has already become final and executory, but in the interregnum
pending such accounting and recovery by the Receiver of the tolls
collected by the plaintiff, the defendants pray that they allowed to put
up a bond in lieu of the said P13,632.00 to answer for damages of the
former, if any.

On the other hand, plaintiff contends in his opposition, admitting that

the decision of the Supreme Court has become final and executory; (1)
the offer of a bond in lieu of payment of P13,632.00 does not, and
cannot, satisfy the condition imposed in the decision of this Court
which was affirmed in toto; (2) the public sale of Portion "B" of the land
has still to take place as ordained before the decision could be executed;
and, (3) that whatever sums plaintiff may derive from the property
cannot be set off against what is due him for the improvements he
made, for which he has to be reimbursed as ordered.

xxx xxx xxx

Let it be known that plaintiff does not dispute his having collected tolls
during the periods from March 1967 to December 31, 1968 and from
September 1969 to March 31, 1970. The Supreme Court affirmed the
decision of this Court its findings that said tolls belong to the
defendant, considering that the same were collected on a portion of the
land question where the plaintiff did not introduce any improvement.
The reimbursement to the plaintiff pertains only to the value of the
improvements, like coconut trees and other plants which he introduced
on the whole property. The tolls collected by the plaintiff on an
unimproved portion naturally belong to the defendants, following the
doctrine on accretion. Further, the reappointment of a Receiver by this
Court was upheld by the Supreme Court when it denied the petition for
certiorari filed by the plaintiff, bolstering the legal claim of defendants
over said tolls. Thus, the decision of the Supreme Court rendered the
decision of this Court retroactive from March 22, 1966 although
pending accounting of the tolls collected by the plaintiff is justified and
will not prejudice anybody, but certainly would substantially satisfy the
conditions imposed in the decision. However, insofar as the one-half
portion "B" of the property, the decision may be executed only after
public sale by the Bureau of Lands shall be accomplished.

WHEREFORE, finding the Motion for Execution filed by the

defendants to be meritorious, the same is granted; provided, however,
that they put up a bond equal the adjudicated amount of P13,632.00
accruing in favor of the plaintiff, from a reputable or recognized
bonding or surety company, conditioned that after an accounting of the
tolls collected by the plaintiff should there be found out any balance
due and payable to him after reckoning said obligation of P13,632.00
the bond shall be held answerable therefor.5
 44

Accordingly, a Writ of Execution was issued after private respondent Quirino

Comintan had filed the required bond. The writ directed the Sheriff to enforce the
decision of the Court, and stated, part in, the following:têñ.£îhqwâ£

But should there be found any amount collectible after accounting and
deducting the amount of P3,632.00, you are hereby ordered that of the
goods and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag,
Quezon, be caused to be made any excess in the above-metioned
amount together with your lawful fees and that you render same to
defendant Quirino Comintan. If sufficient personal property cannot be
found thereof to satisfy this execution and lawful fees thereon, then you
are commanded that of the lands and buildings of the said
BARTOLOME ORTIZ you make the said excess amount in the manner
required by the Rules of Court, and make return of your proceedings
within this Court within sixty (60) days from date of service.

You are also ordered to cause Bartolome Ortiz to vacate the property
within fifteen (15) days after service thereof the defendant Quirino
Comintan having filed the required bond in the amount of THIRTEEN
THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS. 6

On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid
Order and Writ of Execution, alleging:têñ.£îhqwâ£

(a) That the respondent judge has no authority to place respondents in

possession of the property;

(b) That the Supreme Court has never affirmed any decision of the trial
court that tolls collected from the diversionary road on the property,
which is public land, belong to said respondents;

(c) That to assess petitioner a P25,000.00 liability for damages is

purely punitive imposition without factual or legal justification.

The foregoing Motion for Reconsideration was denied by respondent Judge per
Order dated November 18, 1970. Saod Order states, in part:têñ.£îhqwâ£

It goes without saying that defendant Comintan is entitled to be placed

in possession of lot No. 5785-A of PLS-45 (Calauag Public Land
Subdivision) and enjoyment of the tolls from March, 1967 to March,
1968 and from September, 1969 to March 31, l970 which were received
by plaintiff Bartolome Ortiz, collected from the property by reason of
the diversion road where vehicular traffic was detoured. To defendant
Comintan belongs the tolls thus collected from a portion of the land
awarded to him used as a diversionary road by the doctrine of accretion
and his right over the same is ipso jure, there being no need of any
action to possess said addition. It is so because as consistently
maintained by the Supreme Court, an applicant who has complied with
all the terms and conditions which entitle him to a patent for a
particular tract of publlic land, acquires a vested right therein and is to
 45

be regarded as equitable owner thereof so that even without a patent, a

perfected homestead or sales application is a property right in the
fullest sense, unaffectcd by the fact that the paramount title is still in
the Government and no subsequent law can deprive him of that vested
right The question of the actual damages suffered by defendant
Comintan by reason of the unaccounted tolls received by plaintiff had
already been fully discussed in the order of September 23, 1970 and the
Court is honestly convinced and believes it to be proper and regular
under the circumstances.

Incidentally, the Court stands to correct itself when in the same order,
it directed the execution of he decision with respect to the one-half
portion "B" of the property only after the public sale by the Bureau of
Lands, the same being an oversight, it appearing that the Sales
Application of defendant Eleuterio Zamora had already been
recognized and full confirmed by the Supreme Court.

In view thereof, finding the motion filed by plaintiff to be without

merit, the Court hereby denies the same and the order of September 23,
1970 shall remain in full force subject to the amendment that the
execution of the decision with respect to the one-half portion "B" shall
not be conditioned to the public sale by the Bureau of Lands.

SO ORDERED.7

III

Petitioner thus filed the instant petition, contending that in having issued the Order
and Writ of Execution, respondent Court "acted without or in excess of jurisdiction,
and/or with grave abuse of discretion, because the said order and writ in effect vary
the terms of the judgment they purportedly seek to enforce." He argued that since
said judgment declared the petitioner a possessor in good faith, he is entitled to the
payment of the value of the improvements introduced by him on the whole property,
with right to retain the land until he has been fully paid such value. He likewise
averred that no payment for improvements has been made and, instead, a bond
therefor had been filed by defendants (private respondents), which, according to
petitioner, is not the payment envisaged in the decision which would entitle private
respondents to the possession of the property. Furthermore, with respect to portion
"B", petitioner alleges that, under the decision, he has the right to retain the same
until after he has participated and lost in the public bidding of the land to be
conducted by the Bureau of Lands. It is claimed that it is only in the event that he
loses in the bidding that he can be legally dispossessed thereof.

It is the position of petitioner that all the fruits of the property, including the tolls
collected by him from the passing vehicles, which according to the trial court
amounts to P25,000.00, belongs to petitioner and not to defendant/private
respondent Quirino Comintan, in accordance with the decision itself, which decreed
that the fruits of the property shall be in lieu of interest on the amount to be paid to
petitioner as reimbursement for improvements. Any contrary opinion, in his view,
would be tantamount to an amendment of a decision which has long become final
 46

and executory and, therefore, cannot be lawfully done.

Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued

enjoining the enforcement of the Orders of September 23, 1970 and November 18,
1970, and the Writ of Execution issued thereto, or restoring to petitioner the
possession of the property if the private respondents had been placed in possession
thereof; (2) annulling said Orders as well as the Writ of Execution, dissolving the
receivership established over the property; and (3) ordering private respondents to
account to petitioner all the fruits they may have gathered or collected from the
property in question from the time of petitioiier's illegal dispossession thereof.

On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On
January 30, 1971, private respondents filed a Motion for Reconsideration and/or
Modification of the Order dated January 29, 1971. This was followed by a
Supplemental Motion for Reconsideration and Manifestation on February 3, 1971. In
the latter motion, private respondents manifested that the amount of P14,040.96,
representing the amount decreed in the judgment as reimbursement to petitioner for
the improvements, plus interest for six months, has already been deposited by them
in court, "with the understanding that said amount shall be turned over to the
plaintiff after the court a quo shall have determined the improvement on Lot 5785-A,
and subsequently the remaining balance of the deposit shall be delivered to the
petitioner (plaintiff therein) in the event he loses the bid for Lot 5785-B in favor of
private respondent Eleuterio Zamora."8 The deposit is evidenced by a certification
made by the Clerk of the Court a quo.9 Contending that said deposit was a faithful
compliance with the judgment of the trial court, private respondent Quirino
Comintan prayed for the dissolution of the Writ of Injunction.

It appears that as a consequence of the deposit made by private respondents, the

Deputy, Sheriff of Calauag, Quezon ousted petitioner's representative from the land
in question and put private respondents in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for

Reconsideration' dated January 29, 1971' and 'Supplemental Motion for
Reconsideration and Manifestation,'" contending that the tender of deposit
mentioned in the Suplemental Motion was not really and officially made, "inasmuch
as the same is not supported by any official receipt from the lower court, or from its
clerk or cashier, as required by law;" that said deposit does not constitute sufficient
compliance with the judgment sought to be enforced, neither was it legally and
validly made because the requisites for consignation had not been complied with;
that the tender of legal interest for six months cannot substitute petitioner's
enjoyment of the fruits of the property as long as the judgment in Civil Case No. C-90
has not been implemented in the manner decreed therein; that contrary to the
allegations of private respondents, the value of the improvements on the whole
property had been determined by the lower court, and the segregation of the
improvements for each lot should have been raised by them at the opportune
moment by asking for the modification of the decision before it became final and
executory; and that the tolls on the property constituted "civil fruits" to which the
petitioner is entitled under the terms of the decision.

IV
 47

The issue decisive of the controvery is—after the rendition by the trial court of its
judgment in Civil Case No. C-90 on March 22, 1966 confirming the award of one-half
of the property to Quirino Comintan—whether or not petitioner is still entitled to
retain for his own exclusive benefit all the fruits of the property, such as the tolls
collected by him from March 1967 to December 1968, and September 1969 to March
31, 1970, amounting to about P25,000.00. In other words, petitioner contends that
so long as the aforesaid amount of P13,632,00 decreed in the judgment representing
the expenses for clearing the land and the value of the coconuts and fruit trees
planted by him remains unpaid, he can appropriate for his exclusive benefit all the
fruits which he may derive from the property, without any obligation to apply any
portion thereof to the payment of the interest and the principal of the debt.

We find this contention untenable.

There is no question that a possessor in good faith is entitled to the fruits received
before the possession is legally interrupted. 11 Possession in good faith ceases or is
legally interrupted from the moment defects in the title are made known to the
possessor, by extraneous evidence or by the filing of an action in court by the true
owner for the recovery of the property.12 Hence, all the fruits that the possessor may
receive from the time he is summoned in court, or when he answers the complaint,
must be delivered and paid by him to the owner or lawful possessor. 13

However, even after his good faith ceases, the possessor in fact can still retain the
property, pursuant to Article 546 of the New Civil Code, until he has been fully
reimbursed for all the necessary and useful expenses made by him on the property.
This right of retention has been considered as one of the conglomerate of measures
devised by the law for the protection of the possessor in good faith. Its object is to
guarantee the reimbursement of the expenses, such as those for the preservation of
the property,14 or for the enhancement of its utility or productivity. 15 It permits the
actual possessor to remain in possession while he has not been reimbursed by the
person who defeated him in the possession for those necessary expenses and useful
improvements made by him on the thing possessed. The principal characteristic of
the right of retention is its accessory character. It is accessory to a principal
obligation. Considering that the right of the possessor to receive the fruits terminates
when his good faith ceases, it is necessary, in order that this right to retain may be
useful, to concede to the creditor the right to secure reimbursement from the fruits of
the property by utilizing its proceeds for the payment of the interest as well as the
principal of the debt while he remains in possession. This right of retention of the
property by the creditor, according to Scaevola, in the light of the provisions of
Article 502 of the Spanish Civil Code,16 is considered not a coercive measure to oblige
the debtor to pay, depriving him temporarily of the enjoyment of the fruits of his
property, but as a means of obtainitig compensation for the debt. The right of
retention in this case is analogous to a contract of antichresis and it cati be
considered as a means of extinguishing the obligation, inasmuch as the right to
retain the thing lasts only for the period necessary to enable the creditor to be
reimbursed from the fruits for the necessary and useful expenses. 17

According to Manresa, the right of retention is, therefore, analogous to that of a

pledge, if the property retained is a movable, and to that of antichresis, if the
property held is immovable.18 This construction appears to be in harmony with
similar provisions of the civil law which employs the right of retention as a means or
 48

device by which a creditor is able to obtain the payment of a debt. Thus, under Article
1731 of the New Civil Code, any person who has performed work upon a movable has
a right to retain it by way of pledge until he is paid. Similarly, under Article 1914 of
the same Code, the agent may retain in pledge the things which are the object of the
agency until the principal effects reimbursement of the funds advanced by the former
for the execution of the agency, or he is indemnified for all damages which he may
have suffered as a consequence of the execution of the agency, provided he is free
from fault. To the same effect, the depositary, under Article 1994 of the same Code,
may retain the thing in pledge until the full payment of what may be due him by
reason of the deposit. The usufructuary, pursuant to Article 612 of the same Code,
may retain the property until he is reimbursed for the amount paid for taxes levied
on the capital (Article 597) and tor extraordinary repairs (Article 594).

In all of these cases, the right of retention is used as a means of extinguishing the
obligation. As amply observed by Manresa: "El derecho de retencion, lo hemos dicho,
es el derecho de prenda o el de anticresis constituido por la ley con independencia de
las partes." 19 In a pledge, if the thing pledged earns or produces fruits, income,
dividends or interests, the creditor shall compensate what he receives with those
which are owing him.20 In the same manner, in a contract of antichresis, the creditor
acquires the right to receive the fruits of an immovable of his debtor with the
obligation to apply them to payment of the interest, if owing, and thereafter to the
principal of his credit. 21 The debtor can not reacquire enjoyment of the immovable
until he has actually paid what he owes the creditor. 22

Applying the afore-cited principles to the case at bar, petitioner cannot appropriate
for his own exclusive benefit the tolls which he collected from the property retained
by him. It was his duty under the law, after deducting the necessary expenses for his
administration, to apply such amount collected to the payment of the interest, and
the balance to the payment of the obligation.

We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for
administration, belong to Quirino Comintan, owner of the land through which the
toll road passed, further considering that the same was on portions of the property
on which petitioner had not introduced any improvement. The trial court itself
clarified this matter when it placed the toll road under receivership. The omission of
any mention of the tolls in the decision itself may be attributed to the fact that the
tolls appear to have been collected after the rendition of the judgment of the trial
court.

The records further reveal that earnest efforts have been made by private
respondents to have the judgment executed in the most practicable manner. They
deposited in court the amount of the judgment in the sum of P13,632.00 in cash,
subject only to the accounting of the tolls collected by the petitioner so that whatever
is due from him may be set off with the amount of reimbursement. This is just and
proper under the circumstances and, under the law, compensation or set off may
take place, either totally or partially. Considering that petitioner is the creditor with
respect to the judgment obligation and the debtor with respect to the tolls collected,
Comintan being the owner thereof, the trial court's order for an accounting and
compensation is in accord with law. 23

With respect to the amount of reimbursement to be paid by Comintan, it appears

 49

that the dispositive portion of the decision was lacking in specificity, as it merely
provided that Comintan and Zamora are jointly liable therefor. When two persons
are liable under a contract or under a judgment, and no words appear in the contract
or judgment to make each liable for the entire obligation, the presumption is that
their obligation is joint or mancomunada, and each debtor is liable only for a
proportionate part of the obligation. 24 The judgment debt of P13,632.00 should,
therefore, be pro-rated in equal shares to Comintan and Zamora.

Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the
Bureau of Lands and, therefore, petitioner is entitled to remain in possession thereof.
This is not disputed by respondent Eleuterio Zamora. 25 After public sale is had and
in the event that Ortiz is not declared the successful bidder, then he should be
reimbursed by respondent Zamora in the corresponding amount for the
improvements on Lot 5785-B.

WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970
is hereby modified to conform to the foregoing judgment. The Writ of Preliminary
Injunction, dated January 29, 1971, is hereby dissolved. Without special
pronouncement as to costs.

Barredo (Chairman), Concepcion, Jr. and Guerrero, JJ., concur.1äwphï1.ñët

Aquino, J., concurs in the result.

Santos and Abad Santos, JJ., are on leave.

Guerrero, J., was designated to sit in the Second Division

#Footnotestêñ.£îhqwâ£

1 Annex "B", Petition, pp. 26-27. Rollo.

2 Ibid, pp. 35-36, Rollo. Emphasis supplied.

3 Docketed as G.R. No. L-32206, entitleed "Bartolome Ortiz vs. Hon.

Union C. Kaynan, Eleuterio Zamora, Quirino Comintan and Vicente
Ferro."

4 Annex "D", Petition, p. 48, Rollo.

5 Annex "A", Petition, pp. 17-20, Rollo.

6 Annex "C", Petition, p. 38, Rollo.

7 Annex "G ", Petition, pp. 69-71, Rollo.

8 Private respondents' Supplemental Motion for Reconsideration and

Manifestation, pp. 87-88, Rollo.
 50

9 Annex "B" of above Supplemental Motion, p.9l, Rollo.

10 Manifestation of Deputy Sheriff Gregorio B. Pamisaran, p. 95, Rollo.

11 Article 544, New Civil Code.

12 Tacas v. Tobon, 53 Phil. 356; Article 528, New Civil Code.

13 Araujo v. Celis, 16 Phil. 329.

14 IV Manresa, 1951 Ed., pp. 293-294.

15 Ibid., pp. 316- 318.

16 Now Article 594, New Civil Code.

17 Notese en este caso una singularidad: En la situacion juridica

prevista por el art. 502, la retencion se considera, no como medio
coercitivo para obligar al deudor al pago, privandole temporalmente de
los beneficios que el goce de su propiedad pudiera reportarle, sino
como medio de obtener una compansacion. La retencion tiene en este
caso mucha analogia con el pacto anticretico, y podemos considerarla
como medio extintivo de una obligacion, puesto que el derecho de
retener la cosa dura solo el tiempo necessario para compensar con los
frutos el coste de las reparaciones extraordinarias indespensables para
la subsistencia de la cosa usufructuada. El Codigo se desvia
conscientemente de las propiedades genuinas del ius retentionis, pero
la desviacion es racionally va derecha al logro de una finalidad juridica.
' (8 Scaevola, Codigo, Civil, 1948 Ed., p. 478.)

18 Facil es deducir, descartando el art. 494, por su menor relacion con

el caso en que nos encontramos, que el Codigo asimila el derecho de
retencion en los bienes muebles a la prenda, y en los bienes inmuebles
a la anticresis, que confiere al acreedor el derecho de percibir los frutos
de un inmueble con la obligacion de aplicarlos, al pago de los intereses,
si se debieren, y despues al de capital de su credito (art. 1.881).

An tratandose de cosas muebles, la ley hace cuanto esta a su alcance

para hacer util o provechoso este derecho. De aqui el articulo 1.868: 'Si
la prenda produce intereses, compensara el acreedor los que perciba
con los que se le deben; y si no se le deben, o en cuanto excedan de los
legitimamente debidos, los imputara al capital.'

Respecto a la anticresis, veanse los articulos 1.882 y 1.883: 'El acreedor,

dice el primero, salvo pacto en contrario, esta obligado a pagar las
contribuciones v cargas que pesen sobre la finca. Lo esta asimismo a
hacer los gastos necesarios para su conservacion y repacion. Se
deduciran de los frutos las cantidades que emplee en uno u otro objeto'.
'El deudor, dice el 1.883, no puede readquirir el goce del inmueble sin
haher pagado antes enteramente lo que debe a su acreedor.'
 51

La posesion puede recaer en cosas muebles o inmuebles; la retencion

de que habla el art. 453 puede, pues, recaer sobre unas o otras
indistintamente. De aqui tal vez la generalidad de la
expresion: retener hasta el pago. Pero en el art. 453 se trata de gastos
reembolsables, de una deuda, como en los articulos 502, 522, 1.600,
1.730. 1. 780, 1.866 y 1.881. Debemos deducir de aqui, como alguien lo
hace, que el derecho de retencion en el poseedor se reduce a un simple
deposito en los bienes muebles y a una mera administracion en los
muebles? Que bentaja reportaria esa deduccion al poseedor ni al
propietario, al acreedor ni al deudor, al vencedor ni al vencido? No es
mas logico equiparar el derecho de retencion a la prenda o a la
anticresis? La Idea del Codigo es mas bien esta que la otra; propietario
y poseedor ganan mas con ella. ( IV Manresa. 1951 Ed., pp. 328-329.)

19 IV Manresa, 1951 Ed., p. 330.

20 Article 2102, New Civil Code.

21 Article 2132, Ibid.

22 Article 2136, Ibid

23 Cf. Articles 1278, 1279 and 1283, Ibid

24 Cacho v. Valles, 45 Phil, 107; Ramos v. Gibbon, 67 Phil. 371.

25 Memorandum for Respondents, p. 195, Rollo.

GEMINIANO v CA (G.R. No. 120303, July 24, 1996)

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 120303 July 24, 1996

FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO,

ASUNCION GEMINIANO, LARRY GEMINIANO and MARLYN
GEMINIANO, petitioners,
vs.
COURT OF APPEALS, DOMINADOR NICOLAS, and MARY A.
 52

NICOLAS, respondents.

DAVIDE, JR. J.:p

This petition for review on certiorari has its origins in Civil Case No. 9214 of
Branch 3 of the Municipal Trial Court in Cities (MTCC) in Dagupan City for
unlawful detainer and damages. The petitioners ask the Court to set aside the
decision of the Court of Appeals affirming the decision of Branch 40 of the
Regional Trial Court (RTC) of Dagupan City, which, in turn, reversed the
MTCC; ordered the petitioners to reimburse the private respondents the value
of the house in question and other improvements; and allowed the latter to
retain the premises until reimbursement was made.

It appears that Lot No. 3765-B-1 containing an area of 314 square meters was
originally owned by the petitioners' mother, Paulina
Amado vda. de Geminiano. On a 12-square-meter portion of that lot stood the
petitioners' unfinished bungalow, which the petitioners sold in November
1978 to the private respondents for the sum of P6,000.00, with an alleged
promise to sell to the latter that portion of the lot occupied by the house.
Subsequently, the petitioners' mother executed a contract of lease over a 126
square-meter portion of the lot, including that portion on which the house
stood, in favor of the private respondents for P40.00 per month for a period of
seven years commencing on 15 November 1978.1 The private respondents then
introduced additional improvements and registered the house in their names.
After the expiration of the lease contract in November 1985, however, the
petitioners' mother refused to accept the monthly rentals.

It turned out that the lot in question was the subject of a suit, which resulted
in its acquisition by one Maria Lee in 1972. In 1982, Lee sold the lot to Lily
Salcedo, who in turn sold it in 1984 to the spouses Agustin and Ester Dionisio.

On 14 February 1992, the Dionisio spouses executed a Deed of Quitclaim over

the said property in favor of the petitioners.2 As such, the lot was registered in
the latter's name.3

On 9 February 1993, the petitioners sent, via registered mail, a letters

addressed to private respondent Mary Nicolas demanding that she vacate the
premises and pay the rentals in arrears within twenty days from notice. 4

Upon failure of the private respondents to heed the demand, the petitioners
filed with the MTCC of Dagupan City a complaint for unlawful detainer and
damages.

During the pre-trial conference, the parties agreed to confine the issues to: (1)
whether there was an implied renewal of the lease which expired in November
1985; (2) whether the lessees were builders in good faith and entitled to
reimbursement of the value of the house and improvements; and (3) the value
of the house.
 53

The parties then submitted their respective position papers and the case was
heard under the Rule on Summary Procedure.

On the first issue, the court held that since the petitioners' mother was no
longer the owner of the lot in question at the time the lease contract was
executed in 1978, in view of its acquisition by Maria Lee as early as 1972, there
was no lease to speak of, much less, a renewal thereof. And even if the lease
legally existed, its implied renewal was not for the period stipulated in the
original contract, but only on a month-to-month basis pursuant to Article
1687 of the Civil Code. The refusal of the petitioners' mother to accept the
rentals starting January 1986 was then a clear indication of her desire to
terminate the monthly lease. As regard the petitioners' alleged failed promise
to sell to the private respondents the lot occupied by the house, the court held
that such should be litigated in a proper case before the proper forum, not an
ejectment case where the only issue was physical possession of the property.

The court resolved the second issue in the negative, holding that Articles 448
and 546 of the Civil Code, which allow possessors in good faith to recover the
value of improvements and retain the premises until reimbursed, did not
apply to lessees like the private respondents, because the latter knew that their
occupation of the premises would continue only during the life of the lease.
Besides, the rights of the private respondents were specifically governed by
Article 1678, which allow reimbursement of up to one-half of the value of the
useful improvements, or removal of the improvements should the lessor
refuse to reimburse.

On the third issue, the court deemed as conclusive the private respondents'
allegation that the value of the house and improvements was P180,000.00,
there being no controverting evidence presented.

The trial court thus ordered the private respondents to vacate the premises,
pay the petitioners P40.00 a month as reasonable compensation for their stay
thereon from the filing of the complaint on 14 April 1993 until they vacated,
and to pay the sum of P1,000.00 as attorney's fees, plus costs. 5

On appeal by the private respondents, the RTC of Dagupan City reversed the
trial court's decision and rendered a new judgment: (1) ordering the
petitioners to reimburse the private respondents for the value of the house
and improvements in the amount of P180,000.00 and to pay the latter
P10,000.00 as attorney's fees and P2,000.00 as litigation expenses; and (2)
allowing the private respondents to remain in possession of the premises until
they were fully reimbursed for the value of the house.6 It ruled that since the
private respondents were assured by the petitioners that the lot they leased
would eventually be sold to them, they could be considered builders in good
faith, and as such, were entitled to reimbursed of the value of the house and
improvements with the right of retention until reimbursement and had been
made.

