Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. Nos. L-66075-76 July 5, 1990

EULOGIO AGUSTIN, HEIRS OF BALDOMERO LANGCAY, ARTURO BALISI & JUAN LANGCAY, petitioners, vs.INTERMEDIATE APPELLATE COURT, MARIA MELAD, TIMOTEO MELAD, PABLO BINAYUG & GERONIMA UBINA, respondents.

Antonio N. Laggui for petitioners.

Pedro R. Perez, Jr. for private respondents.

 

GRIÑO-AQUINO, J.:

The Cagayan River separates the towns of Solana on the west and Tuguegarao on the east in the province of Cagayan. According to the unrebutted testimony of Romeo Rigor, Geodetic Engineer of the Bureau of Lands, in 1919 the lands east of the river were covered by the Tuguegarao Cadastre. In 1925, Original Certificate of Title No. 5472 was issued for land east of the Cagayan River owned by defendant-petitioner Eulogio Agustin (Exh. 2-Agustin).

As the years went by, the Cagayan River moved gradually eastward, depositing silt on the western bank. The shifting of the river and the siltation continued until 1968.

In 1950, all lands west of the river were included in the Solana Cadastre. Among these occupying lands covered by the Solana Cadastre were plaintiffs-private respondents, namely, Pablo Binayug, who has been in possession of Lots 3349, 7876, 7877, 7878, 7879, 7875, 7881, 7882, 7883, 7884, 7885, 7891 and 7892, and Maria Melad, who owns Lot 3351 (Exh. 3-Binayug; Exh. B-Melad). Pablo Binayug began his possession in 1947. An area of eight (8) hectares was planted to tobacco and corn while 12 hectares were overgrown with talahib (Exh. C-1 Binayug.) Binayug's Homestead Application No. W-79055 over this land was approved in 1959 (Exh. B-Binayug). Binayug's possession was recognized in the decision in Civil Case No. 101 (Exh. F-Binayug). On the other hand, as a result of Civil Case No. 343-T, Macario Melad, the predecessor-in-interest of Maria Melad and Timoteo Melad, was issued Original Certificate of Title No. P-5026 for Lot 3351 of Cad. 293 on June 1, 1956.

Through the years, the Cagayan River eroded lands of the Tuguegarao Cadastre on its eastern bank among which was defendant-petitioner Eulogio Agustin's Lot 8457 (Exh. E-Melad), depositing the alluvium as accretion on the land possessed by Pablo Binayug on the western bank.

However, in 1968, after a big flood, the Cagayan River changed its course, returned to its 1919 bed, and, in the process, cut across the lands of Maria Melad, Timoteo Melad, and the spouses Pablo Binayug and Geronima Ubina whose lands were transferred on the eastern, or Tuguegarao, side of the river. To cultivate those lots they had to cross the river.

In April, 1969, while the private respondents and their tenants were planting corn on their lots located on the eastern side of the Cagayan River, the petitioners, accompanied by the mayor and some policemen of Tuguegarao, claimed the same lands as their own and drove away the private respondents from the premises.

On April 21, 1970, private respondents Maria Melad and Timoteo Melad filed a complaint (Civil Case No. 343-T) to recover Lot No. 3351 with an area of 5 hectares and its 6.6-hectare accretion. On April 24, 1970, private respondent Pablo Binayug filed a separate complaint (Civil Case No. 344-T) to recover his lots and their accretions.

On June 16, 1975, the trial court rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby made:

In Civil Case No. 343-T, commanding Eulogio Agustin, Gregorio Tuliao, Jacinto Buquel and Octavio Bancud, or anybody acting as their representative[s] or agents to vacate Lot No. 3351 of Solana Cadastre together with its accretion consisting of portions of Lots 9463, 9462 and 9461 of Tuguegarao Cadastre and for these defendants to restore ownership in favor of Maria Melad and Timoteo Melad who are the only interested heirs of Macario Melad.

In Civil Case No. 344-T, commanding defendants Justo Adduru, Andres Pastor, Teofilo Tagacay, Vicente Camilan, Nicanor Mora, Baldomero Cagurangan, Domingo Quilang, Cesar Cabalza, Elias Macababbad, Titong Macababbad, Arturo Balisi, Jose Allabun, Eulogio Agustin, Banong Aquino, Junior Cambri and Juan Langoay, or any of their agents or representatives to vacate the Lots 3349, 7876, 7877, 7878, 7879, 7875, 7881, 7882, 7883, 7884, 7885, 7891 and 7892, together with its accretion and to restore possession to plaintiffs Pablo Binayug and Geronima Ubina. Without pronouncement as to damages which were not properly proven and to costs.

SO ORDERED. (As amended by the order dated August 15, 1975.) (pp. 24-25, Rollo.)

Only defendant-petitioner Eulogio Agustin appealed in Civil Case No. 343-T, while in Civil Case No. 344-T, only defendants-petitioners Eulogio Agustin, Baldomero Cagurangan (substituted by his heir), Arturo Balisi and Juan Langcay appealed. But upon motion of plaintiffs-private respondents, the trial court ordered the execution pending appeal of the judgment in Civil Case No. 344-T against Cagurangan, Balisi and Langcay on the ground that their appeal was dilatory as they had not presented evidence at the trial (Order dated August 15, 1975).

On November 29, 1983, the Intermediate Appellate Court rendered a decision affirming in toto the judgment of the trial court, with costs against the defendants-appellants.

In their petition for review of that decision, the petitioners allege that the Court of Appeals erred:

1. in declaring that the land in question had become part of private respondents' estate as a result of accretion;

2. in declaring that the accretion to private respondents' estate which used to pertain to petitioners' estate cannot preclude the private respondents from being the owners thereof; and

3. in declaring that the ownership of private respondents over the accretion is not affected by the sudden and abrupt change in the course of the Cagayan River when it reverted to its old bed

The petition is unmeritorious and must be denied.

The finding of the Court of Appeals that there had been accretions to the lots of the private respondents who did not lose the ownership of such accretions even after they were separated from the principal lots by the sudden change of course of the river, is a finding of fact which is conclusive on this Court. That finding is supported by Art. 457 of the New Civil Code which provides:

Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters. (366)

Accretion benefits a riparian owner when the following requisites are present: (1) that the deposit be gradual and imperceptible; (2) that it resulted from the effects of the current of the water; and (3) that the land where accretion takes place is adjacent to the bank of a river (Republic vs. CA, 132 SCRA 514).

All these requisites of accretion are present in this case for, as the trial court found:

. . . Cagayan River did move year by year from 1919 to 1968 or for a period of 49 years. Within this period, the alluvium (sic) deposited on the other side has become greater in area than the original lands of the plaintiffs in both cases. Still the addition in every year is imperceptible in nature, one could not discern it but can be measured after the lapse of a certain time. The testimonial evidence in these cases that said Cagayan River moved eastward year by year is overwhelming as against the denial of defendant Eulogio Agustin alone. Cesar Caronan, one time mayor of Solana, Cagayan, said so. Arturo Taguian said so. Timoteo Melad said so. Francisco Ubina said so. Geodetic Engineer Rigor impliedly said so when he testified that when Solana Cadastre was executed in 1950 it overlapped portions of Tuguegarao Cadastre executed in 1919. This could not have happened if that part of Tuguegarao Cadastre was not eroded by the overflow of the Cagayan River. These testimonies cannot be destroyed by the denials of Vicente Cauilan, Marcelo Agustin and Eulogio Agustin alone . . . . (p. 27, Rollo.)

The appellate court confirmed that the accretion on the western bank of the Cagayan River had been going on from 1919 up to 1968 or for a period of 49 years. It was gradual and imperceptible. Only when Lot No. 3351, with an original area of 5 hectares described in the free patent that was issued to Macario Melad in June 1956, was resurveyed in 1968 did it become known that 6.6 hectares had been added to it. Lot No. 3351, covered by a homestead patent issued in June, 1950 to Pablo Binayug, grew from its original area of 18 hectares, by an additional 50 hectares through alluvium as the Cagayan River gradually moved to the east. These accretions belong to riparian owners upon whose lands the alluvial deposits were made (Roxas vs. Tuason, 9 Phil. 408; Director of Lands vs. Rizal, 87 Phil. 806). The reason for this principle is because, if lands bordering on streams are exposed to floods and other damage due to the destructive force of the waters, and if by virtue of law they are subject to encumbrances and various kinds of easements, it is only just that such risks or dangers as may prejudice the owners thereof should in some way be compensated by the right of accretion (Cortes vs. City of Manila, 10 Phil. 567).i•t•c-aüsl

The private respondents' ownership of the accretion to their lands was not lost upon the sudden and abrupt change of the course of the Cagayan River in 1968 or 1969 when it reverted to its old 1919 bed, and separated or transferred said accretions to the other side (or eastern bank) of the river. Articles 459 and 463 of the New Civil Code apply to this situation.

Art. 459. Whenever the current of a river, creek or torrent segregates from an estate on its bank a known portion of land and transfers it to another estate, the owner of the land to which the segregated portion belonged retains the ownership of it, provided that he removes the same within two years.

Art. 463. Whenever the current of a river divides itself into branches, leaving a piece of land or part thereof isolated, the owner of the land retains his ownership. He also retains it if a portion of land is separated from the estate by the current. (Emphasis supplied).

In the case at bar, the sudden change of course of the Cagayan River as a result of a strong typhoon in 1968 caused a portion of the lands of the private respondents to be "separated from the estate by the current." The private respondents have retained the ownership of the portion that was transferred by avulsion to the other side of the river.

WHEREFORE, the petition is denied for lack of merit. The decision of the Intermediate Appellate Court, now Court of Appeals, is hereby affirmed. Costs against the petitioners.

THIRD DIVISION

G.R. No. 157906 November 2, 2006

JOAQUINITA P. CAPILI, Petitioner, vs.

SPS. DOMINADOR CARDAÑA and ROSALITA CARDAÑA, Respondents.

D E C I S I O N

QUISUMBING, J.:

Before us is a petition for review assailing the Decision 1 dated October 18, 2002 of the Court of Appeals in CA-G.R. CV. No. 54412, declaring petitioner liable for negligence that resulted in the death of Jasmin Cardaña, a school child aged 12, enrolled in Grade 6, of San Roque Elementary School, where petitioner is the principal. Likewise assailed is the Resolution 2 dated March 20, 2003 denying reconsideration.

The facts are as follows:cra:nad

On February 1, 1993, Jasmin Cardaña was walking along the perimeter fence of the San Roque Elementary School when a branch of a caimito tree located within the school premises fell on her, causing her instantaneous death. Thus, her parents - Dominador and Rosalita Cardaña - filed a case for damages before the Regional Trial Court of Palo, Leyte against petitioner.

The Cardañas alleged in their complaint that even as early as December 15, 1992, a resident of the barangay, Eufronio Lerios, reported on the possible danger the tree posed to passersby. Lerios even pointed to the petitioner the tree that stood near the principal's office. The Cardañas averred that petitioner's gross negligence and lack of foresight caused the death of their daughter.

Petitioner denied the accusation and said that at that time Lerios had only offered to buy the tree. She also denied knowing that the tree was dead and rotting. To prove her point, she presented witnesses who attested that she had brought up the offer of Lerios to the other teachers during a meeting on December 15, 1992 and assigned Remedios Palaña to negotiate the sale.

In a Decision 3 dated February 5, 1996, the trial court dismissed the complaint for failure of the respondents to establish negligence on the part of the petitioner.

On appeal, the Court of Appeals reversed the trial court's decision. The appellate court found the appellee (herein petitioner) liable for Jasmin's death, as follows:cra:nad

Foregoing premises considered, the instant appeal is GRANTED. Appellee Joaquinita Capili is hereby declared liable for negligence resulting to the death of Jasmin D. Cardaña. She is hereby ordered to indemnify appellants, parents of Jasmin, the following amounts:cra:nad

1. For the life of Jasmin D. Cardaña P50,000.00;

2. For burial expenses 15,010.00;

3. For moral damages 50,000.00;

4. For attorney's fees and litigation 10,000.00.

expenses

SO ORDERED. 4 cra

Petitioner's motion for reconsideration was denied. Petitioner now comes before us submitting the following issues for our resolution:

I

WHETHER OR NOT THE COURT OF APPEALS VIS-À-VIS THE SET OF FACTS STATED IN THE CHALLENGED DECISION, ERRED IN FINDING THE PETITIONER NEGLIGENT AND THEREFORE LIABLE FOR DAMAGES UNDER ARTICLE 2206 OF THE CIVIL CODE AND IN ORDERING THE PETITIONER TO PAY DAMAGES TO THE RESPONDENTS; AND

II

WHETHER OR NOT THE COURT OF APPEALS ERRED IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION. 5 cra

On the other hand, respondents posit the following issue:cra:nad

Whether or not the Decision of the Honorable Court of Appeals, Twelfth Division, in CA G.R. CV. No. 54412 promulgated on October 18, 2002 . should be affirmed and respected, thus remain undisturbed. 6 cra

Primarily, the issue is whether petitioner is negligent and liable for the death of Jasmin Cardaña.

Petitioner asserts that she was not negligent about the disposal of the tree since she had assigned her next-in-rank, Palaña, to see to its disposal; that despite her physical inspection of the school grounds, she did not observe any indication that the tree was already rotten nor did any of her 15 teachers inform her that the tree was already rotten; 7 and that moral damages should not be granted against her since there was no fraud nor bad faith on her part.

On the other hand, respondents insist that petitioner knew that the tree was dead and rotting, yet, she did not exercise reasonable care and caution which an ordinary prudent person would have done in the same situation.

To begin, we have to point out that whether petitioner was negligent or not is a question of fact which is generally not proper in a petition for review, and when this determination is supported by substantial evidence, it becomes conclusive

and binding on this Court. 8 However, there is an exception, that is, when the findings of the Court of Appeals are incongruent with the findings of the lower court. 9 In our view, the exception finds application in the present case.

The trial court gave credence to the claim of petitioner that she had no knowledge that the tree was already dead and rotting and that Lerios merely informed her that he was going to buy the tree for firewood. It ruled that petitioner exercised the degree of care and vigilance which the circumstances require and that there was an absence of evidence that would require her to use a higher standard of care more than that required by the attendant circumstances. 10 The Court of Appeals, on the other hand, ruled that petitioner should have known of the condition of the tree by its mere sighting and that no matter how hectic her schedule was, she should have had the tree removed and not merely delegated the task to Palaña. The appellate court ruled that the dead caimito tree was a nuisance that should have been removed soon after petitioner had chanced upon it. 11 cra

A negligent act is an inadvertent act; it may be merely carelessly done from a lack of ordinary prudence and may be one which creates a situation involving an unreasonable risk to another because of the expectable action of the other, a third person, an animal, or a force of nature. A negligent act is one from which an ordinary prudent person in the actor's position, in the same or similar circumstances, would foresee such an appreciable risk of harm to others as to cause him not to do the act or to do it in a more careful manner. 12 cra

The probability that the branches of a dead and rotting tree could fall and harm someone is clearly a danger that is foreseeable. As the school principal, petitioner was tasked to see to the maintenance of the school grounds and safety of the children within the school and its premises. That she was unaware of the rotten state of a tree whose falling branch had caused the death of a child speaks ill of her discharge of the responsibility of her position.

In every tort case filed under Article 2176 of the Civil Code, plaintiff has to prove by a preponderance of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the defendant or some other person for whose act he must respond; and (3) the connection of cause and effect between the fault or negligence and the damages incurred. 13 cra

The fact, however, that respondents' daughter, Jasmin, died as a result of the dead and rotting tree within the school's premises shows that the tree was indeed an obvious danger to anyone passing by and calls for application of the principle of res ipsa loquitur.

The doctrine of res ipsa loquitur applies where (1) the accident was of such character as to warrant an inference that it would not have happened except for the defendant's negligence; (2) the accident must have been caused by an agency or instrumentality within the exclusive management or control of the person charged with the negligence complained of; and (3) the accident must not have been due to any voluntary action or contribution on the part of the person injured. 14 cra

The effect of the doctrine of res ipsa loquitur is to warrant a presumption or inference that the mere falling of the branch of the dead and rotting tree which caused the death of respondents' daughter was a result of petitioner's negligence, being in charge of the school.

In the case of D.M. Consunji, Inc. v. Court of Appeals, 15 this Court held:cra:nad

.As a rule of evidence, the doctrine of res ipsa loquitur is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence.

The concept of res ipsa loquitur has been explained in this wise:cra:nad

While negligence is not ordinarily inferred or presumed, and while the mere happening of an accident or injury will not generally give rise to an inference or presumption that it was due to negligence on defendant's part, under the doctrine of res ipsa loquitur, which means, literally, the thing or transaction speaks for itself, or in one jurisdiction, that the thing or instrumentality speaks for itself, the facts or circumstances accompanying an injury may be such as to raise a presumption, or at least permit an inference of negligence on the part of the defendant, or some other person who is charged with negligence.

x x x where it is shown that the thing or instrumentality which caused the injury complained of was under the control or management of the defendant, and that the occurrence resulting in the injury was such as in the ordinary course of things would not happen if those who had its control or management used proper care, there is sufficient evidence, or, as sometimes stated, reasonable evidence, in the absence of explanation by the defendant, that the injury arose from or was caused by the defendant's want of care.

The procedural effect of the doctrine of res ipsa loquitur is that petitioner's negligence is presumed once respondents established the requisites for the doctrine to apply. Once respondents made out a prima facie case of all requisites, the burden shifts to petitioner to explain. The presumption or inference may be rebutted or overcome by other evidence and, under appropriate circumstances a disputable presumption, such as that of due care or innocence, may outweigh the inference. 16 cra

Was petitioner's explanation as to why she failed to have the tree removed immediately sufficient to exculpate her?cralaw

As the school principal, petitioner was tasked to see to the maintenance of the school grounds and safety of the children within the school and its premises. That she was unaware of the rotten state of the tree calls for an explanation on her part as to why she failed to be vigilant.

Petitioner contends she was unaware of the state of the dead and rotting tree because Lerios merely offered to buy the tree and did not inform her of its condition. Neither did any of her teachers inform her that the tree was an imminent danger to anyone. She argues that she could not see the immediate danger posed by the tree by its mere sighting even as she and the other teachers conducted ground inspections. She further argues that, even if she should have been aware of the danger, she exercised her duty by assigning the disposition of the tree to another teacher.

We find petitioner's explanation wanting. As school principal, petitioner is expected to oversee the safety of the school's premises. The fact that she failed to see the immediate danger posed by the dead and rotting tree shows she failed to

exercise the responsibility demanded by her position.

Moreover, even if petitioner had assigned disposal of the tree to another teacher, she exercises supervision over her assignee. 17 The record shows that more than a month had lapsed from the time petitioner gave instruction to her assistant Palaña on December 15, 1992, to the time the incident occurred on February 1, 1993. Clearly, she failed to check seasonably if the danger posed by the rotting tree had been removed. Thus, we cannot accept her defense of lack of negligence.

Lastly, petitioner questions the award of moral damages. Moral damages are awarded if the following elements exist in the case: (1) an injury clearly sustained by the claimant; (2) a culpable act or omission factually established; (3) a wrongful act or omission by the defendant as the proximate cause of the injury sustained by the claimant; and (4) the award of damages predicated on any of the cases stated in Article 2219 of the Civil Code. 18 However, the person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith. It is not enough that one merely suffered sleepless nights, mental anguish, and serious anxiety as the result of the actuations of the other party. Invariably, such action must be shown to have been willfully done in bad faith or with ill motive. 19 Under the circumstances, we have to concede that petitioner was not motivated by bad faith or ill motive vis-à-vis respondents' daughter's death. The award of moral damages is therefore not proper.

In line with applicable jurisprudence, we sustain the award by the Court of Appeals of P50,000 as indemnity for the death of Jasmin, 20 and P15,010 as reimbursement of her burial expenses. 21 cra

WHEREFORE, the petition is DENIED. The Decision dated October 18, 2002 and the Resolution dated March 20, 2003, of the Court of Appeals in CA-G.R. CV. No. 54412 are AFFIRMED with MODIFICATION such that the award of moral damages is hereby deleted.

Costs against petitioner.

SO ORDERED.

LEONARDO A. QUISUMBINGAssociate Justice

WE CONCUR:

ANTONIO T. CARPIOAssociate Justice

CONCHITA CARPIO MORALESAssociate Justice

(On Leave)

DANTE O. TINGAAssociate Justice

PRESBITERO J. VELASCO, JR.Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

LEONARDO A. QUISUMBINGAssociate Justice

Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

ARTEMIO V. PANGANIBANChief Justice

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 72694 December 1, 1987

AURORA DEL BANCO, EVELYN DEL BANCO, FEDERICO TAINO, SOLEDAD TAINO, JOVENCIO TAINO, SAMSON TAINO, NOE TAINO, SOCORRO TAINO and CLEOFAS TAINO, petitioners, vs.INTERMEDIATE APPELLATE COURT (Second Civil Cases Division), ALEJANDRA PANSACOLA, LEONILA ENCALLADO, VEDASTO ENCALLADO, JOSE YEPES, et al., respondents.

 

PARAS, J.:

This is a petition for review on certiorari by way of appeal from: (a) the decision of respondent Court of Appeals (Intermediate Appellate Court) * promulgated on May 17, 1985 in AC-G.R. CV No. 70460, entitled "Alejandra Pansacola, et al. vs. Domen Villabona del Banco, et al." which reversed and set aside the judgment ** of the trial court; and (b) its resolution ** of October 15, 1985 in the same case, denying petitioners' motion for reconsideration of the aforementioned decision and their supplement to motion for reconsideration.

The dispositive portion of the questioned decision (Rollo, p. 97) reads, as follows:

ACCORDINGLY, the decision appealed from is hereby SET ASIDE insofar as it dismisses the complaint, and another one entered —

(1) Declaring plaintiffs-appellants and defendants-appellees, in their respective capacities as described in par. V of the complaint, as co-owners of the property in dispute, but subject to the four-part pro-indiviso division already made by said property;

(2) Ordering the cancellation of all certificates of title that may have been issued to any of the parties hereto; and

(3) Ordering the complete and final partition of the subject property in conformity with law.