On appeal, this time by the petitioners, the Court of Appeals affirmed the
decision of the RTC7 and denied8 the petitioners' motion for reconsideration.
 54

Hence, the present petition.

The Court is confronted with the issue of which provision of law governs the
case at bench: Article 448 or Article 1678 of the Civil Code? The said 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 plantercannot 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 if
disagreement, the court shall fix the terms thereof.

xxx xxx xxx

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 remover 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 reimbursed, 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.

The crux of the said issue then is whether the private respondents are builder
in good faith or mere lessees.

The private respondents claim they are builders in good faith, hence, Article
448 of the Civil Code should apply. They rely on the lack of title of the
petitioners' mother at the time of the execution of the contract of lease, as well
as the alleged assurance made by the petitioners that the lot on which the
house stood would be sold to them.

It has been said that while the right to let property is an incident of title and
possession, a person may be lessor and occupy the position of a landlord to
the tenant although he is not the owner of the premises let. 9 After all,
ownership of the property is not being transferred, 10 only the temporary use
and enjoyment thereof.11
 55

In this case, both parties admit that the land in question was originally owned
by the petitioners' mother. The land was allegedly acquired later by one Maria
Lee by virtue of an extrajudicial foreclosure of mortage. Lee, however, never
sought a writ of possession in order that she gain possession of the property in
question.12 The petitioners' mother therefore remained in possession of the
lot.

It is undisputed that the private respondents came into possession of 126

square-meter portion of the said lot by virtue of contract of lease executed by
the petitioners' mother as lessor, and the private respondents as lessees, is
therefore well-established, and carries with it a recognition of the lessor's
title.13 The private respondents, as lessees who had undisturbed possession for
the entire term under the lease, are then estopped to deny their landlord's
title, or to assert a better title not only in themselves, but also in some third
person while they remain in possession of the leased premises and until they
surrender possession to the landlord.14 This estoppel applies even though the
lessor had no title at the time the relation of lessor and lessee was
created,15 and may be asserted not only by the original lessor, but also by those
who succeed to his title.16

Being mere lessees, the private respondents knew that their occupation of the
premises would continue only for the life of the lease. Plainly, they cannot be
considered as possessors nor builders in good faith. 17

In a plethora of cases,18 this Court has held that Article 448 of the Civil Code,
in relation to Article 546 of the same Code, which allows full reimbursement
of useful improvements and retention of the premises until reimbursement is
made, applies only to a possessor in good faith, i.e., one who builds on land
with the belief that he is the owner thereof. It does not apply where one's only
interest is that of a lessee under a rental contract; otherwise, it would always
be in the power of the tenant to "improve" his landlord out of his property.

Anent the alleged promise of the petitioners to sell the lot occupied by the
private respondents' house, the same was not substantiated by convincing
evidence. Neither the deed of sale over the house nor the contract of lease
contained an option in favor of the respondent spouses to purchase the said
lot. And even if the petitioners indeed promised to sell, it would not make the
private respondents possessors or builders in good faith so as to covered by
the provision of Article 448 of the Civil Code. The latter cannot raise the mere
expectancy or ownership of the aforementioned lot because the alleged
promise to sell was not fulfilled nor its existence even proven. The first thing
that the private respondents should have done was to reduce the alleged
promise into writing, because under Article 1403 of the Civil Code, an
agreement for the sale of real property or an interest therein is unenforceable,
unless some note or memorandum thereof be produced. Not having taken any
steps in order that the alleged promise to sell may be enforced, the private
respondents cannot bank on the promise and profess any claim nor color of
title over the lot in question.

There is no need to apply by analogy the provisions of Article 448 on

indemnity as was done in Pecson vs. Court of Appeals,19 because the situation
 56

sought to be avoided and which would justify the application of that provision,
is not present in this case. Suffice it to say, "a state of forced coownership"
would not be created between the petitioners and the private respondents.
For, as correctly pointed out by the petitioners, the right of the private
respondents as lessees are governed by Article 1678 of the Civil Code which
allows reimbursement to the extent of one-half of the value of the useful
improvements.

It must be stressed, however, that the right to indemnity under Article 1678 of
the Civil Code arises only if the lessor opts to appropriate the improvements.
Since the petitioners refused to exercise that option,20 the private respondents
cannot compel them to reimburse the one-half value of the house and
improvements. Neither can they retain the premises until reimbursement is
made. The private respondents' sole right then is to remove the improvements
without causing any more impairment upon the property leased than is
necessary.21

WHEREFORE, judgment is hereby rendered GRANTING the instant petition,

REVERSING and SETTING ASIDE the decision of the Court of Appeals of 27
January 1995 in CA-G.R. SP No. 34337; and REINSTATING the decision of
Branch 3 of the Municipal Trial Court in Cities of Dagupan City in Civil Case
No. 9214 entitled "Federico Geminiano, et al. vs. Dominador Nicolas, et al."

Cost against the private respondents.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

Footnotes

1 Rollo, CA-GR. SP No. 34337 (CA-Rollo), 26.

2 Id., 25.

3 Id., 24.

5 CA-Rollo, 37 Per Judge Emilio V. Angeles.

6 Id., 20. Per Judge Deodoro J. Sison.

7 Annex "A" of Petition; Rollo, 15. Per Luna, A., J., with Barcelona, R., and
Jacinto, G., JJ., concurring.

8 Annex "B," Id.; Id., 28.

9 49 Am Jur 2d, Landlord and Tenants, §12, 55.

 57

10 EDGARDO L. PARAS, Civil Code of the Philippines, vol. V [1986], 258.

11 Jovellanos vs. Court of Appeals, 210 SCRA 126, 132 [1992].

12 Joven vs. Court of Appeals, 212 SCRA 700, 708 [1992].

13 49 Am Jur, op. cit., §120, 150.

14 §2(b), Rules of Court; Borre vs. Court of Appeals, 158 SCRA 560, 566
[1988]; Manuel vs. Court of Appeals, 199 SCRA 603, 607 [1991]; Munar vs.
Court of Appeals, 238 SCRA 372, 380 [1994]; 49 Am Jur, op. cit., §129, 158.

15 Manuel vs. Court of Appeals, supra note 14, at 607-608; 49 Am Jur, op. cit.

§129, 158.

16 49 Am Jur, op. cit., §122, 152.

17 Racaza vs. Susana Realty, Inc., 18 SCRA 1172 [1966]; Vda. de Bacaling vs.
Laguna, 54 SCRA 243, 250 [1973]; Santos vs. Court of Appeals, 221 SCRA 42,
46 [1993].

18 Alburo vs. Villanueva, 7 Phil. 277, 280 [1907] (referring to the provisions of
the Old Civil Code); Racaza vs. Susana Realty, Inc. supra note 17, at 1177-1178;
Bulacanag vs. Francisco, 122 SCRA 498, 502 [1983]; Gabrito vs. Court of
Appeals, 167 SCRA 771, 778-779 [1988]; Cabangis vs. Court of Appeals, 200
SCRA 414, 419-421 [1991]; Heirs of the late Jaime Binuya vs. Court of Appeals,
211 SCRA 761, 766 [1992].

19 244 SCRA 407 [1995].

20 CA-Rollo, 15.

21 Heirs of the late Jaime Binuya vs. Court of Appeals, supra note 18, at 768.

PLEASANTVILLE DEV’T CORP v CA (G.R. No. 79688, February 1, 1996)

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 79688             February 1, 1996

PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,

 58

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

DECISION

PANGANIBAN, J.:

Is a lot buyer who constructs improvements on the wrong property erroneously

delivered by the owner's agent, a builder in good faith? This is the main issue
resolved in this petition for review on certiorari to reverse the Decision1 of the Court
of Appeals2 in CA-G.R. No. 11040, promulgated on August 20, 1987.

By resolution dated November 13, 1995, the First Division of this Court resolved to
transfer this case (along with several others) to the Third Division. After due
deliberation and consultation, the Court assigned the writing of this Decision to the
undersigned ponente.

The Facts

The facts, as found by respondent Court, are as follows:

Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II
and located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975,
respondent Eldred Jardinico bought the rights to the lot from Robillo. At that time,
Lot 9 was vacant.

Upon completing all payments, Jardinico secured from the Register of Deeds of
Bacolod City on December 19, 1978 Transfer Certificate of Title No. 106367 in his
name. It was then that he discovered that improvements had been introduced on Lot
9 by respondent Wilson Kee, who had taken possession thereof.

It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same
subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate
agent of petitioner. Under the Contract to Sell on Installment, Kee could possess the
lot even before the completion of all installment payments. On January 20, 1975, Kee
paid CTTEI the relocation fee of P50.00 and another P50.00 on January 27, 1975, for
the preparation of the lot plan. These amounts were paid prior to Kee's taking actual
possession of Lot 8. After the preparation of the lot plan and a copy thereof given to
Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kee's wife,
Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by
Octaviano was Lot 9. Thereafter, Kee proceeded to construct his residence, a store,
an auto repair shop and other improvements on the lot.

After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The
parties tried to reach an amicable settlement, but failed.

On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove
all improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed
with the Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint
 59

for ejectment with damages against Kee.

Kee, in turn, filed a third-party complaint against petitioner and CTTEI.

The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to
CTTEI. It further ruled that petitioner and CTTEI could not successfully invoke as a
defense the failure of Kee to give notice of his intention to begin construction
required under paragraph 22 of the Contract to Sell on Installment and his having
built a sari-sari store without the prior approval of petitioner required under
paragraph 26 of said contract, saying that the purpose of these requirements was
merely to regulate the type of improvements to be constructed on the Lot. 3

However, the MTCC found that petitioner had already rescinded its contract with
Kee over Lot 8 for the latter's failure to pay the installments due, and that Kee had
not contested the rescission. The rescission was effected in 1979, before the
complaint was instituted. The MTCC concluded that Kee no longer had any right over
the lot subject of the contract between him and petitioner. Consequently, Kee must
pay reasonable rentals for the use of Lot 9, and, furthermore, he cannot claim
reimbursement for the improvements he introduced on said lot.

The MTCC thus disposed:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:

1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9, covered by

TCT No. 106367 and to remove all structures and improvements he
introduced thereon;

2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of
P15.00 a day computed from the time this suit was filed on March 12, 1981
until he actually vacates the premises. This amount shall bear interests (sic) at
the rate of 12 per cent (sic) per annum.

3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville

Subdivision are ordered to pay the plaintiff jointly and severally the sum of
P3,000.00 as attorney's fees and P700.00 as cost and litigation expenses. 4

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

The RTC thus disposed:

WHEREFORE, the decision appealed from is affirmed with respect to the

order against the defendant to vacate the premises of Lot No. 9 covered by
Transfer Certificate of Title No. T-106367 of the land records of Bacolod City;
 60

the removal of all structures and improvements introduced thereon at his

expense and the payment to plaintiff (sic) the sum of Fifteen (P15.00) Pesos a
day as reasonable rental to be computed from January 30, 1981, the date of
the demand, and not from the date of the filing of the complaint, until he had
vacated (sic) the premises, with interest thereon at 12% per annum. This Court
further renders judgment against the defendant to pay the plaintiff the sum of
Three Thousand (P3,000.00) Pesos as attorney's fees, plus costs of litigation.

The third-party complaint against Third-Party Defendants Pleasantville

Development Corporation and C.T. Torres Enterprises, Inc. is dismissed. The
order against Third-Party Defendants to pay attorney's fees to plaintiff and
costs of litigation is reversed.6

Following the denial of his motion for reconsideration on October 20, 1986, Kee
appealed directly to the Supreme Court, which referred the matter to the Court of
Appeals.

The appellate court ruled that Kee was a builder in good faith, as he was unaware of
the "mix-up" when he began construction of the improvements on Lot 8. It further
ruled that the erroneous delivery was due to the negligence of CTTEI, and that such
wrong delivery was likewise imputable to its principal, petitioner herein. The
appellate court also ruled that the award of rentals was without basis.

Thus, the Court of Appeals disposed:

WHEREFORE, the petition is GRANTED, the appealed decision is

REVERSED, and judgment is rendered as follows:

1. Wilson Kee is declared a builder in good faith with respect to the

improvements he introduced on Lot 9, and is entitled to the rights granted
him under Articles 448, 546 and 548 of the New Civil Code.

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

Development Corporation are solidarily liable under the following
circumstances:

A.       If Eldred Jardinico decides to appropriate the improvements and,

thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the improvements
thus destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants
shall answer for the amount representing the value of Lot 9 that Kee
should pay to Jardinico.

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

Development Corporation are ordered to pay in solidum the amount of
P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses.

4. The award of rentals to Jardinico is dispensed with.

 61

Furthermore, the case is REMANDED to the court of origin for the

determination of the actual value of the improvements and the property (Lot
9), as well as for further proceedings in conformity with Article 448 of the
New Civil Code.7

Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.

The Issues

The petition submitted the following grounds to justify a review of the respondent
Court's Decision, as follows:

1. The Court of Appeals has decided the case in a way probably not in accord
with law or the the (sic) applicable decisions of the Supreme Court on third-
party complaints, by ordering third-party defendants to pay the demolition
expenses and/or price of the land;

2. The Court of Appeals has so far departed from the accepted course of
judicial proceedings, by granting to private respondent-Kee the rights of a
builder in good faith in excess of what the law provides, thus enriching private
respondent Kee at the expense of the petitioner;

3. In the light of the subsequent events or circumstances which changed the

rights of the parties, it becomes imperative to set aside or at least modify the
judgment of the Court of Appeals to harmonize with justice and the facts;

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

court is clearly a builder in bad faith, having violated several provisions of the
contract to sell on installments;

5. The decision of the Court of Appeals, holding the principal, Pleasantville

Development Corporation (liable) for the acts made by the agent in excess of
its authority is clearly in violation of the provision of the law;

6. The award of attorney's fees is clearly without basis and is equivalent to

putting a premium in (sic) court litigation.

From these grounds, the issues could be re-stated as follows:

(1) Was Kee a builder in good faith?

(2) What is the liability, if any, of petitioner and its agent, C.T. Torres
Enterprises, Inc.? and

(3) Is the award of attorney's fees proper?

The First Issue: Good Faith

Petitioner contends that the Court of Appeals erred in reversing the RTC's ruling that
Kee was a builder in bad faith.
 62

Petitioner fails to persuade this Court to abandon the findings and conclusions of the
Court of Appeals that Kee was a builder in good faith. We agree with the following
observation of the Court of Appeals:

The roots of the controversy can be traced directly to the errors committed by
CTTEI, when it pointed the wrong property to Wilson Kee and his wife. It is
highly improbable that a purchaser of a lot would knowingly and willingly
build his residence on a lot owned by another, deliberately exposing himself
and his family to the risk of being ejected from the land and losing all
improvements thereon, not to mention the social humiliation that would
follow.

Under the circumstances, Kee had acted in the manner of a prudent man in
ascertaining the identity of his property. Lot 8 is covered by Transfer
Certificate of Title No. T-69561, while Lot 9 is identified in Transfer Certificate
of Title No. T-106367. Hence, under the Torrens system of land registration,
Kee is presumed to have knowledge of the metes and bounds of the property
with which he is dealing. . . .

xxx       xxx       xxx

But as Kee is a layman not versed in the technical description of his property,
he had to find a way to ascertain that what was described in TCT No. 69561
matched Lot 8. Thus, he went to the subdivision developer's agent and applied
and paid for the relocation of the lot, as well as for the production of a lot plan
by CTTEI's geodetic engineer. Upon Kee's receipt of the map, his wife went to
the subdivision site accompanied by CTTEI's employee, Octaviano, who
authoritatively declared that the land she was pointing to was indeed Lot 8.
Having full faith and confidence in the reputation of CTTEI, and because of
the company's positive identification of the property, Kee saw no reason to
suspect that there had been a misdelivery. The steps Kee had taken to protect
his interests were reasonable. There was no need for him to have acted ex-
abundantia cautela, such as being present during the geodetic engineer's
relocation survey or hiring an independent geodetic engineer to countercheck
for errors, for the final delivery of subdivision lots to their owners is part of the
regular course of everyday business of CTTEI. Because of CTTEI's blunder,
what Kee had hoped to forestall did in fact transpire. Kee's efforts all went to
naught.8

Good faith consists in the belief of the builder that the land he is building on is his
and his ignorance of any defect or flaw in his title 9 . And as good faith is presumed,
petitioner has the burden of proving bad faith on the part of Kee 10 .

At the time he built improvements on Lot 8, Kee believed that said lot was what he
bought from petitioner. He was not aware that the lot delivered to him was not Lot 8.
Thus, Kee's good faith. Petitioner failed to prove otherwise.

To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22

and 26 of the Contract of Sale on Installment.
 63

We disagree. Such violations have no bearing whatsoever on whether Kee was a

builder in good faith, that is, on his state of mind at the time he built the
improvements on Lot 9. These alleged violations may give rise to petitioner's cause of
action against Kee under the said contract (contractual breach), but may not be bases
to negate the presumption that Kee was a builder in good faith.

Petitioner also points out that, as found by the trial court, the Contract of Sale on
Installment covering Lot 8 between it and Kee was rescinded long before the present
action was instituted. This has no relevance on the liability of petitioner, as such fact
does not negate the negligence of its agent in pointing out the wrong lot. to Kee. Such
circumstance is relevant only as it gives Jardinico a cause of action for unlawful
detainer against Kee.

Petitioner next contends that Kee cannot "claim that another lot was erroneously
pointed out to him" because the latter agreed to the following provision in the
Contract of Sale on installment, to wit:

13. The Vendee hereby declares that prior to the execution of his contract
he/she has personally examined or inspected the property made subject-
matter hereof, as to its location, contours, as well as the natural condition of
the lots and from the date hereof whatever consequential change therein made
due to erosion, the said Vendee shall bear the expenses of the necessary
fillings, when the same is so desired by him/her. 11

The subject matter of this provision of the contract is the change of the location,
contour and condition of the lot due to erosion. It merely provides that the vendee,
having examined the property prior to the execution of the contract, agrees to
shoulder the expenses resulting from such change.

We do not agree with the interpretation of petitioner that Kee contracted away his
right to recover damages resulting from petitioner's negligence. Such waiver would
be contrary to public policy and cannot be allowed. "Rights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good customs, or
prejudicial to a third person with a right recognized by law." 12

The Second Issue: Petitioner's Liability

Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed
by the RTC after ruling that there was no evidence from which fault or negligence on
the part of petitioner and CTTEI can be inferred. The Court of Appeals disagreed and
found CTTEI negligent for the erroneous delivery of the lot by Octaviano, its
employee.

Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the
erroneous delivery of Lot 9 to Kee was an act which was clearly outside the scope of
its authority, and consequently, CTTEI I alone should be liable. It asserts that "while
[CTTEI] was authorized to sell the lot belonging to the herein petitioner, it was never
authorized to deliver the wrong lot to Kee" 13 .

Petitioner's contention is without merit.

 64

The rule is that the principal is responsible for the acts of the agent, done within the
scope of his authority, and should bear the damage caused to third persons 14 . On the
other hand, the agent who exceeds his authority is personally liable for the damage 15

CTTEI was acting within its authority as the sole real estate representative of
petitioner when it made the delivery to Kee. In acting within its scope of authority, it
was, however, negligent. It is this negligence that is the basis of petitioner's liability,
as principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.

Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July
24, 1987 entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico
and Kee did not inform the Court of Appeals of such deal.

The deed of sale contained the following provision:

1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending
appeal with the Court of Appeals, regardless of the outcome of the decision
shall be mutually disregarded and shall not be pursued by the parties herein
and shall be considered dismissed and without effect whatso-ever; 16

Kee asserts though that the "terms and conditions in said deed of sale are strictly for
the parties thereto" and that "(t)here is no waiver made by either of the parties in
said deed of whatever favorable judgment or award the honorable respondent Court
of Appeals may make in their favor against herein petitioner Pleasantville
Development Corporation and/or private respondent C.T. Torres Enterprises; Inc." 17

Obviously, the deed of sale can have no effect on the liability of petitioner. As we have
earlier stated, petitioner's liability is grounded on the negligence of its agent. On the
other hand, what the deed of sale regulates are the reciprocal rights of Kee and
Jardinico; it stressed that they had reached an agreement independent of the
outcome of the case.

Petitioner further assails the following holding of the Court of Appeals:

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

Development Corporation are solidarily liable under the following
circumstances:

a. If Eldred Jardinico decides to appropriate the improvements and,

thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the improvements
thus destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants
shall answer for the amount representing the value of Lot 9 that Kee
should pay to Jardinico. 18

Petitioner contends that if the above holding would be carried out, Kee would be
 65

unjustly enriched at its expense. In other words, Kee would be able to own the lot, as
buyer, without having to pay anything on it, because the aforequoted portion of
respondent Court's Decision would require petitioner and CTTEI jointly and
solidarily to "answer" or reimburse Kee therefor.

We agree with petitioner.

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

The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and
owner in good faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of
the Civil Code). It was error for the Court of Appeals to make a "slight modification"
in the application of such law, on the ground of "equity". At any rate, as it stands
now, Kee and Jardinico have amicably settled through their deed of sale their rights
and obligations with regards to Lot 9. Thus, we delete items 2 (a) and (b) of the
dispositive portion of the Court of Appeals' Decision [as reproduced above] holding
petitioner and CTTEI solidarily liable.

The Third Issue: Attorney's Fees

The MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00
and P700.00, respectively, as prayed for in his complaint. The RTC deleted the
award, consistent with its ruling that petitioner was without fault or negligence. The
Court of Appeals, however, reinstated the award of attorney's fees after ruling that
petitioner was liable for its agent's negligence.

The award of attorney's fees lies within the discretion of the court and depends upon
the circumstances of each case 19 . We shall not interfere with the discretion of the
Court of Appeals. Jardinico was compelled to litigate for the protection of his
interests and for the recovery of damages sustained as a result of the negligence of
petitioner's agent 20 .

In sum, we rule that Kee is a builder in good faith. The disposition of the Court of
Appeals that Kee "is entitled to the rights granted him under Articles 448, 546 and
548 of the New Civil Code" is deleted, in view of the deed of sale entered into by Kee
and Jardinico, which deed now governs the rights of Jardinico and Kee as to each
other. There is also no further need, as ruled by the appellate Court, to remand the
case to the court of origin "for determination of the actual value of the improvements
and the property (Lot 9), as well as for further proceedings in conformity with Article
448 of the New Civil Code."

WHEREFORE , the petition is partially GRANTED. The Decision of the Court of

Appeals is hereby MODIFIED as follows:
 66

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

(2) Petitioner Pleasantville Development Corporation and respondent C.T.

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

(3) Petitioner Pleasantville Development Corporation and respondent C.T.

Torres Enterprises, Inc. are ordered to pay in solidum the amount of
P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses; and

(4) The award of rentals to Jardinico is dispensed with.

SO ORDERED.

Navasa, C.J., Davide, Jr. and Melo, JJ., concur.

Francisco, J., took no part.

Footnotes
1 
Rollo, pp. 37-46.
2 
Eleventh Division, composed of J. Alfredo L. Benipayo, ponente, and JJ.
Lorna S. Lombos-dela Fuente, chair, and Ricardo J. Francisco, member.
3 
Rollo, pp. 28-29.
4 
Rollo, pp. 30-31.
5 
Rollo, p. 34.
6 
Rollo, p. 35.
7 
Rollo, pp. 45-46.
8 
Rollo, pp. 43-44.
9 
Floreza vs. Evangelista, 96 SCRA 130 (February 21, 1980); cf. Art. 526, Civil
Code of the Philippines.
10 
Art. 527, Civil Code of the Philippines.
11 
Rollo, p. 17.
12 
Art. 6, Civil Code of the Philippines; see Canete vs. San Antonio Agro-
Industrial Development Corp., 113 SCRA 723 (April 27, 1982).
 67

13 
Rollo, p. 19.
14 
Lopez vs. Alvendia, 120 Phil. 1424 (December 24, 1964); cf. Art. 1910, Civil
Code.
15 
BA Finance Corporation vs. Court of Appeals, 211 SCRA 112 (July 3, 1992);
Art. 1897, Civil Code.
16 
Rollo, p. 47.
17 
Rollo, p. 61.
18 
Rollo, pp. 9-10.
19 
Universal Shipping Lines, Inc. vs. Intermediate Appellate Court,  188 SCRA
170 (July 31, 1990).
20 
Art. 2208, Civil Code of the Philippines.

FELICES v IRIOLA (G.R. No. 11269, February 28, 1958)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-11269             February 28, 1958

SILVERIO FELICES, plaintiff-appellee,
vs.
MAMERTO IRIOLA, defendant-appellant.

Ezekiel S. Grageda for appellant.

Reyes & Dy-Liaco for appellee.

REYES, J.B.L., J.:

Originally brought to the Court of Appeals, this appeal was certified to us by that
Court on the ground that it does not raise any genuine issue of fact.

It appears that plaintiff and appellee Silverio Fences was the grantee of a homestead
of over eight hectares located in barrio Curry, Municipality of Pili, Province of
 68

Camarines Sur, under Homestead Patent No. V-2117 dated January 26, 1949, and by
virtue of which he was issued Original Certificate of Title No. 104 over said property.
The month following the issuance of his patent, on February 24, 1949, appellee
conveyed in conditional sale to defendant and appellant Mamerto Iriola a portion of
his homestead of more than four hectares, for the consideration of P1,700. The
conveyance (Exh. 1) expressly stipulates that the sale was subject to the provisions of
Sec. 119 of Act 141, as amended, and to the prohibitions spread on the vendor's
patent; and that after the lapse of five years or as soon as may be allowed by law, the
vendor or his successors would execute in vendee's favor a deed of absolute sale over
the land in question.

Two years after the sale, on April 19, 1951, appellee tried to recover the land in
question from appellant, but the latter refused to allow it unless he was paid the
amount of P2,000 as the alleged value of improvements he had introduced on the
property. In view of appellant's persistent refusal, plaintiff deposited the received
price in court and filed this action on October 4, 1951.

In the court below, appellant, while recognizing appellee's right to "redeem", insisted
that he must first be reimbursed, the value of his improvements. Whereupon, the
court appointed a commissioner to ascertain the nature and value of the alleged
improvements, and thereafter found that said improvements were made by
defendant either after plaintiff had informed him of his intention to recover the land,
or after the complaint had been filed; some of the improvements were even
introduced after a commissioner had already been appointed to appraise their value.
Wherefore, the lower court held defendant in bad faith and not entitled to
reimbursement for his improvements. Defendant was, likewise, ordered to accept the
amount of P1,700 deposited by plaintiff in court, to execute in favor of the latter the
corresponding deed of reconveyance, and to restore him in possession of the land in
question.

At the outset, it must be made clear that as the sale in question was executed by the
parties within the five-year prohibitive period under section 118 of the Public Land
Law, the same is absolutely null and void and ineffective from its inception.
Consequently, appellee never lost his title or ownership over the land in question,
and there was no need either for him to repurchase the same from appellant, or for
the latter to execute a deed of reconveyance in his favor. The case is actually for
mutual restitution, incident to the nullity ab initio of the conveyance. .

The question now is: May appellant recover or be reimbursed the value of his
improvements on the land in question, on the theory that as both he and appellee
knew that their sale was illegal and void, they were both in bad faith and
consequently, Art. 453 of the Civil Code applies in that "the rights of one and the
other shall be the same as though both had acted in good faith"?

The rule of Art. 453 of the Civil Code invoked by appellant1 can not be applied to the
instant case for the reason that the lower court found, and appellant admits, that the
improvements in question were made on the premises only after appellee had tried
to recover the land in question from appellant, and even during the pendency of this
action in the court below. After appellant had refused to restore the land to the
appellee, to the extent that the latter even had to resort to the present action to
recover his property, appellee could no longer be regarded as having impliedly
 69

assented or conformed to the improvements thereafter made by appellant on the

premises. Upon the other hand, appellant, recognizing as he does appellee's right to
get back his property, continued to act in bad faith when he made improvements on
the land in question after he had already been asked extra-judicially and judicially, to
surrender and return its possession to appellee; and as a penalty for such bad faith,
he must forfeit his improvements without any right to reimbursement therefor. "He
who builds, plants or sows in bad faith on the land of another, loses that is built,
planted, or sown without right to indemnity" (Art. 449, New Civil Code).

Wherefore, the judgment appealed from is affirmed, with the sole modification that
appellant need not execute a deed of reconveyance in appellee's favor, the original
conveyance being hereby declared void ab initio. Costs against appellant Mamerto
Iriola. So ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador,

Concepcion, Endencia and Felix, JJ., concur.

Footnotes
1
 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.

PECSON v CA (G.R. No. 105360, May 25, 1993)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 105360 May 25, 1993

PEDRO P. PECSON, petitioner,
vs.
 70

THE HON. COURT OF APPEALS, ERLINDA TAN, JUAN NUGUID,

MAMERTO G. NEPOMUCENO, ANSELMO O. REGIS and REGISTER OF
DEEDS OF QUEZON CITY, respondents.

Felixbetro C. Saldi for petitioner.

Mario G. Serrano for M. Nepomuceno.

Nosce, Fernandez, Ishiwata & Barot for E. Tan and J. Nuguid.

The City Attorney for Quezon City Treasurer.

QUIASON, J.:

This is an appeal by certiorari under Rule 45 of the Revised Rules of Court from the
decision of the Court of Appeals (8th Division) in CA-G.R. CV No. 23910, entitled
"Pedro Pecson v. Erlinda Tan, et al." The said decision affirmed in toto the decision
of the Regional Trial Court, Quezon City, dismissing the complaint in Civil Case No.
Q-41471.

In Civil Case No. Q-41471, petitioner filed a complaint to annul the sale at a public
auction conducted by respondent, Anselmo O. Regis, (City Treasurer of Quezon City)
of petitioner's property for non-payment of real estate taxes, alleging that the sale
was made without prior notice to him. The complaint further alleged that petitioner
was not notified of his right to redeem the property, that the title to the property was
transferred by respondent Register of Deeds of Quezon City to respondent Mamerto
G. Nepomuceno (the buyer at the public auction) and that the latter sold the property
to respondents Erlinda Tan and Juan Nuguid.

The major issue before the trial court was whether the sale of the property by
respondent Regis was valid, which in turn depended on whether petitioner was duly
notified of the public auction. In its decision, the trial court upheld the validity of the
public auction, saying that the notices of the auction sale published in a newspaper of
general circulation were notices in rem; that the fact that the notices to the petitioner
were sent to "No. 79 Paquita Street, Sampaloc, Manila" instead of "No. 1009 Paquita
St., Sampaloc, Manila," which petitioner claimed to be the proper address to send the
notices to him, was inconsequential; and that petitioner failed to pay the real estate
taxes on the property.

In an Order dated February 8, 1989, the trial court amended its decision by adding
the statement:

The 4-door edifice of the plaintiff on the subject lot is, however, another
thing which is not a subject of the instant litigation.

On a motion for reconsideration by respondents Tan and Nuguid, the trial court in its
order dated June 16, 1989, reiterated its previous ruling that the 4-door building
constructed by petitioner on the lot in controversy was not covered by the tax sale but
 71

awarded said respondents the amount of P10,000.00 as attorney's fees.

Failing to get any relief from the Court of Appeals, petitioner went to this Court
wherein he reiterates the issue of the validity of the public auction of his property for
non-payment of taxes on the ground that the notices to him were sent to the wrong
postal address.

The records show that petitioner was the registered owner of a parcel of land in
Quezon City consisting of 256 sq. meters and covered by TCT No. 79912 of the
Registry of Deeds of Quezon City.

For non-payment of realty taxes, petitioner's property was sold at public auction on
November 12, 1980 by respondent Regis.

Notices of sale were sent to petitioner at "No. 79 Paquita Street, Sampaloc, Manila,"
and were published in the Times Journal on October 6, 13, and 30, 1980.

A final notice to exercise the right of redemption dated September 14, 1981 was sent
to petitioner at "No. 79 Paquita Street, Sampaloc, Manila."

There being no redemption made after one-year from the date of the auction sale, a
Final Bill of Sale was executed on April 19, 1982 by respondent Regis in favor of
respondent Nepomuceno.

In an order dated July 12, 1982, the Regional Trial Court, Quezon City, consolidated
title in favor of respondent Nepomuceno and directed the Register of Deeds of
Quezon City to cancel TCT No. 79912 and issue a new one in lieu thereof, in the name
of respondent Nepomuceno.

On February 3, 1983, respondent Register of Deeds canceled TCT No. 79912 in the
name of petitioner and issued TCT No. 302292 in the name of respondent
Nepomuceno.

On October 25, 1983, respondent Nepomuceno executed a Deed of Absolute Sale on

the subject property in favor of respondents Tan and Nuguid for P103,000.00.

On December 8, 1983, the Register of Deeds of Quezon City cancelled Nepomuceno's

title to the property and issued TCT No. 308506 in the names of respondents Tan
and Nuguid.

In a Rule 45 appeal, as in this case, this Court can only pass upon questions of law.
The issues raised by the petition involve only questions of fact. These are:

(1) Were the notices required under Section 73 of the Real Property Tax Code
properly sent to the delinquent taxpayer? (Petition, pp. 4-12; Rollo, pp. 5-13)

(2) Were respondents Erlinda Tan and Juan Nuguid buyers in good faith? (Petition,
pp. 13-14; Rollo, pp. 14-15)

(3) Were the requirements of posting and announcement of the sale under the Real
 72

Property Tax Code complied with? (Petition, pp. 12-13; Rollo, pp. 13-14)

Petitioner argues that respondent Regis sent the notices to him at "No. 79 Paquita
St., Sampaloc, Manila" which was not his address. He claims that his correct Manila
address is "No. 1009 Paquita St., Sampaloc" and his correct Quezon City address is
"No. 79, Kamias Road, Quezon City." He admits that on the dates the notices were
mailed, he was no longer residing in Manila but in Quezon City.

The governing law in this case is P.D. No. 464, known as the Real Property Tax Code.
Section 73 thereof, with the epigraph "Advertisement of sale of real property at
public auction," in pertinent part, provides:

xxx xxx xxx

Copy of notices shall forthwith be sent either by registered mail or by

messenger, or through the barrio captain, to the delinquent taxpayer, at
the address as shown in the tax rolls or property tax record cards of the
municipality or city where the property is located, or at his residence, if
known to said treasurer or barrio captain. Provided, however, that a
return of the proof of service under oath shall be filed by the person
making the service with the provincial or city treasurer concerned.

Under the said provisions of the law, notices of the sale of the public auction may be
sent to the delinquent taxpayer, either (i) at the address as shown in the tax rolls or
property tax record cards of the municipality or city where the property is located or
(ii) at his residence, if known to such treasurer or barrio captain.

Petitioner does not claim that the notices issued from 1980 to 1983 should have been
sent to him at his residence in "No. 79 Kamias Road, Quezon City," his residence
since 1965 and where the property in litigation is located. What he claims is that the
notices should have been sent to him at his address at "No. 1009 Paquita St.,
Sampaloc" even if he was no longer residing there because letters sent to him at the
said address were forwarded to him by the occupants of his former house. As found
by the Court of Appeals, what appeared in the records of the Office of the City
Treasurer of Quezon City as the address of petitioner was "1009 Paquita, Manila,"
and below the number 1009 was the number "79". From this entry, one can deduce
that the taxpayer had transferred his residence to "No. 79 Paquita, Sampaloc,
Manila" from "No. 1009 Paquita, Sampaloc, Manila". In the register for the tax years
starting from 1982 (Exh. S; also Exh. 3), the address of petitioner was recorded as
"79 Paquita, Mla." The Court of Appeals advanced the theory that the number "79"
was furnished by petitioner himself, basing its conclusion on the address given by
petitioner in his complaint, which was "No. 79 Kamias Road, Quezon City."

The Court of Appeals concluded that the employees in charge of sending notices in
the Treasurer's Office were not blameworthy in relying on the available tax records.

Petitioner's contention that he would have received the notices had they been sent to
"No. 1009 Paquita, Sampaloc, Manila," because the occupants thereof forwarded the
letters addressed to him to his Quezon City residence, loses force when one considers
that the Court of First Instance of Quezon City sent him a notice, in connection with
 73

the proceedings for the consolidation of title, at "No. 1009 Paquita St., Sampaloc,
Manila," which remained "unclaimed".

For this misfortune that befell petitioner, he has nobody to blame but himself. As a
property owner and a school teacher at that, he should know that if an owner fails to
pay the real estate taxes on property, the said property shall be sold at public auction
to recover the delinquent taxes. When petitioner's property was sold at a public
auction in December 1980, the tax delinquency must have accumulated for several
years. It was only on July 12, 1982 that the order for consolidation of title in the
name of respondent Nepomuceno was issued and it was only on December 8, 1983
that the title over the property was transferred to respondents Tan and Nuguid. All
throughout these years, petitioner never displayed an interest in paying the real
estate taxes on the property. Worse, he introduced improvements thereon without
reporting the same for tax purposes. Had he reported the improvements he had
introduced on the property, the Office of the Treasurer of Quezon City could have
been informed of petitioner's new address in Quezon City.

Petitioner also questions the evidence presented by respondent Regis regarding his
compliance with the requirements of the Real Property Tax Code on the posting and
announcement of notices of the sale. (Petition, pp. 9-13; Rollo, pp. 10-14) In this
regard, said respondent presented the certificates-affidavits of eight employees under
the supervision of the Market Superintendent and two employees of the City
Treasurer's Office. Like the issue of whether respondents Tan and Nuguid were
buyers in good faith, the issue on the compliance with the posting of the notices and
announcement of the sale, is a question of fact which this Court will not inquire into
and review the evidence relied upon by the lower courts to support their findings
(Banaag v. Bartolome, 204 SCRA 924 [1991]; Ching Sui Yong v. Intermediate
Appellate Court, 191 SCRA 187 [1990]).

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
appealed from is AFFIRMED.

SO ORDERED.

Cruz, Griño-Aquino and Bellosillo, JJ., concur.

SPOUSES NUGUID v CA (G.R. No. 151815, February 13, 2005)

 74

FIRST DIVISION

G.R. No. 151815             February 23, 2005

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners,

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

DECISION

QUISUMBING, J.:

This is a petition for review on certiorari of the Decision1 dated May 21, 2001, of the
Court of Appeals in CA-G.R. CV No. 64295, which modified the Order dated July 31,
1998 of the Regional Trial Court (RTC) of Quezon City, Branch 101 in Civil Case No.
Q-41470. The trial court ordered the defendants, among them petitioner herein Juan
Nuguid, to pay respondent herein Pedro P. Pecson, the sum of ₱1,344,000 as
reimbursement of unrealized income for the period beginning November 22, 1993 to
December 1997. The appellate court, however, reduced the trial court’s award in
favor of Pecson from the said ₱1,344,000 to ₱280,000. Equally assailed by the
petitioners is the appellate court’s Resolution2 dated January 10, 2002, denying the
motion for reconsideration.

It may be recalled that relatedly in our Decision dated May 26, 1995, in G.R. No.
115814, entitled Pecson v. Court of Appeals, we set aside the decision of the Court of
Appeals in CA-G.R. SP No. 32679 and the Order dated November 15, 1993, of the
RTC of Quezon City, Branch 101 and remanded the case to the trial court for the
determination of the current market value of the four-door two-storey apartment
building on the 256-square meter commercial lot.

The antecedent facts in this case are as follows:

Pedro P. Pecson owned a commercial lot located at 27 Kamias Road, Quezon City, on
which he built a four-door two-storey apartment building. For failure to pay realty
taxes, the lot was sold at public auction by the City Treasurer of Quezon City to
Mamerto Nepomuceno, who in turn sold it for ₱103,000 to the spouses Juan and
Erlinda Nuguid.

Pecson challenged the validity of the auction sale before the RTC of Quezon City in
Civil Case No. Q-41470. In its Decision,3 dated February 8, 1989, the RTC upheld the
 75

spouses’ title but declared that the four-door two-storey apartment building was not
included in the auction sale.4 This was affirmed in toto by the Court of Appeals and
thereafter by this Court, in its Decision5 dated May 25, 1993, in G.R. No. 105360
entitled Pecson v. Court of Appeals.

On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid decision in
G.R. No. 105360, the Nuguids became the uncontested owners of the 256-square
meter commercial lot.

As a result, the Nuguid spouses moved for delivery of possession of the lot and the
apartment building.

In its Order6 of November 15, 1993, the trial court, relying upon Article 5467 of the
Civil Code, ruled that the Spouses Nuguid were to reimburse Pecson for his
construction cost of ₱53,000, following which, the spouses Nuguid were entitled to
immediate issuance of a writ of possession over the lot and improvements. In the
same order the RTC also directed Pecson to pay the same amount of monthly rentals
to the Nuguids as paid by the tenants occupying the apartment units or ₱21,000 per
month from June 23, 1993, and allowed the offset of the amount of ₱53,000 due
from the Nuguids against the amount of rents collected by Pecson from June 23,
1993 to September 23, 1993 from the tenants of the apartment. 8

Pecson duly moved for reconsideration, but on November 8, 1993, the RTC issued a
Writ of Possession,9 directing the deputy sheriff to put the spouses Nuguid in
possession of the subject property with all the improvements thereon and to eject all
the occupants therein.

Aggrieved, Pecson then filed a special civil action for certiorari and prohibition
docketed as CA-G.R. SP No. 32679 with the Court of Appeals.

In its decision of June 7, 1994, the appellate court, relying upon Article 448 10 of the
Civil Code, affirmed the order of payment of construction costs but rendered the
issue of possession moot on appeal, thus:

WHEREFORE, while it appears that private respondents [spouses Nuguid] have not

yet indemnified petitioner [Pecson] with the cost of the improvements, since Annex I
shows that the Deputy Sheriff has enforced the Writ of Possession and the premises
have been turned over to the possession of private respondents, the quest of
petitioner that he be restored in possession of the premises is rendered moot and
academic, although it is but fair and just that private respondents pay petitioner the
construction cost of P53,000.00; and that petitioner be ordered to account for any
and all fruits of the improvements received by him starting on June 23, 1993, with
the amount of P53,000.00 to be offset therefrom.

IT IS SO ORDERED.11 [Underscoring supplied.]

Frustrated by this turn of events, Pecson filed a petition for review docketed as G.R.
No. 115814 before this Court.

On May 26, 1995, the Court handed down the decision in G.R. No 115814, to wit:
 76

WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the
Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in
Civil Case No. Q-41470 are hereby SET ASIDE.

The case is hereby remanded to the trial court for it to determine the current market
value of the apartment building on the lot. For this purpose, the parties shall be
allowed to adduce evidence on the current market value of the apartment
building. The value so determined shall be forthwith paid by the private respondents
[Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwise the
petitioner shall be restored to the possession of the apartment building until
payment of the required indemnity.

No costs.

SO ORDERED.12 [Emphasis supplied.]

In so ruling, this Court pointed out that: (1) Article 448 of the Civil Code is not
apposite to the case at bar where the owner of the land is the builder, sower, or
planter who then later lost ownership of the land by sale, but may, however, be
applied by analogy; (2) the current market value of the improvements should be
made as the basis of reimbursement; (3) Pecson was entitled to retain ownership of
the building and, necessarily, the income therefrom; (4) the Court of Appeals erred
not only in upholding the trial court’s determination of the indemnity, but also in
ordering Pecson to account for the rentals of the apartment building from June 23,
1993 to September 23, 1993.

On the basis of this Court’s decision in G.R. No. 115814, Pecson filed a Motion to
Restore Possession and a Motion to Render Accounting, praying respectively for
restoration of his possession over the subject 256-square meter commercial lot and
for the spouses Nuguid to be directed to render an accounting under oath, of the
income derived from the subject four-door apartment from November 22, 1993 until
possession of the same was restored to him.

In an Order13 dated January 26, 1996, the RTC denied the Motion to Restore
Possession to the plaintiff averring that the current market value of the building
should first be determined. Pending the said determination, the resolution of the
Motion for Accounting was likewise held in abeyance.

With the submission of the parties’ assessment and the reports of the subject realty,
and the reports of the Quezon City Assessor, as well as the members of the duly
constituted assessment committee, the trial court issued the following Order 14 dated
October 7, 1997, to wit:

On November 21, 1996, the parties manifested that they have arrived at a
compromise agreement that the value of the said improvement/building is
₱400,000.00 The Court notes that the plaintiff has already received ₱300,000.00.
However, when defendant was ready to pay the balance of ₱100,000.00, the plaintiff
now insists that there should be a rental to be paid by defendants. Whether or not
this should be paid by defendants, incident is hereby scheduled for hearing on
November 12, 1997 at 8:30 a.m.
 77

Meantime, defendants are directed to pay plaintiff the balance of ₱100,000.00.

SO ORDERED.15

On December 1997, after paying the said ₱100,000 balance to Pedro Pecson the
spouses Nuguid prayed for the closure and termination of the case, as well as the
cancellation of the notice of lis pendens on the title of the property on the ground
that Pedro Pecson’s claim for rentals was devoid of factual and legal bases. 16

After conducting a hearing, the lower court issued an Order dated July 31, 1998,
directing the spouses to pay the sum of ₱1,344,000 as reimbursement of the
unrealized income of Pecson for the period beginning November 22, 1993 up to
December 1997. The sum was based on the computation of ₱28,000/month rentals
of the four-door apartment, thus:

The Court finds plaintiff’s motion valid and meritorious. The decision of the Supreme
Court in the aforesaid case [Pecson vs. Court of Appeals, 244 SCRA 407] which set
aside the Order of this Court of November 15, 1993 has in effect upheld plaintiff’s
right of possession of the building for as long as he is not fully paid the value thereof.
It follows, as declared by the Supreme Court in said decision that the plaintiff is
entitled to the income derived therefrom, thus –

...

Records show that the plaintiff was dispossessed of the premises on November 22,
1993 and that he was fully paid the value of his building in December 1997.
Therefore, he is entitled to the income thereof beginning on November 22, 1993, the
time he was dispossessed, up to the time of said full payment, in December 1997, or a
total of 48 months.

The only question left is the determination of income of the four units of apartments
per month. But as correctly pointed out by plaintiff, the defendants have themselves
submitted their affidavits attesting that the income derived from three of the four
units of the apartment building is P21,000.00 or P7,000.00 each per month, or
P28,000.00 per month for the whole four units. Hence, at P28,000.00 per month,
multiplied by 48 months, plaintiff is entitled to be paid by defendants the amount of
P1,344,000.00.17

The Nuguid spouses filed a motion for reconsideration but this was denied for lack of
merit.18

The Nuguid couple then appealed the trial court’s ruling to the Court of Appeals,
their action docketed as CA-G.R. CV No. 64295.

In the Court of Appeals, the order appealed from in CA-G.R. CV No. 64295, was
modified. The CA reduced the rentals from ₱1,344,000 to ₱280,000 in favor of the
appellee.19 The said amount represents accrued rentals from the determination of the
current market value on January 31, 199720 until its full payment on December 12,
1997.
 78

Hence, petitioners state the sole assignment of error now before us as follows:

THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS LIABLE TO PAY

RENT OVER AND ABOVE THE CURRENT MARKET VALUE OF THE
IMPROVEMENT WHEN SUCH WAS NOT PROVIDED FOR IN THE DISPOSITIVE
PORTION OF THE SUPREME COURT’S RULING IN G.R. No. 115814.

Petitioners call our attention to the fact that after reaching an agreed price of
₱400,000 for the improvements, they only made a partial payment of ₱300,000.
Thus, they contend that their failure to pay the full price for the improvements will,
at most, entitle respondent to be restored to possession, but not to collect any
rentals. Petitioners insist that this is the proper interpretation of the dispositive
portion of the decision in G.R. No. 115814, which states in part that "[t]he value so
determined shall be forthwith paid by the private respondents [Spouses Juan and
Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwise the petitioner shall be
restored to the possession of the apartment building until payment of the required
indemnity."21

Now herein respondent, Pecson, disagrees with herein petitioners’ contention. He

argues that petitioners are wrong in claiming that inasmuch as his claim for rentals
was not determined in the dispositive portion of the decision in G.R. No. 115814, it
could not be the subject of execution. He points out that in moving for an accounting,
all he asked was that the value of the fruits of the property during the period he was
dispossessed be accounted for, since this Court explicitly recognized in G.R. No.
115814, he was entitled to the property. He points out that this Court ruled that "[t]he
petitioner [Pecson] not having been so paid, he was entitled to retain ownership of
the building and, necessarily, the income therefrom."22 In other words, says
respondent, accounting was necessary. For accordingly, he was entitled to rental
income from the property. This should be given effect. The Court could have very
well specifically included rent (as fruit or income of the property), but could not have
done so at the time the Court pronounced judgment because its value had yet to be
determined, according to him. Additionally, he faults the appellate court for
modifying the order of the RTC, thus defeating his right as a builder in good faith
entitled to rental from the period of his dispossession to full payment of the price of
his improvements, which spans from November 22, 1993 to December 1997, or a
period of more than four years.

It is not disputed that the construction of the four-door two-storey apartment,

subject of this dispute, was undertaken at the time when Pecson was still the owner
of the lot. When the Nuguids became the uncontested owner of the lot on June 23,
1993, by virtue of entry of judgment of the Court’s decision, dated May 25, 1993, in
G.R. No. 105360, the apartment building was already in existence and occupied by
tenants. In its decision dated May 26, 1995 in G.R. No. 115814, the Court declared the
rights and obligations of the litigants in accordance with Articles 448 and 546 of the
Civil Code. These provisions of the Code are directly applicable to the instant case.

Under Article 448, the landowner is given the option, either to appropriate the
improvement as his own upon payment of the proper amount of indemnity or to sell
the land to the possessor in good faith. Relatedly, Article 546 provides that a builder
in good faith is entitled to full reimbursement for all the necessary and useful
 79

expenses incurred; it also gives him right of retention until full reimbursement is
made.

While the law aims to concentrate in one person the ownership of the land and the
improvements thereon in view of the impracticability of creating a state of forced co-
ownership,23 it guards against unjust enrichment insofar as the good-faith builder’s
improvements are concerned. The right of retention is considered as one of the
measures devised by the law for the protection of builders in good faith. Its object is
to guarantee full and prompt reimbursement as it permits the actual possessor to
remain in possession while he has not been reimbursed (by the person who defeated
him in the case for possession of the property) for those necessary expenses and
useful improvements made by him on the thing possessed. 24 Accordingly, a builder in
good faith cannot be compelled to pay rentals during the period of retention 25 nor be
disturbed in his possession by ordering him to vacate. In addition, as in this case, the
owner of the land is prohibited from offsetting or compensating the necessary and
useful expenses with the fruits received by the builder-possessor in good faith.
Otherwise, the security provided by law would be impaired. This is so because the
right to the expenses and the right to the fruits both pertain to the possessor, making
compensation juridically impossible; and one cannot be used to reduce the other. 26

As we earlier held, since petitioners opted to appropriate the improvement for

themselves as early as June 1993, when they applied for a writ of execution despite
knowledge that the auction sale did not include the apartment building, they could
not benefit from the lot’s improvement, until they reimbursed the improver in full,
based on the current market value of the property.