For this purpose, this case is hereby remanded to the Court of origin so that a final partition shall be made in accordance with Sections 2, 3, et. seq., Rule 69 of the Rules of Court.

Let a copy of this decision be furnished to the Register of Deeds for the Province of Quezon.

The facts of the case are taken from the decision of the Appellate Court (Rollo, p. 39) as follows:

In a document executed in the Municipality of San Rafael, Bulacan, on February 11, 1859, three brothers, Benedicto Pansacola, Jose Pansacola and Manuel Pansacola (known as Fr. Manuel Pena) entered into an agreement which provided, among others:

(1) That they will purchase from the Spanish Government the lands comprising the Island of Cagbalite which is located within the boundaries of the Municipality of Mauban, Province of Tayabas (now Quezon) and has an approximate area of 1,600 hectares;

(2) That the lands shall be considered after the purchase as their common property;

(3) That the co-ownership includes Domingo Arce and Baldomera Angulo, minors at that time represented by their father, Manuel Pansacola (Fr. Manuel Pena) who will contribute for them in the proposed purchase of the Cagbalite Island;

(4) That whatever benefits may be derived from the Island shall be shared equally by the co-owners in the following proportion: Benedicto Pansacola-1/4 share; Jose Pansacola-1/4 share; and, Domingo Arce and Baldomera Angulo-2/4 shares which shall be placed under the care of their father, Manuel Pansacola (Fr. Manuel Pena).

On August 14, 1866, co-owners entered into the actual possession and enjoyment of the Island purchased by them from the Spanish Government. On April 11, 1868 they agreed to modify the terms and conditions of the agreement entered into by them on February 11, 1859. The new agreement provided for a new sharing and distribution of the lands, comprising the Island of Cagbalite and whatever benefits may be derived therefrom, as follows:

(a) The first one-fourth (1/4) portion shall belong to Don Benedicto Pansacola;

(b) The second one-fourth (1/4) portion shall belong to Don Jose Pansacola;

(c) The third one-fourth(1/4) portion shall henceforth belong to the children of their deceased brother, Don Eustaquio Pansacola, namely: Don Mariano Pansacola,- Maria Pansacola and Don Hipolito Pansacola;

(d) The fourth and last one-fourth (1/4) portion shall belong to their nephews and nieces (1) Domingo Arce, (2) Baldomera Angulo, (3) Marcelina Flores, (4) Francisca Flores, (5) Candelaria dela Cruz, and (6) Gervasio Pansacola who, being all minors, are still under the care of their brother, Manuel Pansacola (Fr. Manuel Pena). The latter is the real father of said minors.

About one hundred years later, on November 18, 1968, private respondents brought a special action for partition in the Court of First Instance of Quezon, under the provisions of Rule 69 of the Rules of Court, including as parties the heirs and successors-in-interest of the co-owners of the Cagbalite Island in the second contract of co-ownership dated April 11, 1968. In their answer some of the defendants, petitioners herein, interposed such defenses as prescription, res judicata, exclusive ownership, estoppel and laches.

After trial on the merits, the trial court rendered a decision *** dated November 6, 1981 dismissing the complaint, the dispositive portion of which reads as follows:

WHEREFORE, and in the fight of all the foregoing this Court finds and so holds that the Cagbalite Island has already been partitioned into four (4) parts among the original co-owners or their successors-in-interest.

Judgment is therefore rendered for the defendants against the plaintiffs dismissing the complaint in the above entitled case.

Considering that the cross claims filed in the above entitled civil case are not compulsory cross claims and in order that they may be litigated individually the same are hereby dismissed without prejudice.

IT IS SO ORDERED.

The motion for reconsideration filed by the plaintiffs, private respondents herein, was denied by the trial court in an order dated February 25, 1982 (Record on Appeal, p. 241).

On appeal, respondent Court reversed and set aside the decision of the lower court (Rollo, p. 117). It also denied the motion for reconsideration and the supplement to motion for reconsideration filed by private respondents, in its resolution dated October 15, 1983 (Rollo, p. 86).

Instant petition was filed with the Court on December 5, 1985 (Rollo, p. 12). Petitioners Josefina Pansacola, et al. having filed a separate petition (G.R. No. 72620) on the same subject matter and issues raised in the instant 'petition, the counsel for private respondents filed a consolidated comment on the separate petitions for review on February 24, 1986 with the First Division of the Court (Rollo, p. 119). It appears that counsel for petitioners also filed a consolidated reply to the consolidated comment of private respondents as required by the Second Division of the Court (Rollo, p. 151). However, petitioners filed a separate reply in the instant case on February 18,1987 (Rollo, p. 168)as required by the Court in a Resolution of the Second Division dated November 24, 1986 (Rollo, p. 160).

On May 19, 1987, private respondents in the instant petition filed a manifestation praying for the denial of the instant petition in the same manner that G.R. No. 72620 was denied by the Court in its Resolution dated July 23, 1986 (Rollo, p. 151). Their rejoinder to the reply of petitioners was filed on May 25,1987 (Rollo, p. 179).

On June 8, 1987, the Court resolved to give due course to the petition (Rollo, p. 192). The memorandum of private respondents was mailed on July 18, 1987 and received in the Court on July 29, 1987 (Rollo, p. 112); the memorandum for petitioners was mailed on August 18, 1987 and received in the Court on September 7, 1987 (Rollo, p. 177).

The sole issue to be resolved by the Court is the question of whether or not Cagbalite Island is still undivided property owned in common by the heirs and successors-in-interest of the brothers, Benedicto, Jose and Manuel Pansacola.

The Pansacola brothers purchased the Island in 1859 as common property and agreed on how they would share in the benefits to be derived from the Island. On April 11, 1868, they modified the terms and conditions of the agreement so as to include in the co-ownership of the island the children of their deceased brothers Eustaquio and the other children of Manuel Pansacola (Fr. Manuel Pena) who were committed in the agreement of February 11, 1859. The new agreement provided for a new sharing proportion and distribution of the Island among the co-owners.

On January 20, 1907, the representative of the heirs of all the original owners of Cagbalite Island entered into an agreement to partition the Island, supplemented by another agreement dated April 18, 1908. The contract dated January 20, 1907 provides as follows:

Sa Mauban, Tayabas, ika 20 ng Enero ng 1907 caming mga quinatawan ng mga ibang co-herederos na hindi caharap, sa pulong na ito, sa nasa naming lahat na magcaroon na ng catahimikan ang aming-aming cabahagui sa Pulong Kagbalete sumacatuid upang mapagtoos ang hangahan ng apat na sapul na pagcacabahagui nitong manang ito, pagcacausap na naming lahat at maihanay at mapagtalonan ang saysay ng isa't isa, ay cusa naming pinagcasunduan at pinasiya ang nangasosonod:—

Una: Ang malaquing calupaan, alis ang lahat na pacatan ay babahaguin alinsunod sa pagcabaki na guinawa sa croquis na niyari ng practico agrimensor Don Jose Garcia.

Icalawa: Ang Lomingoy, doon ang tuid na guhit sa ilong ng Pait ay pagaapatin ding sinlaqui ayon sa dating pagkakabaki.

Icatlo: Cung magawa na ang tunay na piano at icapit na sa lupa, paglalagay ng nadarapat na mojon, ang masacupan ng guhit, sumacatuid ang caingin at pananim ng isa na nasacupan ng pucto na noocol sa iba, ay mapapasulit sa dapat mag-ari, na pagbabayaran nito ang nagtanim sa halagang:- bawat caponong niog na nabunga, P 1.00 'un peso); cung ang bias ay abot sa isang vara, P 0.50; cung bagong tanim o locloc P 0. 50 ang capono.

Icapat: Ang lahat na pacatan ay bacod na pagaapatin at bawat bahagui ay noocol sa isat-isa sa apat na sanga ng paganacang nagmana.

Icalima: Upang ang naipatanim ng bawat isa ay matama sa canya ng mailagan ang hirap ng loob ng nagatikha; ay pagtotolong-tolongan ng lahat naiba na mahusay ang dalawang partes na magcalapit na mapa ayong tumama, hangang may pagluluaran, sa nagsikap at maoyanam, maidaco sa lugar na walang cailangang pagusapan.

Icanim: Ang casulatang ito, cung mapermahan na na magcacaharap sampong ng mga ibang co-herederos na notipicahan nitong lahat na pinagcasundoan ay mahahabilin sa camay ng agrimensor, Amadeo Pansacola, upang canyang mapanusugan ang maipaganap ang dito'y naootos.

Na sa catunayan at catibayan ng lahat na nalalagda dito, sa pag galang at pag ganap dito sa paingacaisahan ay pumirma sampo ng mga sacsing caharap at catanto ngayong fecha ayon sa itaas.

The contract dated April 18, 1908 provides as follows:

Sa Mauban, ika 18 ng Abril ng 1908, sa pagcacatipon ng lahat na firmantes nito ay pinagcaisahan itong nangasosonod:—

Una — Pinagtitibay ang mga pinagcasundoan sa itaas noong 20 ng Enero ng 1907, liban na lamang sa mga pangcat na una at icapat at tongcol doon pinasiya naming bahaguinin ng halohalo at paparejo ang calupaan at pacatan.

Ycalawa — Sa pagsucat ng agrimensor na si Amadeo at paggawa ng piano at descripcion ay pagbabayaran siya ng sa bawat isa naoocol sa halagang isang piso sa bawat hectares.

Icatlo — Ang counting pucto sa 'Mayanibulong' na may caingin ni G. Isidro Altamarino, asawa ni Restitute ay tutumbasan naman cay G. Norberto Pansacola sa lugar ng Dapo calapit ng Pinangalo ng gasing sucat.

Icapat — Sa inilahad na piano ay pinasiya nang itoloy at upang maca pagparehistro ang isa't isa ay pinagcaisahang magcacagastos na parepareho para sa tablang pangmohon at ibat iba pang cagastusan.

Sa catunayan at catibayan ay cami, pumirma. (Record on Appeal, p. 224)

There is nothing in all four agreements that suggests that actual or physical partition of the Island had really been made by either the original owners or their heirs or successors-in-interest. The agreement entered into in 1859 simply provides for the sharing of whatever benefits can be derived from the island. The agreement, in fact, states that the Island to be purchased shall be considered as their common property. In the second agreement entered in 1868 the co-owners agreed not only on the sharing proportion of the benefits derived from the Island but also on the distribution of the Island each of the brothers was allocated a 1/4 portion of the Island with the children of the deceased brother, Eustaquio Pansacola allocated a 1/4 portion and the children of Manuel Pansacola (Fr. Manuel Pena) also allocated a 1/4 portion of the Island. With the distribution agreed upon each of the co-owner is a co-owner of the whole, and in this sense, over the whole he exercises the right of dominion, but he is at the same time the sole owner of a portion, in the instant case, a 1/4 portion (for each group of co-owners) of the Island which is truly abstract, because until physical division is effected such portion is merely an Ideal share, not concretely determined (3 Manresa, Codigo Civil, 3rd Ed., page 486, cited in Lopez vs. Cuaycong, 74 Phil. 601; De la Cruz vs. Cruz, 32 SCRA 307 [1970]; Felices vs. Colegado, 35 SCRA 173 [1970],; Dultra vs. CFl 70 SCRA 465 [1976]; Gatchalian vs. Arlegui, 75 SCRA 234 [1977].)

In the agreement of January 20, 1907, the heirs that were represented agreed on how the Island was to be partitioned. The agreement of April 18, 1908 which supplements that of January 20, 1907 reveals that as of the signing of the 1908 agreement no actual partition of the Island had as yet been done. The second and fourth paragraphs of the agreement speaks of a survey yet to be conducted by a certain Amadeo and a plan and description yet to be made. Virgilio Pansacola, a son of the surveyor named Amadeo who is referred to in the contract dated April 18, 1908 as the surveyor to whom the task of surveying Cagbalite Island pursuant to said agreement was entrusted, however, testified that said contracts were never implemented because nobody defrayed the expenses for surveying the same (Record on Appeal, p. 225).

Petitioners invoke res judicata to bar this action for partition in view of the decision of the Court in G.R. No. 21033, "Domingo Arce vs. Maria Villabona, et al.," 21034, "Domingo Arce vs. Francisco Pansacola, et al.," and 21035, "Domingo Arce vs. Emiliano Pansacola, et al." promulgated on February 20, 1958 (Rollo, p. 141) and Brief for Defendants-Appellees, p. 87 Appendix 1), wherein the Court said:

Considering the facts that he waited for a period of nearly 23 years after the return from his deportation before taking any positive action to recover his pretended right in the property in question, gives great credit, in our opinion, to the declaration of the witnesses for the defense (a) that the original parcel of land was partitioned as they claim, and (b) that the plaintiff had disposed of all the right and interest which he had in the portion which had been given to him.

The issue in the aforementioned case which were tried together is not whether there has already been a partition of the Cagbalite Island. The actions were brought by the plaintiff to recover possession of three distinct parcels of land, together with damages. In fact the word partition was used in the metaphysical or Ideal sense (not in its physical sense).

Commenting on the above ruling of the Court in connection with the instant case, the respondent Court said:

Concededly, the Supreme Court decision in G.R. Nos. 21033-35 (Exh. X) did use or employ the word "partition." A careful reading of the said decision will, however, reveal, and we so hold, that the employment or use of the word "partition" therein was made not in its technical and legal meaning or sense adverted to above, but, rather in its Ideal, abstract and spiritual sense, this is (at) once evident from the bare statement in said decision to the effect that the property was divided into four parts, without any reference to the specific parts of the property that may have been adjudicated to each owner. There being no such reference in the decision and in the judgment affirmed therein to the adjudication of specific and definite portions of the property to each co-owner, there is a clear and logical inference that there was indeed no adjudication of specific and definite portions of the property made to each co-owner.

It must be admitted that the word "partition" is not infrequently used both in popular and technical parlance (Fule vs. Fule, 52 Phil. 750 [1929]). For purposes of the aforementioned case, evidently the Court used the word "partition" to refer to the distribution of the Cagbalite Island agreed upon by the original owners and in the later agreements, by the heirs and their subsequent successors-in-interest. There need not be a physical partition; a distribution of the Island even in a state of indiviso or was sufficient in order that a co-owner may validly sell his portion of the co-owned property. The sale of part of a particular lot thus co-owned by one co-owner was within his right pro-indiviso is valid in its entirety (Pamplona vs. Moreto, 96 SCRA 775 [1980]) but he may not convey a physical portion with boundaries of the land owned in common (Mercado vs. Liwanag, 5 SCRA 472 [1962]). Definitely, there was no physical partition of the Island in 1859. Neither could there have been one in 1894 because the manner of subdividing the Island was only provided for in the later agreements entered into by the heirs in 1907 and 1908. There was a distribution of the Island in 1868 as agreed upon by the original co-owners in their agreement of April 11, 1868. Any agreement entered into by the parties in 1894 could be no more than another agreement as to the distribution of the Island among the heirs of the original co-owners and the preparation of a tentative plan by a practical surveyor, a Mr. Jose Garcia, mentioned in the first paragraph of the 1907 agreement, preparatory to the preparation of the real plan to be prepared by the surveyor Amadeo, mentioned in the agreement of April 18, 1908.

What is important in the Court's ruling in the three aforementioned cases is that, the fact that there was a distribution of the Island among the co-owners made the sale of Domingo Arce of the portion allocated to him though pro-indiviso, valid. He thus disposed of all his rights and interests in the portion given to him.

It is not disputed that some of the private respondents and some of the petitioners at the time the action for partition was filed in the trial court have been in actual possession and enjoyment of several portions of the property in question (Rollo, p. 148). This does not provide any proof that the Island in question has already been actually partitioned and co-ownership terminated. A co-owner cannot, without the conformity of the other co-owners or a judicial decree of partition issued pursuant to the provision of Rule 69 of the Rules of Court (Rule 71 of the Old Rules), adjudicate to himself in fee simple a determinate portion of the lot owned in common, as his share therein, to the exclusion of other co-owners (Santos, Jr. vs. Buenconsejo, 14 SCRA 407 [1965]; Carvajal vs. Court of Appeals, 112 SCRA 237 [1982]). It is a basic principle in the law of co-ownership both under the present Civil Code as in the Code of 1889 that no individual co- owner can claim any definite portion thereof (Diversified Credit Corporation vs. Rosada 26 SCRA 470 [1968]). lt is therefore of no moment that some of the co-owners have succeeded in securing cadastral titles in their names to some portions of the Island occupied by them (Rollo, p. 10).

It is not enough that the co-owners agree to subdivide the property. They must have a subdivision plan drawn in accordance with which they take actual and exclusive possession of their respective portions in the plan and titles issued to each of them accordingly (Caro vs. Court of Appeals, 113 SCRA 10 [1982]). The mechanics of actual partition should follow the procedure laid down in Rule 69 of the Rules of Court. Maganon vs. Montejo, 146 SCRA 282 [1986]).

Neither can such actual possession and enjoyment of some portions of the Island by some of the petitioners herein be considered a repudiation of the co-ownership. It is undisputed that the Cagbalite Island was purchased by the original co-owners as a common property and it has not been proven that the Island had been partitioned among them or among their heirs. While there is co-ownership, a co-owner's possession of his share is co-possession which is linked to the possession of the other co-owners (Gatchalian vs. Arlegui, 75 SCRA 234 [1977]).

Furthermore, no prescription shall run in favor of a co-owner against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Valdez vs. Olonga, 51 SCRA 71 [1973], Tero vs. Tero, 131 SCRA 100 [1984]). Co-owners cannot acquire by prescription the share of the other co-owners, absent a clear repudiation of the co-ownership clearly communicated to the other co-owners (Mariano vs. De Vega, 148 SCRA 342 [1987]).

An action for partition does not prescribe. Article 403 of the Old Civil Code, now Article 497, provides that the assignees of the co-owners may take part in the partition of the common property, and Article 400 of the Old Code, now Article 494 provides that each co-owner may demand at any time the partition of the common property, a provision which implies that the action to demand partition is imprescriptible or cannot be barred by laches (Budlong vs. Pondoc, 79 SCRA 24 [1977]). An action for partition does not lie except when the co-ownership is properly repudiated by the co- owner (Jardin vs. Hollasco, 117 SCRA 532 [1982]).

On July 23, 1986, the Court through its Second Division denied the petition for the review of G.R. No. 72620, the petition for review on certiorari separately filed by Josefina Pansacola (Rollo, p. 151).

PREMISES CONSIDERED, the instant petition is likewise DENIED for lack of merit.

SO ORDERED.

Teehankee, C.J., Narvasa, Cruz and Gancayco, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 76351 October 29, 1993

VIRGILIO B. AGUILAR, petitioner, vs.COURT OF APPEALS and SENEN B. AGUILAR, respondents.

Jose F. Manacop for petitioner.

Siruello, Muyco & Associates Law Office for private respondent.

 

BELLOSILLO, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision of the Court of Appeals in CA-GR CV No. 03933 declaring null and void the orders of 23 and 26 April, 1979, the judgment by default of 26 July 1979, and the order of 22 October 1979 of the then Court of First Instance of Rizal, Pasay City, Branch 30, and directing the trial court to set the case for pre-trial conference.

Petitioner Virgilio and respondent Senen are brothers; Virgilio is the youngest of seven (7) children of the late Maximiano Aguilar, while Senen is the fifth. On 28 October 1969, the two brothers purchased a house and lot in Parañaque where their father could spend and enjoy his remaining years in a peaceful neighborhood. Initially, the brothers agreed that Virgilio's share in the co-ownership was two-thirds while that of Senen was one-third. By virtue of a written memorandum dated 23 February 1970, Virgilio and Senen agreed that henceforth their interests in the house and lot should be equal, with Senen assuming the remaining mortgage obligation of the original owners with the Social Security System (SSS) in exchange for his possession and enjoyment of the house together with their father.

Since Virgilio was then disqualified from obtaining a loan from SSS, the brothers agreed that the deed of sale would be executed and the title registered in the meantime in the name of Senen. It was further agreed that Senen would take care of their father and his needs since Virgilio and his family were staying in Cebu.

After Maximiano Aguilar died in 1974, petitioner demanded from private respondent that the latter vacate the house and that the property be sold and proceeds thereof divided among them.

Because of the refusal of respondent to give in to petitioner's demands, the latter filed on 12 January 1979 an action to compel the sale of the house and lot so that the they could divide the proceeds between them.

In his complaint, petitioner prayed that the proceeds of the sale, be divided on the basis of two-thirds (2/3) in his favor and one-third (1/3) to respondent. Petitioner also prayed for monthly rentals for the use of the house by respondent after their father died.

In his answer with counterclaim, respondent alleged that he had no objection to the sale as long as the best selling price could be obtained; that if the sale would be effected, the proceeds thereof should be divided equally; and, that being a co-owner, he was entitled to the use and enjoyment of the property.

Upon issues being joined, the case was set for pre-trial on 26 April 1979 with the lawyers of both parties notified of the pre-trial, and served with the pre-trial order, with private respondent executing a special power of attorney to his lawyer to

appear at the pre-trial and enter into any amicable settlement in his behalf. 1

On 20 April 1979, Atty. Manuel S. Tonogbanua, counsel for respondent, filed a motion to cancel pre-trial on the ground that he would be accompanying his wife to Dumaguete City where she would be a principal sponsor in a wedding.

On 23 April 1979, finding the reasons of counsel to be without merit, the trial court denied the motion and directed that the pre-trial should continue as scheduled.

When the case was called for pre-trial as scheduled on 26 April 1979, plaintiff and his counsel appeared. Defendant did not appear; neither his counsel in whose favor he executed a special power of attorney to represent him at the pre-trial. Consequently, the trial court, on motion of plaintiff, declared defendant as in default and ordered reception of plaintiff's evidence ex parte.

On 7 May 1979, defendant through counsel filed an omnibus motion to reconsider the order of default and to defer reception of evidence. The trial court denied the motion and plaintiff presented his evidence.

On 26 July 1979, rendering judgment by default against defendant, the trial court found him and plaintiff to be co-owners of the house and lot, in equal shares on the basis of their written agreement. However, it ruled that plaintiff has been deprived of his participation in the property by defendant's continued enjoyment of the house and lot, free of rent, despite demands for rentals and continued maneuvers of defendants, to delay partition. The trial court also upheld the right of plaintiff as co-owner to demand partition. Since plaintiff could not agree to the amount offered by defendant for the former's share, the trial court held that this property should be sold to a third person and the proceeds divided equally between the parties.

The trial court likewise ordered defendant to vacate the property and pay plaintiff P1,200.00 as rentals 2 from January 1975 up to the date of decision plus interest from the time the action was filed.

On 17 September 1979, defendant filed an omnibus motion for new trial but on 22 October 1979 the trial court denied the motion.

Defendant sought relief from the Court of Appeals praying that the following orders and decision of the trial court be set aside: (a) the order of 23 April 1970 denying defendants motion for postponement of the pre-trial set on 26 April 1979; (b) the order of 26 April 1979 declaring him in default and authorizing plaintiff to present his evidence ex-parte; (e) the default judgment of 26 July 1979; and, (d) the order dated 22 October 1979 denying his omnibus motion for new trial.

On 16 October 1986, the Court of Appeals set aside the order of the trial court of 26 April 1979 as well as the assailed judgment rendered by default., The appellate court found the explanation of counsel for defendant in his motion to cancel pre-trial as satisfactory and devoid of a manifest intention to delay the disposition of the case. It also ruled that the trial court should have granted the motion for postponement filed by counsel for defendant who should not have been declared as in default for the absence of his counsel.

Petitioner now comes to us alleging that the Court of Appeals erred (1) in not holding that the motion of defendant through counsel to cancel the pre-trial was dilatory in character and (2) in remanding the case to the trial court for pre-trial and trial.

The issues to be resolved are whether the trial court correctly declared respondent as in default for his failure to appear at the pre-trial and in allowing petitioner to present his evidence ex-parte, and whether the trial court correctly rendered the default judgment against respondent.

We find merit in the petition.

As regards the first issue, the law is clear that the appearance of parties at the pre-trial is mandatory. 3 A party who fails to

appear at a pre-trial conference may be non-suited or considered as in default. 4 In the case at bar, where private respondent and counsel failed to appear at the scheduled pre-trial, the trial, court has authority to declare respondent in

default. 5

Although respondent's counsel filed a motion to postpone pre-trial hearing, the grant or denial thereof is within the sound discretion of the trial court, which should take into account two factors in the grant or denial of motions for postponement,

namely: (a) the reason for the postponement and (b) the merits of the case of movant. 6

In the instant case, the trial court found the reason stated in the motion of counsel for respondent to cancel the pre-trial to be without merit. Counsel's explanation that he had to go to by boat as early as 25 March 1979 to fetch his wife and accompany her to a wedding in Dumaguete City on 27 April 1979 where she was one of the principal sponsors, cannot be accepted. We find it insufficient to justify postponement of the pre-trial, and the Court of Appeals did not act wisely in overruling the denial. We sustain the trial court and rule that it did not abuse its discretion in denying the postponement for lack of merit. Certainly, to warrant a postponement of a mandatory process as pre-trial would require much more than mere attendance in a social function. It is time indeed we emphasize that there should be much more than mere perfunctory treatment of the pre-trial procedure. Its observance must be taken seriously if it is to attain its objective, i.e., the speedy and inexpensive disposition of cases.

Moreover, the trial court denied the motion for postponement three (3) days before the scheduled pre-trial. If indeed, counsel for respondent could not attend the pre-trial on the scheduled date, respondent at least should have personally appeared in order not to be declared as in default. But, since nobody appeared for him, the order of the trial court

declaring him as in default and directing the presentation of petitioner's evidence ex parte was proper. 7

With regard to the merits of the judgment of the trial court by default, which respondent appellate court did not touch upon in resolving the appeal, the Court holds that on the basis of the pleadings of the parties and the evidence presented ex parte, petitioner and respondents are co-owners of subject house and lot in equal shares; either one of them may demand the sale of the house and lot at any time and the other cannot object to such demand; thereafter the proceeds of the sale shall be divided equally according to their respective interests.

Private respondent and his family refuse to pay monthly rentals to petitioner from the time their father died in 1975 and to vacate the house so that it can be sold to third persons. Petitioner alleges that respondent's continued stay in the property hinders its disposal to the prejudice of petitioner. On the part of petitioner, he claims that he should be paid two-thirds (2/3) of a monthly rental of P2,400.00 or the sum of P1,600.00.

In resolving the dispute, the trial court ordered respondent to vacate the property so that it could be sold to third persons and the proceeds divided between them equally, and for respondent to pay petitioner one-half (1/2) of P2,400.00 or the sum of P1,200.00 as monthly rental, conformably with their stipulated sharing reflected in their written agreement.

We uphold the trial court in ruling in favor of petitioner, except as to the effectivity of the payment of monthly rentals by respondent as co-owner which we here declare to commence only after the trial court ordered respondent to vacate in accordance with its order of 26 July 1979.

Article 494 of the Civil Code provides that no co-owner shall be obliged to remain in the co-ownership, and that each co-owner may demand at any time partition of the thing owned in common insofar as his share is concerned. Corollary to this rule, Art. 498 of the Code states that whenever the thing is essentially, indivisible and the co-owners cannot agree that it be, allotted to one of them who shall indemnify the others, it shall be sold and its proceeds accordingly distributed. This is resorted to (1) when the right to partition the property is invoked by any of the co-owners but because of the nature of the property it cannot be subdivided or its subdivision would prejudice the interests of the co-owners, and (b) the co-owners are not in agreement as to who among them shall be allotted or assigned the entire property upon proper reimbursement

of the co-owners. In one case, 8 this Court upheld the order of the trial court directing the holding of a public sale of the properties owned in common pursuant to Art. 498 of the Civil Code.

However, being a co-owner respondent has the right to use the house and lot without paying any compensation to petitioner, as he may use the property owned in common long as it is in accordance with the purpose for which it is

intended and in a manner not injurious to the interest of the other co-owners. 9 Each co-owner of property held pro indiviso exercises his rights over the whole property and may use and enjoy the same with no other limitation than that he shall not injure the interests of his co-owners, the reason being that until a division is made, the respective share of each

cannot be determined and every co-owner exercises, together with his co-participants joint ownership over the pro indiviso property, in addition to his use and enjoyment of the

same. 10

Since petitioner has decided to enforce his right in court to end the co-ownership of the house and lot and respondent has not refuted the allegation that he has been preventing the sale of the property by his continued occupancy of the premises, justice and equity demand that respondent and his family vacate the property so that the sale can be effected immediately. In fairness to petitioner, respondent should pay a rental of P1,200.00 per month, with legal interest; from the time the trial court ordered him to vacate, for the use and enjoyment of the other half of the property appertaining to petitioner.

When petitioner filed an action to compel the sale of the property and the trial court granted the petition and ordered the ejectment of respondent, the co-ownership was deemed terminated and the right to enjoy the possession jointly also ceased. Thereafter, the continued stay of respondent and his family in the house prejudiced the interest of petitioner as the property should have been sold and the proceeds divided equally between them. To this extent and from then on, respondent should be held liable for monthly rentals until he and his family vacate.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated 16 October 1986 is REVERSED and SET ASIDE. The decision of the trial court in Civil Case No. 69.12-P dated 16 July 1979 is REINSTATED, with the modification that respondent Senen B. Aguilar is ordered to vacate the premises in question within ninety (90) days from receipt of this and to pay petitioner Virgilio B. Aguilar a monthly rental of P1,200.00 with interest at the legal rate from the time he received the decision of the trial court directing him to vacate until he effectively leaves the premises.

The trial court is further directed to take immediate steps to implement this decision conformably with Art. 498 of the Civil Code and the Rules of Court. This decision is final and executory.

SO ORDERED.

Cruz, Davide, Jr., Quiason, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 78178 April 15, 1988

DELIA BAILON-CASILAO, LUZ PAULINO-ANG, EMMA PAULINO-YBANEZ, NILDA PAULINO-TOLENTINO, and SABINA BAILON, petitioners, vs.THE HONORABLE COURT OF APPEALS and CELESTINO AFABLE, respondents.

Veronico E. Rubio for petitioners.

Mario G. Fortes for private-respondent.

 

CORTES, J.:

The fate of petitioners' claim over a parcel of land rests ultimately on a determination of whether or not said petitioners are chargeable with such laches as may effectively bar their present action.

The petitioners herein filed a case for recovery of property and damages with notice of lis pendens on March 13, 1981 against the defendant and herein private respondent, Celestino Afable. The parcel of land involved in this case, with an area of 48,849 square meters, is covered by Original Certificate of Title No. 1771 issued on June 12, 1931, in the names of Rosalia, Gaudencio, Sabina Bernabe, Nenita and Delia, all surnamed Bailon, as co-owners, each with a 1/6 share. Gaudencio and Nenita are now dead, the latter being represented in this case by her children. Luz, Emma and Nilda. Bernabe went to China in 1931 and had not been heard from since then [Decision of the Court of Appeals, Rollo, p. 39].

It appears that on August 23, 1948, Rosalia Bailon and Gaudencio Bailon sold a portion of the said land consisting of 16,283 square meters to Donato Delgado. On May 13, 1949, Rosalia Bailon alone sold the remainder of the land consisting of 32,566 square meters to Ponciana V. Aresgado de Lanuza. On the same date, Lanuza acquired from Delgado the 16,283 square meters of land which the latter had earlier acquired from Rosalia and Gaudencio. On December 3, 1975, John Lanuza, acting under a special power of attorney given by his wife, Ponciana V. Aresgado de Lanuza, sold the two parcels of land to Celestino Afable, Sr.

In all these transfers, it was stated in the deeds of sale that the land was not registered under the provisions of Act No. 496 when the fact is that it is. It appears that said land had been successively declared for taxation first, in the name of Ciriaca Dellamas, mother of the registered co-owners, then in the name of Rosalia Bailon in 1924, then in that of Donato Delgado in 1936, then in Ponciana de Lanuza's name in 1962 and finally in the name of Celestino Afable, Sr. in 1983.

In his answer to the complaint filed by the herein petitioners, Afable claimed that he had acquired the land in question through prescription and contended that the petitioners were guilty of laches.He later filed a third-party complaint against Rosalia Bailon for damages allegedly suffered as a result of the sale to him of the land.

After trial, the lower court rendered a decision:

1. Finding and declaring Celestino Afable, a co-owner of the land described in paragraph III of the complaint having validly bought the two-sixth (2/6) respective undivided shares of Rosalia Bailon and Gaudencio Bailon;

2. Finding and declaring the following as pro-indiviso co-owners, having 1/6 share each, of the property described in paragraph III of the complaint, to wit:

a. Sabina Bailon

b. Bernabe Bailon

c. Heirs of Nenita Bailon-Paulino

d. Delia Bailon-Casilao;

3. Ordering the segregation of the undivided interests in the property in order to terminate co-ownership to be conducted by any Geodetic Engineer selected by the parties to delineate the specific part of each of the co-owners.

4. Ordering the defendant to restore the possession of the plaintiffs respective shares as well as all attributes of absolute dominion;

5. Ordering the defendant to pay the following:

a. P5,000.00 as damages;

b. P2,000.00 as attorney's fees and;

c. to pay the costs.

[Decision of the Trial Court, Rollo, p. 37-38].

On appeal, the respondent Court of Appeals affirmed the decision of the lower court insofar as it held that prescription does not he against plaintiffs-appellees because they are co-owners of the original vendors. However, the appellate court declared that, although registered property cannot be lost by prescription, nevertheless, an action to recover it may be barred by laches, citing the ruling in Mejia de Lucaz v. Gamponia [100 Phil. 277 (1956)]. Accordingly, it held the petitioners guilty of laches and dismissed their complaint. Hence, this petition for review on certiorari of the decision of the Court of Appeals.

The principal issue to be resolved in this case concerns the applicability of the equitable doctrine of laches. Initially though, a determination of the effect of a sale by one or more co-owners of the entire property held in common without the consent of all the co-owners and of the appropriate remedy of the aggrieved co-owners is required.

The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil Code.Thus:

Art. 493. Each co-owner shall have the full ownership of his part and of the acts and benefits pertaining thereto, and he may therefore alienate assign or mortgage it and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. [Emphasis supplied.]

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his own share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat 44 Phil. 320 (1923)]. This is because under the aforementioned codal provision, the sale or other disposition affects only his undivided share and the transferee gets only what would correspond to his grantor in the partition of the thing owned in common.[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect to their proportionate shares, and the subsequent transfers which culminated in the sale to private respondent Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel of land as correctly held by the lower court since the sales produced the effect of substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the property.

The proper action in cases like this is not for the nullification of the sale or for the recovery of possession of the thing owned in common from the third person who substituted the co-owner or co-owners who alienated their shares, but the DIVISION of the common property as if it continued to remain in the possession of the co-owners who possessed and administered it [Mainit v. Bandoy, supra.]

Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent were not secured in a sale of the entire property as well as in a sale merely of the undivided shares of some of the co-owners is an action. for PARTITION under Rule 69 of the Revised Rules of Court. Neither recovery of possession nor restitution can be granted since the defendant buyers are legitimate proprietors and possessors in joint ownership of the common property claimed [Ramirez v. Bautista, supra].

As to the action for petition, neither prescription nor laches can be invoked.

In the light of the attendant circumstances, defendant-appellee's defense of prescription is a vain proposition. Pursuant to Article 494 of the Civil Code, '(n)o co-owner shall be obliged to remain in the co-ownership. Such co-owner may demand at anytime the partition of the thing owned in common, insofar as his share is concerned.' [Emphasis supplied.] In Budiong v. Bondoc [G.R. No. L-27702, September 9, 1977, 79 SCRA 241, this Court has interpreted said provision of law to mean that the action for partition is imprescriptible or cannot be barred by prescription. For Article 494 of the Civil Code explicitly declares: "No prescription shall lie in favor of a co-owner or co- heir so long as he expressly or impliedly recognizes the co-ownership."

Furthermore, the disputed parcel of land being registered under the Torrens System, the express provision of Act No. 496 that '(n)o title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession' is squarely applicable. Consequently, prescription will not lie in favor of Afable as against the petitioners who remain the registered owners of the disputed parcel of land.

It is argued however, that as to the petitioners Emma, Luz and Nelda who are not the registered co-owners but merely represented their deceased mother, the late Nenita Bailon, prescription lies.Respondents bolster their argument by citing a decision of this Court in Pasion v. Pasion [G.R.No. L-15757, May 31, 1961, 2 SCRA 486, 489] holding that "the imprescriptibility of a Torrens title can only be invoked by the person in whose name the title is registered" and that 'one who is not the registered owner of a parcel of land cannot invoke imprescriptibility of action to claim the same.'

Reliance on the aforesaid Pasion case is futile. The ruling therein applies only against transferees other than direct issues or heirs or to complete strangers. The rational is clear:

If prescription is unavailing against the registered owner, it must be equally unavailing against the latter's hereditary successors, because they merely step into the shoes of the decedent by operation of law (New Civil Code, Article 777; Old Civil Code, Article 657), the title or right undergoing no change by its transmission mortis causa [Atus, et al., v. Nunez, et al., 97 Phil. 762, 764].

The latest pronouncement of this Court in Umbay v. Alecha [G. R. No. 67284, March 18, 1985, 135 SCRA 427, 429], which was promulgated subsequent to the Pasion case reiterated the Atus doctrine. Thus:

Prescription is unavailing not only against the registered owner but also against his hereditary successors, because they merely step into the shoes of the decedent by operation of law and are merely the continuation of the personality of their predecessor-in-interest. [Barcelona v. Barcelona, 100 Phil. 251, 257].

Laches is likewise unavailing as a shield against the action of herein petitioners.

Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on the part of the defendant or of one under whom he claims, giving rise to the situation of which complaint is made and for which the complainant seeks a remedy; (2) delay in asserting the corporations complainant's rights, the complainant having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and, (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred [Go China Gun, et al. v.

Co Cho et al., 96 Phil. 622 (1955)].

While the first and last elements are present in this case, the second and third elements are missing.

The second element speaks of delay in asserting the complainant's rights. However, the mere fact of delay is insufficient to constitute, laches. It is required that (1) complainant must have had knowledge of the conduct of defendant or of one under whom he claims and (2) he must have been afforded an opportunity to institute suit. This court has pointed out that laches is not concerned with the mere lapse of time. Thus:

Laches has been defined as the failure or neglect, for an unreasonable length of time to do that which by exercising due diligence could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. Tijam, et al., v. Sibonghanoy, G.R. No. L-21450, April 25, 1968, 23 SCRA 29,35; Tendo v. Zamacoma, G.R. No. L-63048, August 7, 1985, 138 SCRA 78, 90].

The doctrine of "laches" or of "stale demands" is based upon grounds of public policy which requires for the peace of society, the discouragement of stale claims and unlike the statute of limitations, is not a mere question of time but is principally a question of inequity or unfairness of permitting a right or claim to be enforced or asserted," [Tijam v. Sibonghanoy, supra, p. 35]. [Emphasis supplied.]

It must be noted that while there was delay in asserting petitioners' rights, such delay was not attended with any knowledge of the sale nor with any opportunity to bring suit. In the first place, petitioners had no notice of the sale made by their eldest sister. It is undisputed that the petitioner co-owners had entrusted the care and management of the parcel of land to Rosalia Bailon who was the oldest among them [TSN, July 27, 1983, p. 14]. In fact, Nicanor Lee, a son of Rosalia, who was presented as a witness by the plaintiffs-petitioners, testified on cross-examination that his mother was only the administrator of the land as she is the eldest and her brothers and sisters were away [TSN, October 5, 1983, p. 15]. Indeed, when Delia Bailon-Casilao left Sorsogon in 1942 after she got married, it was only in 1983 that she returned. Sabina on the other hand, is said to be living in Zamboanga while Bernabe who left for China in 1931 has not been heard from since then. Consequently, when Rosalia, from whom the private respondent derived his title, made the disputed sales covering the entire property, the herein petitioners were unaware thereof.

In the second place, they were not afforded an opportunity to bring suit inasmuch as until 1981, they were kept in the dark about the transactions entered into by their sister. It was only when Delia Bailon-Casilao returned to Sorsogon in 1981 that she found out about the sales and immediately, she and her co-petitioners filed the present action for recovery of property. The appellate court thus erred in holding that 'the petitioners did nothing to show interest in the land." For the administration of the parcel of land was entrusted to the oldest co-owner who was then in possession thereof precisely because the other co-owners cannot attend to such a task as they reside outside of Sorsogon where the land is situated. Her co-owners also allowed her to appropriate the entire produce for herself because it was not even enough for her daily consumption [TSN, October 5, 1983, pp. 17-18]. And since petitioner was the one receiving the produce, it is but natural that she was the one to take charge of paying the real estate taxes. Now, if knowledge of the sale by Rosalia was conveyed to the petitioners only later, they cannot be faulted for the acts of their co-owner who failed to live up to the trust and confidence expected of her. In view of the lack of knowledge by the petitioners of the conduct of Rosalia in selling the land without their consent in 1975 and the absence of any opportunity to institute the proper action until 1981, laches may not be asserted against the petitioners.

The third element of laches is likewise absent. There was no lack of knowledge or notice on the part of the defendant that the complainants would assert the right on which they base the suit. On the contrary, private respondent is guilty of bad faith in purchasing the property as he knew that the property was co-owned by six persons and yet, there were only two signatories to the deeds of sale and no special authorization to self was granted to the two sellers by the other co-owners.

Even as the land here was misrepresented in the deeds of sale as "unregistered," the truth was that Afable already had notice that the land was titled in the name of six persons by virtue of the Certificate of Title which was already in his possession even before the sale. Such fact is apparent from his testimony before the court a quo:

COURT:

Q: From whom did you get the certificate of Title?

A: When it was mortgaged by Ponciana Aresgado.

Q: It was mortgaged to you before you bought it?

A: Yes, Your Honor. (TSN, March 5, 1984, p. 12) When cross-examined, he stated:

Q: Mr. Witness, the original Certificate of Title was given to you in the year 1974, was it not?

A: 1975.

Q: In 1975, you already discovered that the title was in the name of several persons, is it not?

A: Yes, sir.

Q: When you discovered that it is in the name of several persons, you filed a case in court for authority to cancel the title to be transferred in your name, is it not?

A: Yes, sir.

Q: And that was denied by the Court of First Instance of Sorsogon because there was ordinary one signatory to the deed of sale instead of six, was it not?

A: Not one but two signatories.

[Decision of the Regional Trial Court of Sorsogon, Rollo, p. 35]

Such actual knowledge of the existence of other co-owners in whose names the lot subject of the sale was registered should have prompted a searching inquiry by Afable considering the well- known rule in this jurisdiction that:

... a person dealing with a registered land has a right to rely upon the face of the Torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautions man to make such inquiry. [Gonzales v. IAC and Rural Bank of Pavia, Inc., G.R. No. 69622, January 29, 1988).

Moreover, the undisputed fact is that petitioners are relatives of his wife. As a genuine gesture of good faith, he should have contacted the petitioners who were still listed as co-owners in the certificate of title which was already in his possession even before the sale. In failing to exercise even a minimum degree of ordinary prudence required by the situation, he is deemed to have bought the lot at his own risk. Hence any prejudice or injury that may be occasioned to him by such sale must be borne by him.