Despite the Court’s recognition of Pecson’s right of ownership over the apartment
building, the petitioners still insisted on dispossessing Pecson by filing for a Writ of
Possession to cover both the lot and the building. Clearly, this resulted in a violation
of respondent’s right of retention. Worse, petitioners took advantage of the situation
to benefit from the highly valued, income-yielding, four-unit apartment building by
collecting rentals thereon, before they paid for the cost of the apartment building. It
was only four years later that they finally paid its full value to the respondent.

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

The text of the decision in G.R. No. 115814 expressly exempted Pecson from liability
to pay rentals, for we found that the Court of Appeals erred not only in upholding the
trial court’s determination of the indemnity, but also in ordering him to account for
the rentals of the apartment building from June 23, 1993 to September 23, 1993, the
period from entry of judgment until Pecson’s dispossession. As pointed out by
Pecson, the dispositive portion of our decision in G.R. No. 115814 need not
specifically include the income derived from the improvement in order to entitle him,
as a builder in good faith, to such income. The right of retention, which entitles the
builder in good faith to the possession as well as the income derived therefrom, is
already provided for under Article 546 of the Civil Code.
 80

Given the circumstances of the instant case where the builder in good faith has been
clearly denied his right of retention for almost half a decade, we find that the
increased award of rentals by the RTC was reasonable and equitable. The petitioners
had reaped all the benefits from the improvement introduced by the respondent
during said period, without paying any amount to the latter as reimbursement for his
construction costs and expenses. They should account and pay for such benefits.

We need not belabor now the appellate court’s recognition of herein respondent’s
entitlement to rentals from the date of the determination of the current market value
until its full payment. Respondent is clearly entitled to payment by virtue of his right
of retention over the said improvement.

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision dated
May 21, 2001 of the Court of Appeals in CA-G.R. CV No. 64295 is SET ASIDE and the
Order dated July 31, 1998, of the Regional Trial Court, Branch 101, Quezon City, in
Civil Case No. Q-41470 ordering the herein petitioners, Spouses Juan and Erlinda
Nuguid, to account for the rental income of the four-door two-storey apartment
building from November 1993 until December 1997, in the amount of ₱1,344,000,
computed on the basis of Twenty-eight Thousand (₱28,000.00) pesos monthly, for a
period of 48 months, is hereby REINSTATED. Until fully paid, said amount of
rentals should bear the legal rate of interest set at six percent (6%) per annum
computed from the date of RTC judgment. If any portion thereof shall thereafter
remain unpaid, despite notice of finality of this Court’s judgment, said remaining
unpaid amount shall bear the rate of interest set at twelve percent (12%) per annum
computed from the date of said notice. Costs against petitioners.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

Footnotes
1 
Rollo, pp. 6-17. Penned by Associate Justice Fermin A. Martin, Jr., with
Associate Justices Portia Aliño-Hormachuelos, and Mercedes Gozo-Dadole
concurring.
2 
Id. at 19-20. Penned by Associate Justice Mercedes Gozo-Dadole, with
Associate Justices Portia Aliño-Hormachuelos, and Rebecca de Guia-Salvador
concurring.
3 
Records, Vol. 1, pp. 501-510.
4 
Ibid.
5 
222 SCRA 580-586.
6 
Records, Vol. 2, pp. 578-580.
 81

7 
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.
8 
Records, Vol. 2, p. 580.
9 
Id. at 587.
10 
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.
11 
Records, Vol. 2, p. 744.
12 
Pecson v. Court of Appeals, G.R. No. 115814, 26 May 1995, 244 SCRA 407,
416-417.
13 
Records, Vol. 2, pp. 706-707.
14 
Id. at 824.
15 
Ibid.
16 
Id. at 832-833.
17 
Rollo, pp. 74-75; CA Rollo, pp. 25-26; Records, Vol. 2, pp. 836-837.
18 
Records, Vol. 2, p. 861.
19 
Rollo, p. 44.
20 
Records, Vol. 2, p. 805.
21 
Rollo, p. 37.
22 
Supra, note 12 at 416.
23 
2 Edgardo L. Paras, Civil Code of the Philippines Annotated 205 (1999 ed.)
 82

citing 3 Manresa 213 (4th Ed).

24 
Ortiz v. Kayanan, No. L-32974, 30 July 1979, 92 SCRA 146, 159.
25 
San Diego v. Hon. Montesa, No. L-17985, 29 September 1962, 116 Phil. 512,
515.
26 
2 Arturo M. Tolentino, Commentaries and Jurisprudence on the Civil Code
of the Philippines 261 (1983 ed.) citing 4 Manresa 290.
27 
See Republic of the Philippines v. Hon. De Los Angeles, G.R. No. L-26112, 4
October 1971, 148-B Phil. 902, 924

COLEONGCO v REGALADO (G.R. No. L-4529, December 29, 1952)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-4529 December 29, 1952

VICENTE M. COLEONGCO, petitioner,
vs.
PEDRO F. REGALADO and LEONOR MONTILLA, respondents.

Jose Ur. Carbonell for petitioner.

Jose M. Estacion and Remigio M. Peña for respondents.

JUGO, J.:

The Court of Appeals (5th Division) rendered the following decision, the facts of
which cannot be reviewed by this court:

DECISION

FELIX, J.:

Antecedents. — Prior to September of 1944, Pedro F. Regalado was the owner

of lot No. 1205-A of plan Psd. 12393, G.L.R.O. cadastral record No. 55,
situated at barrio Mandalagan, Municipality of Bacolod, Province of Negros
Occidental, of which lot No. 157 of the subdivision plan Psd. 12395 was a
portion. In this lot there was erected a building which in September of 1944,
 83

was being occupied by the forces of the Japanese Army. In that month of
September Pedro F. Regalado sold lot No. 157 to Vicente M. Coleongco who
thus became the owner of the lot, covered by transfer certificate of title No.
663 of the Land Records of Negros Occidental. The total area of the lot was
1,000 square meters, and the land occupied by the house was 245 square
meters. Until the year of 1947, the assessed value of the whole lot and the
house was P1,156 and P4,500, respectively.

It appears from the records that Vicente M. Coleongco contended that the
house erected on lot 157 was included in the sale to him of this property, and
when the City of Bacolod was liberated by the American Forces that succeeded
the Japanese and occupied said house for about two months, Coleongco
received from the local office of the AFWESPAC as rentals for such occupation
the sum of $93.75 or P137.50. It so happened, however, that after the
American Forces vacated the house, Pedro F. Regalado occupied the same, so
Vicente M. Coleongco instituted Civil Case No. 185 of the Court of First
Instance of Negros Occidental, which on March 21, 1947, decided that the
improvement of lot No. 157, consisting of a residential house, was the property
of the defendant therein Pedro F. Regalado. From that decision Coleongco
appealed to the Court of Appeals, but on August 28, 1947, this tribunal
declared the appeal abandoned.

The case. — One month before this outcome in the Court of Appeals of said
case No. 185, or on July 21, 1947, Vicente M. Coleongco filed the complaint
that gave rise to the present action. On September 20, 1947, Pedro F.
Regalado, in consideration of the sum of P3,500, deeded and sold said house
to Leonor Montilla Vda. de Peña, who was duly apprised of the present case
that was pending against the vendor (Annex A). This transaction was
supplemented by contract Annex B, dated October 3, 1947, wherein the
vendee Leonor Montilla expressly admitted that she had knowledge of the
existence of this civil case (docket No. 718 of the Court of First Instance of
Negros Occidental) concerning the house object of the sale, assumed whatever
rights and obligations might arise with respect to such civil case, and freed
and liberated the vendor Regalado from the result of the case. Because of
these transactions between Regalado and Mrs. Montilla, on or about October
22, 1947, the plaintiff amended his complaint including Leonor Montilla as
party defendant. In the amended complaint it is prayed that after due hearing
the defendants be condemned:

1. To pay unto the plaintiff the monthly rental of sixty pesos (P60) for his
premises during the period occupied by said defendants;

2. To order the defendants to remove or clear the house from the plaintiff's
premises;

3. To pay the costs of the suit; and

4. To grant such relief or other remedies which the court may consider just
and equitable.
 84

On November 3, 1947, Atty. Vivencio T. Ibrado, signing over the title of

"Attorney for the Defendant", filed an answer to the amended complaint with
counterclaim, praying the court that:

1. The complaint of the plaintiff be dismissed, with costs against the

plaintiff;lawphil.net

2. That the Honorable Court fix the rental for the occupation of the 245 square
meters of the lot in question and that said rental be made effective only from
August 28, 1947;

3. That the plaintiff be ordered to pay to the defendant the sum of ninety-three
dollars and seventy-five cents ($93.75);

4. That the Honorable Court fix the value of the lot in question and order the
plaintiff to sell the lot to the defendant;

5. To grant such other remedies as this Honorable Court may deem just and
equitable in the premises;

Defendant Leonor Montilla did not file a separate answer to the amended
complaint, and on motion of the plaintiff the court by order of February 11,
1948, declared Leonor Montilla in default over the objection of both
defendants who claimed that the answer to the amended complaint filed by
Attorney Ibrado on November 3, 1947, used the words "defendants" in various
parts of the answer, and that it was intended to be the answer for both.

After proper proceedings and hearing, on January 3, 1949, the court rendered
judgment, the dispositive part of which, translated into English, is as
follows:lawphil.net

"In view of the foregoing, the court renders judgment in this case, sentencing
the defendants to pay the plaintiff the monthly sum of P14.06 from
September, 1945, as rentals, with legal interest thereon from the date of the
filing of the complaint in this case, and providing that the sum of $93.75 or
P187.50, its equivalent in Philippine currency, he deducted from the total sum
of said rents.

"Defendants are ordered to vacate the building from the portion of the lot on
which it is erected within the period of two months from the date this decision
becomes final, and to that end they are ordered to remove the building from
the said portion of the lot within the aforementioned period.

"The costs are taxed against the defendants."

From this decision both defendants appealed, and in this instance their
counsel maintains that the lower court erred:

1. In declaring the appellant Leonor Montilla in default;

 85

2. In sentencing the defendants to pay the plaintiff the monthly rental of

P14.06 for the portion of lot No. 157 of subdivision plan Psd-12395 from the
month of September, 1945, with legal-interest from the date of the
presentation of the complaint;

3. In ordering the appellants to remove their house from the portion of the lot
occupied by the same within the period of two months from the date its
decision becomes final; and

4. In not absolving the defendants from the complaint and in sentencing them
to pay the costs of this suit.

Discussion of the controversy. — Before the presentation of evidence at the

hearing, the parties entered into the following stipulation of facts, to wit:

"1. That the parties are all of legal age and residents of the City of Bacolod,
Philippines;

"2. That since the month of September, 1944, the plaintiff became the
registered owner of lot No. 157 of the subdivision plan Psd-12395, which is a
portion of lot No. 1205-A of subdivision plan Psd-12393, G.L.R.O. cadastral
record No. 55, situated in the City of Bacolod and described in the transfer
certificate of title No. 663 (P.R.);

"3. That be decision rendered in civil case No. 185 by this same court and
which is now final, defendant Pedro F. Regalado was declared the owner of the
building of strong materials erected on said lot;

"4. That actual assessed value of said lot is P5,625;

"5. That said building is also assessed at P4,500;

"6. That on October 30, 1946, the lot in question was assessed at P1,312.50;

"7. That said lot has an area of 1,000 square meters;

"8. That the portion of the same occupied by the building existing thereon is of
an area of 245 square meters;

"9. That in the month of September of 1947, defendant Pedro F. Regalado sold
said building to his co-defendant Leonor Montilla for the sum of P3,500, of
which amount the vendee paid the vendor, at the time of the execution of the
deed of sale, the sum of P2,000, binding herself to pay the balance of P1,500
on or before October 31, 1947. Defendants Pedro F. Regalado and Leonor
Montilla have executed a contract supplementary to the previous deed of sale,
by virtue of which said Leonor Montilla acknowledged the existence of the
present case and assumed the obligation of paying whatever rents and of
complying with whatever obligations the court would impose on the defendant
Pedro F. Regalado."
 86

Aside from this stipulation and the facts appearing in the preceding narration
of the antecedents and of the statement of the case, plaintiff-appellee declared
that he desired to take possession of the portion of the lot occupied by the
questioned building because he intended to construct his own house, as he
was then paying rents for the lease of his residence at a rate higher than the
amount he is entitled to receive as rents from the portion of the land occupied
by the building of the defendants.

A perusal of the record discloses that the present action for ejectment was

instituted on July 21, 1947, before plaintiff's appeal in Case No. 185 was finally
declared abandoned in the Court of Appeals, and the fact that in said case
Coleongco unsuccessfully claimed to be the owner of the house in litigation
does not preclude his right to depart from his former contention and to
institute these ejectment proceedings to compel the defendants to vacate his
lot and to remove therefrom the building which at first he maintained to be
his, and to further demand payment of the corresponding rentals for the
occupancy of the lot by said building from September, 1944, when he bought
the property, up to the time said building is actually removed, except, of
course, for the period that he might have occupied or used that building. But
the record is silent about such use and all indications are that from September
of 1944, the house was first occupied by the Japanese, then by the American
Forces, after liberation, and right afterwards in September of 1945 by
defendant Regalado himself and by his successors in interest. The lower court,
however, sentenced the defendants to pay rents from September, 1945, and as
plaintiff has not appealed from that ruling, We can only consider the adequacy
of the amount fixed by the court as rentals from September, 1945.

With regard to defendant Leonor Montilla's alleged default, and despite the
considerations made by the lower court in its order of February 11, 1948, we
are of the opinion that the answer with the counterclaim filed by Attorney
Ibrado on November 3, 1947, should have been considered as submitted for
both defendants: firstly, because the attorney that filed that answer
specifically so stated; and, secondly, because the grammatical errors in the use
of the verbs in connection with the word "defendants", as for example in the
expression of "defendants alleges", should not be charged against any of them
who did not prepare that pleading and, under the circumstances, should not
be deprived of any right on account of the careless preparation thereof.
Notwithstanding this opinion, we hold that the ruling of the lower court on
this point is of no sequence, because both defendants had common interests
and the defenses, and the rights of appellant Leonor Montilla have been
properly attended to by her co-appellant Pedro F. Regalado.

The action which originally was instituted as an ejectment case for the main
purpose of causing the removal of defendants' building from plaintiff's lot —
and was filed directly in the Court of First Instance of Occidental Negros
because the right of action had accrued since September of 1944 — was
enlarged by defendants' counterclaim to include plaintiff's right of accession
prescribed in article 361 of the old Civil Code. In passing upon the merits of
the controversy on this question at issue, we may state that it is not disputed
that the building in litigation was formerly the property of Pedro F. Regalado
and presently of Leonor Montilla, that this building was constructed in good
 87

faith, and consequently, that the enjoyment and possession thereof must be
considered to have been always in good faith. Our Civil Code provides:

"ART. 358. What is built, planted or sown on another's land and any
improvements or repair made on it, belongs to the owner of the land, subject
to the provisions of the following articles.

"ART. 361. The owner of land on which anything has been built, sown or
planted, in good faith, shall be entitled to appropriate the thing so built,
sown, or planted, upon paying the compensation mentioned in articles 453
and 456, or to compel the person who has built or planned to pay him the
value of the land, and the person who sowed thereon to pay the proper rent
therefor.

"ART. 453. Necessary expenditures shall be refunded to every possessor; but

only the possessor in good faith may retain the thing until they are repaid to
him.

Useful expenditures shall be paid to the possessor in good faith with the same
right of retention, the person who has defeated him in his possession having
the option of refunding the amount of such expenditures or paying him the
increase in value which the thing has acquired by reason thereof.

"ART. 454. Expenditures purely for ostentation or mere pleasure shall not be
repaid the possessor in good faith; but he may remove the ornaments with
which he has established the principal thing if it does not suffer injury thereby
and if the successor in the possession does no prefer to refund the amount
expended.

"In view of this legal provisions, we have to declare that the right of the owner
of a lot to have the same vacated or cleared from any construction or
improvement belonging to another which built it in good faith, is to be
subordinated to and without prejudice of whatever rights the owner and
builder in good faith of the improvement may have. We, therefore, cannot now
act favorably on plaintiff's complaint for ejectment disregarding defendants'
rights either to pay for the acquisition of lot No. 157 or of being paid the value
of the building erected thereon, at the option of the plaintiff.

"As regards the amount of monthly rents that appellants were condemned to
pay the plaintiff, the following considerations must be taken into account, to
wit: (a) that although the portion of lot 157 actually occupied by the building is
of an area of 245 square meters, for the purpose of fixing the rent in this case
the assessed value of the whole lot should be had in mind, as there is no
evidence that the occupied portion of said lot had been devoted to any use
other than as site of the house in question; (b) that the amount of the rent that
defendants should have been sentenced to pay for the period of from
September, 1945, to the end of 1946 should have been fixed in accordance
with its former assessed value of P1,312.50; (c) that from January of 1947, the
assessed value of P5,625 should be the one determining the proper amount of
the rents; (d) that section 3 of Commonwealth Act No. 689 promulgated
 88

October 15, 1945, prescribes that "in the case of the lease for the occupation of
the lot, the rents shall be presumed unjust and unreasonable if the amount
thereof per annum likewise exceeds twenty per centum of the annual
assessment value of said lot"; (e) that although Executive Order No. 62, issued
on June 21, 1947, reduced the annual rent demandable to an amount not
exceeding twelve per centum of the assessed value, said Executive Order was
declared null and void for having been issued without authority of law
(Araneta vs. Dinglasan, * 45 Off. Gaz., No. 10, p. 4411); (f) that on the strength
of the provisions of law quoted, the amount of the rent that ought to have been
fixed as monthly rent in this case is P21.875 from September, 1944, up to
December, 1946, and P93.75 from January of 1947, up to the time of actual
removal of the building form the lot, or to the time when the parties would
come to an agreement as per article 361 of the old Civil Code; (g) that the
aggregate sum of such rents being greater than the amount fixed by the lower
court, and even greater than the amount that plaintiff prayed for in the
complaint, and as plaintiff has not appealed from the amount fixed in this
decision of the lower court, we are not in a position to increase or modify the
amount of the rents the defendants have been sentenced to pay to the plaintiff.

Wherefore, the decision appealed from is hereby affirmed in so far as it

condemns the defendants to pay to the plaintiff as monthly rents the sum of
P14.06 from September, 1945, with legal interest thereon from the date of the
filing of the complaint (July 21, 1947), from the total of which the sum of
P187.50 should be deducted. The decision is reversed as to the rest and this
case is returned to the lower court, with instructions to give the plaintiff an
opportunity to exercise his right of option granted to him by article 361 of the
old Civil Code, without pronouncement as to cost. It is so ordered.

ALFONSO FELIX
Associate Justice

We concur:

M. L. DE LA ROSA EMILIO PEÑA

Associate Justice Associate Justice

Coleongco contended that in September, 1944, he bought not only the lot above-
mentioned but also the house erected thereon. He instituted an action in civil case
No. 185 of the Court of First Instance of Occidental Negros, in order to be declared
the owner of the house. However, the Court of First Instance, on March 21, 1947,
decided that said house was the property of the defendant Pedro F. Regalado, not
sold to Coleongco. Coleongco appealed to the Court of Appeals but latter on said
Court declared the appeal abandoned and the decision of the Court of First Instance
became final. This decision is to the effect that Regalado, being the owner of both the
lot and the house, sold only the lot to Coleongco, retaining ownership of the house.
Consequently, Regalado or his successor Leonor Montilla should remove said house
from the lot without any compensation from Coleongco.

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
 89

361 applies only in the 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.

In view of the foregoing, the decision of the Court of Appeals is modified by ordering
Regalado and his successor Leonor Montilla to remove the above-mentioned house
from the lot of Coleongco, without any obligation on the part of the latter to pay any
compensation to Regalado or his successor Montilla. In all other respects, the
decision of the Court of Appeals is affirmed with costs against respondents Regalado
and Montilla. So ordered.

Paras, C.J., Pablo, Bengzon, Padilla, Bautista Angelo and Labrador, JJ., concur.

Natural (Accession Continua Natural)

REPUBLIC v CA (G.R. No. L-61647, October 12, 1984)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-61647 October 12, 1984

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF LANDS), petitioner,

vs.
THE HON. COURT OF APPEALS, BENJAMIN TANCINCO, AZUCENA
TANCINCO REYES, MARINA TANCINCO IMPERIAL and MARIO C.
TANCINCO, respondents.

The Solicitor General for petitioner.

Martin B. Laurea for respondents.

GUTIERREZ, JR., J.:ñé+.£ªwph!1

This is a petition for certiorari to set aside the decision of the respondent Court of
Appeals (now Intermediate Appellate Court) affirming the decision of the Court of
First Instance of Bulacan, Fifth Judicial District, Branch VIII, which found that Lots
1 and 2 of Plan Psu-131892 are accretion to the land covered by Transfer Certificate
of Title No. 89709 and ordered their registration in the names of the private
respondents.
 90

Respondents Benjamin Tancinco, Azucena Tancinco Reyes, Marina (should be

"Maria") Tancinco Imperial and Mario C. Tancinco are registered owners of a parcel
of land covered by Transfer Certificate of Title No. T-89709 situated at Barrio
Ubihan, Meycauayan, Bulacan bordering on the Meycauayan and Bocaue rivers.

On June 24, 1973, the private respondents filed an application for the registration of
three lots adjacent to their fishpond property and particularly described as
follows: têñ.£îhqwâ£

Lot 1-Psu-131892
(Maria C. Tancinco)

A parcel of land (lot 1 as shown on plan Psu-131892), situated in the

Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the NE., along line 1-2, by Lot 3 of plan Psu-131892; on the
SE., along lines 2-3-4, by Meycauayan River; on the S.W., along fines 4-
5-6-7-8-9, by Bocaue River; on the NE., along line 9-10, by property of
Joaquina Santiago; on the E., NE., and NW., along lines 10-11-12-1, by
property of Mariano Tancinco (Lot 2, Psu-111877). ... containing an
area of THIRTY THREE THOUSAND NINE HUNDRED THIRTY
SEVEN (33,937) SQUARE METERS. ...

Lot 2-Psu-131892
(Maria C. Tancinco)

A parcel of land (Lot 2 as shown on plan Psu-131892), situated in the

Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the E., along line 1-2, by property of Rafael Singson; on the
S., along line 2-3, by Meycauayan River; on the SW., along line 3-4, by
Lot 3 of plan Psu-131892; and on the N., along line 4-1, by property of
Mariano Tancinco (Lot 1, Psu-111877). ... containing an area of FIVE
THOUSAND FOUR HUNDRED FIFTY THREE (5,453) SQUARE
METERS. ...

Lot 3-Psu-131892
(Maria C. Tancinco)

A parcel of land (Lot 3 as shown on plan Psu-131892), situated in the

Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the NE., along line 1-2, by property of Mariano Tancinco
(Lot 1, Psu-111877); and along line 2-3, by Lot 2 of plan Psu-131892; on
the S., along line 3-4, by Meycauayan River, on the SW., along line 4-5,
by Lot 1 of plan Psu-131892; and along line 5-6 by property of Mariano
Tancinco (Lot 2, Psu-111877), and on the NW., along line 6-1, by
property of Joaquina Santiago. ... containing an area of ONE
THOUSAND NINE HUNDRED EIGHTY FIVE (1,985) SQUARE
METERS. ...

On April 5, 1974, Assistant Provincial Fiscal Amando C. Vicente, in representation of

the Bureau of Lands filed a written opposition to the application for registration.
 91

On March 6, 1975, the private respondents filed a partial withdrawal of the

application for registration with respect to Lot 3 of Plan Psu-131892 in line with the
recommendation of the Commissioner appointed by the Court.

On March 7, 1975, Lot 3 was ordered withdrawn from the application and trial
proceeded only with respect to Lots 1 and 2 covered by Plan Psu-131892.

On June 26, 1976, the lower court rendered a decision granting the application on
the finding that the lands in question are accretions to the private respondents'
fishponds covered by Transfer Certificate of Title No. 89709. The dispositive portion
of the decision reads: têñ.£îhqwâ£

WHEREFORE, it appearing that Lots 1 & 2 of plan Psu-131892 (Exh.

H) are accretions to the land covered by Transfer Certificate of Title No.
89709 of the Register of Deeds of Bulacan, they belong to the owner of
said property. The Court, therefore, orders the registration of lots 1 & 2
situated in the barrio of Ubihan, municipality of Meycauayan, province
of Bulacan, and more particularly described in plan Psu-131892 (Exh.
H) and their accompanying technical descriptions (Exhs. E, E-1) in
favor of Benjamin Tancinco, married to Alma Fernandez and residing
at 3662 Heatherdown, Toledo, Ohio 43614 U.S.A.; Azucena Tancinco
Reyes, married to Alex Reyes, Jr., residing at 4th St., New Manila,
Quezon City; Marina Tancinco Imperial, married to Juan Imperial,
residing at Pasay Road, Dasmariñas Village, Makati, Rizal; and Mario
C. Tancinco, married to Leticia Regidor, residing at 1616 Cypress St.,
Dasmariñas Village, Makati, Rizal, all of legal age, all Filipino citizens.