Indeed, aware of the flaws impairing his title, Afable went to the herein petitioner Delia Bailon-Casilao, asking the latter to sign a document obviously to cure the flaw [TSN, July 27, 1983, p.6]. Later, he even filed a petition in the Court of First Instance to register the title in his name which was denied as aforesaid.

It may be gleaned from the foregoing examination of the facts that Celestino Afable is not a buyer in good faith. Laches being an equitable defense, he who invokes it must come to the court with clean hands.

WHEREFORE, the petition for certiorari is hereby GRANTED, the challenged decision of the Court of Appeals is SET ASIDE, and the decision of the trial court is REINSTATED.

SO ORDERED.

Fernan, Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 75886 August 30, 1988

CONCEPCION ROQUE, petitioner, vs.HON. INTERMEDIATE APPELLATE COURT, ERNESTO ROQUE, FILOMENA OSMUNDO, CECILIA ROQUE, MARCELA ROQUE, JOSE ROQUE and RUBEN ROQUE, respondents.

Lorenzo J. Liwag for petitioner.

Dominador Ad Castillo for private respondents.

 

FELICIANO, J.:

The subject of the present Petition for Review is the 31 July 1986 Decision of the former Intermediate Appellate Court in AC-G.R. CV No. 02248 (entitled, "Concepcion Roque, plaintiff-appellee, vs. Ernesto Roque, Filomena Osmunda Cecilia Roque, Marcela Roque, Jose Roque and Ruben Roque, defendants-appellants") which reversed and set aside on appeal the decision of the Regional Trial Court of Malolos, Branch 9.

The controversy here involves a 312 square meter parcel of land situated in San Juan, Malolos, Bulacan and designated as Lot No. 1549 of the Cadastral Survey of Malolos. The property was registered originally in the name of Januario Avendaño, a bachelor who died intestate and without issue on 22 October 1945.

On 21 September 1959, the intestate heirs of Januario Avendafio executed a document entitled "Paghahati at

Pagtagabuyan ng Mana sa Labas ng Hukuman." 1 Through this instrument, extrajudicial partition of Lot No. 1549 was effected among the intestate heirs as follows:

a. One-fourth (1/4) undivided portion to Illuminada Avendaño.

b. One-fourth (1/4) undivided portion to Gregorio Avendafio and Miguel Avendaño.

c. One-fourth (1/4) undivided portion to Bernardino, Bienvenido, Numeriano and Rufina, all surnamed Avendaño.

d. One-fourth (1/4) undivided portion to respondent Emesto Roque and Victor Roque. 2

On 28 September 1959, co-owners Illuminada, Gregorio, Miguel, Bernardino, Bienvenido, Numeriano and Rufina, all surnamed Avendaño, in consideration of the aggregate amount of P500.00, transferred their collective and undivided threefourths (3/4) share in Lot No. 1549 to respondent Ernesto Roque and Victor Roque, thereby vesting in the latter full and complete ownership of the property. The transactions were embodied in two (2) separate deeds of sale both entitled

"Kasulatan ng Bilihang Patuluyan" 3 and both duly notarized. Subsequently, in an unnotarized "Bilihan Lubos at

Patuluyan" 4 dated 27 November 1961, Emesto and Victor Roque purportedly sold a three-fourths (3/4) undivided portion of Lot No. 1549 to their half-sister, petitioner Concepcion Roque, for the same amount. The property, however, remained registered in the name of the decedent, Januario Avendaño.

Upon the instance of petitioner Concepcion Roque and allegedly of respondent Ernesto Roque, Lot No. 1549 was

surveyed on 20 September 1975. Consequent thereto, a Subdivision Plan 5 was drawn up by the Geodetic Engineer Identifying and delineating a one-fourth (1/4) portion (78 square meters) of the property as belonging to respondent Ernesto Roque and Victor Roque (who had died on 14 April 1962), upon the one hand, and a three-fourths (3/4) portion (234 square meters) of the same property as belonging to petitioner Concepion Roque, upon the other hand. Petitioner claimed that preparation of the Subdivision Plan, which was approved on 3 November 1975 by the Land Registration Commission was a preliminary step leading eventually to partition of Lot No. 1549, partition allegedly having been previously agreed upon inter se by the co-owners. Respondents Ernesto Roque and the legal heirs of Victor Roque, however, refused to acknowledge petitioner's claim of ownership of any portion of Lot No. 1549 and rejected the plan to divide the land.

Attempts at amicable settlement having fallen through, petitioner Concepcion Roque, on 6 December 1977, filed a

Complaint for "Partition with Specific Performance" 6 (docketed as Civil Case No. 5236-M) with Branch 2 of the then Court of First Instance of Malolos against respondents Emesto Roque and the heirs of Victor Roque. In her complaint, petitioner (plaintiff below) claimed legal ownership of an undivided threefourths (3/4) portion of Lot No. 1549, by virtue of the 27 November 1961 "Bilihan Lubos at Patuluyan" executed in her favor by Emesto Roque and Victor Roque. In support of this claim, petitioner also presented an undated and unnotarized "Kasulatang Pagkilala sa Bilihan Patuluyan ng Bahagui at

Pagmamana sa Labas ng Hukuman at Paghahati-hati at Abuyan ng Bahagui" 7 said to have been signed by the respondents in acknowledgment of the existence and validity of the Bilihan in favor of petitioner. Finally, petitioner alleged that, as a coowner of Lot No. 1549, she had a right to seek partition of the property, that she could not be compelled to remain in the coownership of the same.

In an Answer with Compulsory Counterclaim 8 filed on 28 December 1977, respondents (defendants below) impugned the genuineness and due execution of the "Bilihan Lubos at Patuluyan" dated 27 November 1961 on the ground "that the signatures appearing thereon are not the authentic signatures of the supposed signatories ...." It was also alleged that petitioner Concepcion Roque, far from being a co-owner of Lot No. 1549, "occupied a portion of the lot in question by mere tolerance of the [defendants]." Respondents also refused to honor the unnotarized Kasulatan and, additionally, denied having had any participation in the preparation of the Subchvision Plan.

On 27 June 1983, the trial court (now Branch 9, Regional Trial Court of Malolos) rendered a Decision, 9 the dispositive portion of which read:

WHEREFORE, judgment is hereby rendered, in favor of the plaintiff and against the defendants;

1. Ordering the heirs of the late Victor Roque namely Filomena Osmunda his spouse, his children, Cecilia Roque, Marcela Roque, Jose Roque and Ruben Roque and their uncle and co-defendant Emesto Roque, to execute a deed of confirmation of the sale made by Emesto and Victor Roque in favor of plaintiff Concepcion Roque, entitled "Bilihan Lubos at Patuluyan," executed on November 27, 1961, Exh. E, over the 3/4 portion of the subject property;

2. Ordering the partition of the parcel of land described in par. 3 of tie complaint covered by Original Certificate of Title No. 1442 Bulacan issued in the name of Januario Avendafio, in the proportion of 3/4 to pertain to Concepcion Roque, and 1/4 to pertain to Emesto Roque and his co- defendants, his sister-in-law, nephews and nieces, in accordance with the approved subdivision plan (LRC Psd-230726).

3. Ordering defendants,jointly and severally, to pay to plaintiff the sum of P2,000.00 as and for attomey's fees and the costs of suit.

SO ORDERED.

The respondents appealed from this decision alleging the following errors:

I

The lower court erred when it decided and ordered defendantsappellants to execute a confirmation of the "Bilihan Lubos at Patuluyan," Exh. "E."

II

The lower court erred when it decided and ordered the defendantsappellant,s to deliver unto the plaintiff [a] 3/4 share of the land in question.

III

The lower court erred in deciding this case in favor of the plaintiff-appellee, based on an unnotarized and forged signature of defendantappellant Ernesto Roque.

IV

The lower court erred in giving credence to the testimony of the plaintiff-appellee Concepcion Roque

despite [its] gross inconsistencies. 10

Acting on the appeal (docketed as A.C.-G.R. CV No. 02248), the Intermediate Appellate Court, in a Decision 11 dated 31 July 1986, reversed the judgment of the trial court and dismissed both the petitioner's complaint and the respondents' appeal. A Motion for Reconsideration of petitioner Concepcion Roque was denied.

The present Petition for Review was filed with this Court on 18 September 1986. In a resolution dated 27 July 1987, we gave due course to the Petition and required the parties to submit their respective Memoranda.

1. On the matter of dismissal of petitioner's complaint, the Intermediate Appellate Court stated in its decision:

While the action filed by the plaintiff is for partition, the defendantz, after denying plaintiff's assertion of co-ownership, asserted that they are the exclusive and sole owners of the 314 portion of the parcel of land claimed by the plaintiff.

Upon the issue thusjoined by the pleadings, it is obvious that the case has become one ofownership of the disputed portion of the subject lot.

It is well settled that an action for partition will not prosper as such from the moment an alleged co-owner asserts an adverse title. The action that may be brought by an aggrieved co-owner is accion reivindicatoria or action for recovery of title and possession (Jardin vs. Hallasgo, 11 7 SCRA 532, 536, 537; Paner vs. Gaspar, 3 CA Rep. 155, 158). (Emphasis supplied)

Viewed in the light of the facts of the present case, the Intermediate Appellate Court's decision appears to imply that from the moment respondents (defendants below) alleged absolute and exclusive ownership of the whole of Lot No. 1549 in their Answer, the trial court should have immediately ordered the dismissal of the action for partition and petitioner (plaintiff below), if she so desired, should have refiled the case but this time as an accion reinvindicatoria. Taking this analysis a step further should the reivindicatory action prosper — i.e., a co-ownership relation is found to have existed between the parties — a second action for partition would still have to be instituted in order to effect division of the property among the co-owners.

We do not agree with the above view. An action for partition-which is typically brought by a person claiming to be co-owner of a specified property against a defendant or defendants whom the plaintiff recognizes to be co-owners — may be seen to present simultaneously two principal issues. First, there is the issue of whether the plaintiff is indeed a co-owner of the property sought to be partitioned. Second, assuming that the plaintiff successfully hurdles the first issue, there is the secondary issue of how the property is to be divided between plaintiff and defendant(s) — i.e., what portion should go to which co-owner.

Should the trial court find that the defendants do not dispute the status of the plaintiff as co-owner, the court can forthwith proceed to the actual partitioning of the property involved. In case the defendants assert in their Answer exclusive title in themselves adversely to the plaintiff, the court should not dismiss the plaintiffs action for partition but, on the contrary and in the exercise of its general jurisdiction, resolve the question of whether the plaintiff is co-owner or not. Should the trial court find that the plaintiff was unable to sustain his claimed status as co-owner, or that the defendants are or have become the sole and exclusive owners of the property involved, the court will necessarily have to dismiss the action for

partition. This result would be reached, not because the wrong action was commenced by the plaintiff, but rather because the plaintiff having been unable to show co-ownership rights in himself, no basis exists for requiring the defendants to submit to partition the property at stake. If, upon the other hand, the court after trial should find the eidstence of co-ownership among the parties litigant, the court may and should order the partition of the property in the same action. Judgment for one or the other party being on the merits, the losing party (respondents in this case) may then appeal the same. In either case, however, it is quite unnecessary to require the plaintiff to file another action, separate and independent from that for partition originally instituted. Functionally, an action for partition may be seen to be at once an action for declaration of coownership and for segregation and conveyance of a determinate portion of the property

involved. This is the import of our jurisprudence on the matter. 12 and is sustained by the public policy which abhors multiplicity of actions.

The question of prescription also needs to be addressed in this connection. It is sometimes said that "the action for

partition of the thing owned in common (actio communi dividendo or actio familiae erciscundae) does not prescribe." 13

This statement bears some refinement. In the words of Article 494 of the Civil Code, "each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concemed." No matter how long the co-ownership has lasted, a co-owner can always opt out of the co-ownership, and provided the defendant co-owners or co-heirs have theretofore expressly or impliedly recognized the co-ownership, they cannot set up as a defense the prescription of the action for partition. But if the defendants show that they had previously asserted title in themselves adversely to the plaintiff and for the requisite period of time, the plaintiffs right to require recognition of his status as a co-owner will have been lost by prescription and the court cannot issue an order requiring partition. This is precisely what happened in Jardin v. Hallasgo, 117 SCRA 532 (1982), which the respondent appellate court cited to support its position quoted above.

The case of Jardin involved, among others, two (2) parcels of land which were inherited in 1920 by the brothers Catalino jardin and Galo Jardin together with their half-brother, Sixto Hallasgo. The three (3) held these lands in co-ownership until Sixto later (the date was not specified) repudiated the coownership and occupied and possessed both parcels of land, claiming the same exclusively as his own. Sometime in 1973, the heirs of Catalino and Galo instituted an action for partition of the two (2) properties against Sixto's heirs, who had refused to surrender any portion of the same to the former. The trial court, assuming that prescription had started to run in that case even before the Civil Code took effect, held that the action for partition filed by the heirs of Catalino and Galo had already prescribed. On appeal, this Court affirmed the trial court on this point in the following terms:

Article 494 of the Civil Code provides that "no co-owner shall be obliged to remain in the co- ownership" and that "each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned." It also provides that 'no prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership.

While the action for the partition of the thing owned in common (actio communi dividendo or actio familiae erciscundae) does not prescribe, the co-ownership does not last forever since it may be repudiated by a co-owner [i.e., Sixto]. In such a case, the action for partition does not lie. What may be brought by the aggrieved co-owner [i.e., the heirs of Catalino and Galo] is an accion reivindicatoria or action for recovery of title and possession. That action may be barred by prescription.

If the co-heir or co-owner having possession of the hereditary or community property, holds the same in his own name, that is, under claim of exclusive ownership, he may acquire the property by prescription if his possession meets all the other requirements of the law, and after the expiration of the prescriptive period, his co-heir or co-owner may lose their right to demand partition, and their action may then be held to have prescribed (De los Santos vs. Santa Teresa, 44 Phil. 811).

xxx xxx xxx

(Emphasis supplied)

In the light of the foregoing discussion, it will be seen that the underscored portion of the Court's opinion in Jardin is actually obiter. For there, the Court simply held the action for partition by the heirs of Catalino and Galo had prescribed and did not require such heirs to start a new action (which would have been quite pointless); on the other hand, the Court remanded the case to the lower court for further proceedings in respect of the recovery of a 350 square meter lot which the evidence showed was owned by the plaintiffs but wrongfully included by Sixto in the cadastral survey of his share of the adjoining lot.

In Jardin, the claim of co-ownership asserted by the heirs of Catalino and Galo was effectively refuted by the heirs of Sixto, who not only claimed for themselves absolute and exclusive ownership of the disputed properties but were also in actual and adverse possesion thereof for a substantial length of time. The Court found, further, that the action for partition initially available to the heirs of Catalino and Galo had, as a result of the preceding circumstance, already prescribed.

An entirely different situation, however, obtains in the case at bar. First of all, petitioner Concepcion Roque-the co-owner seeking partition — has been and is presently in open and continuous possession of a three-fourths (3/4) portion of the property owned in common. The Court notes in this respect the finding of the trial court that petitioner, following execution of the "Bilihan Lubos at Pattlluyan" on 27 November 1961, had been in "continuous occupancy of the 3/4 portion of the

lot ... up to the present, and whereon plaintifrs house and that of her son are erected. " 14 Respondents do not dispute this finding of fact, although they would claim that petitioner's possession is merely tolerated by them. Second, prior to filing in 1977 of the Complaint in Civil Case No. 5236-M, neither of the parties involved had asserted or manifested a claim of absolute and exclusive ownership over the whole of Lot No. 1549 adverse to that of any of the other co-owners: in other words, co-ownership of the property had continued to be recognized by all the owners. Consequently, the action for partition could not have and, as a matter of fact, had not yet prescribed at the time of institution by Concepcion of the action below.

2. Coming now to the matter regarding dismissal of the respondents'appeal, the Intermediate Appellate Court held that inasmuch as the attack on the validity of the "Bilihan Lubos at Patuluyan" was predicated on fraud and no action for annulment of the document had been brought by respondents within the four (4) year prescriptive period provided under

Article 1391 of the Civil Code, such action had already prescribed.

We find it unnecessary to deal here with the issue of prescription discussed by the respondent court in its assailed decision. The facts on record clearly show that petitioner Concepcion Roque had been in actual, open and continuous possession of a three-fourths (3/4) portion of Lot No. 1549 ever since execution of the "Bilihan Lubos at Patuluyan" in November of 1961. The Court notes that it was only in their Answer with Compulsory Counterclaim filed with the trial court in December of 1977 — more than sixteen (16) years later — that respondents first questioned the genuineness and authenticity of the "Bilihan Lubos at Patuluyan." Not once during those sixteen (16) years did respondents contest petitioner's occupation of a three-fourths (3/4) portion of Lot No. 1549. Furthermore, if indeed it is true that respondents, as they claim, are the absolute owners of the whole of Lot No. 1549, it is most unusual that respondents would have allowed or tolerated such prolonged occupation by petitioner of a major portion (3/4) of the land while they, upon the other hand, contented themselves with occupation of only a fourth thereof. This latter circumstance, coupled with the passage of a very substantial length of time during which petitioner all the while remained undisturbed and uninterrupted in her occupation and possession, places respondents here in laches: respondents may no longer dispute the existence of the co-ownership between petitioner and themselves nor the validity of petitioner's claim of a threefourths (3/4) interest in Lot

No. 1549, as they are deemed, by their unreasonably long inaction, to have acquiesced in the coow,aership. 15 In this respect, we affirm the decision of the respondent appellate court presently under review.

WHEREFORE, the Decision of the Intermediate Appellate Court dated 31 July 1986 in A.C.-G.R. CV No. 02248 is SET ASIDE with respect to that portion which orders the dismissal of the Complaint in Civil Case No. 5236-M, but is AFFIRMED with respect to that portion which orders the dismissal of the respondents'appeal in A.C.-G.R. CV No. 02248. The Decision of Branch 9 of the Regional Trial Court of Malolos dated 27 June 1983 in Civil Case No. 5236-M is hereby REINSTATED. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr. and Cortes, JJ., concur.

Bidin, J., took no part.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. L-46296 September 24, 1991

EPITACIO DELIMA, PACLANO DELIMA, FIDEL DELIMA, VIRGILIO DELIMA, GALILEO DELIMA, JR., BIBIANO BACUS, OLIMPIO BACUS and PURIFICACION BACUS, petitioners, vs.HON. COURT OF APPEALS, GALILEO DELIMA (deceased), substituted by his legal heirs, namely: FLAVIANA VDA. DE DELIMA, LILY D. ARIAS, HELEN NIADAS, ANTONIO DELIMA, DIONISIO DELIMA, IRENEA DELIMA, ESTER DELIMA AND FELY DELIMA, respondents.

Gabriel J. Canete for petitioners.

Emilio Lumontad, Jr. for private respondents.

 

MEDIALDEA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals reversing the trial court's judgment which declared as null and void the certificate of title in the name of respondents' predecessor and which ordered the partition of the disputed lot among the parties as co-owners.

The antecedent facts of the case as found both by the respondent appellate court and by the trial court are as follows:

During his lifetime, Lino Delima acquired Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate in Cebu by sale on installments from the government. Lino Delima later died in 1921 leaving as his only heirs three brothers and a sister namely: Eulalio Delima, Juanita Delima, Galileo Delima and Vicente Delima. After his death, TCT No. 2744 of the property in question was issued on August 3, 1953 in the name of the Legal Heirs of Lino Delima, deceased, represented by Galileo Delima.

On September 22, 1953, Galileo Delima, now substituted by respondents, executed an affidavit of "Extra-judicial Declaration of Heirs." Based on this affidavit, TCT No. 2744 was cancelled and TCT No. 3009 was issued on February 4,1954 in the name of Galileo Delima alone to the exclusion of the other heirs.

Galileo Delima declared the lot in his name for taxation purposes and paid the taxes thereon from 1954 to 1965.

On February 29, 1968, petitioners, who are the surviving heirs of Eulalio and Juanita Delima, filed with the Court of First Instance of Cebu (now Regional Trial Court) an action for reconveyance and/or partition of property and for the annulment of TCT No. 3009 with damages against their uncles Galileo Delima and Vicente Delima,. Vicente Delima was joined as party defendant by the petitioners for his refusal to join the latter in their action.

On January 16, 1970, the trial court rendered a decision in favor of petitioners, the dispositive portion of which states:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the following are the declared owners of Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate presently covered by transfer Certificate of Title No. 3009, each sharing a pro-indiviso share of one-fourth;

1) Vicente Delima (one-fourth)

2) Heirs of Juanita Delima, namely: Bibiano Bacus, Olimpio Bacus and Purificacion Bacus (on-fourth);

3) Heirs of Eulalio Delima, namely Epitacio, Pagano, Fidel, Virgilio and Galileo Jr., all surnamed Delima (one-fourth); and

4) The Heirs of Galileo Delima, namely Flaviana Vda. de Delima, Lily D. Arias, Helen Niadas and Dionisio, Antonio, Eotu Irenea, and Fely, all surnamed Delima (one-fourth).

Transfer Certificate of Title No. 3009 is declared null and void and the Register of Deeds of Cebu is ordered to cancel the same and issue in lieu thereof another title with the above heirs as pro-indiviso owners.

After the payment of taxes paid by Galileo Delima since 1958, the heirs of Galileo Delima are ordered to turn a over to the other heirs their respective shares of the fruits of the lot in question computed at P170.00 per year up to the present time with legal (interest).

Within sixty (60) days from receipt of this decision the parties are ordered to petition the lot in question and the defendants are directed to immediately turn over possession of the shares here awarded to the respective heirs.

Defendants are condemned to pay the costs of the suit.

The counterclaim is dismissed.

SO ORDERED. (pp. 54-55, Rollo)

Not satisfied with the decision, respondents appealed to the Court of Appeals. On May 19, 1977, respondent appellate court reversed the trial court's decision and upheld the claim of Galileo Delima that all the other brothers and sister of Lino Delima, namely Eulalio, Juanita and Vicente, had already relinquished and waived their rights to the property in his favor, considering that he (Galileo Delima) alone paid the remaining balance of the purchase price of the lot and the realty taxes thereon (p. 26, Rollo).

Hence, this petition was filed with the petitioners alleging that the Court of Appeals erred:

1) In not holding that the right of a co-heir to demand partition of inheritance is imprescriptible. If it does, the defenses of prescription and laches have already been waived.

2) In disregarding the evidence of the petitioners.(p.13, Rollo)

The issue to be resolved in the instant case is whether or not petitioners' action for partition is already barred by the statutory period provided by law which shall enable Galileo Delima to perfect his claim of ownership by acquisitive prescription to the exclusion of petitioners from their shares in the disputed property. Article 494 of the Civil Code expressly provides:

Art. 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned.

Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement.

A donor or testator may prohibit partition for a period which shall not exceed twenty years.

Neither shall there be any partition when it is prohibited by law.

No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership.

As a rule, possession by a co-owner will not be presumed to be adverse to the others, but will be held to benefit all. It is understood that the co-owner or co-heir who is in possession of an inheritance pro-indiviso for himself and in representation of his co-owners or co-heirs, if, as such owner, he administers or takes care of the rest thereof with the obligation of delivering it to his co-owners or co-heirs, is under the same situation as a depository, a lessee or a trustee (Bargayo v. Camumot, 40 Phil, 857; Segura v. Segura, No. L-29320, September 19, 1988, 165 SCRA 368). Thus, an action to compel partition may be filed at any time by any of the co-owners against the actual possessor. In other words, no prescription shall run in favor of a co-owner against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Del Blanco v. Intermediate Appellate Court, No. 72694, December 1, 1987, 156 SCRA 55).

However, from the moment one of the co-owners claims that he is the absolute and exclusive owner of the properties and denies the others any share therein, the question involved is no longer one of partition but of ownership (De Castro v. Echarri, 20 Phil. 23; Bargayo v. Camumot, supra; De los Santos v. Santa Teresa, 44 Phil. 811). In such case, the imprescriptibility of the action for partition can no longer be invoked or applied when one of the co-owners has adversely possessed the property as exclusive owner for a period sufficient to vest ownership by prescription.

It is settled that possession by a co-owner or co-heir is that of a trustee. In order that such possession is considered adverse to the cestui que trust amounting to a repudiation of the co-ownership, the following elements must concur: 1) that the trustee has performed unequivocal acts amounting to an ouster of the cestui que trust; 2) that such positive acts of repudiation had been made known to the cestui que trust; and 3) that the evidence thereon should be clear and conclusive (Valdez v. Olorga, No. L-22571, May 25, 1973, 51 SCRA 71; Pangan v. Court of Appeals, No. L-39299, October 18, 1988, 166 SCRA 375).

We have held that when a co-owner of the property in question executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein he appears as the new owner of the property, thereby in effect denying or repudiating the ownership of the other co-owners over their shares, the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder (Castillo v. Court of Appeals, No. L-18046, March 31, 1964, 10 SCRA 549). Since an action for reconveyance of land based on implied or constructive trust prescribes after ten (10) years, it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitations is counted (Jaramil v. Court of Appeals, No. L-31858, August 31, 1977, 78 SCRA 420).

Evidence shows that TCT No. 2744 in the name of the legal heirs of Lino Delima, represented by Galileo Delima, was cancelled by virtue of an affidavit executed by Galileo Delima and that on February 4, 1954, Galileo Delima obtained the issuance of a new title in Ms name numbered TCT No. 3009 to the exclusion of his co-heirs. The issuance of this new title constituted an open and clear repudiation of the trust or co-ownership, and the lapse of ten (10) years of adverse possession by Galileo Delima from February 4, 1954 was sufficient to vest title in him by prescription. As the certificate of title was notice to the whole world of his exclusive title to the land, such rejection was binding on the other heirs and started as against them the period of prescription. Hence, when petitioners filed their action for reconveyance and/or to compel partition on February 29, 1968, such action was already barred by prescription. Whatever claims the other co-heirs could have validly asserted before can no longer be invoked by them at this time.

ACCORDINGLY, the petition is hereby DENIED and the assailed decision of the Court of Appeals dated May 19, 1977 is AFFIRMED.

SO ORDERED.

Narvasa (Chairman), Cruz and Griño-Aquino, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 82680 August 15, 1994

NICANOR SOMODIO, petitioner, vs.COURT OF APPEALS, EBENECER PURISIMA, and FELOMINO AYCO, respondents.

Jose V. Panes for petitioner.

Vencer, Purisima & Associates for private respondents.

 

QUIASON, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse and set aside the Decision dated September 29, 1987 and the Resolution dated February 2, 1988 of the Court of Appeals in CA-G.R. SP No. 11602.

I

On October 21, 1974, Jose Ortigas executed an instrument designated as a Transfer of Rights, conveying to Wilfredo Mabugat the possession of a residential lot situated at Rajah Muda, Bula, General Santos City and described in the said instrument as:

Lot No. (Unnumbered), bounded on the North by Temporary Road, on the South by Customs Zone (Sarangani Bay), on the East by Public Land, and on the West by Public Land.

Nicanor Somodio, herein petitioner, contributed one-half of the purchase price. On October 22, 1974, Mabugat executed an Affidavit of Trust expressly recognizing the right of petitioner over one-half undivided portion of the lot. Later, petitioner discovered in the District Land Office that the lot was numbered "6328-X, Csd 2281-D." Thereafter, petitioner and Mabugat partitioned the property into two portions, with petitioner taking the western part. Immediately after the partition, petitioner took possession of his portion and planted thereon ipil-ipil trees, coconut trees and other fruit-bearing trees.

In 1976, petitioner began construction of a structure with a dimension of 22-by-18 feet on his lot. His employment, however, took him to Kidapawan, North Cotabato, and he left the unfinished structure to the case of his uncle. He would visit the property every three months or on weekened when he had time.

Sometime in October 1977, petitioner allowed respondent Felomino Ayco, to transfer his hut to petitioner's lot. About six years later, petitioner demanded that Ayco vacate the premises but such demand proved futile. Hence, on August 23, 1983, petitioner filed an action for unlawful detainer with damages against respondent Ayco before the Municipal Trial Court, Branch I, General Santos, docketed as Civil Case No. 2032-II.

Meanwhile, on June 26, 1983, respondent Ebenecer Purisima entered the land and constructed a house thereon. Four days later, petitioner filed against respondent Purisima a complaint for forcible entry before the same court docketed as Civil Case No. 2013-I. Said case was later consolidated with Civil Case No. 2032-II.

In his answer, respondent Purisima averred that the lot was a portion of the land subject of his application for miscellaneous sales patent with the Bureau of Lands. Purisima described the lot in question as:

Lot No. 6328-Y, CSD-2281-D, Bula, General Santos, Cotabato. Bounded on the North by 6328-X; on the South by Sarangani Bay; on the East by a Municipal Road; and on the West by Lot No. 6328-W, containing an area of 1,095 square meters and covered by Tax Declaration No. 9647 (Rollo, p. 36; Emphasis supplied).

Respondent Purisima contended that his father, a geodetic engineer, had surveyed the parcel of land comprising of Lots Nos. 6427 and 6328 for the Small Farmers Fishpond Association, Inc. in February 1958, and that his father's survey plan was approved by the Director of Lands in 1960. Respondent Ayco, on the other hand, did not present any evidence but merely anchored his right to possess the property on the evidence of Purisima.

On April 30, 1986, the trial court rendered a decision finding that respondent Purisima built his house "almost on the spot where Somodio's unfinished house" stood "thru stealth and strategy," not knowing that the house was built on Lot No. 6328-X and not on Lot No. 6328-Y, the lot said respondent was claiming (Rollo, p. 43). The court went on to state that:

. . . . He (private respondent Purisima) was a frequent visitor in Rajah Muda and had sometimes stayed with Mrs. Maturan in Judge Purisima's house on the adjoining lots, and could not have remained unaware of the possession of Somodio. He must have depended on the thought that it was his father who made the subdivision survey and had fenced an area which he had claimed. He did not exactly verify that the area fenced by his father had an area of only 1,095 square meters, which did not include the are Lot No. 6328-X could eventually be standing on his property, for Lot No. 6328-X is not claimed by him and has not been applied for even by his father. His father has been abroad and has not taken steps to apply for Lot No. 6328-X. This lot is not declared for taxation purposes in the name of any claimant-applicant. Unless and until there would be an administrative proceedings and the title ultimately issued in favor of an applicant, the possession of the actual claimant and occupant has to be respected and maintained in the interest of public order . . . (Rollo, pp. 43-44).

The Municipal Trial Court further held that petitioner was the actual possessor of Lot No. 6328-X. The court did not believe respondent Ayco's claim that the administratrix of the estate of respondent Purisima's father authorized him to build a hut

on Lot No. 6328-X in 1976. At any rate, the court said that respondent Ayco was willing to vacate the premises provided he be given financial assistance to do so (Rollo, pp. 43-44).

Nothing that the ocular inspection of the area showed that the houses of respondents Purisima and Ayco were "inside Lot No. 6328-X" and not on Lot No. 6328-Y, the Municipal Trial Court held that the case became one which entailed mere removal of the houses from the lot in question. Accordingly, the court ordered private respondents to remove their respective houses, to deliver the land to petitioner, and to pay attorney's fees and litigation expenses.

On appeal, the Regional Trial Court, Branch 22, General Santos City, affirmed in toto the decision of the Municipal Trial Court. Respondent then elevated the cases on a petition for review to the Court of Appeals, which, in its decision dated September 27, 1987, set aside the decisions of the two trial courts and ordered the dismissal of the two complaints filed by petitioner.

The Court of Appeals held that herein petitioner had not "clearly and conclusively established physical, prior possession over Lot No. 6328-X."

Petitioner's motion for the reconsideration of the decision of the Court of Appeals having been denied, he filed the instant petition for review on certiorari.

We grant the petition.

II

The procedural issue raised by private respondents should first be resolved. The issue is whether the instant petition is proper considering that petitioner "merely touch(es) upon questions of fact which had been carefully considered" by the Court of Appeals (Rollo, p. 92). As a general rule, the findings of fact of the Court of Appeals are binding on this Court. This rule, however, is not without exceptions, one of which is when the factual findings of the Court of Appeals and the trial court are contrary to each other. In such a case, this Court may scrutinize the evidence on record in order to arrive at the correct findings based on the record (Valenzuela v. Court of Appeals, 191 SCRA 1 [1990]; Roman Catholic Bishop of Malolos, Inc. v. Intermediate Appellate Court, 191 SCRA 411 [1990]).

Upon a review of the records, we are convinced that petitioner indeed enjoyed priority of possession over Lot No. 6328-X, notwithstanding respondent Purisima's claim to the contrary.

In ejectment cases, the only issue for resolution is who is entitled to the physical or material possession of the property involved, independent of any claim of ownership set forth by any of the party-litigants. Anyone of them who can prove prior possession de facto may recover such possession even from the owner himself. This rule holds true regardless of the character of a party's possession, provided, that he has in his favor priority of time which entitles him to stay on the property until he is lawfully ejected by a person having a better right by either accion publiciana or accion reivindicatoria (De Luna v. Court of Appeals, 212 SCRA 276 [1992]).

Petitioner took possession of the property sometime in 1974 when he planted the property to coconut trees, ipil- ipil trees and fruit trees. In 1976, he started the construction of a building on the property. It is immaterial that the building was unfinished and that he left for Kidapawan for employment reasons and visited the property only intermittently. Possession in the eyes of the law does not mean that a man has to have his feet on every square meter of ground before it can be said that he is in possession (Ramos v. Director of Lands, 39 Phil. 175 [1918]). It is sufficient that petitioner was able to subject the property to the action of his will.

Article 531 of the Civil Code of the Philippines provides:

Possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities established for acquiring such right.

Even if the Court of Appeals is correct in its finding that petitioner started introducing improvements on the land only in 1981, he still enjoyed priority of possession because respondent Purisima entered the premises only in 1983.

It should be emphasized that the Court of Appeals noted that none of the parties had produced tax declarations or applications as public land claimants. As such, what should have been scrutinized is who between the claimants had priority of possession.

Moreover, neither is the fact that respondent Purisima's father surveyed the property of help to his cause. As the Court of Appeals found, respondent Purisima's father surveyed the land for the Small Farmers Fishpond Association, Inc., not for himself. Although respondent Purisima now claims that Lot No. 6328-X was in payment of his fee for the services of his father and that he caused the construction of a perimeter wall in the area, these facts do not mean that respondent Purisima himself had prior possession. He did not present any proof that his father had authorized him to enter the land as his successor-in-interest. Neither did he present proof that between 1958, when his father allegedly took possession of the land, and 1983, when said respondent himself entered the land, his father ever exercised whatever right of possession he should have over the property. Under these circumstances, priority in time should be the pivotal cog in resolving the issue of possession.

The Court of Appeals opined that petitioner had not properly identified the lot he had occupied. The matter of identification of the land, however, had been resolved by respondent Purisima's admission in his pleadings, as well as by two ocular inspections.

In his answer to the complaint, respondent Purisima claimed possession over Lot No. 6328-Y, while petitioner identified the lot adjacent to it, Lot NO. 6328-X, as the area where private respondents built their houses. That these two lots are distinct from one another was resolved by the ocular inspection conducted by a Senior Geodetic Engineer of the Office of the City Engineer, who found that "south of lot 6328-H across a 10 meter wide road is lot 6328-Y and from thence to the south is lot 6328-X." On June 13, 1985, the Municipal Trial Court judge himself went to the premises in question and discovered that aside from the houses of respondents Purisima and Ayco, five other houses had been built on Lot No. 6328-X.

Petitioner's prior possession over the property, however, is not synonymous with his right of ownership over the same. As earlier stated, resolution of the issue of possession is far from the resolution of the issue of ownership. Forcible entry is merely a quieting process and never determines the actual title to an estate (German Management & Services, Inc. v. Court of Appeals, 177 SCRA 495 [1989]; Manuel v. Court of Appeals, 199 SCRA 603 [1991].

WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE and that of the trial courts REINSTATED. Costs against private respondents.

SO ORDERED.

Davide, Jr., Bellosillo and Kapunan, JJ., concur.

Cruz, J., On official leave.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 46623 December 7, 1939

MARCIAL KASILAG, petitioner, vs.RAFAELA RODRIGUEZ, URBANO ROQUE, SEVERO MAPILISAN and IGNACIO DEL ROSARIO, respondents.

Luis M. Kasilag for petitioner.Fortunato de Leon for respondents.

 

IMPERIAL, J.:

This is an appeal taken by the defendant-petitioner from the decision of the Court of Appeals which modified that rendered by the court of First Instance of Bataan in civil case No. 1504 of said court and held: that the contract Exhibit "1" is entirely null and void and without effect; that the plaintiffs-respondents, then appellants, are the owners of the disputed land, with its improvements, in common ownership with their brother Gavino Rodriguez, hence, they are entitled to the possession thereof; that the defendant-petitioner should yield possession of the land in their favor, with all the improvements thereon and free from any lien; that the plaintiffs-respondents jointly and severally pay to the defendant-petitioner the sum of P1,000 with interest at 6 percent per annum from the date of the decision; and absolved the plaintiffs-respondents from the cross-complaint relative to the value of the improvements claimed by the defendant-petitioner. The appealed decision also ordered the registrar of deeds of Bataan to cancel certificate of title No. 325, in the name of the deceased Emiliana Ambrosio and to issue in lieu thereof another certificate of title in favor of the plaintiffs-respondents and their brother Gavino Rodriguez, as undivided owners in equal parts, free of all liens and incumbrances except those expressly provided by law, without special pronouncement as to the costs.

The respondents, children and heirs of the deceased Emiliana Ambrosio, commenced the aforesaid civil case to the end that they recover from the petitioner the possession of the land and its improvements granted by way of homestead to Emiliana Ambrosio under patent No. 16074 issued on January 11, 1931, with certificate of title No. 325 issued by the registrar of deeds of Bataan on June 27, 1931 in her favor, under section 122 of Act No. 496, which land was surveyed and identified in the cadastre of the municipality of Limay, Province of Bataan, as lot No. 285; that the petitioner pay to them the sum of P650 being the approximate value of the fruits which he received from the land; that the petitioner sign all the necessary documents to transfer the land and its possession to the respondents; that he petitioner be restrained, during the pendency of the case, from conveying or encumbering the land and its improvements; that the registrar of deeds of Bataan cancel certificate of title No. 325 and issue in lieu thereof another in favor of the respondents, and that the petitioner pay the costs of suit.

The petitioner denied in his answer all the material allegations of the complaint and by way of special defense alleged that he was in possession of the land and that he was receiving the fruits thereof by virtue of a mortgage contract, entered into between him and the deceased Emiliana Ambrosio on May 16, 1932, which was duly ratified by a notary public; and in counterclaim asked that the respondents pay him the sum of P1,000 with 12 per cent interest per annum which the deceased owed him and that, should the respondents be declared to have a better right to the possession of the land, that they be sentenced to pay him the sum of P5,000 as value of all the improvements which he introduced upon the land.lawphil.net

On May 16, 1932 Emiliana Ambrosio, in life, and the petitioner executed the following public deed:

"This agreement, made and entered into this 16th day of May, 1932, by and between Emiliana Ambrosio, Filipino, of legal age, widow and resident of Limay, Bataan, P.L., hereinafter called the party of the first part, and Marcial Kasilag, Filipino, of legal age, married to Asuncion Roces, and resident at 312 Perdigon Street, Manila, P.L., hereinafter called party of the second part.

WITNESSETH: That the parties hereto hereby covenant and agree to and with each other as follows:

ARTICLE I. That the party of the first part is the absolute registered owner of a parcel of land in the barrio of Alngan, municipality of Limay, Province of Bataan, her title thereto being evidenced by homestead certificate of title No. 325 issued by the Bureau of Lands on June 11, 1931, said land being lot No. 285 of the Limay Cadastre, General Land Registration Office Cadastral Record No. 1054, bounded and described as follows:

Beginning at point marked 1 on plan E-57394, N. 84º 32' W. 614.82 m. from B.B.M. No. 3, thence N. 66º 35' E. 307.15 m. to point "2"; S. 5º 07' W. to point "5"; S.6º 10' E. 104.26 m. to point "4"; S. 82º 17' W. to point "5"; S. 28º 53' W. 72.26 m. to point "6"; N. 71º 09' W. to point "7"; N. 1º 42' E. 173.72 m. to point 1, point of beginning, "Containing an area of 6.7540 hectares. "Points 1,2,6 and 7, B.L.; points 3,4 and 5, stakes; points 4, 5 and 6 on bank of Alangan River. "Bounded on the North, by property claimed by Maria Ambrosio; on the East, by Road; on the South, by Alangan River and property claimed by Maxima de la Cruz; and on the West, by property claimed by Jose del Rosario. "Bearing true. Declination 0º 51' E. "Surveyed under authority of sections 12-22, Act No. 2874 and in accordance with existing regulations of the Bureau of Lands, by Mamerto Jacinto, public land surveyor, on July 8, 1927 and approved on February 25, 1931.

ARTICLE II. That the improvements on the above described land consist of the following:

Four (4) mango trees, fruit bearing: one hundred ten (110) hills of bamboo trees; one (1) tamarind and six (6) boñga trees.

ARTICLE III. That the assessed value of the land is P940 and the assessed value of the improvements is P860, as evidenced by tax declaration No. 3531 of the municipality of Limay, Bataan.

ARTICLE IV. That for and in consideration of the sum of one thousand pesos (P1,000) Philippine currency, paid by the party of second part to the party of the first part, receipt whereof is hereby acknowledged, the party of the first part hereby encumbers and hypothecates, by way of mortgage, only the improvements described in Articles II and III hereof, of which improvements the party of the first part is the absolute owner.

ARTICLE V. That the condition of said mortgage is such that if the party of the first part shall well and truly pay, or cause to paid to the party of the second part, his heirs, assigns, or executors, on or before the 16th day of November, 1936, or four and one-half (4½) years after date of the execution of this instrument, the aforesaid sum of one thousand pesos (P1,000) with interest at 12 per cent per annum, then said mortgage shall be and become null and void; otherwise the same shall be and shall remain in full force and effect, and subject to foreclosure in the manner and form provided by law for the amount due thereunder, with costs and also attorney's fees in the event of such foreclosure.lawphil.net

ARTICLE VI. That the party of the first part shall pay all taxes and assessments which are or may become due on the above described land and improvements during the term of this agreement.

ARTICLE VII. That within thirty (30) days after date of execution of this agreement, the party of the first part shall file a motion before the Court of First Instance at Balanga, Bataan, P. I., requesting cancellation of Homestead Certificate of Title No. 325 referred to in Article I hereof and the issuance, in lieu thereof, of a certificate of title under the provisions of Land Registration Act No. 496, as amended by Act 3901.

ARTICLE III. It if further agreed that if upon the expiration of the period of time (4½) years stipulated in this mortgage, the mortgagor should fail to redeem this mortgage, she would execute a deed of absolute sale of the property herein described for the same amount as this mortgage, including all unpaid interests at the rate of 12 per cent per annum, in favor of the mortgagee.

ARTICLE IX. That in the event the contemplated motion under Article VII hereof is not approved by the Court, the foregoing contract of sale shall automatically become null and void, and the mortgage stipulated under Article IV and V shall remain in full force and effect.

In testimony whereof, the parties hereto have hereunto set their hands the day and year first herein before written.

(Sgd.) MARCIAL KASILAG

(Sgd.) EMILIANA AMBROSIO

Signed in the presence of:

(Sgd.) ILLEGIBLE

(Sgd.) GAVINO RODRIGUEZ.