On July 30, 1976, the petitioner Republic appealed to the respondent Court of
Appeals.

On August, 19, 1982, the respondent Court rendered a decision affirming in toto the
decision of the lower court. The dispositive portion of the decision reads: têñ.
£îhqwâ£

DAHIL DITO, ang hatol na iniakyat ay sinasangayunan at pinagtitibay

sa kanyang kabuuan nang walang bayad.

The rule that the findings of fact of the trial court and the Court of Appeals are
binding upon this Court admits of certain exceptions. Thus in Carolina Industries
Inc. v. CMS Stock Brokerage, Inc. (97 SCRA 734) we held that this Court retains the
power to review and rectify the findings of fact of said courts when (1) the conclusion
is a finding grounded entirely on speculations, surmises and conjectures; (2) when
the inference made is manifestly mistaken, absurd, and impossible; (3) where there
is grave abuse of discretion, (4) when the judgment is based on a misapprehension of
facts; and (5) when the court, in making its findings, went beyond the issues of the
case and the same are contrary to the admissions of both appellant and appellee.

There are facts and circumstances in the record which render untenable the findings
of the trial court and the Court of Appeals that the lands in question are accretions to
the private respondents' fishponds.
 92

The petitioner submits that there is no accretion to speak of under Article 457 of the
New Civil Code because what actually happened is that the private respondents
simply transferred their dikes further down the river bed of the Meycauayan River,
and thus, if there is any accretion to speak of, it is man-made and artificial and not
the result of the gradual and imperceptible sedimentation by the waters of the river.

On the other hand, the private respondents rely on the testimony of Mrs. Virginia
Acuña to the effect that: têñ.£îhqwâ£

xxx xxx xxx

... when witness first saw the land, namely, Lots 1 & 2, they were
already dry almost at the level of the Pilapil of the property of Dr.
Tancinco, and that from the boundaries of the lots, for about two (2)
arms length the land was still dry up to the edge of the river; that
sometime in 1951, a new Pilapil was established on the boundaries of
Lots 1 & 2 and soil from the old Pilapil was transferred to the new
Pilapil and this was done sometime in 1951; that the new lots were then
converted into fishpond, and water in this fishpond was two (2) meters
deep on the side of the Pilapil facing the fishpond ... .

The private respondents submit that the foregoing evidence establishes the fact of
accretion without human intervention because the transfer of the dike occurred after
the accretion was complete.

We agree with the petitioner.

Article 457 of the New Civil Code provides: têñ.£îhqwâ£

To the owners of lands adjoining the banks of rivers belong the

accretion which they gradually receive from the effects of the current of
the waters.

The above-quoted article requires the concurrence of three requisites before an

accretion covered by this particular provision is said to have taken place. They are (1)
that the deposit be gradual and imperceptible; (2) that it be made through the effects
of the current of the water; and (3) that the land where accretion takes place is
adjacent to the banks of rivers.

The requirement that the deposit should be due to the effect of the current of the
river is indispensable. This excludes from Art. 457 of the New Civil Code all deposits
caused by human intervention. Alluvion must be the exclusive work of nature. In the
instant case, there is no evidence whatsoever to prove that the addition to the said
property was made gradually through the effects of the current of the Meycauayan
and Bocaue rivers. We agree with the observation of the Solicitor General that it is
preposterous to believe that almost four (4) hectares of land came into being because
of the effects of the Meycauayan and Bocaue rivers. The lone witness of the private
respondents who happens to be their overseer and whose husband was first cousin of
their father noticed the four hectare accretion to the twelve hectare fishpond only in
1939. The respondents claim that at this point in time, accretion had already taken
 93

place. If so, their witness was incompetent to testify to a gradual and imperceptible
increase to their land in the years before 1939. However, the witness testified that in
that year, she observed an increase in the area of the original fishpond which is now
the land in question. If she was telling the truth, the accretion was sudden. However,
there is evidence that the alleged alluvial deposits were artificial and man-made and
not the exclusive result of the current of the Meycauayan and Bocaue rivers. The
alleged alluvial deposits came into being not because of the sole effect of the current
of the rivers but as a result of the transfer of the dike towards the river and
encroaching upon it. The land sought to be registered is not even dry land cast
imperceptibly and gradually by the river's current on the fishpond adjoining it. It is
under two meters of water. The private respondents' own evidence shows that the
water in the fishpond is two meters deep on the side of the pilapil facing the fishpond
and only one meter deep on the side of the pilapil facing the river

The reason behind the law giving the riparian owner the right to any land or alluvion
deposited by a river is to compensate him for the danger of loss that he suffers
because of the location of his land. If estates bordering on rivers are exposed to
floods and other evils produced by the destructive force of the waters and if by virtue
of lawful provisions, said estates are subject to incumbrances and various kinds of
easements, it is proper that the risk or danger which may prejudice the owners
thereof should be compensated by the right of accretion. (Cortes v. City of Manila, 10
Phil. 567). Hence, the riparian owner does not acquire the additions to his land
caused by special works expressly intended or designed to bring about accretion.
When the private respondents transferred their dikes towards the river bed, the dikes
were meant for reclamation purposes and not to protect their property from the
destructive force of the waters of the river.

We agree with the submission of the Solicitor General that the testimony of the
private respondents' lone witness to the effect that as early as 1939 there already
existed such alleged alluvial deposits, deserves no merit. It should be noted that the
lots in question were not included in the survey of their adjacent property conducted
on May 10, 1940 and in the Cadastral Survey of the entire Municipality of
Meycauayan conducted between the years 1958 to 1960. The alleged accretion was
declared for taxation purposes only in 1972 or 33 years after it had supposedly
permanently formed. The only valid conclusion therefore is that the said areas could
not have been there in 1939. They existed only after the private respondents
transferred their dikes towards the bed of the Meycauayan river in 1951. What
private respondents claim as accretion is really an encroachment of a portion of the
Meycauayan river by reclamation.

The lower court cannot validly order the registration of Lots 1 & 2 in the names of the
private respondents. These lots were portions of the bed of the Meycauayan river and
are therefore classified as property of the public domain under Article 420 paragraph
1 and Article 502, paragraph 1 of the Civil Code of the Philippines. They are not open
to registration under the Land Registration Act. The adjudication of the lands in
question as private property in the names of the private respondents is null and void.

WHEREFORE, the instant petition is GRANTED. The decision appealed from is

hereby REVERSED and SET ASIDE. The private respondents are ordered to move
back the dikes of their fishponds to their original location and return the disputed
property to the river to which it belongs.
 94

SO ORDERED.1äwphï1.ñët

Teehankee, Actg. C.J., Melencio-Herrera, Plana, Relova and De la Fuente, JJ.,

concur.

The Lawphil Project - Arellano Law Foundation

GRANDE v CA (G.R. No. L-17652, June 30, 1962)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-17652             June 30, 1962

IGNACIO GRANDE, ET AL., petitioners,

vs.
HON. COURT OF APPEALS, DOMINGO CALALUNG, and ESTEBAN
CALALUNG, respondents.

Bartolome Guirao and Antonio M. Orara for petitioners.

Gonzales and Fernandez for respondents.

BARRERA, J.:

This is an appeal taken by petitioners Ignacio, Eulogia, Alfonso, Eulalia, and Sofia
Grande, from the decision of the Court of Appeals (CA-G.R. No. 25169-R) reversing
that of the Court of First Instance of Isabela (Civil Case No. 1171), and dismissing
petitioners' action against respondents Domingo and Esteban Calalung, to quiet title
to and recover possession of a parcel of land allegedly occupied by the latter without
petitioners' consent.

The facts of the case, which are undisputed, briefly are: Petitioners are the owners of
a parcel of land, with an area of 3.5032 hectares, located at barrio Ragan,
municipality of Magsaysay (formerly Tumauini), province of Isabela, by inheritance
from their deceased mother Patricia Angui (who inherited it from her parents Isidro
Angui and Ana Lopez, in whose name said land appears registered, as shown by
Original Certificate of Title No. 2982, issued on June 9, 1934). Said property is
identified as Lot No. 1, Plan PSU-83342. When it was surveyed for purposes of
registration sometime in 1930, its northeastern boundary was the Cagayan River (the
same boundary stated in the title). Since then, and for many years thereafter, a
gradual accretion on the northeastern side took place, by action of the current of the
 95

Cagayan River, so much so, that by 1958, the bank thereof had receded to a distance
of about 105 meters from its original site, and an alluvial deposit of 19,964 square
meters (1.9964 hectares), more or less, had been added to the registered area (Exh.
C-1).

On January 25, 1958, petitioners instituted the present action in the Court of First
Instance of Isabela against respondents, to quiet title to said portion (19,964 square
meters) formed by accretion, alleging in their complaint (docketed as Civil Case No.
1171) that they and their predecessors-in-interest, were formerly in peaceful and
continuous possession thereof, until September, 1948, when respondents entered
upon the land under claim of ownership. Petitioners also asked for damages
corresponding to the value of the fruits of the land as well as attorney's fees and
costs. In their answer (dated February 18, 1958), respondents claim ownership in
themselves, asserting that they have been in continuous, open, and undisturbed
possession of said portion, since prior to the year 1933 to the present.

After trial, the Court of First Instance of Isabela, on May 4, 1959, rendered a decision
adjudging the ownership of the portion in question to petitioners, and ordering
respondents to vacate the premises and deliver possession thereof to petitioners, and
to pay to the latter P250.00 as damages and costs. Said decision, in part, reads:

It is admitted by the parties that the land involved in this action was formed
by the gradual deposit of alluvium brought about by the action of the Cagayan
River, a navigable river. We are inclined to believe that the accretion was
formed on the northeastern side of the land covered by Original Certificate of
Title No. 2982 after the survey of the registered land in 1931, because the
surveyors found out that the northeastern boundary of the land surveyed by
them was the Cagayan River, and not the land in question. Which is indicative
of the fact that the accretion has not yet started or begun in 1931. And, as
declared by Pedro Laman, defendant witness and the boundary owner on the
northwest of the registered land of the plaintiffs, the accretion was a little
more than one hectare, including the stony portion, in 1940 or 1941.
Therefore, the declarations of the defendant Domingo Calalung and his
witness, Vicente C. Bacani, to the effect that the land in question was formed
by accretion since 1933 do not only contradict the testimony of defendants'
witness Pedro Laman, but could not overthrow the incontestable fact that the
accretion with an area of 4 hectare more or less, was formed in 1948, reason
for which, it was only declared in that same year for taxation purposes by the
defendants under Tax Dec. No. 257 (Exh. "2") when they entered upon the
land. We could not give credence to defendants' assertion that Tax Dec. No.
257 (Exh. "2") cancelled Tax Dee. No. 28226 (Exh. "1"), because Exh. "2" says
that "tax under this declaration begins with the year 1948. But, the fact that
defendants declared the land for taxation purposes since 1948, does not mean
that they become the owner of the land by mere occupancy, for it is a new
provision of the New Civil Code that ownership of a piece of land cannot be
acquired by occupation (Art. 714, New Civil Code). The land in question being
an accretion to the mother or registered land of the plaintiffs, the accretion
belongs to the plaintiffs (Art. 457, New Civil Code; Art. 366, Old Civil Code).
Assuming arguendo, that the accretion has been occupied by the defendants
since 1948, or earlier, is of no moment, because the law does not require any
act of possession on the part of the owner of the riparian owner, from the
 96

moment the deposit becomes manifest (Roxas v. Tuason, 9 Phil. 408; Cortez
v. City of Manila, 10 Phil. 567). Further, no act of appropriation on the part of
the reparian owner is necessary, in order to acquire ownership of the alluvial
formation, as the law does not require the same (3 Manresa, C.C., pp. 321-
326).

This brings us now to the determination of whether the defendants, granting

that they have been in possession of the alluvium since 1948, could have
acquired the property by prescription. Assuming that they occupied the land
in September, 1948, but considering that the action was commenced on
January 25, 1958, they have not been in possession of the land for ten (10)
years; hence, they could not have acquired the land by ordinary prescription
(Arts. 1134 and 1138, New Civil Code). Moreover, as the alluvium is, by law,
part and parcel of the registered property, the same may be considered as
registered property, within the meaning of Section 46 of Act No. 496: and,
therefore, it could not be acquired by prescription or adverse possession by
another person.

Unsatisfied, respondents appealed to the Court of Appeals, which rendered, on

September 14, 1960, the decision adverted to at the beginning of this opinion, partly
stating:

That the area in controversy has been formed through a gradual process of
alluvium, which started in the early thirties, is a fact conclusively established
by the evidence for both parties. By law, therefore, unless some superior title
has supervened, it should properly belong to the riparian owners, specifically
in accordance with the rule of natural accession in Article 366 of the old Civil
Code (now Article 457), which provides that "to the owner of lands adjoining
the banks of rivers, belongs the accretion which they gradually receive from
the effects of the current of the waters." The defendants, however, contend
that they have acquired ownership through prescription. This contention
poses the real issue in this case. The Court a quo, has resolved it in favor of the
plaintiffs, on two grounds: First, since by accession, the land in question
pertains to the original estate, and since in this instance the original estate is
registered, the accretion, consequently, falls within the purview of Section 46
of Act No. 496, which states that "no title to registered land in derogation to
that of the registered owner shall be acquired by prescription or adverse
possession"; and, second, the adverse possession of the defendant began only
in the month of September, 1948, or less than the 10-year period required for
prescription before the present action was instituted.

As a legal proposition, the first ground relied upon by the trial court, is not
quite correct. An accretion to registered land, while declared by specific
provision of the Civil Code to belong to the owner of the land as a natural
accession thereof, does not ipso jure become entitled to the protection of the
rule of imprescriptibility of title established by the Land Registration Act.
Such protection does not extend beyond the area given and described in the
certificate. To hold otherwise, would be productive of confusion. It would
virtually deprive the title, and the technical description of the land given
therein, of their character of conclusiveness as to the identity and area of the
land that is registered. Just as the Supreme Court, albeit in a negative manner,
 97

has stated that registration does not protect the riparian owner against the
erosion of the area of his land through gradual changes in the course of the
adjoining stream (Payatas Estate Development Co. v. Tuason, 53 Phil. 55), so
registration does not entitle him to all the rights conferred by Land
Registration Act, in so far as the area added by accretion is concerned. What
rights he has, are declared not by said Act, but by the provisions of the Civil
Code on accession: and these provisions do not preclude acquisition of the
addition area by another person through prescription. This Court has held as
much in the case of Galindez, et al. v. Baguisa, et al., CA-G.R. No. 19249-R,
July 17, 1959.

We now proposed to review the second ground relied upon by the trial court,
regarding the length of time that the defendants have been in possession.
Domingo Calalung testified that he occupied the land in question for the first
time in 1934, not in 1948 as claimed by the plaintiffs. The area under
occupancy gradually increased as the years went by. In 1946, he declared the
land for purposes of taxation (Exhibit 1). This tax declaration was superseded
in 1948 by another (Exhibit 2), after the name of the municipality wherein it is
located was changed from Tumauini to Magsaysay. Calalung's testimony is
corroborated by two witnesses, both owners of properties nearby. Pedro
Laman, 72 years of age, who was Municipal president of Tumauini for three
terms, said that the land in question adjoins his own on the south, and that
since 1940 or 1951, he has always known it to be in the peaceful possession of
the defendants. Vicente C. Bacani testified to the same effect, although, he
said that the defendants' possession started sometime in 1933 or 1934. The
area thereof, he said, was then less than one hectare.

We find the testimony of the said witnesses entitled to much greater weight
and credence than that of the plaintiff Pedro Grande and his lone witness,
Laureana Rodriguez. The first stated that the defendants occupied the land in
question only in 1948; that he called the latter's attention to the fact that the
land was his, but the defendants, in turn, claimed that they were the owners,
that the plaintiffs did not file an action until 1958, because it was only then
that they were able to obtain the certificate of title from the surveyor,
Domingo Parlan; and that they never declared the land in question for
taxation purposes or paid the taxes thereon. Pedro Grande admitted that the
defendants had the said land surveyed in April, 1958, and that he tried to stop
it, not because he claimed the accretion for himself and his co-plaintiffs, but
because the survey included a portion of the property covered by their title.
This last fact is conceded by the defendants who, accordingly, relinquished
their possession to the part thus included, containing an area of some 458
square meters.1äwphï1.ñët

The oral evidence for the defendants concerning the period of their possession
— from 1933 to 1958 — is not only preponderant in itself, but is, moreover,
supported by the fact that it is they and not the plaintiffs who declared the
disputed property for taxation, and by the additional circumstance that if the
plaintiff had really been in prior possession and were deprived thereof in
1948, they would have immediately taken steps to recover the same. The
excuse they gave for not doing so, namely, that they did not receive their copy
of the certificate of title to their property until 1958 for lack of funds to pay the
 98

fees of the surveyor Domingo Parlan, is too flimsy to merit any serious
consideration. The payment of the surveyor's fees had nothing to do with their
right to obtain a copy of the certificate. Besides, it was not necessary for them
to have it in their hands, in order to file an action to recover the land which
was legally theirs by accession and of which, as they allege, they had been
illegally deprived by the defendants. We are convinced, upon consideration of
the evidence, that the latter, were really in possession since 1934, immediately
after the process of alluvion started, and that the plaintiffs woke up to their
rights only when they received their copy of the title in 1958. By then,
however, prescription had already supervened in favor of the defendants.

It is this decision of the Court of Appeals which petitioners seek to be reviewed by us.

The sole issue for resolution in this case is whether respondents have acquired the
alluvial property in question through prescription.

There can be no dispute that both under Article 457 of the New Civil Code and Article
366 of the old, petitioners are the lawful owners of said alluvial property, as they are
the registered owners of the land which it adjoins. The question is whether the
accretion becomes automatically registered land just because the lot which receives it
is covered by a Torrens title thereby making the alluvial property imprescriptible. We
agree with the Court of Appeals that it does not, just as an unregistered land
purchased by the registered owner of the adjoining land does not, by extension,
become ipso facto registered land. Ownership of a piece of land is one thing, and
registration under the Torrens system of that ownership is quite 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 Acts 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 been provided. The fact
remain, however, that petitioners never sought registration of said alluvial property
(which was formed sometime after petitioners' property covered by Original
Certificate of Title No. 2982 was registered on June 9, 1934) up to the time they
instituted the present action in the Court of First Instance of Isabela in 1958. The
increment, therefore, never became registered property, and hence is not entitled or
subject to the protection of imprescriptibility enjoyed by registered property under
the Torrens system. Consequently, it was subject to acquisition through prescription
by third persons.

The next issue is, did respondents acquire said alluvial property through acquisitive
prescription? This is a question which requires determination of facts: physical
possession and dates or duration of such possession. The Court of Appeals, after
analyzing the evidence, found that respondents-appellees were in possession of the
alluvial lot since 1933 or 1934, openly, continuously and adversely, under a claim of
ownership up to the filing of the action in 1958. This finding of the existence of these
facts, arrived at by the Court of Appeals after an examination of the evidence
presented by the parties, is conclusive as to them and can not be reviewed by us.

The law on prescription applicable to the case is that provided in Act 190 and not the
 99

provisions of the Civil Code, since the possession started in 1933 or 1934 when the
pertinent articles of the old Civil Code were not in force and before the effectivity of
the new Civil Code in 1950. Hence, the conclusion of the Court of Appeals that the
respondents acquired alluvial lot in question by acquisitive prescription is in
accordance with law.

The decision of the Court of Appeals under review is hereby affirmed, with costs
against the petitioners. So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Paredes and Dizon,
JJ., concur.
Reyes, J.B.L., Regala and Makalintal, JJ., took no part.

LUNOD v MENESES (G.R. No. 4223, August 19, 1908, supra )

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 4223            August 19, 1908

NICOLAS LUNOD, ET AL., plaintiffs-appellees,

vs.
HIGINO MENESES, defendant-appellant.

T. Icasiano, for appellant.

R. Salinas, for appellee.

TORRES, J.:

On the 14th of March, 1904, Nicolas Lunod, Juan de la Vega, Evaristo Rodriguez,
Fernando Marcelo, Esteban Villena, Benito Litao, Ventura Hernandez, and Casimiro
Pantanilla, residents of the town of Bulacan, province of the same name, filed a
written complaint against Higino Meneses, alleging that they each owned and
possessed farm lands, situated in the places known as Maytunas and Balot, near a
small lake named Calalaran; that the defendant is the owner of a fish-pond and a
strip of land situated in Paraanan, adjoining the said lake on one side, and the River
Taliptip on the other; that from time immemorial, and consequently for more than
twenty years before 1901, there existed and still exists in favor of the rice fields of the
plaintiffs a statutory easement permitting the flow of water over the said land in
Paraanan, which easement the said plaintiffs enjoyed until the year 1901 and
consisted in that the water collected upon their lands and in the Calalaran Lake flow
through Paraanan into the Taliptip River. From that year however, the defendant,
 100

without any right or reason, converted the land in Paraanan into a fishpond and by
means of a dam and a bamboo net, prevented the free passage of the water through
said place into the Taliptip River, that in consequence the lands of the plaintiff
became flooded and damaged by the stagnant waters, there being no outlet except
through the land in Paraanan; that their plantation were destroyed, causing the loss
and damages to the extent of about P1,000, which loss and damage will continue if
the obstructions to the flow of the water are allowed to remain, preventing its
passage through said land and injuring the rice plantations of the plaintiffs. They
therefore asked that judgment be entered against the defendant, declaring that the
said tract of land in Paraanan is subject to a statutory easement permitting the flow
of water from the property of the plaintiffs, and that, without prejudice to the issuing
of a preliminary injunction, the defendant be ordered to remove and destroy the
obstructions that impede the passage of the waters through Paraanan, and that in
future, and forever, he abstain from closing in any manner the aforesaid tract of land;
that, upon judgment being entered, the said injunction be declared to be final and
that the defendant be sentenced to pay to the plaintiffs an indemnity of P1,000, and
the costs in the proceedings; that they be granted any other and further equitable or
proper remedy in accordance with the facts alleged and proven.

In view of the demurrer interposed by the plaintiffs to the answer of the defendant,
the latter, on the 29th of August, 1904, filed an amended answer, denying each and
everyone of the allegations of the complaint, and alleged that no statutory easement
existed nor could exist in favor of the lands described in the complaint, permitting
the waters to flow over the fish pond that he, together with his brothers, owned in the
sitio of Bambang, the area and boundaries of which were stated by him, and which he
and his brothers had inherited from their deceased mother.

Apolinara de Leon; that the same had been surveyed by a land surveyor in
September, 1881, he also denied that he had occupied or converted any land in the
barrio of Bambang into a fishpond; therefore, and to sentence the plaintiffs to pay
the costs and corresponding damages.

Upon the evidence adduced by both parties to the suit, the court, on the 13th of
March, 1907, entered judgment declaring that the plaintiffs were entitled to a
decision in their favor, and sentenced the defendant to remove the dam placed on the
east of the Paraanan passage on the side of the Taliptip River opposite the old dam in
the barrio of Bambang, as well as to remove and destroy the obstacles to the free
passage of the waters through the strip of land in Paraanan; to abstain in future, and
forever, from obstructing or closing in any manner the course of the waters through
the said strip of land. The request that the defendant be sentenced to pay an
indemnity was denied, and no ruling was made as to costs.

The defendant excepted to the above judgment and furthermore asked for a new trial
which was denied and also excepted to, and, upon approval of the bill of exceptions,
the question was submitted to this court.

Notwithstanding the defendant's denial in his amended answer, it appears to have

been clearly proven in this case that the lands owned by the plaintiffs in the aforesaid
barrio, as well as the small adjoining lake, named Calalaran, are located in places
relatively higher than the sitio called Paraanan where the land and fish pond of the
defendant are situated, and which border on the Taliptip River; that during the rainy
 101

season the rain water which falls on he land of the plaintiffs, and which flows toward
the small Calalaran Lake at flood time, has no outlet to the Taliptip River other than
through the low land of Paraanan: that the border line between Calalaran and
Paraanan there has existed from time immemorial a dam, constructed by the
community for the purpose of preventing the salt waters from the Taliptip River, at
high tide, from flooding the land in Calalaran, passing through the lowlands of
Paraanan; but when rainfall was abundant, one of the residents was designated in his
turn by the lieutenant or justice of the barrio to open the sluice gate in order to let
out the water that flooded the rice fields, through the land of Paraanan to the above-
mentioned river, that since 1901, the defendant constructed another dam along the
boundary of this fishpond in Paraanan, thereby impeding the outlet of the waters
that flood the fields of Calalaran, to the serious detriment of the growing crops.

According to article 530 of the Civil Code, an easement is charge imposed upon one
estate for the benefit of another estate belonging to a different owner, and the realty
in favor of which the easement is established is called the dominant estate, and the
one charged with it the servient estate.

The lands of Paraanan being the lower are subject to the easement of receiving and
giving passage to the waters proceeding from the higher lands and the lake of
Calalaran; this easement was not constituted by agreement between the interested
parties; it is of a statutory nature, and the law had imposed it for the common public
utility in view of the difference in the altitude of the lands in the barrio Bambang.

Article 552 of the Civil code provides:

Lower estates must receive the waters which naturally and without the
intervention of man descend from the higher estates, as well as the stone or
earth which they carry with them.

Neither may the owner of the lower estates construct works preventing this
easement, nor the one of the higher estate works increasing the burden.

Article 563 of the said code reads also:

The establishment, extent, form, and conditions of the easements of waters to

which this section refers shall be governed by the special law relating thereto
in everything not provided for in this code.