PHILIPPINE ISLANDS } ss.BALANGA, BATAAN } ss.

Before me this day personally appeared Emiliana Ambrosio without cedula by reason of her sex, to me known and known to me to be the person who signed the foregoing instrument, and acknowledged to me that she executed the same as her free and voluntary act and deed.

I hereby certify that this instrument consists of three (3) pages including this page of the acknowledgment and that each page thereof is signed by the parties to the instrument and the witnesses in their presence and in the presence of each other, and that the land treated in this instrument consists of only one parcel.

In witness whereof I have hereunto set my hand and affixed my notarial seal, this 16th day of May, 1932.

(Sgd.) NICOLAS NAVARRONotary Public

My commission expires December 31, 1933.

Doc. No. 178 Page 36 of my register Book No. IV

One year after the execution of the aforequoted deed, that is, in 1933, it came to pass that Emiliana Ambrosio was unable to pay the stipulated interests as well as the tax on the land and its improvements. For this reason, she and the petitioner entered into another verbal contract whereby she conveyed to the latter the possession of the land on condition that the latter would not collect the interest on the loan, would attend to the payment of the land tax, would benefit by the fruits of the land, and would introduce improvements thereon. By virtue of this verbal contract, the petitioner entered upon the possession of the land, gathered the products thereof, did not collect the interest on the loan, introduced improvements upon the land valued at P5,000, according to him and on May 22, 1934 the tax declaration was transferred in his name and on March 6, 1936 the assessed value of the land was increased from P1,020 to P2,180.

After an analysis of the conditions of Exhibit "1" the Court of Appeals came to the conclusion and so held that the contract entered into by and between the parties, set out in the said public deed, was one of absolute purchase and sale of the land and its improvements. And upon this ruling it held null and void and without legal effect the entire Exhibit 1 as well as the subsequent verbal contract entered into between the parties, ordering, however, the respondents to pay to the petitioner, jointly and severally, the loan of P1,000 with legal interest at 6 per cent per annum from the date of the decision. In this first assignment of error the petitioner contends that the Court of Appeals violated the law in holding that Exhibit 1 is an absolute deed of sale of the land and its improvements and that it is void and without any legal effect.

The cardinal rule in the interpretation of contracts is to the effect that the intention of the contracting parties should always prevail because their will has the force of law between them. Article 1281 of the Civil Code consecrates this rule and provides, that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be followed; and if the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail. The contract set out in Exhibit 1 should be interpreted in accordance with these rules. As the terms thereof are clear and leave no room for doubt, it should be interpreted according to the literal meaning of its clauses. The words used by the contracting parties in Exhibit 1 clearly show that they intended to enter into the principal contract of loan in the amount of P1,000, with interest at 12 per cent per annum, and into the accessory contract of mortgage of the improvements on the land acquired as homestead, the parties having moreover, agreed upon the pacts and conditions stated in the deed. In other words, the parties entered into a contract of mortgage of the improvements on the land acquired as homestead, to secure the payment of the indebtedness for P1,000 and the stipulated interest thereon. In clause V the parties stipulated that Emiliana Ambrosio was to pay, within four and a half years, or until November 16, 1936, the debt with interest thereon, in which event the mortgage would not have any effect; in clause VI the parties agreed that the tax on the land and its improvements, during the existence of the mortgage, should be paid by the owner of the land; in clause VII it was covenanted that within thirty days from the date of the contract, the owner of the land would file a motion in the Court of First Instance of Bataan asking that certificate of title No. 325 be cancelled and that in lieu thereof another be issued under the provisions of the Land Registration Act No. 496, as amended by Act No. 3901; in clause VIII the parties agreed that should Emiliana Ambrosio fail to redeem the mortgage within the stipulated period of four years and a half, she would execute an absolute deed of sale of the land in favor of the mortgagee, the petitioner, for the same amount of the loan of P1,000 including unpaid interest; and in clause IX it was stipulated that in case the motion to be presented under clause VII should be disapproved by the Court of First Instance of Bataan, the contract of sale would automatically become void and the mortgage would subsist in all its force.

Another fundamental rule in the interpretation of contracts, not less important than those indicated, is to the effect that the terms, clauses and conditions contrary to law, morals and public order should be separated from the valid and legal contract and when such separation can be made because they are independent of the valid contract which expresses the will of the contracting parties. Manresa, commenting on article 1255 of the Civil Code and stating the rule of separation just mentioned, gives his views as follows:

On the supposition that the various pacts, clauses or conditions are valid, no difficulty is presented; but should they be void, the question is as to what extent they may produce the nullity of the principal obligation. Under the view that such features of the obligation are added to it and do not go to its essence, a criterion based upon the stability of juridical relations should tend to consider the nullity as confined to the clause or pact suffering therefrom, except in case where the latter, by an established connection or by manifest intention of the parties, is inseparable from the principal obligation, and is a condition, juridically speaking, of that the nullity of which it would also occasion. (Manresa, Commentaries on the Civil Code, Volume 8, p. 575.)

The same view prevails in the Anglo-American law, as condensed in the following words:

Where an agreement founded on a legal consideration contains several promises, or a promise to do several things, and a part only of the things to be done are illegal, the promises which can be separated, or the promise, so far as it can be separated, from the illegality, may be valid. The rule is that a lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the same time and for the same consideration, and this rule applies, although the invalidity is due to violation of a statutory provision, unless the statute expressly or by necessary implication declares the entire contract void. . . . (13 C. J., par. 470, p. 512; New York Cent. etc. R. Co. v. Gray, 239 U.S., 583; 60 Law ed., 451; U.S. v. Mora, 97 U.S., 413, 24 Law. ed., 1017; U.S. v. Hodson, 10 Wall, 395; 19 Law ed. 937; Gelpcke v. Dubuque, 1 Wall. 175, 17 Law ed., 520; U.S. v. Bradly, 10 Pet. 343, 9 Law. ed., 448; Borland v. Prindle, 144 Fed 713; Western Union Tel. Co. v. Kansas Pac. R. Co., 4 Fed., 284; Northern Pac. R. Co. v. U.S., 15 Ct. Cl., 428.)

Addressing ourselves now to the contract entered into by the parties, set out in Exhibit 1, we stated that the principal contract is that of loan and the accessory that of mortgage of the improvements upon the land acquired as a homestead. There is no question that the first of these contract is valid as it is not against the law. The second, or the mortgage of the improvements, is expressly authorized by section 116 of Act No. 2874, as amended by section 23 of Act No. 3517, reading:

SEC. 116. Except in favor of the Government or any of its branches, units or institutions, or legally constituted banking corporations, lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

It will be recalled that by clause VIII of Exhibit 1 the parties agreed that should Emiliana Ambrosio fail to redeem the mortgage within the stipulated period of four and a half years, by paying the loan together with interest, she would execute in favor of the petitioner an absolute deed of sale of the land for P1,000, including the interest stipulated and owing. The stipulation was verbally modified by the same parties after the expiration of one year, in the sense that the petitioner would take possession of the land and would benefit by the fruits thereof on condition that he would condone the payment of interest upon the loan and he would attend to the payment of the land tax. These pacts made by the parties independently were calculated to alter the mortgage a contract clearly entered into, converting the latter into a contract of antichresis. (Article 1881 of the Civil Code.) The contract of antichresis, being a real encumbrance burdening the land, is illegal and void because it is legal and valid.

The foregoing considerations bring us to the conclusion that the first assignment of error is well-founded and that error was committed in holding that the contract entered into between the parties was one of absolute sale of the land and its improvements and that Exhibit 1 is null and void. In the second assignment of error the petitioner contends that the Court of Appeals erred in holding that he is guilty of violating the Public Land Act because he entered into the contract, Exhibit 1. The assigned error is vague and not specific. If it attempts to show that the said document is valid in its entirety, it is not

well-founded because we have already said that certain pacts thereof are illegal because they are prohibited by section 116 of Act No. 2874, as amended.

In the third assignment of error the petitioner insists that his testimony, as to the verbal agreement entered into between him and Emiliana Ambrosio, should have been accepted by the Court of Appeals; and in the fourth and last assignment of error the same petitioner contends that the Court of Appeals erred in holding that he acted in bad faith in taking possession of the land and in taking advantage of the fruits thereof, resulting in the denial of his right to be reimbursed for the value of the improvements introduced by him.

We have seen that subsequent to the execution of the contract, Exhibit 1, the parties entered into another verbal contract whereby the petitioner was authorized to take possession of the land, to receive the fruits thereof and to introduce improvements thereon, provided that he would renounce the payment of stipulated interest and he would assume payment of the land tax. The possession by the petitioner and his receipt of the fruits of the land, considered as integral elements of the contract of antichresis, are illegal and void agreements because, as already stated, the contract of antichresis is a lien and such is expressly prohibited by section 116 of Act No. 2874, as amended. The Court of Appeals held that the petitioner acted in bad faith in taking possession of the land because he knew that the contract he made with Emiliana Ambrosio was an absolute deed of sale and, further, that the latter could not sell the land because it is prohibited by section 116. The Civil Code does not expressly define what is meant by bad faith, but section 433 provides that "Every person who is unaware of any flaw in his title, or in the manner of its acquisition, by which it is invalidated, shall be deemed a possessor in good faith"; and provides further, that "Possessors aware of such flaw are deemed possessors in bad faith". Article 1950 of the same Code, covered by Chapter II relative to prescription of ownership and other real rights, provides, in turn, that "Good faith on the part of the possessor consists in his belief that the person from whom he received the thing was the owner of the same, and could transmit the title thereto." We do not have before us a case of prescription of ownership, hence, the last article is not squarely in point. In resume, it may be stated that a person is deemed a possessor in bad faith when he knows that there is a flaw in his title or in the manner of its acquisition, by which it is invalidated.

Borrowing the language of Article 433, the question to be answered is whether the petitioner should be deemed a possessor in good faith because he was unaware of any flaw in his title or in the manner of its acquisition by which it is invalidated. It will be noted that ignorance of the flaw is the keynote of the rule. From the facts found established by the Court of Appeals we can neither deduce nor presume that the petitioner was aware of a flaw in his title or in the manner of its acquisition, aside from the prohibition contained in section 116. This being the case, the question is whether good faith may be premised upon ignorance of the laws. Manresa, commenting on article 434 in connection with the preceding article, sustains the affirmative. He says:

"We do not believe that in real life there are not many cases of good faith founded upon an error of law. When the acquisition appears in a public document, the capacity of the parties has already been passed upon by competent authority, and even established by appeals taken from final judgments and administrative remedies against the qualification of registrars, and the possibility of error is remote under such circumstances; but, unfortunately, private documents and even verbal agreements far exceed public documents in number, and while no one should be ignorant of the law, the truth is that even we who are called upon to know and apply it fall into error not infrequently. However, a clear, manifest, and truly unexcusable ignorance is one thing, to which undoubtedly refers article 2, and another and different thing is possible and excusable error arising from complex legal principles and from the interpretation of conflicting doctrines.

But even ignorance of the law may be based upon an error of fact, or better still, ignorance of a fact is possible as to the capacity to transmit and as to the intervention of certain persons, compliance with certain formalities and appreciation of certain acts, and an error of law is possible in the interpretation of doubtful doctrines. (Manresa, Commentaries on the Spanish Civil Code. Volume IV, pp. 100, 101 and 102.)

According to this author, gross and inexcusable ignorance of law may not be the basis of good faith, but possible, excusable ignorance may be such basis. It is a fact that the petitioner is not conversant with the laws because he is not a lawyer. In accepting the mortgage of the improvements he proceeded on the well-grounded belief that he was not violating the prohibition regarding the alienation of the land. In taking possession thereof and in consenting to receive its fruits, he did not know, as clearly as a jurist does, that the possession and enjoyment of the fruits are attributes of the contract of antichresis and that the latter, as a lien, was prohibited by section 116. These considerations again bring us to the conclusion that, as to the petitioner, his ignorance of the provisions of section 116 is excusable and may, therefore, be the basis of his good faith. We do not give much importance to the change of the tax declaration, which consisted in making the petitioner appear as the owner of the land, because such an act may only be considered as a sequel to the change of possession and enjoyment of the fruits by the petitioner, to about which we have stated that the petitioner's ignorance of the law is possible and excusable. We, therefore, hold that the petitioner acted in good faith in taking possession of the land and enjoying its fruits.

The petitioner being a possessor in good faith within the meaning of article 433 of the Civil Code and having introduced the improvements upon the land as such, the provisions of article 361 of the same Code are applicable; wherefore, the respondents are entitled to have the improvements and plants upon indemnifying the petitioner the value thereof which we fix at P3,000, as appraised by the trial court; or the respondents may elect to compel the petitioner to have the land by paying its market value to be fixed by the court of origin.

The respondents also prayed in their complaint that the petitioner be compelled to pay them the sum of P650, being the approximate value of the fruits obtained by the petitioner from the land. The Court of Appeals affirmed the judgment of the trial court denying the claim or indemnity for damages, being of the same opinion as the trial court that the respondents may elect to compel the petitioner to have the land. The Court of Appeals affirmed the judgment of the trial court that the respondents have not established such damages. Under the verbal contract between the petitioner and the deceased Emiliana Ambrosio, during the latter's lifetime, the former would take possession of the land and would receive the fruits of the mortgaged improvements on condition that he would no longer collect the stipulated interest and that he would attend to the payment of the land tax. This agreement, at bottom, is tantamount to the stipulation that the petitioner should apply the value of the fruits of the land to the payment of stipulated interest on the loan of P1,000 which is, in turn, another of

the elements characterizing the contract of antichresis under article 1881 of the Civil Code. It was not possible for the parties to stipulate further that the value of the fruits be also applied to the payment of the capital, because the truth was that nothing remained after paying the interest at 12% per annum. This interest, at the rate fixed, amounted to P120 per annum, whereas the market value of the fruits obtainable from the land hardly reached said amount in view of the fact that the assessed value of said improvements was, according to the decision, P860. To this should be added the fact that, under the verbal agreement, from the value of the fruits had to be taken a certain amount to pay the annual land tax. We mention these data here to show that the petitioner is also not bound to render an accounting of the value of the fruits of the mortgaged improvements for the reason stated that said value hardly covers the interest earned by the secured indebtednes.

For all the foregoing considerations, the appealed decision is reversed, and we hereby adjudge: (1) that the contract of mortgage of the improvements, set out in Exhibit 1, is valid and binding; (2) that the contract of antichresis agreed upon verbally by the parties is a real incumbrance which burdens the land and, as such, is a null and without effect; (3) that the petitioner is a possessor in good faith; (4) that the respondents may elect to have the improvements introduced by the petitioner by paying the latter the value thereof, P3,000, or to compel the petitioner to buy and have the land where the improvements or plants are found, by paying them its market value to be filed by the court of origin, upon hearing the parties; (5) that the respondents have a right to the possession of the land and to enjoy the mortgaged improvements; and (6) that the respondents may redeem the mortgage of the improvements by paying to the petitioner within three months the amount of P1,000, without interest, as that stipulated is set off by the value of the fruits of the mortgaged improvements which petitioner received, and in default thereof the petitioner may ask for the public sale of said improvements for the purpose of applying the proceeds thereof to the payment of his said credit. Without special pronouncement as to the costs in all instances. So ordered.

Diaz, J., concur.

 

 

 

Separate Opinions

 

VILLA-REAL, J., concurring and dissenting:

According to the contract entered into May 16, 1932, between Emiliana Ambrosio, in life, and the petitioner Marcial Kasilag, the first, in consideration of the sum of P1,000 given to her by the second, constituted a mortgage on the improvements only of the land which she acquired by way of homestead. The improvements which she mortgaged consisted of four fruit bearing mango trees, one hundred ten hills of bamboo trees, 1 tamarind tree and 6 betelnut trees, the assessed value of which was P660. The condition of the loan were that if the mortgagor should pay the mortgage on November 16, 1936, that is, four and a half years after the execution of the deed, said sum of P1,000 with interest thereon at 12% per annum, the aforesaid mortgage would become null and void, otherwise it would remain in full force and effect and would b subject to foreclosure in the manner provided by law; that the mortgagor would pay all the land tax on the land and its improvements during the duration of the contract; and that if after the expiration of the said period of four and a half years the mortgagor should fail to redeem the mortgage, she would execute in favor of the mortgage an absolute deed of sale of the property described in the contract for the same sum of P1,000 plus interest due and unpaid at the rate of 12 per cent per annum.

The principal rule in the interpretation of contracts is that "If the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be followed. If the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail" (article 1281, Civil Cod). "In order to judge as to the intention of the contracting parties, attention must be paid principally to their conduct at the time of making the contract and subsequently thereto." (Article 1282.)

Now, then what is the true nature of the contract entered into between the parties by virtue of the deed of sale executed by them on May 16, 1932? The Court of Appeals held that it is an absolute deed of sale of a land with a homestead certificate of title, under the guise of a loan secured by a mortgage upon its improvements in order to go around the prohibition contained in section 116 of Act No. 2874, as amended by section 23 of Act No. 3517.

Closely examined, the only clauses of the contract which may lead to the conclusion that it is one of the sale are those which state that if at the expiration of the period of four years and a half the mortgagor should fail to pay the amount of the loan plus interest due and unpaid at the rate of 12 per cent per annum, she would execute in favor of the mortgagee a deed of absolute sale of the land whose improvements were mortgaged for the amount of the loan and the interest owing. It will be seen that the sale would not be made until after the lapse of four and a half years from the execution of the deed, if the mortgagor should fail or should not wish to redeem the mortgaged improvements. Consequently, the obligation contracted by said mortgagor was no more than a conditional promise to sell. Now, then, is this a promise to sell valid? Like any other onerous, consensual and mutually binding contract, that of promise to sell requires for its legal existence and validity the concurrence of consent, consideration and subject-matter. The contract before us dos not show what is the cause or consideration for such promise to sell. Assuming that it was the economic impotence of the mortgagor to redeem the mortgaged improvements, before she could be compelled to comply with her obligation to sell, there is need to wait until she should fail of funds or to abandonment. The cause will come into being only upon the happening of said event after the four and half years and only then will the said contract of promise to sell have juridical existence. The P1,000 and its interest, should the mortgagor fail to redeem the improvements upon the maturity of the indebtedness, would be the consideration of the sale; because the promise to sell is a contract different and distinct from that of sale and each requires a consideration for its existence and validity.

The terms of the contract are clear and explicit and do not leave room for doubt that the intention of the contracting parties was to constitute a mortgage on the improvements of the land in litigation to secure the payment of the loan for P1,000, within interest thereon at 12 per cent per annum. It cannot be said that this contract is simulated because the assessed

value of the improvements is P860 only. It is well known that rural properties are valued for assessment purposes not less than half of their market value. The true value of the said improvements may therefore be P1,720, and the mortgagee may have considered that adequate. Moreover, the petitioner could not have the property whose improvements were mortgaged to him the property whose improvements were mortgaged to him even should the mortgagor default in the payment of interest. He could only have the mortgaged improvements in case of foreclosure should he bid therefor at the sale. Neither could the mortgagor sell the same property to the mortgagee, even after the expiration of five years from the issuance of the homestead certificate of title, for then the sale would be in satisfaction of an obligation contracted during the five years, which is prohibited by the oft-mentioned section 116 of Act No. 2874, as amended by section 23 of Act No. 3517. The fact that after one year the contracting parties had novated the contract of loan secured by a mortgagee, converting the same into a contract of anti-chresis because of the mortgagor's failure to pay the accrued interest, does not show that they intended to enter into a contract of sale, because the conversion in this case of the contract of loan secured by a mortgage into one of antichresis was accidental, due to the mortgagor's default in the payment of unpaid interest for the first year. if the parties' intention from the beginning had been to sell the property, the mortgagee would have immediately entered upon the possession of the land instead of waiting until after the expiration of one year. The transfer of the Torrens certificate of title to the homestead by the original owner to the mortgagee in 1934 was only a consequence of the conversion of the mortgage loan into an anti-chretic loan, the parties having such a transfer. The setting off of the interest on the debt against the fruits of the property given in antichresis finds authority in article 1885 of the of the Civil Code. There is, therefore, no ambiguity in the terms of the contract warranting the search outside its four corners for the true intention of the contracting parties other than that of entering into a contract of loan secured by the said improvements. If the true intention of the contracting parties, as clearly gathered from the terms of the contract, was to enter into a contract, was to enter into a contract of loan secured by a mortgage upon the improvements, although they should convert it into a contract of antichresis after one year and although after the maturity of the loan with interest they may wish to convert it into one of absolute sale — both conversions being illegal and, hence, void, — 8 the original intention of entering into a contract of loan secured by a mortgagee upon the improvements would prevail, the said contract of loan being the only one legal and valid, and the petitioner having acted in good faith in making it.

The verbal contract of antichresis, entered into by the petitioner Marcial Kasilag and Emiliana Ambrosio, being null and void ab initio and without any legal effect because it is in violation of the express prohibition of section 116 of Act No. 2874 as amended by section 23 of Act No. 3517, (article 4 of the Civil Code), the contracting parties should restore to each other the things which have been the subject-matter of the contract, together with their fruits, and the price paid therefor, together with interest, pursuant to Article 1303 of the same Code. Marcial Kasilag, therefore, should return to Emiliana Ambrosio or to her heirs the possession of the homestead and the improvements thereon with its fruits, and Emiliana Ambrosio or her heirs should pay him the sum of P1,000, being the amount of the loan, plus interest due and unpaid.

As to the improvements introduced upon the land by the petitioner, having done so with the knowledge and consent of its owner Emiliana Ambrosio, the former acted in good faith, and under article 361 of the Civil Code, the owner of the land may have the said improvements upon paying the indemnity provided in articles 453 and 454, or may compel the said Marcial Kasilag, who introduced the said improvements, to pay the price of the land. If the herein respondents, as heirs of Emiliana Ambrosio, do not wish or are unable to pay for said improvements, and Marcial Kasilag does not wish or is unable to pay the land, said petitioner would lose his right of intention over the same (Bernardo vs. Batalan, 37 Off. G., No. 74, p. 1382), provided that he may remove the improvements which he had introduced in good faith.