The special law cited in the Law of Waters of August 3, 1866, article 111 of which,
treating of natural easements relating to waters, provides:

Lands situated at a lower level are subject to receive the waters that flow
naturally, without the work of man, from the higher lands together with the
stone or earth which they carry with them.

Hence, the owner of the lower lands can not erect works that will impede or prevent
such an easement or charge, constituted and imposed by the law upon his estate for
the benefit of the higher lands belonging to different owners; neither can the latter do
anything to increase or extend the easement.
 102

According to the provisions of law above referred to, the defendant, Meneses, had no
right to construct the works, nor the dam which blocks the passage, through his lands
and the outlet to the Taliptip River, of the waters which flood the higher lands of the
plaintiffs; and having done so, to the detriment of the easement charged on his
estate, he has violated the law which protects and guarantees the respective rights
and regulates the duties of the owners of the fields in Calalaran and Paraanan.

It is true that article 388 of said code authorizes every owner to enclose his estate by
means of walls, ditches fences or any other device, but his right is limited by the
easement imposed upon his estate.

The defendant Meneses might have constructed the works necessary to make and
maintain a fish pond within his own land, but he was always under the strict and
necessary obligation to respect the statutory easement of waters charged upon his
property, and had no right to close the passage and outlet of the waters flowing from
the lands of the plaintiffs and the lake of Calalaran into the Taliptip River. He could
not lawfully injure the owners of the dominant estates by obstructing the outlet to the
Taliptip River of the waters flooding the upper lands belonging to the plaintiffs.

It is perhaps useful and advantageous to the plaintiffs and other owners of high lands
in Calalaran, in addition to the old dike between the lake of said place and the low
lands in Paraanan, to have another made by the defendant at the border of Paraanan
adjoining the said river, for the purpose of preventing the salt waters of the Taliptip
River flooding, at high tide, not only the lowlands in Paraanan but also the higher
ones of Calalaran and its lake, since the plaintiffs can not prevent the defendant from
protecting his lands against the influx of salt water; but the defendant could never be
permitted to obstruct the flow of the waters through his lands to the Taliptip River
during the heavy rains, when the high lands in Calalaran and the lake in said place
are flooded, thereby impairing the right of the owners of the dominant estates.

For the above reasons, and accepting the findings of the court below in the judgment
appealed from in so far as they agree with the terms of this decision, we must and do
hereby declare that the defendant, Higino Meneses, as the owner of the servient
estate, is obliged to give passage to and allow the flow of the waters descending from
the Calalaran Lake and from the land of the plaintiffs through his lands in Paraanan
for their discharge into the Taliptip River; and he is hereby ordered to remove any
obstacle that may obstruct the free passage of the waters whenever there may be
either a small or large volume of running water through his lands in the sitio of
Paraanan for their discharge into the Taliptip River; and in future to abstain from
impeding, in any manner, the flow of the waters coming from the higher lands. The
judgment appealed from is affirmed, in so far as it agrees with decision, and reversed
in other respects, with the costs of this instance against the appellants. So ordered.

Carson, Willard and Tracey, JJ., concur.

 103

NAVARRO v. IAC (G.R. No. 68166, February 12, 1997)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 68166 February 12, 1997

HEIRS OF EMILIANO NAVARRO, petitioner,

vs.
INTERMEDIATE APPELLATE COURT & HEIRS OF SINFOROSO
PASCUAL, respondents.

HERMOSISIMA, JR., J.:

Unique is the legal question visited upon the claim of an applicant in a Land
Registration case by oppositors thereto, the Government and a Government lessee,
involving as it does ownership of land formed by alluvium.

The applicant owns the property immediately adjoining the land sought to be
registered. His registered property is bounded on the east by the Talisay River, on the
west by the Bulacan River, and on the north by the Manila Bay. The Talisay River and
the Bulacan River flow down towards the Manila Bay and act as boundaries of the
applicant's registered land on the east and on the west.

The land sought to be registered was formed at the northern tip of the applicant's
land. Applicant's registered property is bounded on the north by the Manila Bay.

The issue: May the land sought to be registered be deemed an accretion in the sense
that it naturally accrues in favor of the riparian owner or should the land be
considered as foreshore land?

Before us is a petition for review of: (1) the decision 1 and (2) two subsequent
resolutions 2 of the Intermediate Appellate Court 3 (now the Court of Appeals) in
 104

Land Registration Case No. N-84, 4 the application over which was filed by private
respondents' predecessor-in-interest, Sinforoso Pascual, now deceased, before the
Court of First Instance 5 (now the Regional Trial Court) of Balanga, Bataan.

There is no dispute as to the following facts:

On October 3, 1946, Sinforoso Pascual, now deceased, filed an application for

foreshore lease covering a tract of foreshore land in Sibocon, Balanga, Bataan, having
an area of approximately seventeen (17) hectares. This application was denied on
January 15, 1953. So was his motion for reconsideration.

Subsequently, petitioners' predecessor-in-interest, also now deceased, Emiliano

Navarro, filed a fishpond application with the Bureau of Fisheries covering twenty
five (25) hectares of foreshore land also in Sibocon, Balanga, Bataan. Initially, such
application was denied by the Director of Fisheries on the ground that the property
formed part of the public domain. Upon motion for reconsideration, the Director of
Fisheries, on May 27, 1958, gave due course to his application but only to the extent
of seven (7) hectares of the property as may be certified by the Bureau of Forestry as
suitable for fishpond purposes.

The Municipal Council of Balanga, Bataan, had opposed Emiliano Navarro's

application. Aggrieved by the decision of the Director of Fisheries, it appealed to the
Secretary of Natural Resources who, however, affirmed the grant. The then Executive
Secretary, acting in behalf of the President of the Philippines, similarly affirmed the
grant.

On the other hand, sometime in the early part of 1960, Sinforoso Pascual flied an
application to register and confirm his title to a parcel of land, situated in Sibocon,
Balanga, Bataan, described in Plan Psu-175181 and said to have an area of 146,611
square meters. Pascual claimed that this land is an accretion to his property, situated
in Barrio Puerto Rivas, Balanga, Bataan, and covered by Original Certificate of Title
No. 6830. It is bounded on the eastern side by the Talisay River, on the western side
by the Bulacan River, and on the northern side by the Manila Bay. The Talisay River
as well as the Bulacan River flow downstream and meet at the Manila Bay thereby
depositing sand and silt on Pascual's property resulting in an accretion thereon.
Sinforoso Pascual claimed the accretion as the riparian owner.

On March 25, 1960, the Director of Lands, represented by the Assistant Solicitor
General, filed an opposition thereto stating that neither Pascual nor his
predecessors-in-interest possessed sufficient title to the subject property, the same
being a portion of the public domain and, therefore, it belongs to the Republic of the
Philippines. The Director of Forestry, through the Provincial Fiscal, similarly
opposed Pascual's application for the same reason as that advanced by the Director
of Lands. Later on, however, the Director of Lands withdrew his opposition. The
Director of Forestry become the sole oppositor.

On June 2, 1960, the court a quo issued an order of general default excepting the
Director of Lands and the Director of Forestry.

Upon motion of Emiliano Navarro, however, the order of general default was lifted
 105

and, on February 13, 1961, Navarro thereupon filed an opposition to Pascual's

application. Navarro claimed that the land sought to be registered has always been
part of the public domain, it being a part of the foreshore of Manila Bay; that he was
a lessee and in possession of a part of the subject property by virtue of a fishpond
permit issued by the Bureau of Fisheries and confirmed by the Office of the
President; and that be bad already converted the area covered by the lease into a
fishpond.

During the pendency of the land registration case, that is, on November 6, 1960,
Sinforoso Pascual filed a complaint for ejectment against Emiliano Navarro, one
Marcelo Lopez and their privies, alleged by Pascual to have unlawfully claimed and
possessed, through stealth, force and strategy, a portion of the subject property
covered by Plan Psu-175181. The defendants in the case were alleged to have built a
provisional dike thereon: thus they have thereby deprived Pascual of the premises
sought to be registered. This, notwithstanding repeated demands for defendants to
vacate the property.

The case was decided adversely against Pascual. Thus, Pascual appealed to the Court
of First Instance (now Regional Trial Court) of Balanga, Bataan, the appeal having
been docketed as Civil Case No. 2873. Because of the similarity of the parties and the
subject matter, the appealed case for ejectment was consolidated with the land
registration case and was jointly tried by the court a quo.

During the pendency of the trial of the consolidated cases, Emiliano Navarro died on
November 1, 1961 and was substituted by his heirs, the herein petitioners.

Subsequently, on August 26, 1962, Pascual died and was substituted by his heirs, the
herein private respondents.

On November 10, 1975, the court a quo rendered judgment finding the subject
property to be foreshore land and, being a part of the public domain, it cannot be the
subject of land registration proceedings.

The decision's dispositive portion reads:

WHEREFORE, judgment is rendered:

(1) Dismissing plaintiff [private respondent] Sinforoso Pascual's

complaint for ejectment in Civil Case No. 2873;

(2) Denying the application of Sinforoso Pascual for land registration

over the land in question; and

(3) Directing said Sinforoso Pascual, through his heirs, as plaintiff in

Civil Case No. 2873 and as applicant in Land Registration Case No. N-
84 to pay costs in both instances." 6

The heirs of Pascual appealed and, before the respondent appellate court, assisted
the following errors:
 106

1. The lower court erred in not finding the land in question as an

accretion by the action of the Talisay and Bulacan Rivers to the land
admittedly owned by applicants-appellants [private respondents].

2. The lower court erred in holding that the land in question is

foreshore land.

3. The lower court erred in not ordering the registration of the land in
controversy in favor of applicants-appellants [private respondents].

4. The lower court erred in not finding that the applicants-appellants

[private respondents] are entitled to eject the oppositor-appellee
[petitioners]. 7

On appeal, the respondent court reversed the findings of the court a quo and granted
the petition for registration of the subject property but excluding therefrom fifty (50)
meters from corner 2 towards corner 1; and fifty meters (50) meters from corner 5
towards corner 6 of the Psu-175181.

The respondent appellate court explained the reversal in this wise:

The paramount issue to be resolved in this appeal as set forth by the

parties in their respective briefs is — whether or not the land sought to
be registered is accretion or foreshore land, or, whether or not said land
was formed by the action of the two rivers of Talisay and Bulacan or by
the action of the Manila Bay. If formed by the action of the Talisay and
Bulacan rivers, the subject land is accretion but if formed by the action
of the Manila Bay then it is foreshore land.

xxx xxx xxx

It is undisputed that applicants-appellants [private respondents]

owned the land immediately adjoining the land sought to be registered.
Their property which is covered by OCT No. 6830 is bounded on the
east by the Talisay River, on the west by the Bulacan River, and on the
north by the Manila Bay. The Talisay and Bulacan rivers come from
inland flowing downstream towards the Manila Bay. In other words,
between the Talisay River and the Bulacan River is the property of
applicants with both rivers acting as the boundary to said land and the
flow of both rivers meeting and emptying into the Manila Bay. The
subject land was formed at the tip or apex of appellants' [private
respondents'] land adding thereto the land now sought to be registered.

This makes this case quite unique because while it is undisputed that
the subject land is immediately attached to appellants' [private
respondents'] land and forms the tip thereof, at the same time, said
land immediately faces the Manila Bay which is part of the sea. We can
understand therefore the confusion this case might have caused the
lower court, faced as it was with the uneasy problem of deciding
whether or not the subject land was formed by the action of the two
 107

rivers or by the action of the sea. Since the subject land is found at the
shore of the Manila Bay facing appellants' [private respondents'] land,
it would be quite easy to conclude that it is foreshore and therefore part
of the patrimonial property of the State as the lower court did in fact
rule . . . .

xxx xxx xxx

It is however undisputed that appellants' [private respondents'] land

lies between these two rivers and it is precisely appellants' [private
respondents'] land which acts as a barricade preventing these two
rivers to meet. Thus, since the flow of the two rivers is downwards to
the Manila Bay the sediments of sand and silt are deposited at their
mouths.

It is, therefore, difficult to see how the Manila Bay could have been the
cause of the deposit thereat for in the natural course of things, the
waves of the sea eat the land on the shore, as they suge [sic] inland. It
would not therefore add anything to the land but instead subtract from
it due to the action of the waves and the wind. It is then more logical to
believe that the two rivers flowing towards the bay emptied their cargo
of sand, silt and clay at their mouths, thus causing appellants' [private
respondents'] land to accumulate therein.

However, our distinguished colleage [sic], Mr. Justice Serrano, do [sic]

not seem to accept this theory and stated that the subject land arose
only when . . . . Pascual planted "palapat" and "bakawan" trees thereat
to serve as a boundary or strainer. But we do not see how this act of
planting trees by Pascual would explain how the land mass came into
being. Much less will it prove that the same came from the sea.
Following Mr. Justice Serrano's argument that it were the few trees that
acted as strainers or blocks, then the land that grew would have
stopped at the place where the said trees were planted. But this is not
so because the land mass went far beyond the boundary, or where the
trees were planted.

On the other hand, the picture-exhibits of appellants [private

respondents] clearly show that the land that accumulated beyond the
so- called boundary, as well as the entire area being applied for is dry
land, above sea level, and bearing innumerable trees . . . The existence
of vegetation on the land could only confirm that the soil thereat came
from inland rather than from the sea, for what could the sea bring to
the shore but sand, pebbles, stones, rocks and corrals? On the other
hand, the two rivers would be bringing soil on their downward flow
which they brought along from the eroded mountains, the lands along
their path, and dumped them all on the northern portion of appellants'
[private respondents'] land.

In view of the foregoing, we have to deviate from the lower court's

finding. While it is true that the subject land is found at the shore of the
 108

Manila Bay fronting appellants' [private respondents'] land, said land is

not foreshore but an accretion from the action of the Talisay and
Bulacan rivers. In fact, this is exactly what the Bureau of Lands found
out, as shown in the following report of the Acting Provincial Officer,
Jesus M. Orozco, to wit:

"Upon ocular inspection of the land subject of this

registration made on June 11, 1960, it was found out that
the said land is . . . . sandwitched [sic] by two big
rivers . . . . These two rivers bring down considerable
amount of soil and sediments during floods every year
thus raising the soil of the land adjoining the private
property of the applicant [private respondents]. About
four-fifth [sic] of the area applied for is now dry land
whereon are planted palapat trees thickly growing
thereon. It is the natural action of these two rivers that
has caused the formation of said land . . . . subject of this
registration case. It has been formed, therefore, by
accretion. And having been formed by accretion, the said
land may be considered the private property of the
riparian owner who is the applicant herein [private
respondents] . . . .

In view of the above, the opposition hereto filed by the

government should be withdrawn, except for the portion
recommended by the land investigator in his report dated
May 2, 1960, to be excluded and considered
foreshore. . . ."

Because of this report, no less than the Solicitor General representing

the Bureau of Lands withdrew his opposition dated March 25, 1960,
and limited "the same to the northern portion of the land applied for,
compromising a strip 50 meters wide along the Manila Bay, which
should be declared public land as part of the foreshore" . . . . 8

Pursuant to the aforecited decision, the respondent appellate court ordered

the issuance of the corresponding decree of registration in the name of private
respondents and the reversion to private respondents of the possession of the
portion of the subject property included in Navarro's fishpond permit.

On December 20, 1978, petitioners filed a motion for reconsideration of the

aforecited decision. The Director of Forestry also moved for the reconsideration of
the same decision. Both motions were opposed by private respondents on January
27, 1979.

On November 21, 1980, respondent appellate court promulgated a resolution

denying the motion for reconsideration filed by the Director of Forestry. It, however,
modified its decision, to read, viz:

(3). Ordering private oppositors Heirs of Emiliano Navarro to vacate

 109

that portion included in their fishpond permit covered by Plan Psu-

175181 and hand over possession of said portion to applicants-
appellants, if the said portion is not within the strip of land fifty (50)
meters wide along Manila Bay on the northern portion of the land
subject of the registration proceedings and which area is more
particularly referred to as fifty (50) meters from corner 2 towards
corner 1; and fifty (50) meters from corner 5 towards corner 6 of Plan
Psu-175181. . . . 9

On December 15, 1980, we granted the Solicitor General, acting as counsel for the
Director of Forestry, an extension of time within which to file in this court, a petition
for review of the decision dated November 29, 1978 of the respondent appellate court
and of the aforecited resolution dated November 21, 1980.

Thereafter, the Solicitor General, in behalf of the Director of Forestry, filed a petition
for review entitled, "The Director of Forestry vs. the Court of Appeals." 10 We,
however, denied the same in a minute resolution dated July 20, 1981, such petition
having been prematurely filed at a time when the Court of Appeals was yet to resolve
petitioners' pending motion to set aside the resolution dated November 21, 1980.

On October 9, 1981, respondent appellate court denied petitioners' motion for

reconsideration of the decision dated November 29, 1978.

On October 17, 1981, respondent appellate court made an entry of judgment stating
that the decision dated November 29, 1978 had become final and executory as
against herein petitioners as oppositors in L.R.C. Case No. N-84 and Civil Case No.
2873 of the Court of First Instance (now the Regional Trial Court) of Balanga,
Bataan.

On October 26, 1981, a second motion for reconsideration of the decision dated
November 29, 1978 was filed by petitioners' new counsel.

On March 26, 1982, respondent appellate court issued a resolution granting

petitioners' request for leave to file a second motion for reconsideration.

On July 13, 1984, after hearing, respondent appellate court denied petitioners'
second motion for reconsideration on the ground that the same was filed out of time,
citing Rule 52, Section 1 of the Rules of Court which provides that a motion for
reconsideration shall be made ex-parte and filed within fifteen (15) days from the
notice of the final order or judgment.

Hence this petition where the respondent appellate court is imputed to have palpably
erred in appreciating the fact of the case and to have gravely misapplied statutory
and case law relating to accretion, specifically, Article 457 of the Civil Code.

We find no merit in the petition.

The disputed property was brought forth by both the withdrawal of the waters
of Manila Bay and the accretion formed on the exposed foreshore land by the
action of the sea which brought soil and sand sediments in turn trapped by the
 110

palapat and bakawan trees planted thereon by petitioner Sulpicio Pascual in

1948

Anchoring their claim of ownership on Article 457 of the Civil Code, petitioners
vigorously argue that the disputed 14-hectare land is an accretion caused by the joint
action of the Talisay and Bulacan Rivers which run their course on the eastern and
western boundaries, respectively, of petitioners' own tract of land.

Accretion as a mode of acquiring property under said Article 457, requires the
concurrence of the following requisites: (1) that the accumulation of soil or sediment
be gradual and imperceptible; (2) that it be the result of the action of the waters of
the river; and (3) that the land where the accretion takes place is adjacent to the bank
of the river. 11 Accretion is the process whereby the soil is deposited, while alluvium is
the soil deposited on the estate fronting the river bank 12; the owner of such estate is
called the riparian owner. Riparian owners are, strictly speaking, distinct from
littoral owners, the latter being owners of lands bordering the shore of the sea or lake
or other tidal waters. 13 The alluvium, by mandate of Article 457 of the Civil Code, is
automatically owned by the riparian owner from the moment the soil deposit can be
seen 14 but is not automatically registered property, hence, subject to acquisition
through prescription by third persons 15.

Petitioners' claim of ownership over the disputed property under the principle of
accretion, is misplaced.

First, the title of petitioners' own tract of land reveals its northeastern boundary to be
Manila Bay. Petitioners' land, therefore, used to adjoin, border or front the Manila
Bay and not any of the two rivers whose torrential action, petitioners insist, is to
account for the accretion on their land. In fact, one of the petitioners, Sulpicio
Pascual, testified in open court that the waves of Manila Bay used to hit the disputed
land being part of the bay's foreshore but, after he had planted palapat and bakawan
trees thereon in 1948, the land began to
rise. 16

Moreover, there is no dispute as to the location of: (a) the disputed land; (b)
petitioners' own tract of land; (c) the Manila Bay; and, (d) the Talisay and Bulacan
Rivers. Petitioners' own land lies between the Talisay and Bulacan Rivers; in front of
their land on the northern side lies now the disputed land where before 1948, there
lay the Manila Bay. If the accretion were to be attributed to the action of either or
both of the Talisay and Bulacan Rivers, the alluvium should have been deposited on
either or both of the eastern and western boundaries of petitioners' own tract of land,
not on the northern portion thereof which is adjacent to the Manila Bay. Clearly
lacking, thus, is the third requisite of accretion, which is, that the alluvium is
deposited on the portion of claimant's land which is adjacent to the river bank.

Second, there is no dispute as to the fact that petitioners' own tract of land adjoins
the Manila Bay. Manila Bay is obviously not a river, and jurisprudence is already
settled as to what kind of body of water the Manila Bay is. It is to be remembered
that we held that:

Appellant next contends that . . . . Manila Bay cannot be considered as a

 111

sea. We find said contention untenable. A bay is part of the sea, being a
mere indentatiom of the same:

"Bay. — An opening into the land where the water is shut

in on all sides except at the entrance; an inlet of the sea;
an arm of the sea, distinct from a river, a bending or
curbing of the shore of the sea or of a lake. " 7 C.J. 1013-
1014." 17

The disputed land, thus, is an accretion not on a river bank but on a sea bank, or on
what used to be the foreshore of Manila Bay which adjoined petitioners' own tract of
land on the northern side. As such, the applicable law is not Article 457 of to Civil
Code but Article 4 of the Spanish Law of Waters of 1866.

The process by which the disputed land was formed, is not difficult to discern from
the facts of the case. As the trial court correctly observed:

A perusal of the survey plan . . . . of the land subject matter of these

cases shows that on the eastern side, the property is bounded by Talisay
River, on the western side by Bulacan River, on the southern side by
Lot 1436 and on the northern side by Manila Bay. It is not correct to
state that the Talisay and Bulacan Rivers meet a certain portion
because the two rivers both flow towards Manila Bay. The Talisay River
is straight while the Bulacan River is a little bit meandering and there is
no portion where the two rivers meet before they end up at Manila Bay.
The land which is adjacent to the property belonging to Pascual cannot
be considered an accretion [caused by the action of the two rivers].

Applicant Pascual . . . . has not presented proofs to convince the Court

that the land he has applied for registration is the result of the settling
down on his registered land of soil, earth or other deposits so as to be
rightfully be considered as an accretion [caused by the action of the two
rivers]. Said Art. 457 finds no applicability where the accretion must
have been caused by action of the bay. 18

The conclusion formed by the trial court on the basis of the aforegoing observation is
that the disputed land is part of the foreshore of Manila Bay and therefore, part of the
public domain. The respondent appellate court, however, perceived the fact that
petitioners' own land lies between the Talisay and Bulacan Rivers, to be basis to
conclude that the disputed land must be an accretion formed by the action of the two
rivers because petitioners' own land acted as a barricade preventing the two rivers to
meet and that the current of the two rivers carried sediments of sand and silt
downwards to the Manila Bay which accumulated somehow to a 14-hectare land.
These conclusions, however, are fatally incongruous in the light of the one
undisputed critical fact: the accretion was deposited, not on either the eastern or
western portion of petitioners' land where a river each runs, but on the northern
portion of petitioners' land which adjoins the Manila Bay. Worse, such conclusions
are further eroded of their practical logic and consonance with natural experience in
the light of Sulpicio Pascual's admission as to having planted palapat and bakawan
trees on the northern boundary of their own land. In amplification of this, plainly
 112

more reasonable and valid are Justice Mariano Serrano's observations in his
dissenting opinion when he stated that:

As appellants' (titled) land . . . . acts as a barricade that prevents the two

rivers to meet, and considering the wide expanse of the boundary
between said land and the Manila Bay, measuring some 593.00
meters . . . . it is believed rather farfetched for the land in question to
have been formed through "sediments of sand and salt [sic] . . . .
deposited at their [rivers'] mouths." Moreover, if "since the flow of the
two rivers is downwards to the Manila Bay the sediments of sand and
silt are deposited at their mouths," why then would the alleged cargo of
sand, silt and clay accumulate at the northern portion of appellants'
titled land facing Manila Bay instead of merely at the mouths and
banks of these two rivers? That being the case, the accretion formed at
said portion of appellants' titled [land] was not caused by the current of
the two rivers but by the action of the sea (Manila Bay) into which the
rivers empty.

The conclusion . . . . is not supported by any reference to the evidence

which, on the contrary, shows that the disputed land was formed by the
action of the sea. Thus, no less than Sulpicio Pascual, one of the heirs of
the original applicant, testified on cross-examination that the land in
dispute was part of the shore and it was only in 1948 that he noticed
that the land was beginning to get higher after he had planted trees
thereon in
1948. . . . .

. . . . it is established that before 1948 sea water from the Manila Bay at
high tide could reach as far as the dike of appellants' fishpond within
their titled property, which dike now separates this titled property from
the land in question. Even in 1948 when appellants had already
planted palapat and bakawan trees in the land involved, inasmuch as
these trees were yet small, the waves of the sea could still reach the
dike. This must be so because in . . . . the survey plan of the titled
property approved in 1918, said titled land was bounded on the north
by Manila Bay. So Manila Bay was adjacent to it on the north. It was
only after the planting of the aforesaid trees in 1948 that the land in
question began to rise or to get higher in elevation.

The trees planted by appellants in 1948 became a sort of strainer of the

sea water and at the same time a kind of block to the strained
sediments from being carried back to the sea by the very waves that
brought them to the former shore at the end of the dike, which must
have caused the shoreline to recede and dry up eventually raising the
former shore leading to the formation of the land in question." 19

In other words, the combined and interactive effect of the planting of palapat
and bakawan trees, the withdrawal of the waters of Manila Bay eventually
resulting in the drying up of its former foreshore, and the regular torrential
action of the waters of Manila Bay, is the formation of the disputed land on the
northern boundary of petitioners' own tract of land.
 113

The disputed property is an accretion on a sea bank, Manila Bay being an inlet
or an arm of the sea; as such, the disputed property is, under Article 4 of the
Spanish Law of Waters of 1866, part of the public domain

At the outset, there is a need to distinguish between Manila Bay and Laguna de Bay.

While we held in the case of Ignacio v. Director of Lands and

Valeriano  20 that Manila Bay is considered a sea for purposes of determining which
law on accretion is to be applied in multifarious situations, we have ruled differently
insofar as accretions on lands adjoining the Laguna de Bay are concerned.

In the cases of Government of the P.I v. Colegio de San Jose  21, Republic v. Court of

Appeals  22, Republic v. Alagad  23, and Meneses v. Court of
Appeals  24, we categorically ruled that Laguna de Bay is a lake the accretion on
which, by the mandate of Article 84 of the Spanish Law of Waters of 1866, belongs to
the owner of the land contiguous thereto.

The instant controversy, however, brings a situation calling for the application of
Article 4 of the Spanish Law of Waters of 1866, the disputed land being an accretion
on the foreshore of Manila Bay which is, for all legal purposes, considered a sea.

Article 4 of the Spanish Law of Waters of August 3, 1866 provides as follows:

Lands added to the shores by accretions and alluvial deposits caused by

the action of the sea, form part of the public domain. When they are no
longer washed by the waters of the sea and are not necessary for
purposes of public utility, or for the establishment of special industries,
or for the coast-guard service, the Government shall declare them to be
the property of the owners of the estates adjacent thereto and as
increment thereof.

In the light of the aforecited vintage but still valid law, unequivocal is the public
nature of the disputed land in this controversy, the same being an accretion on a sea
bank which, for all legal purposes, the foreshore of Manila Bay is. As part of the
public domain, the herein disputed land is intended for public uses, and "so long as
the land in litigation belongs to the national domain and is reserved for public uses, it
is not capable of being appropriated by any private person, except through express
authorization granted in due form by a competent authority." 25 Only the executive
and possibly the legislative departments have the right and the power to make the
declaration that the lands so gained by action of the sea is no longer necessary for
purposes of public utility or for the cause of establishment of special industries or for
coast guard services. 26 Petitioners utterly fail to show that either the executive or
legislative department has already declared the disputed land as qualified, under
Article 4 of the Spanish Law of Waters of 1866, to be the property of petitioners as
owners of the estates adjacent thereto.

WHEREFORE, the instant Petition for Review is hereby DENIED and DISMISSED.

Costs against petitioners.

 114

SO ORDERED.

Padilla, Bellosillo and Kapunan, JJ., concur.

Separate Opinions

Vitug, J., concuring:

I concur; the amandatory provisions of the Water Code (P.D. 1067) did not affect
Article 4 of the Spanish Law of Water of 1866.

Separate Opinions

Vitug, J., concuring:

I concur; the amandatory provisions of the Water Code (P.D. 1067) did not affect
Article 4 of the Spanish Law of Water of 1866.

Footnotes

1 In CA G.R. No. 59044-R, dated November 29, 1978, penned by

Associate Justice Porfirio v. Sison and concurred in by Associate
Justices Nestor B. Alampay, Jorge R. Coquia, and Rafael C. Climaco,
with Associate Justice Mariano Serrano, dissenting; Rollo, pp. 39-54.

2 Resolution (on the First Motion for Reconsideration) dated

November 21, 1980, penned by Associate Justice Porfirio V. Sison and
concurred in by Associate Justices B.S. de la Fuente, Nestor B.
Alampay, Jorge R. Coquia, and Elias B. Asuncion; Rollo, pp. 68-69; and
Resolution (on the Second Motion for Reconsideration) dated March
28, 1982, penned by Associate Justice Porfirio V. Sison and concurred
in by Associate Justices B.S. de la Fuente, Nestor B. Alampay, Elias B.
Asuncion, and Hugo E. Gutierrez, Jr., Rollo, pp. 90-91.

3 Fourth Civil Cases Division.

4 L.R.C. Case No. 18607.

5 Branch 1.

6 Decision in CA G.R. No. 59044 dated November 29, 1978, pp. 2-

3; Rollo, pp. 40-41.
 115

7 Id., p. 3; Rollo, p. 41.

8 Id., pp. 3-6; Rollo, pp 41-44.

9 Resolution in CA-G.R. No. 59044-R dated November 21, 1980, p.

1; Rollo, p. 68.

10 Docketed as G.R. No. 55584.

11 Desamparado Vda. de Nazareno and Leticia Nazareno Tapia v. Court

of Appeals, et al., G.R. No. 98045, June 26, 1996; Meneses v. Court of
Appeals, 246 SCRA 374 [1995]; Reynante v. Court of Appeals, 207
SCRA 794, 799 [1992]; Binalay v. Manalo, 195 SCRA 374, 385 [1991].

12 Paras, Edgardo, Civil Code of the Philippines, Vol. 3, 1984 Edition, p.

211.

13 Santulan v. The Executive Secretary, 80 SCRA 548,556 [1977].

14 Paras, supra, at p. 212, citing Cortez v. City of Manila, to Phil. 567;

Roxas v. Tuason, 9 Phil. 408; 3 Manresa 236.

15 Id., at p. 216, citing Grande, et al. v. Court of Appeals, L-17652, June

30, 1962.

16 The pertinent portion of Sulpicio Pascual's testimony is as follows:

Q: Is that portion contiguous to Manila Bay?

A: Near but not contiguous.

Q: During the high tide is that portion reached by water?

A: Before 1948.

Q: Before you introduced palapat and bakawan in that

area?

A: Yes, sir.

Q: It was only after you have planted palapat and

bakawan . . . .

when the sea water no longer reaches that area?

A: I only planted few trees in 1948 to serve as boundary

and as

marker. . . . .
 116

Q: Was it only in 1948 that you observe that portion was

becoming higher?

A: At the beginning of 1948 I noticed that land was

getting

higher. (TSN, June 11, 1969, pp. 9-11)

17 Ignacio v. Director of Lands and Valeriano, 108 Phil. 336, 338

[1960].

18 Petition, pp. 6-7; Rollo, pp. 122-123.

19 Dissenting Opinion of Associate Justice Mariano Serrano; Rollo, pp.

48-51.

20 108 Phil. 335 [1960].

21 53 Phil. 423 [1929].

22 131 SCRA 532 [1984].

23 169 SCRA 455 [1989].

24 246 SCRA 162 [1995].

25 Insular Government v. Aldecoa & Co., 19 Phil. 505, 517 [1911].

26 Joven y Monteverde, et al. v. The Director of Lands, 93 Phil. 134,

136-137 [1953].
 117

BAES v CA (G.R. No. 108065, July 6, 1993)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 108065 July 6, 1993

SPOUSES FELIX BAES AND RAFAELA BAES, petitioners,

vs.
THE COURT OF APPEALS AND REPUBLIC OF THE
PHILIPPINES, respondents.

Lorenzo F. Miravite for petitioners.

The Solicitor General for respondents.

CRUZ, J.:

This is an appeal by way of certiorari from the decision of the respondent Court of

Appeals which affirmed in toto the ruling of the trial court in Civil Case No. 0460-P,
the dispositive portion of which read thus:

WHEREFORE, judgment is hereby rendered declaring null and void

TCT Nos. 14405, 29592, 29593, 29594, 29595, and TCT No. 29593's
derivative titles TCT Nos. 124725, 124726, 124727 and 124729, and
ordering the Register of Deeds for Pasay City to cancel them and issue
new ones in their stead in the name of the plaintiff after segregating
from TCT No. 29593 452 sq. m., the actual area of Lot 2958-C (covered
by cancelled TCT No. 11043) belonging to defendant Felix Baes. The
counterclaim is hereby dismissed.
 118

Let a copy of this Decision be furnished the Register of Deeds for Pasay
City.

SO ORDERED.

The controversy began in 1962, when the government dug a canal on a private parcel
of land, identified as Lot 2958 and covering an area of P33,902 sq.m., to streamline
the Tripa de Gallina creek.

This lot was later acquired by Felix Baes, who registered it in his name under TCT
No. 10990 and then had it subdivided into three lots, namely: (a) Lot 2958-A, with
an area of 28,889 sq.m.; (b) Lot 2958-B, with an area of 3,588 sq.m.; and (c) Lot
2958-C, with an area of 452 sq.m., covered by TCT Nos. 11041, 11042 and 11043,
respectively.

In exchange for Lot 2958-B, which was totally occupied by the canal, the government
gave Baes a lot with exactly the same area as Lot 2958-B through a Deed of Exchange
of Real Property dated June 20, 1970.1 The property, which was near but not
contiguous to Lot 2956-C, was denominated as Lot 3271-A and later registered in the
name of Felix Baes under TCT No. 24300. The soil displaced by the canal was used to
fill up the old bed of the creek.

Meanwhile, Baes had Lot 2958-C and a portion of Lot 2958-A designated as Lot 1,
Blk., 4, resurveyed and subdivided. On January 12, 1968, he submitted a petition for
the approval of his resurvey and subdivision plans, claiming that after the said lots
were plotted by a competent surveyor, it was found that there were errors in respect
of their bearings and distances.

The resurvey-subdivision plan was approved by the Court of First Instance of Pasay
City in an order dated January 15, 1968.2

As a result, the old TCTs covering the said lots were canceled and new ones were
issued, to wit: (a) Lot 1-A, Blk. 4, with 672 sq.m., under TCT No.
T-14404; (b) Lot 1-B, with 826 sq.m., representing the increase in area after the
resurvey, under TCT No. T-14405; (c) Lot 2958-C-1, with 452 sq.m., under TCT No.
T-14406; and (d) Lot 2958-C-2, with 2,770 sq.m. representing the increase after
resurvey, under TCT No. T-14407.

Lots 2958-C-1 and 2958-C-2 were later consolidated and this time further subdivided
into four (4) lots, namely, Lot 1, with an area of 147 sq.m.; Lot 2, with an area of 950
sq.m.; Lot 3, with an area of 257 sq.m.; and Lot 4, with an area of 1,868 sq.m., which
were respectively issued TCT Nos. 29592, 29593, 29594, and 29595.

In 1978, the Republic of the Philippines discovered that Lot 1-B (with TCT No. 14405
and an area of 826 sq.m.), on which the petitioners had erected an apartment
building, covered Lot 3611 of the Pasay Cadastre, which is a filled-up portion of the
Tripa de Gallina creek. Moreover, Lot 2958-C (covered by TCT Nos. 29592 to 29595,
with an increased area of 2,770 after resurvey and subdivision) had been unlawfully
enlarged.
 119

On November 17, 1982, it filed a petition for cancellation of TCT Nos. 14405 and
29592 to 29595.3

Baes did not object in his answer to the cancellation of TCT Nos. 29592, 29594 and
29595 and was notable to prove during the trial that the government utilized a
portion of Lot 2 under, TCT No. 29593. The trial court therefore decreed (correctly)
that the original Lot 2958-C (with an area of 452 sq.m.) be reverted to its status
before the resurvey-subdivision of Lot 2958-C.

The only remaining dispute relates to Lot 1-B (TCT No. 14405), which the
petitioners, relying on Article 461 of the Civil Code, are claiming as their own. The
government rejects this claim and avers that the petitioners had already been fully
compensated for it on June 20, 1970 when they agreed to exchange their Lot 2958-B
with Lot 3271-A belonging to the government.

Article 461 of the Civil Code states:

River beds which are abandoned through the natural change in the

course of the waters ipso facto belong to the owners whose lands are
occupied by the new course in proportion to the area lost. However, the
owners of the land adjoining the old bed shall have the right to acquire
the same by paying the value thereof, which value shall not exceed the
value of the area occupied by the new bed. (Emphasis supplied)

A portion of the Tripa de Gallina creek was diverted to a man-made canal which
totally occupied Lot 2958-B (with an area of 3,588 sq.m.) belonging to Felix Baes.
Thus, the petitioners claim that they became the owners of the old bed (which was
eventually filled up by soil excavated from Lot 2958-B) by virtue of Article 461.

The petitioners rely heavily on Dr. Arturo M. Tolentino's interpretation of this

Article, to wit:

This article (461) refers to a natural change in the course of a stream. If

the change of the course is due to works constructed by concessioners
authorized by the government, the concession may grant the
abandoned river bed to the concessioners. If there is no such grant,
then, by analogy, the abandoned river bed will belong to the owners of
the land covered by the waters, as provided in this article, without
prejudice to a superior right of third persons with sufficient title.
(Citing 3 Manresa 251-252; 2 Navarro Amandi, 100-101; 3 Sanchez
Roman 148)

We agree.

If the riparian owner is entitled to compensation for the damage to or loss of his
property due to natural causes, there is all the more reason to compensate him when
the change in the course of the river is effected through artificial means. The loss to
the petitioners of the land covered by the canal was the result of a deliberate act on
the part of the government when it sought to improve the flow of the Tripa de Gallina
creek. It was therefore obligated to compensate the Baeses for their loss.
 120

We find, however, that the petitioners have already been so compensated. Felix Baes
was given Lot 3271-A in exchange for the affected Lot 2958-B through the Deed of
Exchange of Real Property dated June 20, 1970. This was a fair exchange because the
two lots were of the same area and value and the agreement was freely entered into
by the parties. The petitioners cannot now claim additional compensation because,
as correctly observed by the Solicitor General,

. . . to allow petitioners to acquire ownership of the dried-up portion of

the creek would be a clear case of double compensation and unjust
enrichment at the expense of the state.

The exchange of lots between the petitioners and the Republic was the result of
voluntary negotiations. If these had failed, the government could still have taken Lot
2958-B under the power of eminent domain, upon payment of just compensation, as
the land was needed for a public purpose.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so

ordered.

Griño-Aquino, Bellosillo and Quiason, JJ., concur.

# Footnotes

1 Exhibit "4," Records, p. 293.

2 Records, p. 398.

3 Ibid., pp. 2-10.

BINALAY v MANALO (G.R. No. 92161, March 18, 1991)

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 92161             March 18, 1991

SIMPLICIO BINALAY, PONCIANO GANNABAN, NICANOR MACUTAY,

DOMINGO ROSALES, GREGORIO ARGONZA, EUSTAQUIO BAUA,
 121

FLORENTINO ROSALES, TEODORO MABBORANG, PATRICIO

MABBORANG and FULGENCIO MORA, petitioners
vs.
GUILLERMO MANALO and COURT OF APPEALS, respondents.

Josefin De Alban Law Office for Petitioners.

FELICIANO, J.:

The late Judge Taccad originally owned a parcel of land situated in Tumauini, Isabela
having an estimated area of twenty (20) hectares. The western portion of this land
bordering on the Cagayan River has an elevation lower than that of the eastern
portion which borders on the national road. Through the years, the western portion
would periodically go under the waters of the Cagayan River as those waters swelled
with the coming of the rains. The submerged portion, however, would re-appear
during the dry season from January to August. It would remain under water for the
rest of the year, that is, from September to December during the rainy season.

The ownership of the landholding eventually moved from one person to another. On
9 May 1959, respondent Guillermo Manalo acquired 8.65 hectares thereof from
Faustina Taccad, daughter of Judge Juan Taccad. The land sold was described in the
Deed of Absolute Sale1 as follows:

. . . a parcel of agricultural land in Balug, Tumauini, Isabela, containing an

area of 8.6500 hectares, more or less; bounded on the North by Francisco
Forto on the East by National Road; on South by Julian Tumolva and on the
West by Cagayan River; declared for taxation under Tax Declaration No.
12681 in the name of Faustina Taccad, and assessed at P 750.00. . . .

Later in 1964, respondent Manalo purchased another 1.80 hectares from Gregorio
Taguba who had earlier acquired the same from Judge Juan Taccad. The second
purchase brought the total acquisition of respondent Manalo to 10.45 hectares. The
second piece of property was more particularly described as follows:

. . . a piece of agricultural land consisting of tobacco land, and containing an

area of 18,000 square meters, more or less, bounded on the North by Balug
Creek; on the South, by Faustina Taccad (now Guillermo R. Manalo); on the
East, by a Provincial Road; and on the West, by Cagayan River assessed at P
440.00, as tax Declaration No. 3152. . . .2

During the cadastral survey conducted at Balug, Tumauini, Isabela on 21 October

1969, the two (2) parcels of land belonging to respondent Manalo were surveyed and
consolidated into one lot, designated as Lot No. 307, Pls-964. Lot 307 which contains
4.6489 hectares includes: (a) the whole of the 1.80 hectares acquired from Gregorio
Taguba; and (b) 2.8489 hectares out of the 8.65 hectares purchased from Faustina
Taccad. As the survey was conducted on a rainy month, a portion of the land bought
from Faustina Taccad then under water was left unsurveyed and was not included in
Lot 307.

The Sketch Plan3 submitted during the trial of this case and which was identified by
 122

respondent Manalo shows that the Cagayan River running from south to north, forks
at a certain point to form two (2) branches—the western and the eastern branches—
and then unites at the other end, further north, to form a narrow strip of land. The
eastern branch of the river cuts through the land of respondent Manalo and is
inundated with water only during the rainy season. The bed of the eastern branch is
the submerged or the unsurveyed portion of the land belonging to respondent
Manalo. For about eight (8) months of the year when the level of water at the point
where the Cagayan River forks is at its ordinary depth, river water does not flow into
the eastern branch. While this condition persists, the eastern bed is dry and is
susceptible to cultivation.

Considering that water flowed through the eastern branch of the Cagayan River when
the cadastral survey was conducted, the elongated strip of land formed by the
western and the eastern branches of the Cagayan River looked very much like an
island. This strip of land was surveyed on 12 December 1969. 4

It was found to have a total area of 22.7209 hectares and was designated as Lot 821
and Lot 822. The area of Lot 822 is 10.8122 hectares while Lot 821 has an area of
11.9087 hectares. Lot 821 is located directly opposite Lot 307 and is separated from
the latter only by the eastern branch of the Cagayan River during the rainy season
and, during the dry season, by the exposed, dry river bed, being a portion of the land
bought from Faustina Taccad. Respondent Manalo claims that Lot 821 also belongs
to him by way of accretion to the submerged portion of the property to which it is
adjacent.

Petitioners who are in possession of Lot 821, upon the other hand, insist that they
own Lot 821. They occupy the outer edges of Lot 821 along the river banks, i.e., the
fertile portions on which they plant tobacco and other agricultural products. They
also cultivate the western strip of the unsurveyed portion during summer. 5 This
situation compelled respondent Manalo to file a case for forcible entry against
petitioners on 20 May 1969. The case was dismissed by the Municipal Court of
Tumauini, Isabela for failure of both parties to appear. On 15 December 1972,
respondent Manalo again filed a case for forcible entry against petitioners. The latter
case was similarly dismissed for lack of jurisdiction by the Municipal Court of
Tumauini, Isabela.

On 24 July 1974, respondent Manalo filed a complaints 6 before the then Court of
First Instance of Isabela, Branch 3 for quieting of title, possession and damages
against petitioners. He alleged ownership of the two (2) parcels of land he bought
separately from Faustina Taccad and Gregorio Taguba for which reason he prayed
that judgment be entered ordering petitioners to vacate the western strip of the
unsurveyed portion. Respondent Manalo likewise prayed that judgment be entered
declaring him as owner of Lot 821 on which he had laid his claim during the survey.

Petitioners filed their answer denying the material allegations of the complaint. The
case was then set for trial for failure of the parties to reach an amicable agreement or
to enter into a stipulation of facts.7 On 10 November 1982, the trial court rendered a
decision with the following dispositive portion:

WHEREFORE, in the light of the foregoing premises, the Court renders

 123

judgment against the defendants and in favor of the plaintiff and orders:

1. That plaintiff, Guillermo Manalo, is declared the lawful owner of the land in
question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more
particularly described in paragraph 2-b of the Complaint;

2. That the defendants are hereby ordered to vacate the premises of the land
in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more
particularly described in paragraph 2-b of the Complaint;

3. That the defendants are being restrained from entering the premises of the
land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is
more particularly described in paragraph 2-b of the Complaint; and

4. That there is no pronouncement as to attorney's fees and costs.

SO ORDERED.8

Petitioners appealed to the Court of Appeals which, however, affirmed the decision of
the trial court. They filed a motion for reconsideration, without success.

While petitioners insist that Lot 821 is part of an island surrounded by the two (2)
branches of the Cagayan River, the Court of Appeals found otherwise. The Court of
Appeals concurred with the finding of the trial court that Lot 821 cannot be
considered separate and distinct from Lot 307 since the eastern branch of the
Cagayan River substantially dries up for the most part of the year such that when this
happens, Lot 821 becomes physically (i.e., by land) connected with the dried up bed
owned by respondent Manalo. Both courts below in effect rejected the assertion of
petitioners that the depression on the earth's surface which separates Lot 307 and
Lot 821 is, during part of the year, the bed of the eastern branch of the Cagayan
River.

It is a familiar rule that the findings of facts of the trial court are entitled to great
respect, and that they carry even more weight when affirmed by the Court of
Appeals.9 This is in recognition of the peculiar advantage on the part of the trial court
of being able to observe first-hand the deportment of the witnesses while testifying.
Jurisprudence is likewise settled that the Court of Appeals is the final arbiter of
questions of fact.10 But whether a conclusion drawn from such findings of facts is
correct, is a question of law cognizable by this Court.11

In the instant case, the conclusion reached by both courts below apparently collides
with their findings that periodically at the onset of and during the rainy season, river
water flows through the eastern bed of the Cagayan River. The trial court held:

The Court believes that the land in controversy is of the nature and character
of alluvion (Accretion), for it appears that during the dry season, the body of
water separating the same land in controversy (Lot No. 821, Pls-964) and the
two (2) parcels of land which the plaintiff purchased from Gregorio Taguba
and Justina Taccad Cayaba becomes a marshy land and is only six (6) inches
deep and twelve (12) meters in width at its widest in the northern tip (Exhs.
 124

"W", "W-l", "W-2", "W-3" and "W-4"), It has been held by our Supreme Court
that "the owner of the riparian land which receives the gradual deposits of
alluvion, does not have to make an express act of possession. The law does not
require it, and the deposit created by the current of the water becomes
manifest" (Roxas vs. Tuazon, 6 Phil. 408).12

The Court of Appeals adhered substantially to the conclusion reached by the trial
court, thus:

As found by the trial court, the disputed property is not an island in the strict
sense of the word since the eastern portion of the said property claimed by
appellants to be part of the Cagayan River dries up during summer.
Admittedly, it is the action of the heavy rains which comes during rainy season
especially from September to November which increases the water level of the
Cagayan river. As the river becomes swollen due to heavy rains, the lower
portion of the said strip of land located at its southernmost point would be
inundated with water. This is where the water of the Cagayan river gains its
entry. Consequently, if the water level is high the whole strip of land would be
under water.

In Government of the Philippine Islands vs. Colegio de San Jose, it was held that —

According to the foregoing definition of the words "ordinary" and "extra-

ordinary," the highest depth of the waters of Laguna de Bay during the dry
season is the ordinary one, and the highest depth they attain during the extra-
ordinary one (sic); inasmuch as the former is the one which is regular,
common, natural, which occurs always or most of the time during the year,
while the latter is uncommon, transcends the general rule, order and measure,
and goes beyond that which is the ordinary depth. If according to the
definition given by Article 74 of the Law of Waters quoted above, the natural
bed or basin of the lakes is the ground covered by their waters when at their
highest ordinary depth, the natural bed or basin of Laguna de Bay is the
ground covered by its waters when at their highest depth during the dry
season, that is up to the northeastern boundary of the two parcels of land in
question.

We find the foregoing ruling to be analogous to the case at bar. The highest ordinary
level of the waters of the Cagayan River is that attained during the dry season which
is confined only on the west side of Lot [821] and Lot [822]. This is the natural
Cagayan river itself. The small residual of water between Lot [821] and 307 is part of
the small stream already in existence when the whole of the late Judge Juan Taccad's
property was still susceptible to cultivation and uneroded.13

The Court is unable to agree with the Court of Appeals that Government of the
Philippine Islands vs. Colegio de San Jose  14 is applicable to the present case. That
case involved Laguna de Bay; since Laguna de Bay is a lake, the Court applied the
legal provisions governing the ownership and use of lakes and their beds and shores,
in order to determine the character and ownership of the disputed property.
Specifically, the Court applied the definition of the natural bed or basin of lakes
found in Article 74 of the Law of Waters of 3 August 1866. Upon the other hand, what
 125

is involved in the instant case is the eastern bed of the Cagayan River.

We believe and so hold that Article 70 of the Law of Waters of 3 August 1866 is the
law applicable to the case at bar:

Art. 70. The natural bed or channel of a creek or river is the ground covered
by its waters during the highest floods. (Emphasis supplied)

We note that Article 70 defines the natural bed or channel of a creek or river as the
ground covered by its waters during the highest floods. The highest floods in the
eastern branch of the Cagayan River occur with the annual coming of the rains as the
river waters in their onward course cover the entire depressed portion. Though the
eastern bed substantially dries up for the most part of the year (i.e., from January to
August), we cannot ignore the periodical swelling of the waters ( i.e., from September
to December) causing the eastern bed to be covered with flowing river waters.