In view of the foregoing, I concur in the majority opinion except insofar as it holds that the interest is set off against the fruits of the mortgaged improvements, because as a result of the nullity of the contract of antichresis the petitioner should return to the respondents the products of the mortgaged improvements, and the latter should pay to the petitioner the amount of the loan plus interest due and unpaid at the rate of 12 per cent per annum from the date of the contract until fully paid.

LAUREL, J., concurring in the result:

On August 27, 1918, Emiliana Ambrosio put in a homestead application for lot No. 285 of the Limay cadastre, Province of Bataan. After complying with the requisite legal formalities, she obtained therefor homestead patent No. 16074, the same having been recorded in the Registry of Deeds of Bataan on Juner 26, 1931. On May 16, 1932, she entered with the herein petitioner, Marcial Kasilag, into a contract, Exhibit 1, inserted in the foregoing majority opinion.

Sometime in 1933, or a year after the execution of the aforequoted and land taxes, whereupon, the mortgage, Marcial Kasilag, and the mortgagor, Emiliana Ambrosio, verbally agreed that the former would pay the land taxes and waive the unpaid interest, enter into the possession of the property in question, introducing improvements thereon, and thereafter be reimbursed for the value of such improvements. Under this verbal pact, Kasilag went into possession of the property, planted it with the fruit trees allegedly valued at P5,000, and on May 22, 1934, declared the same for taxation purposes. In 1934 the original homesteader, Emiliana Rodriguez, Severo Mapilisan, Ignacio del Rosario and Gavino Rodriguez.

On May 16, 1936, the said heirs, with the exception Gavino Rodriguez who testified for the defendant, sued Marcial Kasilag in the Court of First Instance of Bataan to recover the possession of the aforesaid property belonging to their mother. For answer, the defendant put in as was in good faith with the knowledge and tolerance of the plaintiffs, a counterclaim for P1,000 representing the loan to the deceased homesteader with stipulated interest there on, and a recoupment for P5,000 allegedly the value of the improvements he had introduced upon the land. On the issues thus joined, the trial court gave judgment for the defendant couched in the following language:

Resuming all that has been said above, the court find and declares that the deed of combined mortgage and sale executed by Emiliana Ambrosio in favor of the defendant Marcial Kasilag and dated May 16, 1932, is null and void as a contract for a future conveyance or sale of the homestead, but valid as an equitable mortgage on the improvements for the sum of P1,000; and that the possession of the homestead by the defendant Marcial Kasilag by virtue of said contract or by virtue of any other agreement is null and void, but that the making of the improvements thereon by him, which the court finds to be valued at P3,000, by virtue of the verbal agreement entered into after the executing of the original instrument of mortgage, was in good faith, entitling the said Marcial Kasilag to be reimbursed of their actual value, the above-mentioned amount. Wherefore, let judgment be entered declaring that the plaintiffs are entitled to the possession as owners of the homestead subject of the present suit,

lot No. 285 of the Limay cadastral survey, subject to an encumbrance of the improvements for the sum of P1,000 in favor of the defendant, ordering the defendant deliver unto the plaintiffs in turn to pay unto the defendant jointly and severally, as heirs of their deceased mother Rafaela Rodriguez the sum of P3,000, value of the improvements introduced on said homestead by defendant. Let there be no pronouncement as to costs." On appeal by the plaintiffs, the Third Division of the Court of Appeals reached a different result and modified the judgment of the trial court as follows:

Wherefore, the appealed judgment is hereby modified by declaring that the contract, Exhibit "1", is entirely null and void; that the plaintiffs and appellants are the owners of the lot in question together with all the improvements thereon in common with their brother, Gavino Rodriguez, and are, therefore, entitled to the possession thereof; ordering the defendant and appellee to vacate and deliver the possession of the aforementioned plaintiffs and appellants free from any encumbrance; requiring latter, however, to pay jointly and severally to the said appellee the sum of P1,000 with the interest thereon at the rate of 6 per cent per annum from and including the date this decision becomes final; and absolving the said plaintiffs and appellants from the cross-complaint with respect to the value of the improvements claimed by the appellee.

It is further ordered that the register of deeds of Bataan cancel the certificate of title No. 325 in the name of the deceased, Emiliana Ambrosio, and issue in lieu thereof anew certificate of title in favor of the herein plaintiffs and appellants and their brother, Gavino Rodriguez, as owners pro indiviso and in equal shares free from any lien or encumbrance except those expressly provided by law.

Without special pronouncement as to the costs.

The case is before us on petition for certiorari which was given due course, filed by defendant-appellee, Marcial Kasilag, now petitioner, against plaintiffs-appellants, Rafaela Rodriguez and others, now respondents. The burden of petitioner's case is condensed in the following assignments of error:

The Honorable Court of Appeals erred:

I. In having interpreted that document Exhibit "1" is an absolute sale and declared it entirely null and void, and in not having interpreted and declared that it is a deed of combined mortgage and future sale which, if void as a contract for future conveyance of the homestead in question is, however, valid as an equitable mortgage on the improvements thereof for the sum of P1,000 loaned by petitioner Marcial Kasilag to the homestead owner Emiliana Ambrosio.

II. In holding that the petitioner was guilty of the violation of the public land law for having entered into said contract Exhibit "1".

III. In not giving probative value to the uncontradicted testimony of the petitioner Marcial Kasilag that he was expressly authorized by the homestead owner Emiliana Ambrosio to introduction by him of improvements therein by virtue of the verbal agreement entered into after the execution of the original instrument of mortgage was in good faith, entitling him to reimbursed of the actual value of improvements he introduced.

Boiled down to the fundamentals, there are only two propositions which stands to be resolved in this appeal: (1) What is the legal nature of the agreement, Exhibit 1, entered into by and between the parties? and (2) Is Marcial Kasilag guilty of bad faith in entering upon the possession of the homestead, paying the land tax and introducing improvements thereon?

The numerous adjudications in controversies of this nature will show that each case must be decided in the light of the attendant circumstances and the situation of the parties which, upon the whole, mark its character. However, for the purpose of ascertaining the manner and extent to which persons have intended to be found by their written agreements, the safe criterion, the time honored test, is their contention which is intimately woven into the instrument itself. It is true that resort to extrinsic evidence is imperative when the contract is ambiguos and is susceptible of divergent interpretations; nevertheless, the primary obligation of the courts is to discover the intention of the contracting parties, as it is expressed by the language of the document itself. We are not authorized to make a contract for the parties.

In the trial court as in the Court of Appeals, the discussion centered on the nature and validity of the document, Exhibit 1. This is the correct approach. The Court of Appeals, however, rejected the conclusion of the trial court that it is an absolute deed of sale which is null and void in its entirely because it is banned by section 116, as amended of the Public land Act. The ruling is now assailed by the petitioner. I share petitioner's view that the deed is not what it was construed to be by the Court of Appeals.

From Article I to III thereof is a description of the homestead and the improvements existing thereon. By its Article IV the homesteader, Emiliana Ambrosio, "encumbers and hipothecates, by way of mortgage, only the improvements described in Articles II and III" under the conditions set out in Articles V, VI and VII. Its closing Articles VIII and IX, particularly relied upon by the Court of Appeals, speak, not of a present deed of absolute sale, but of one to be executed "upon the expiration of the period of time (4½ years) stipulated in the mortgage" if "the mortgagor should fail to redeem this mortgage". In other words, the redemption of the mortgage by the payment of the loan may bring about the frustration of contemplated sale, hence, to hold unqualifiedly that the whole of Exhibit 1, or even a part thereof, is an absolute deed of sale would be to do violence to the terms of the document it self.

Still other tokens drive home the same conviction. The intimation by the Court of Appeals that the petitioner "know, therefore, that the land subject of the patent could not be alienated by express prohibition of law," is an argument that the petitioner could not have brazenly disregarded the law by intending Exhibit 1 to be an absolute deed of sale. Its further observation that "the stipulation under article VIII of the contract, Exhibit '1' . . . clearly indicates that there was nothing left to be done except the execution of the deed of absolute sale," is a concession that no such sale has yet been executed. Finally it will be recalled that under Article VII of Exhibit 1, "within thirty (30) days after date of execution of this agreement the party of the first part shall file a motion before the Court of First Instance of Balanga, Bataan, P.I., requesting cancellation of homestead certificate of title No. 325 referred to in Article 1 hereof and the issuance, in lieu thereof, of a certificate of title under the provisions of Land Registration Act 496, as amended by Act 3901." And by its Article IX it provides "That in the event the contemplated motion under Article VII hereof is not approved by the Court, the foregoing contract of sale shall automatically become null and void." (Underlining is mine.) We have nothing in the record to show

that the required motion was filed within thirty days or thereafter, by Emiliana Ambrosio in life, or by her successors-in-interest after her death. Indeed, Homestead Certificate of Title No. 325, sought to be substituted by another through the said motion, still stands. It is, evident, therefore, that the projected sale has and may never come into being, because under Article IX of Exhibit 1, it became automatically null and void. This view, incidentally, precludes further consideration of the validity or invalidity of the sale clause of Exhibit 1, as it will purely academic to dwell upon the nature and effect of a contract that has passed out of existence in the contemplation of the parties.

Having reached the conclusion, upon its plain language and unequivocal import, that Exhibit 1 is essentially and fundamentally a mortgage upon the improvements found on the questioned homestead, with a conditional clause for the future sale of said homestead and improvements which has become a "dead twig" still attached to a living tree because the condition has never been performed, I would, under Articles 1281 and 1283 of the Civil Code, be otherwise content in resting our decision of this aspect of the case on this interpretation. But I do not propose to so limit my inquiry in view of the fact that the Court of Appeals points to contemporaneous and subsequent circumstances, beyond the four corners of the document, Exhibit 1, allegedly revelatory of petitioner's concealed but evident intention to circumvent the law. I may state, at the outset, that these circumstances are fairly susceptible of legitimate explanations. The appealed decision could not conceive of a man, of petitioner's intelligence, who "would accept improvements valued at only P860 as security for the payment of a larger amount of P1,000." But we are concerned with an assessed valuation which is not always nor even frequently the value that it can command in the market. To ignore this is to live in monastic seclusion. The appealed decision would imply from the fact that petitioner subsequently paid the land taxes and from the further fact that Emiliana never paid stipulated interest on the one thousand-peso loan, that Exhibit 1 was meant to vest absolute title irretrievably in the petitioner. It could hardly be supposed at the time of the execution of Exhibit 1 that the homesteader would fail to make these payments, nor does it seem just to draw from these circumstances, induced by Emiliana's own neglect, deductions unfavorable to the petitioner. That the petitioner went upon the possession of the questioned property is not proof that he was even already the would-be owner thereof, for as elsewhere stated, the said possession came practically at the suggestion of or at least with the consent of Emiliana Ambrosio as a result of her failure to live up to her part of the bargain. Finally, the Court of Appeals asked: "If the real purpose was to mortgage the improvements only as specified in article IV of the contract, why is it that in article VIII thereof it was provided that in case of failure to redeem the alleged mortgage the grantor would be required to execute a de of absolute sale of the property described therein for the same amount of the mortgage in favor of the grantee, and not of" the improvements only'?" The precaution which the petitioner took to have the sale clause of Exhibit I so phrased that the said sale would not be affected until after the expiration of the five-year period prohibited by law, at which time the alienation of the homestead would then have been perfectly legitimate, may not be without significance to show petitioner's respect for and intention to be on the side of the law. The very mention of the word "sale" in the document in question argues against any attempt at concealment, for if the said document was intended as a cover and cloak of an illegal alienation, then the reference to the contract of sale therein was illtimed and foolhardy.

The question next at hand is whether or not the mortgage constituted upon the improvement's of the homestead is valid. It is, under express provisions of section 116 of the Public Land Act, before and after its amendment, reading pertinently that "the improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations." I find no occasion to dispute this legislative policy however mistaken it may be. It is sufficient to observe that what the law permits may be done. Upon the other hand, I find no occasion to test the legality of the sale provisions of Exhibit 1, as I have heretofore said, this question is, in my opinion, moot. Moreover, the petitioner, technically, is barred from raising this question, as he did not appeal from and, therefore, abided by the decision of the trial court which outlawed this sale clause as violative of the provisions of section 116 of the Public Land Act. This part of the decision of the trial court was affirmed by the Court of Appeals when the latter struck down Exhibit 1 in its entirety and, even now, petitioner does not complain against the destruction of Exhibit 1 with respect to its sale clause. In other words, counsel for petitioner concedes all along that the said sale clause may be properly legislated out. As the mortgage provisions of Exhibit 1 are independent of and severable from the rest thereof, the same are perfectly enforceable. Where a part of the contract is perfectly valid and separable from the rest, the valid portion should not be avoided. (Ollendorf vs. Abrahamson, 38 Phil., 585.)

The question yet to be answered is whether the petitioner's possession of the question homestead was in good faith so as to entitle him to reimbursement for improvements introduced upon the land. The basis of petitioner's possession was a verbal agreement with the original homesteader whereby, for failure of the latter to comply with her obligations to pay land taxes and stipulated interest on the loan, the former assumed the said obligations for the privilege of going into possession of the property, introducing improvements thereon, and thereafter being reimbursed for the value of such improvements. The petitioner did enter upon such possession, planted the land to fruit trees valued at P5,000, according to him, and P3,000, according to the trial judge. It should be stated, in passing, that the Court of Appeals was unable to belie this verbal agreement, although it was of the opinion "that the trial court erred in giving probative value to the testimony of the appellee with reference to the alleged verbal agreement". Its reason for the opinion is not because the testimony is untrue, but because even if it were true, "it only tends to corroborate the allegation that he acted in bad faith when he took possession of the property and made improvements thereon, because then he knew full well that the homestead owner could not enter into an agreement involving the future final and absolute alienation of the homestead in his favor." As the said opinion and the reason back of it does not involve a question of strict fact, it is in our power to inquire into its soundness. The weakness of the argument lies, first, in its, (a) inconsistency and (b) in the misconception of the legal principle involved: inconsistency, because it considers entry of possession, payment of land tax as facts tending to show the real character of the transaction and as evidencing bad faith on the part of the petitioner, but at the same time it improperly rejects the verbal agreement by which such facts are established. It is clear that we cannot directly reject the verbal agreement between the parties in so fat as it is favorable to the petitioner. The misconception proceeds from the erroneous legal conclusion that, upon the facts, the good faith is attributable to the petitioner alone and that Ambrosio was not to be blamed for the prohibited alienation of the homestead, as I shall presently proceed to discuss.

In holding that the petitioner was a possessor in bad faith, the decision sought to be reviewed first laid down the premise that such possession is banned by law at least for five years from the issuance of patent (section 116, Public Land Act), assumed that the petitioner had knowledge of such law, and then drew the conclusion that the petitioner was aware of the illegality of his possession. We think that the assumption and conclusion are precipitate. As observed in the foregoing majority opinion-citing Manresa-knowledge of a legal provision does not necessarily mean knowledge of its true meaning

and scope, or of the interpretation which the courts may place upon it. In this particular case, what section 116 of the Public Land Act prohibits is the "incumbrance or alienation" of land acquired thereunder within the period prescribed therein. We may concede, as assumed by the appealed decision, that the petitioner was cognizant of said section 116, but this is not saying that petitioner knew that his possession came under the phrase "incumbrance or alienation" prohibited by law, and that the petitioner, therefore, knew that his possession was illegal. The import of the phrase "incumbrance or alienation" is a subject upon which "men of reason may reasonably differ," in the same way that we ourselves have differed in the deliberation of this case. It is not correct to assume that the petitioner had knowledge of the illegality of his possession. The contrary assumption, namely, that petitioner had no idea of such illegality, would have been more in accord with the experience of everyday, for petitioner would not have invested money and labor in the land and assumed obligations incumbent upon the homesteader if he had even the least suspicion that all his efforts would count for nothing and would in the end entangle him in a mild scandal. As possession in bad faith does not necessarily mean possession illegal under the law, it being necessary that the possessor be aware of such illegality, it follows that the petitioner's possession of the homestead of the respondents was in good faith. (Art. 433, Civil Code.) "Good faith is always presumed, and the burden of proving bad faith on the part of the possessor rests upon the person alleging it" (article 434, Civil Code.) As a bona fide possessor, and it being unquestioned that the improvements introduced by him upon the land redounded to its benefit, the petitioner is by law entitled to be paid for the value of such improvements in the amount of P3,000, as found by the trial judge. "Useful expenditures shall be paid 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." ( Article 453, 2nd par., Civil Code). The reimbursement in this particular case is the more in order in view of the express undertaking of respondent's predecessor-in-interest to pay therefor.

Even the equities of the case militate against the respondents and in favor of the petitioner. There is a concession that the petitioner's possession was neither imposed upon nor wrested from the homesteader; on the contrary, it came about by virtue of a mutual agreement whereby the said homesteader and the herein respondents were spared the burden of paying for land taxes and stipulated interest and extended the benefit of having their land improved on condition that they pay the value of such improvements upon redeeming the land. We also have uncontradicted fact that P400 of the one thousand-peso loan were given to the herein respondents and the balance kept by their mother. They may not reap and retain these benefits at the same time repudiate and go back upon contractual obligations solemnly entered into.

But let grant that the contract, Exhibit 1, is one of absolute sale, as found by the Court of Appeals, what then? As the land could not be alienated for five years from the date of the issuance of the patent, the sale was illegal and void because it was entered into in violation of section 116 of the Public Land Act, as amended. By whom was the law violated? Certainly, not by Kasilag alone but by Ambrosio as well. Both are presumed to know the law, and we cannot justly charge Kasilag alone with that knowledge on the alleged reason that Kasilag is rich and Ambrosio is poor. Neither can we proceed on the bare assumption that because Exhibit 1 was written in English it was prepared by Kasilag as if he were the only English-speaking person in the Province of Bataan where the document was executed. Are we already living in the midst of a communistic society that we shall have to incline invariably the balance in favor of a litigant who happens to be well-to-do, regardless of the merits of the case? And to this end, shall we, by a series of assumptions and deductions, impute to a party malice aforethought dishonesty and bad faith, in entering into a transaction made in the open sun, publicly recorded and whose effectiveness was even conditioned by the approval of a court of justice? If so, then I dare say that we have not profited by the admonition of Aristotle in his Metaphysics centuries ago that "justice is a virtue of the soul which discards party, friendship and sentiment and is therefore always represented as blind." There is a charm in rhetoric but its value in cool judicial reasoning is nil.

And if — as we are confidently told — we should relax the legal principle with reference to Ambrosio, because she was "poor and ignorant," I am reluctant to believe that she was ignorant of the condition against the alienation inserted in all homestead patents, and my knowledge of the Public Land Law, of the activities of the Department and bureau charged with the administration of public lands, gives me just the contrary impression. Every homestead patent contains that condition. Circulars and instructions and general information have been issued in pursuance with law. (Sec. 5, Act No. 2874; see also sec. 5, Comonwealth Act No. 141.) I must presume that the Government and its officials charged with the administration of public lands have complied with the law and their duties in this connection, and I cannot believe that Ambrosio, when she alienated the property, was unaware of the legal prohibition. Under the circumstances, then, it is reasonable to conclude that on the hypothesis that the document, Exhibit 1, was a contract of absolute sale between Kasilag and Ambrosio, both of them were guilty of infraction of the law. If this is correct, what is the legal situation of the parties?

Justinian, who, by his Corpus Juris Civiles, still speaks through practically all the civil codes of Continental Europe, considers both as having acted in good faith. "Realmente," bluntly observes Manresa, "si los dos que se encuentran en lucha sobre la propiedad han provocado el conflicto por su voluntad; a ciencia y paciencia del dueno del suelo, ante cuya vista las obras se han ejecutado, y con conciencia, por parte del que edifica o planta, de que el terreno no es suyo, no hay razon alguna que abone derecho preferente en favor de ninguno de los dos; deben, por tanto, tratarse como si los dos hubiesen obrado de buena fe; la mala fe del uno extingue y neutraliza, en justa reciprocidad, la del otro ." (Manresa, Codigo Civil segunda edicion Tomo III pag. 203.) Article 364 of our Civil Code then comes into play. "Where there has been bad faith, not only on the part of the person who built, sewed, or planted on another's land, but also on the part of the owner of the latter, the rights of both shall be the same as if they had acted in good faith. Bad faith on the part of the owner is deemed to exist whenever the act has been done in his presence, with his knowledge and tolerance, and without opposition on his part." ( Article 364, Civil Code; see also arts. 1303, 1306 ibid.) The codal section is evidently based upon the vulnerable maxim of equity that one who comes into equity must come with clean hands. A court which seeks to enforce on the part of the defendant uprightness, fairness, and conscientiousness also insists that, if relief is to be granted, it must be to a plaintiff whose conduct is not inconsistent with the standards he seeks to have applied to his adversary.

Fundamenta justitiae sunt, ut ne cui noceatur, deinde ut communi serviatur. I therefore concur in the result.

CONCEPCION, J., dissenting:

In view of the findings of fact of the Court of Appeals, which are final according to law, I dissent from the majority opinion

as to the legal denomination of the contract really entered into by the petitioners and the now deceased Emiliana Ambrosio.

The facts according to the decision of the Court of Appeals are as follows:

On August 27, 1918, the deceased Emiliana Ambrosio applied for the land in question as a homestead, now known as lot No. 285 of the Limay cadastral survey of Bataan, and the application was approved on September 10, 1919. A final proof was submitted on November 10, 1927 which was approved on October 17, 1929. The homestead patent No. 16074 and homestead certificate of title No. 325 were issued in favor of the applicant on June 11, 1931 which were recorded on June 26, 1931 in the office of registrar of deeds in accordance with the provisions of section 122 of Act 496.