The conclusion of this Court that the depressed portion is a river bed rests upon
evidence of record.1âwphi1 Firstly, respondent Manalo admitted in open court that
the entire area he bought from Gregorio Taguba was included in Lot 307. 15 If the 1.80
hectares purchased from Gregorio Taguba was included in Lot 307, then the Cagayan
River referred to as the western boundary in the Deed of Sale transferring the land
from Gregorio Taguba to respondent Manalo as well as the Deed of Sale signed by
Faustina Taccad, must refer to the dried up bed (during the dry months) or the
eastern branch of the river (during the rainy months). In the Sketch Plan attached to
the records of the case, Lot 307 is separated from the western branch of the Cagayan
River by a large tract of land which includes not only Lot 821 but also what this Court
characterizes as the eastern branch of the Cagayan River.

Secondly, the pictures identified by respondent Manalo during his direct

examination depict the depressed portion as a river bed. The pictures, marked as
Exhibits "W" to "W-4", were taken in July 1973 or at a time when the eastern bed
becomes visible.16 Thus, Exhibit "W-2" which according to respondent Manalo was
taken facing the east and Exhibit "W-3" which was taken facing the west both show
that the visible, dried up portion has a markedly lower elevation than Lot 307 and
Lot 821. It has dike-like slopes on both sides connecting it to Lot 307 and Lot 821
that are vertical upward and very prominent. This topographic feature is compatible
with the fact that a huge volume of water passes through the eastern bed regularly
during the rainy season. In addition, petitioner Ponciano Gannaban testified that one
had to go down what he called a "cliff" from the surveyed portion of the land of
respondent Manalo to the depressed portion. The cliff, as related by petitioner
Gannaban, has a height of eight (8) meters.17

The records do not show when the Cagayan River began to carve its eastern channel
on the surface of the earth. However, Exhibit "E" 18 for the prosecution which was the
Declaration of Real Property standing in the name of Faustina Taccad indicates that
the eastern bed already existed even before the sale to respondent Manalo. The
words "old bed" enclosed in parentheses—perhaps written to make legitimate the
claim of private ownership over the submerged portion—is an implied admission of
the existence of the river bed. In the Declaration of Real Property made by
respondent Manalo, the depressed portion assumed the name Rio Muerte de
 126

Cagayan. Indeed, the steep dike-like slopes on either side of the eastern bed could
have been formed only after a prolonged period of time.

Now, then, pursuant to Article 420 of the Civil Code, respondent Manalo did not
acquire private ownership of the bed of the eastern branch of the river even if it was
included in the deeds of absolute sale executed by Gregorio Taguba and Faustina
Taccad in his favor. These vendors could not have validly sold land that constituted
property of public dominion. Article 420 of the Civil Code states:

The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;

(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth. (Emphasis supplied)

Although Article 420 speaks only of rivers and banks, "rivers" is a composite term
which includes: (1) the running waters, (2) the bed, and (3) the banks. 19 Manresa, in
commenting upon Article 339 of the Spanish Civil Code of 1889 from which Article
420 of the Philippine Civil Code was taken, stressed the public ownership of river
beds:

La naturaleza especial de los rios, en punto a su disfrute general, hace que sea
necesario considerar en su relacion de dominio algo mas que sus aguas
corrientes. En efecto en todo rio es preciso distinguir 1. esta agua corriente;
2. el alveo o cauce, y 3. las riberas. Ahora bien: son estas dos ultimas cosas
siempre de dominio publico, como las aguas?

Realmente no puede imaginarse un rio sin alveo y sin ribera; de suerte

que al decir el Codigo civil que los rios son de dominio publico, parece que
debe ir implicito el dominio publico de aquellos tres elementos que integran
el rio. Por otra parte, en cuanto a los alveos o cauces tenemos la declaracion
del art. 407, num 1, donde dice: son de dominion publico . . . los rios y sus
cauces naturales; declaracion que concuerda con lo que dispone el art. 34 de
la ley de [Aguas], segun el cual, son de dominion publico: 1. los alveos o
cauces de los arroyos que no se hallen comprendidos en el art. 33, y 2. los
alveos o cauces naturales de los rios en la extension que cubran sus aguas en
las mayores crecidas ordinarias.20 (Emphasis supplied)

The claim of ownership of respondent Manalo over the submerged portion is bereft
of basis even if it were alleged and proved that the Cagayan River first began to
encroach on his property after the purchase from Gregorio Taguba and Faustina
Taccad. Article 462 of the Civil Code would then apply divesting, by operation of law,
respondent Manalo of private ownership over the new river bed. The intrusion of the
eastern branch of the Cagayan River into his landholding obviously prejudiced
respondent Manalo but this is a common occurrence since estates bordering on
rivers are exposed to floods and other evils produced by the destructive force of the
 127

waters. That loss is compensated by, inter alia, the right of accretion acknowledged
by Article 457 of the Civil Code.21 It so happened that instead of increasing the size of
Lot 307, the eastern branch of the Cagayan River had carved a channel on it.

We turn next to the issue of accretion. After examining the records of the case, the
Court considers that there was no evidence to prove that Lot 821 is an increment to
Lot 307 and the bed of the eastern branch of the river. Accretion as a mode of
acquiring property under Article 457 of the Civil Code requires the concurrence of
three (3) requisites: (a) that the deposition of soil or sediment be gradual and
imperceptible; (b) that it be the result of the action of the waters of the river (or sea);
and (c) that the land where accretion takes place is adjacent to the banks of rivers (or
the sea coast).22 The Court notes that the parcels of land bought by respondent
Manalo border on the eastern branch of the Cagayan River. Any accretion formed by
this eastern branch which respondent Manalo may claim must be deposited on or
attached to Lot 307. As it is, the claimed accretion (Lot 821) lies on the bank of the
river not adjacent to Lot 307 but directly opposite Lot 307 across the river.

Assuming (arguendo only) that the Cagayan River referred to in the Deeds of Sale
transferring ownership of the land to respondent Manalo is the western branch, the
decision of the Court of Appeals and of the trial court are bare of factual findings to
the effect that the land purchased by respondent Manalo received alluvium from the
action of the aver in a slow and gradual manner. On the contrary, the decision of the
lower court made mention of several floods that caused the land to reappear making
it susceptible to cultivation. A sudden and forceful action like that of flooding is
hardly the alluvial process contemplated under Article 457 of the Civil Code. It is the
slow and hardly perceptible accumulation of soil deposits that the law grants to the
riparian owner.

Besides, it is important to note that Lot 821 has an area of 11.91 hectares. Lot 821 is
the northern portion of the strip of land having a total area of 22.72 hectares. We find
it difficult to suppose that such a sizable area as Lot 821 resulted from slow accretion
to another lot of almost equal size. The total landholding purchased by respondent
Manalo is 10.45 hectares (8.65 hectares from Faustina Taccad and 1.80 hectares
from Gregorio Taguba in 1959 and 1964, respectively), in fact even smaller than Lot
821 which he claims by way of accretion. The cadastral survey showing that Lot 821
has an area of 11.91 hectares was conducted in 1969. If respondent Manalo's
contention were accepted, it would mean that in a span of only ten (10) years, he had
more than doubled his landholding by what the Court of Appeals and the trial court
considered as accretion. As already noted, there are steep vertical dike-like slopes
separating the depressed portion or river bed and Lot 821 and Lot 307. This
topography of the land, among other things, precludes a reasonable conclusion that
Lot 821 is an increment to the depressed portion by reason of the slow and constant
action of the waters of either the western or the eastern branches of the Cagayan
River.

We turn finally to the issue of ownership of Lot 821. Respondent Manalo's claim over
Lot 821 rests on accretion coupled with alleged prior possession. He alleged that the
parcels of land he bought separately from Gregorio Taguba and Faustina Taccad were
formerly owned by Judge Juan Taccad who was in possession thereof through his
(Judge Taccad's) tenants. When ownership was transferred to him, respondent
Manalo took over the cultivation of the property and had it declared for taxation
 128

purposes in his name. When petitioners forcibly entered into his property, he twice
instituted the appropriate action before the Municipal Trial Court of Tumauini,
Isabela. Against respondent Manalo's allegation of prior possession, petitioners
presented tax declarations standing in their respective names. They claimed lawful,
peaceful and adverse possession of Lot 821 since 1955.

If respondent Manalo had proved prior possession, it was limited physically to Lot
307 and the depressed portion or the eastern river bed. The testimony of Dominga
Malana who was a tenant for Justina Taccad did not indicate that she was also
cultivating Lot 821. In fact, the complaints for forcible entry lodged before the
Municipal Trial Court of Tumauini, Isabela pertained only to Lot 307 and the
depressed portion or river bed and not to Lot 821. In the same manner, the tax
declarations presented by petitioners conflict with those of respondent Manalo.
Under Article 477 of the Civil Code, the plaintiff in an action for quieting of title must
at least have equitable title to or interest in the real property which is the subject
matter of the action. The evidence of record on this point is less than satisfactory and
the Court feels compelled to refrain from determining the ownership and possession
of Lot 821, adjudging neither petitioners nor respondent Manalo as owner(s) thereof.

WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-GR CV

No. 04892 are hereby SET ASIDE. Respondent Manalo is hereby declared the owner
of Lot 307. The regularly submerged portion or the eastern bed of the Cagayan River
is hereby DECLARED to be property of public dominion. The ownership of Lot 821
shall be determined in an appropriate action that may be instituted by the interested
parties inter se. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.

Footnotes
1
 Records, p. 123.
2
 Id., p. 120.
3
 Id., p. 209.
4
 Id., p. 210.
5
 Exhibits "1-C. " "1-D" and "1-E" for the Prosecution. Records, p. 209.
6
 Records, pp. 1-6.
7
 Id., p. 24.
8
 Court of First Instance Decision, p. 40; Rollo, p. 98.
 129

9
 Go Ong vs. Court of Appeals, 154 SCRA 270 (1987).
10
 Sese vs. Intermediate Appellate Court, 152 SCRA 585 (1987).
11
 Pilar Development Corporation vs. Intermediate Appellate Court, 146 SCRA
215 (1986).
12
 Court of First Instance Decision, p. 39; Rollo, p. 97.
13
 Court of Appeals Decision, pp. 5-6; citation omitted.
14
 53 Phil. 423.(1929).
15
 TSN, 7 October 1975, pp. 4-6.
16
 TSN, 13 October 1975, pp. 9-10.
17
 TSN, 3 November 1976, p. 3.
18
 Records, p. 122.
19
 Hilario vs. City of Manila, 126 Phil. 128 (1967).
20
 3 Manresa, Comentarios al Codigo Civil Español (6a ed., 1934), p. 75.
21
 Cortes vs. City of Manila, 10 Phil. 567 (1908). See also Article 461, Civil
Code.
22
 Republic vs. Court of Appeals, 132 SCRA 514 (1984).

Commixtion and Confusion

SIARI VALLEY ESTATES v LUCASAN (G.R. No. L-7046, August 31, 1955)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-11005           October 31, 1957

SIARI VALLEY ESTATES, INC., petitioner,

 130

vs.
FILEMON LUCASAN and Hon. W. M. ORTEGA, Judge of the Court of
First Instance of Zamboanga del Norte, respondents.

Orendain and Sarmiento for petitioner.

Hon. Wenceslao M. Ortega in his own behalf.
Barrios, Barrios and Lucasan for respondents.

BENGZON, J.:

This is an offshoot of our decision in G.R. No. L-7046, Siari Valley Estate Inc, vs.
Filemon Lucasan,1 wherein we affirmed, on appeal, the judgment of Hon. Patricio
Ceniza, of the Zamboanga court of first instance in its Civil Case No. 134. The
dispositive part of such affirmed judgment read as follows:

Valley Estate all the cattle that may be found in the cattle ranch ". . . judgment
is hereby rendered adjudicating to the Siari of Filemon Lucasan specially the
321 heads that had been entrusted to his care as receiver or trustee of this
Court and ordering the defendant to deliver to the plaintiff all said cattle or
their value amounting to P40,000 to pay damages to the Siari Valley Estate
for the 400 heads of cattle that he sold since 1946 up to the date of the trial at
the rate of P100 per head or P40,000 plus interest at the rate of 6 per cent
from the date of the trial of this case in January, 1951 and to pay the cost of the
proceeding. In addition, the defendant is hereby ordered to allow the Siari
Valley Estate to round up all the buffaloes that may be found in his cattle
ranch after the Siari Valley Estate shall have posted a bond in the amount of
P5,000 to answer for whatever damages the operation may cause to him.

With regard to the contempt proceedings, Filemon Lucasan is hereby found guilty of
the charges and he is hereby sentenced to pay a fine of P500 pursuant to section 6
Rule 64 of the Rules of Court or suffer subsidiary imprisonment in case of insolvency
at the rate of one day every P2.50 that he falls to pay.

With regard to the three causes of action the counter-claim of the defendant, all of
them are hereby dismissed for lack of merit.

Upon petition by the intervenors, the intervention had been dismissed in a previous
order of this Court, without prejudice to the filing of an independent action.
(emphasis ours.)

After our decision had become final, the expediente was returned to the court below
for execution. Thereupon a dispute arose whether we had affirmed also that part of
Judge Ceniza's judgement underlined in the above quotation (concerning buffaloes)
Lucasan pointed out that, in quoting the dispositive paragraphs of the appealed
judgment, our decision had omitted the underlined portion. Therefore, he argued,
the affirmance of the judgment did not include the directive about buffaloes. As the
respondent judge sustained Lucasan's contention, this petition for mandamus and
other auxiliary remedies was promptly filed.

Knowing the extent and scope of our decision in said appealed case, we issued a
 131

preliminary injunction designed to protest petitioner's interests. And now, after the
parties have been heard, we turn to the principal question, which is: did we uphold
the right given to plaintiff by the court below "to round up the buffaloes"? The
answer must be: we did. In the concluding part of our decision we found the
appealed judgment to be substantially in accordance with the facts and the law; and
then we adjudged: "Therefore it is hereby affirmed with appellant."

Ordinarily the affirmed judgment is that contained in its dispositive part; in the said
Siari Valley appealed case, the above-quoted four paragraphs.

It is true that in the opening statements our decision quoted the dispositive part of
the appealed judgment as follows:

Premises considered, judgment is hereby rendered, adjudicating to the Siari

Valley Estate all the cattle that may be found in the cattle ranch of Filemon
Lucasan, specially the 321 heads that had been entrusted to his care as
receiver or trustee of this Court and ordering the defendant to deliver to the
plaintiff all said cattle or their value amounting to P40,000, to pay damages to
the Siari Valley Estate for the 400 heads of cattle that he sold since 1946 up to
the date of the trial at the rate of P100 per head or P40,000 plus interest at
the rate of 6 per cent from the date of the trial of this case in January, 1951 and
to pay the costs of the proceeding.

With regard to the contempt proceedings, Filemon Lucasan is hereby found

guilty of the charges and he is hereby sentenced to pay a fine of P500 pursuant
to section 6, Rule 64, of the Rules of Court or suffer subsidiary imprisonment
in case of insolvency at the rate of one day for every P2.50 that he fails to pay.

thereby omitting the portion regarding buffaloes. But observe that we used elliptical
signs, i. e. several *'s which indicated the omission of some portion or portions. This
did not evince any intention to "modify" the judgment by eliminating the omitted
portion.2 The judgment, we decreed in concluding, "is hereby affirmed". We did not
say, it is hereby modified. Neither did we say, "the quoted portion of the judgment is
hereby affirmed". For that matter, would respondents maintain likewise the last two
paragraphs of the dispositive part of the appealed judgment (regarding the
counterclaim and the intervenors) were not equally affirmed, because they were not
quoted?

We explained in Contreras vs. Felix, 78 Phil., 570, 44 Off. Gaz., 4306 that "the final
judgment as rendered is the judgment of the court, irrespective of all seemingly
contrary statements in the decision", and that the judgement must be distinguished
from the opinion. Our decree was one affirming the appealed judgment. If any
statement in the opinion preceding the decree seemingly excluded a portion (which
we deny), it must be overlooked, because the judgment or the decree prevails over
the opinion.

In construing confirmatory decisions of appellate courts the practice is to regard the

whole of the appealed judgment to have been upheld3 even if several points thereof
have not been discussed "or touched upon such confirmatory decision." 4
 132

The truth is, as may be verified from our decision itself, our statement omitted the
portion concerning buffaloes because it was immaterial for the purpose of the appeal.
It was not a point necessary to understand or decide the questions then before
us.5 Indeed the whole decision made no reference to the subject of buffaloes, even as
appellant's brief (Lucasan) failed to debate such aspect of the appealed judgment.

The argument is advanced that inasmuch as the plaintiff "never claimed the buffaloes
in its amended complaint (and) the (lower) court could not have granted that which
was not prayed", therefore the Supreme Court most probably had excluded the
matter (of buffaloes) from its confirmatory order. Such reasoning has no valid
foundation because Lucasan was not in default, there was trial, and under the
circumstances the plaintiff could be granted any relief that was supported by the
evidence "although not specified in his pleadings."6 The other argument addressed to
the proposition that the Court shouldn't have, and couldn't have affirmed that phase
of the judgment is too late, if not impertinent. The affirmance without modification
of the judgment is final. And the parties should realize that the matter of buffaloes
was not such plain error (supposing it was error) as to call for special consideration
by this Court even if ignored7 by appellant's counsel in his brief.

All the foregoing shows the respondent judge's mistake in declining to permit Siari
Valley Inc. to round up its buffaloes roaming on Lucasan's ranch. But the latter's
resistance to such rounding-up, founded on a rather technical plea, despite his
knowledge that he had complained of such buffaloes grazing on his land (R. A. in L-
7046 p. 140), was not a mere mistake but a rather sharp practice transcending the
limits of good faith. However-overruling petitioner's contention-Lucasan will not be
declared to have committed contempt of court considering on the one hand that his
ground of objection appeared to be not so flimsy8 as to make his conduct a "willful
disregard or disobedience"9 or a "clear and contumacious refusal to obey"10 and on
the other hand remembering that the power to punish for contempt should be
conservatively exercised.

Wherefore, the petition for mandamus is granted, the respondent judge, and

whoever may be acting in his place, is hereby ordered to enforce, and the other
respondent Filemon Lucasan is ordered to obey, the aforementioned judgment in full
of Judge Ceniza which was totally affirmed by this Court on appeal. Costs of this
proceeding shall be paid respondent Lucasan. So ordered.

Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador,

Concepcion, Reyes, J.B.L., Endencia, and Felix, JJ, concur.

Footnotes
1
 97 Phil., 987.
2
 It would be unorthodox, not to say illegal, thus to modify, since the litigants
are entitled to know why it was modified.
 133

3
 In the absence of words to the contrary.
4
 The affirmance of a judgment makes it conclusive as to all matters actually
adjudicated by it, even though not mentioned in the affirming opinion.
(Freeman on Judgments, Vol. 2, section 640 citing cases.
5
 The effect of the confirmatory judgment as an adjudication is not controlled
by general expressions of the court in its opinion outside the matter before it
and not necessary to its decision. Freeman on judgments, Vol. 2 p. 1848.
6
 See section 9 Rule 35, Rules of Court; Iturralde vs. Magcauas, 9 Phil. 599;
Santos vs. Macapinlac, 51 Phil. 224 and other cases cited in Moran, Comments
on the Rules of Court 1957 Ed. Vol. 1 p. 486.
7
 Cf. Rule 53 section 5 in relation with section 1, Rule 58.
8
 He even managed to convince the judge of a superior court.
9
 People vs. Rivera, (91 Phil., 354) and other cases cited in Moran, Rules of
Court (1957 Ed.) Vol. 2 p; 127.
10
 Gamboa vs. Teodoro, (91 Phil., 270) and other authorities cited in Moran,
Rules of Court (1957 Ed.) Vol. 2 p. 129.
11
 Gamboa vs. Teodoro, supra.
 134

SANTOS v BERNABE (G.R. No. L-31163, November 6, 1929)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-31163             November 6, 1929

URBANO SANTOS, plaintiff-appellee,
vs.
JOSE C. BERNABE, ET AL., defendants.
PABLO TIONGSON and THE PROVINCIAL SHERIFF OF
BULACAN, appellants.

Arcadio Ejercito and Guevara, Francisco and Recto for appellants.

Eusebio Orense And Nicolas Belmonte for appellee.

VILLA-REAL, J.:

This appeal was taken by the defendants Pablo Tiongson and the Provincial Sheriff of
Bulacan from the judgment of the Court of First of said province, wherein said
defendant Pablo Tiongson was ordered to pay the plaintiff Urbano Santos the value
of 778 cavans and 38 kilos of palay, at the rate of P3 per cavan, without special
pronouncement as to costs.

In support of their appeal, the appellants assign the following alleged errors
committed by the lower court in its judgment, to wit:

1. The court erred in holding that it has been proved that in the cavans of palay
attached by the herein defendant Pablo Tiongson from the defendant Jose C.
Bernabe were included those claimed by the plaintiff in this cause.

2. The court erred in ordering the defendant Pablo Tiongson to pay the
 135

plaintiff the value of 778 cavans and 38 kilos of palay, the refund of which is
claimed by said plaintiff.

3. The court erred in denying the defendants' motion for a new

trial.1awphil.net

The following facts were conclusively proved at the trial:

On March 20, 1928, there were deposited in Jose C. Bernabe's warehouse by the
plaintiff Urbano Santos 778 cavans and 38 kilos of palay and by Pablo Tiongson
1,026 cavans and 9 kilos of the same grain.

On said date, March 20, 1928, Pablo Tiongson filed with the Court of First Instance
of Bulacan a complaint against Jose C. Bernabe, to recover from the latter the 1,026
cavans and 9 kilos of palay deposited in the defendant's warehouse. At the same
time, the application of Pablo Tiongson for a writ of attachment was granted, and the
attachable property of Jose C. Bernabe, including 924 cavans and 31 1/2 kilos of
palay found by the sheriff in his warehouse, were attached, sold at public auction,
and the proceeds thereof delivered to said defendant Pablo Tiongson, who obtained
judgment in said case.

The herein plaintiff, Urbano Santos, intervened in the attachment of the palay, but
upon Pablo Tiongson's filing the proper bond, the sheriff proceeded with the
attachment, giving rise to the present complaint.

It does not appear that the sacks of palay of Urbano Santos and those of Pablo
Tiongson, deposited in Jose C. Bernabe's warehouse, bore any marks or signs, nor
were they separated one from the other.

The plaintiff-appellee Urbano Santos contends that Pablo Tiongson cannot claim the
924 cavans and 31 ½ kilos of palay attached by the defendant sheriff as part of those
deposited by him in Jose C. Bernabe's warehouse, because, in asking for the
attachment thereof, he impliedly acknowledged that the same belonged to Jose C.
Bernabe and not to him.

In the complaint filed by Pablo Tiongson against Jose C. Bernabe, civil case No. 3665
of the Court of First Instance of Bulacan, it is alleged that said plaintiff deposited in
the defendant's warehouse 1,026 cavans and 9 kilos of palay, the return of which, or
the value thereof, at the rate of P3 per cavan was claimed therein. Upon filing said
complaint, the plaintiff applied for a preliminary writ of attachment of the
defendant's property, which was accordingly issued, and the defendant's property,
including the 924 cavans and 31 ½ kilos of palay found by the sheriff in his
warehouse, were attached.

It will be seen that the action brought by Pablo Tiongson against Jose C. Bernabe is
that provided in section 262 of the Code of Civil Procedure for the delivery of
personal property. Although it is true that the plaintiff and his attorney did not follow
strictly the procedure provided in said section for claiming the delivery of said
personal property nevertheless, the procedure followed by him may be construed as
equivalent thereto, considering the provisions of section 2 of the Code of Civil
 136

Procedure of the effect that "the provisions of this Code, and the proceedings under
it, shall be liberally construed, in order to promote its object and assist the parties in
obtaining speedy justice."

Liberally construing, therefore, the above cited provisions of section 262 of the Code
of Civil Procedure, the writ of attachment applied for by Pablo Tiongson against the
property of Jose C. Bernabe may be construed as a claim for the delivery of the sacks
of palay deposited by the former with the latter.

The 778 cavans and 38 kilos of palay belonging to the plaintiff Urbano Santos, having
been mixed with the 1,026 cavans and 9 kilos of palay belonging to the defendant
Pablo Tiongson in Jose C. Bernabe's warehouse; the sheriff having found only 924
cavans and 31 1/2 kilos of palay in said warehouse at the time of the attachment
thereof; and there being no means of separating form said 924 cavans and 31 1/2 of
palay belonging to Urbano Santos and those belonging to Pablo Tiongson, the
following rule prescribed in article 381 of the Civil Code for cases of this nature, is
applicable:

Art. 381. If, by the will of their owners, two things of identical or dissimilar
nature are mixed, or if the mixture occurs accidentally, if in the latter case the
things cannot be separated without injury, each owner shall acquire a right in
the mixture proportionate to the part belonging to him, according to the value
of the things mixed or commingled.

The number of kilos in a cavan not having been determined, we will take the
proportion only of the 924 cavans of palay which were attached and sold, thereby
giving Urbano Santos, who deposited 778 cavans, 398.49 thereof, and Pablo
Tiongson, who deposited 1,026 cavans, 525.51, or the value thereof at the rate of P3
per cavan.

Wherefore, the judgment appealed from is hereby modified, and Pablo Tiongson is
hereby ordered to pay the plaintiff Urbano Santos the value of 398.49 cavans of palay
at the rate of P3 a cavan, without special pronouncement as to costs. So ordered.

Avanceña, C.J., Street, Villamor and Ostrand, JJ., concur.

Johnson, J., reserves his vote.
Johns, J., dissents.
137