"On or about May 16, 1932, the homestead owner, Emiliana Ambrosio offered to sell the property to the defendant and appellee, Marcial Kasilag. The latter, upon examining her title found that it was a homestead patent and knew, therefore, that the land subject of the patent could not be alienated by express prohibition of law, so he devised a means by which the proposed sale might not appear in any document and had the patentee, Emiliana Ambrosio, execute a public instrument, Exhibit '1', purporting to be a mere mortgage of the improvements thereon consisting of four mango trees, fruit bearing; 110 hills of bamboo trees, 1 tamarind, and 6 boñga trees, with the assessed value of P860, in consideration of the sum of P1,000 alleged to have been loaned by the said Kasilag to the said patentee, Emiliana Ambrosio. It was expressly stipulated in that document that the aforementioned amount should be paid within four and a half years from the date of the instrument (May 16, 1932), the condition being that if she would fail to redeem the alleged mortgage at the expiration of the stipulated period, she would execute a deed of absolute sale of the property therein described for the same amount of the alleged mortgage (P1,000) including all unpaid interest at the rate of 12 per cent per annum in favor of the alleged mortgagee. It was further stipulated therein that the said Emiliana should pay all the taxes and assessment which might become due on the land and improvements during the term of the agreement and that within thirty days after the date of the execution thereof she should file a motion before the Court of First Instance of Bataan requesting the cancellation of the homestead certificate No. 325 above referred to and the issuance in lieu thereof a certificate of title under the provisions of the Land Registration Act 496, as amended by Act 3901.

The lot in question was originally declared for land tax purposes in the name of the homestead (owner) Emiliana Ambrosio, and assessed at P1,020 in 1933; but on May 22, 1934, the tax declaration was transferred in the name of the appellee, Marcial Kasilag, and on March 6, 1936 the assessed value was raised to P2,180.

Emiliana, however, never paid any interest on the alleged loan of P1,000 or paid taxes on the land since the execution of the contract.

The evidence further discloses that the appellant entered upon the actual possession of the land and had been holding the same up to the present time, having planted various kinds of fruit trees valued according to him at P5,000, and collected the products thereof for his own exclusive benefit.

Relying upon the foregoing facts, the majority contends that the contract executed by the parties was one of mortgage, as per Exhibit 1, with a promise to sell the land in question. I cannot hold to these rulings of the majority, because the nature of the contract of mortgage is inconsistent with the idea that the creditor should immediately enter upon a possession of the mortgaged land; that he should pay the land tax; that he should accept as security something whose values does not cover the amount of the loan sought to be secured, for in this case the supposed loan was P1,000, and what were mortgaged were only the improvements consisting of 4 mango trees, 110 hills of bamboo trees, 1 tamarind tree and 6 betelnut trees, assessed at P860.

I believe that the contract which the parties intended to execute is a promise to sell the land, for which reason Ambrosio retained the right of ownership of the land and its improvements while the deed of the promised sale had not been executed. Under the terms of the deed Exhibit 1, Kasilag could not be considered the owner of the land, nor could he execute any act promised upon the assumption of ownership, nor could he alienate the same as he had no title to it. But the parties, in consideration of the fact that Kasilag paid in advance the price of the land and assumed the obligation to pay the tax thereon, which Ambrosio could not pay, agreed that Kasilag may enter upon the enjoyment of the land until the promise to sell is converted in fact into an absolute sale by the execution of the corresponding deed by Ambrosio. It was stipulated, however, that if the sale is not approved by the Court, Kasilag would collect the amount of P1,000 paid him as a mortgage credit, with all the interest due and payable.

Under these circumstances, the conclusion of law that Kasilag acted in bad faith is not supported by the established facts.

Wherefore, the plaintiffs are bound to comply with the contract as heirs of Ambrosio, by executing in favor of Kasilag the deed of sale of the land, but should the sale, for any reason, be not approved, Kasilag may collect the amount of P1,000 with all the interest thereon, and may execute the judgment obtained by him upon the land and all its improvements, deducting, however, in his favor the value of the improvements which he introduced upon the land in good faith.

In view of the foregoing, I am of the opinion that the decision of the Court of Appeals should be reversed and that another should be entered against the respondents, requiring them to execute the deed of sale of the land in favor of the petitioner, provided that if the sale, for any reason, be not approved by the court, the petitioner may execute his credit upon the land and all its improvements, after deducting the value of the improvements introduced by him upon the land.

MORAN, J., dissenting:

According to section 116 of Act No. 2874, as amended by section 23 of Act No. 3517, "lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period."

About June 11, 1931, homestead patent No. 16074 was issued to Emiliana Ambrosio, now deceased. On May 16, 1932 Emiliana Ambrosio offered the sale of the said homestead to the herein petitioner, Marcial Kasilag, and in view of the above-quoted legal prohibition, the parties executed the document Exhibit 1, copied in the majority decision. The heirs of Emiliana Ambrosio filed a complaint for the annulment of the contract in the Court of First Instance of Bataan, and from

the judgment rendered by said court an appeal was taken to the Court of Appeals, which held that the true contract between the parties is one of absolute sale, wherefore, it is null and void under the already cited legal prohibition. Marcial Kasilag comes to this court on certiorari, and this court reverses the decision of the Court of Appeals.

The only question is as to the true contract between the parties at the time of the execution of the deed Exhibit 1; Kasilag contends that the contract is that set out in the document Exhibit 1, that is, a mortgage of the improvements of the homestead to secure a loan of one thousand pesos given to Emiliana Ambrosio; and the latter's heirs, in turn, contend that the contract is one of the absolute sale of the homestead, wherefore, it is null and void. The findings of the Court of Appeals are as follows:

The pertinent facts as disclosed by the evidence of record are as follows:

On August 27, 1918 the deceased, Emiliana Ambrosio, applied for the land in question as a homestead, not known as Lot No. 285 of the Limay cadastral survey of Bataan, and the application was approved on September 10, 1919. A final proof was submitted on November 10, 1927 which was approved on October 17, 1929. The homestead patent No. 16074 and homestead certificate of title No. 325 were issued in favor of the applicant on June 11, 1931 which were recorded on June 26, 1931 in the office of the register of deeds in accordance with the provisions of Section 122 of Act No. 496.

On or about May 16, 1932, the homestead owner Emiliana Ambrosio offered to sell the property to the defendant and appellee, Marcial Kasilag. The latter, upon examining her title found that it was a homestead patent and knew, therefore, that the land subject of the patent could not be alienated by express prohibition of law, so he devised means by which the proposed sale might not appear in any document and had the patentee, Emiliana Ambrosio, execute a public instrument, Exhibit 1, purporting to be a mere mortgage of the improvements thereon consisting of four mango trees, fruit bearing; one hundred ten hills of bamboo trees, one thousand and six boñga trees, with the assessed value of P860, in consideration of the sum of P1,000 alleged to have been loaned by the said Kasilag to the said patentee Emiliana Ambrosio. It was expressly stipulated in that document that the aforementioned amount should be paid within four and a half years from the date of the instrument (May 16, 1932), the condition being that if she failed to redeem the alleged mortgage at the expiration of the stipulated period, she would execute a deed of absolute sale of the property therein described for the same amount of the alleged mortgage (P1,000) including all unpaid interest at the rate of 12 per cent per annum in favor of the alleged mortgagee. It was further stipulated therein that the said Emiliana should pay all the taxes and assessment which might become due on the land and improvements during the term of the agreement and that within thirty days after the date of the execution thereof she should file a motion before the Court of First Instance of Bataan requesting the cancellation of the homestead certificate No. 325 above referred to and the issuance in lieu thereof of a certificate of title under the provisions of the Land Registration Act No. 496, as amended by Act No. 3901.

The lot in question was originally declared for land tax purposes in the name of the homestead owner, Emiliana Ambrosio, and assessed at P1,020 in 1933; but on May 22, 1934, the tax declaration was transferred in the name of the appellee, Marcial Kasilag, and on March 6, 1936 the assessed value was raised to P2,180.

Emiliana, however, never paid any interest on the alleged loan of P1,000 or paid taxes on the land since the execution of the contract.

The evidence further discloses that the appellee entered upon the actual possession of the land and had been holding the same up to the present time, having planted various kinds of fruit trees valued according to him at P5,000, and collected the products thereof for his own exclusive benefit.

Construing the contract, Exhibit 1, in the light of all the foregoing facts and circumstances under which it was executed in relation to the subsequent acts of the contracting parties, we are led to the inescapable conclusion that their real intention was to execute an agreement of absolute sale of the homestead together with the improvements thereon. The stipulation concerning an alleged mortgage in the instrument is a mere devise to circumvent the law which expressly prohibits the alienation or encumbrance of the homestead during the period of five years from the date of the issuance of the homestead patent. (Sec. 116 of Act No. 2874 as amended by Act No. 3517.)

It is inconceivable, and, therefore, we refuse to believe that the appellee, Marcial Kasilag, being an intelligent man far above the average, would accept improvements valued at only P860 as security for the payment of a larger amount of P1,000, the alleged loan. We entertain no doubt that at the time the execution of the contract, Exhibit 1, the appellee knew that the homestead owner, Emiliana Ambrosio, a poor ignorant woman, was badly in need of money and that she was determined to dispose of and alienate definitely her homestead, as evidenced by the fact testified to by Gavino Rodriguez as witness for the said appellee that she actually offered to sell the land to the latter. He also knew that she would not be able to pay back to him such a large amount with interest of 12 per cent per annum because she had no other income except what she would derive from the homestead. Under such circumstances, there is reason to believe that she was no longer concerned with the form in which the contract would be drawn, as long as could obtain the amount of P1,000 which was agreeable to her as the price of the homestead she offered to sell to the appellee. This conclusion is supported in part by the subsequent action of Emiliana in not paying any interest on the alleged loan of P1,000 or the land taxes thereon since the execution of the contract and by the action of the appellee in declaring the land for tax purposes in his own name as owner thereof, notwithstanding that he had no interest in the land, as he alleged, except in the improvements only.

The contract of absolute sale was consummated, because the grantor, Emiliana, received full payment of the purchase price disguised as a loan of P1,000 and placed the grantee, Marcial Kasilag, in absolute possession and control of the land conveyed to him with all the improvements thereon. The stipulation under article VIII of the contract, Exhibit I, to the effect that the grantor would execute a deed of absolute sale of the property herein described for the said amount of this mortgage including all unpaid interest at the rate of 12 per cent per annum in favor of the mortgagee', clearly indicates that there was nothing left to be done except the execution of the deed of absolute sale, which is merely a matter of form in contracts of this nature, which was postponed until after the expiration of four and a half years because by that time the period of five years within which the property could not

be alienated nor encumbered in any way, as provided by section 116 of Act No. 2874 as amended by Act No. 3517, supra, would have already expired. If the real purpose was to mortgage the improvements only as specified in article VIII thereof it was provided that in case of failure to redeem the alleged mortgage the grantor would be required to execute a deed of absolute sale of the property described therein for the same amount of the mortgage in favor of the grantee, and not of 'the improvements only'? It is clear, therefore, that the real contract under Exhibit 1, was one of absolute sale and not a mortgage with future sale.

In other words, although the document Exhibit 1 states that it is a mortgage of the improvements, with a stipulation regarding a future sale of the land in case of failure to comply with the mortgage obligations, in reality the true contract between the parties is one of absolute sale in the light of the circumstances of the case, among them the following:

First, Emiliana Ambrosio offered the sale, not the mortgage, of her homestead to Marcial Kasilag, and it is a fact found established by the Court of Appeals that she was agreeable to the sum of one thousand pesos as the price of the sale offered by her. If this is so, it is unlikely that Kasilag would refuse the offer of sale of the homestead and would accept in lieu thereof a simple mortgage of the improvements, for the same sum of one thousand pesos;

Second. In the deed it is stipulated that, if at the expiration of the period of four and a half years, the debtor should fail to redeem the mortgage, she would execute in favor of the creditor, Marcial Kasilag, a deed of absolute sale not only of the mortgaged improvements but also of the land for the same amount of the loan of one thousand pesos. This magic conversion of the mortgage of the improvements into an absolute sale of the land at the expiration of four and a half years and without any additional consideration can only mean that the two contracts are one and the same thing, and that the first has been availed of to go around the legal prohibition. The scheme is very obvious, and to make any attempt to reconcile it with good faith is simply to fall into it.

The mortgage of the improvements could not have been intended because the supposed loan which it guaranteed was the same price of the stipulated sale to be later executed, and further because Kasilag knew, according to the findings of fact of the Court of Appeals, that Emiliana Ambrosio was a poor and ignorant woman who was not in a position to return to one thousand pesos;

Third. Kasilag had always considered the contract as one of sale of the land and not as a mortgage of the improvements, because he put the tax declaration of the land in his name, paid the corresponding land tax, took possession of the land, received the fruits thereof for his exclusive use, and introduced thereon permanent improvements, one of them being a summer house, all of which were valued at about five thousand pesos. It is not an attribute of a contract of mortgage that the creditor should take possession of the mortgaged property, or that he should pay the taxes thereon. Kasilag would not spend five thousand pesos for permanent improvements if he knew that his possession was precarious.

Fourth. In the document it is stipulated that the debtor would pay interest, but she did not pay any, and the alleged mortgage was not foreclosed thereby, which shows that the stipulation was nothing but a ruse.

Fifth. The deed Exhibit 1 was drawn by Kasilag, because it is in English, and the other party is a poor and ignorant woman, wherefore, all doubts and uncertainties arising therefrom should be resolved against Kasilag. It is to noted that in this document are phrases indicative of the real contract between the parties. For instance: in clause IV the word paid and not loaned is used in referring to the loan of one thousand pesos; and clause IX of the document states "the foregoing contract of sale."

Under all these circumstances, the irresistible conclusion is that the real contract between the parties is an absolute sale, and that the contract of mortgage was made to appear in the document Exhibit 1 for the sole purpose of defeating the legal prohibition. Nevertheless, the majority of this Court, brushing aside the findings of fact made by the Court of Appeals without stating its reasons therefor, holds as to the document Exhibit 1, that "as the terms thereof are clear and leave no room for doubt, it should be interpreted according to the literal meaning of its clauses." I have already shown in speaking of the second circumstance, that the context itself of the document Exhibit 1 discloses strong tokens that the contract between the parties was one of the sale and not of mortgage. Moreover, the rule relied upon by the majority is only applicable in the absence of any allegation that the document does not express the real contract between the parties. Under section 285, No. 1, of Act No. 190, a document, however clear its conditions may be, may and should be rejected when it is alleged and shown by evidence aliunde that it does not express the true intent of the parties. We have often considered as document, by its terms a contract of absolute sale, as one of mortgage because it has been so alleged and established by convincing oral evidence. (Cuyugan vs. Santos, 34 Phil., 100; Villa vs. Santiago, 38 Phil., 157; Laureano vs. Kilayco, 34 Phil., 148; Cuyugan vs. Santos, 39 Phil., 970; Rodriguez vs. Pamintuan, 37 Phil., 876; see also Manalo vs. Gueco, 42 Phil., 925; Gatmaitan vs. Nepumuceno, 42 Phil., 295.)

The majority decision does not only pass over the findings of fact made by the Court of Appeals, but further, gives weight to certain facts which said court finds not to have been established. For instance, we have the following passages the majority decision:

One year after the execution of the aforequoted deed, that is, in 1933, it came to pass that Emiliana Ambrosio was unable to pay the stipulated interest as well as the tax on the land and its improvements. For this reason, she and the petitioner entered into another verbal contract whereby she conveyed to the latter the possession of the land on condition that the latter would not collect the interest on the loan, would attend to the payment of the land tax, would benefit by the fruits of the land, and would introduce improvements thereon. . . . .

. . . This stipulation was verbally modified by the same parties after the expiration of one year, in the sense that the petitioner would take possession of the land and would benefit by the fruits thereof on condition that he would condone the payment of interest upon the loan and he would attend to the payment of the land tax. . . . .

These two paragraphs state as an established fact the supposed verbal contract between the parties which Kasilag tried to prove by his testimony. However, the Court of Appeals expressly held: "We believe, however, that the trial court erred in giving probative value to the testimony of the appellee (Marcial Kasilag) with reference to the alleged verbal agreement with the deceased, Emiliana Ambrosio, and based thereon the conclusion that the appellee acted in good faith," (Words in parenthesis are mine.)

Rule 47, paragraph (b), of our Rules, provides expressly that in appeals to this court on certiorari, "only questions of law

may be raised and must be distinctly set forth." And we have held in various decisions that in passing upon the legal conclusions of the Court of Appeals, we shall abide by the findings of fact of said court.

I, moreover, find certain ambiguities in the majority decision, for while it states on the one hand that the verbal contract had for its purpose the "alteration of the mortgage contract clearly entered into, converting the latter into a contract of antichresis," (underscoring mine) thereby implying that the mortgage contract was abandoned by the parties and ceased to exist, in the dispositive part of its decision, the majority holds that the mortgage of the improvements is valid and binding, and gives to the respondents the right to "redeem the mortgage of the improvements by paying to the petitioner within three months the amount of P1,000 . . . ." It, therefore, requires compliance with a contract that has ceased to exist.

While on the one hand the majority states that the aforesaid verbal contract is one of antichresis and that it is void, on the other hand, it gives force thereto by holding that the interest on the loan of one thousand pesos is sufficiently "set off by the value of the fruits of the mortgaged improvements which the petitioner received." And, furthermore, why should the interest be set off against the fruits of the improvements only and not against those of the entire land? And if the verbal contract of antichresis is void, why is Kasilag not required to render an accounting of the fruits of the land received by him which may exceed the total amount of interest, taxes and even the principal itself?

The majority states that Kasilag, in taking possessions of the homestead, receiving its fruits and introducing improvements thereon, did so under the void contract of antichresis, and did so in good faith as he was excusably unaware of the legal provision which prohibits the incumbrance of the homestead within the period of five years. Whether Kasilag was aware or unaware of the legal prohibition is again a factual question resolved by the Court of Appeals as follows: "the appellee ( Marcial Kasilag) was also aware of these provisions which were incorporated in the homestead patent shown to him at the beginning of the transaction" (Words in parenthesis are mine). I do not understand how we can disturb this factual finding.

I found, moreover, that in the majority decision it is ordered that, if the heirs of Emiliana Ambrosio cannot pay the value of the permanent improvements introduced by Marcial Kasilag, the latter may have the homestead by paying to them its price in the market. The improvements were appraised by the trial court at three thousand pesos, and as the heirs of Emiliana Ambrosio probably inherited nothing from the latter but poverty, they will eventually be unable to pay the said amount and, in the last analysis, will lose the homestead of their mother. The practical effect, therefore, of the majority decision is that the heirs of Emiliana Ambrosio will be deprived of the homestead by virtue of a void antichretic obligation contracted by her within the period of five years from the granting of the homestead. And this, at least, is in violation of the spirit of section 116 of the Homestead Act.

I have other reasons which I need not set out to bring this dissent to a close. But before I conclude, I should like to state that the Homestead Act has been enacted for the welfare and protection of the poor. The law gives a needy citizen a piece of land where he may build a modest house for himself and family and plant what is necessary for subsistence and for the satisfaction of life's other needs. The right of the citizens to their homes and to the things necessary for their subsistence is as vital as the right to life itself. They have a right to live with a certain degree of comfort as become human beings, and the State which looks after the welfare of the people's happiness is under a duty to safeguard the satisfaction of this vital right. Moreover, a man with a home and a means of subsistence is a lover of peace and order and will profess affection for his country, whereas one without a home and in penury is not only a social parasite but also a dangerous element in the social order. The Homestead Act at once aims at the promotion of wholesome and happy citizenship and the wiping out of the germs of social discontent found everywhere.

Considering the social and economic ends of the Homestead Act, the courts should exercise supreme care and strict vigilance towards faithful compliance with all its benign provisions and against the defeat, directly or indirectly, of its highly commendable purposes. And it is my firm conviction that where, as in the present case, a rich and clever man attempts to wrest a homestead granted to a poor and ignorant woman, the slightest tokens of illegality should be enough to move the courts to apply the strong arm of the law.

I dissent from the majority decision and vote for the affirmance of the decision of the Court of Appeals.

AVANCEÑA, C.J., dissenting:

I concur in this dissenting opinion of Justice Moran.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. Nos. L-20300-01             April 30, 1965

ANTONINO DIZON, ADELAIDA D. REYES, CONSOLACION DEGOLLACION, ET AL., petitioners, vs.HON. JUAN DE G. RODRIGUEZ, as Secretary of Agriculture & Natural Resources, HERACLITO MONTALBAN, as Acting Director of Fisheries, MIGUEL TOLENTINO, REPUBLIC OF THE PHILIPPINES, ET AL., respondents.

-----------------------------

G.R. Nos. L-20355-56             April 30, 1965

REPUBLIC OF THE PHILIPPINES, THE SECRETARY OF AGRICULTURE & NATURAL RESOURCES, DIRECTOR OF FISHERIES, MIGUEL TOLENTINO, and CLEMENCIA TOLENTINO, petitioners, vs.HON. COURT OF APPEALS, ANTONINO DIZON, ADELAIDA D. REYES, CONSOLACION DE DEGOLLACION, ARTEMIO DIZON, AMORANDO DIZON, REMEDIOS MANAPAT SY-JUCO, and LEONILA SIOCHI GOCO, respondents.

Jalandoni and Jamir for petitioners Antonino Dizon, et al.Office of the Solicitor General for respondents Republic, et al.Miguel Tolentino for and in his own behalf.

BARRERA, J.:

These are separate appeals instituted by Antonino Dizon, et al. (G.R. Nos. L-20300-01) and the Republic of the Philippines, et al. (G.R. Nos. L-20355-56), from a single decision of the Court of Appeals, as modified by its resolution of August 20, 1962, holding that Lots Nos. 49 and 1 of subdivision plan Psd.-27941 are parts of the navigable boundary of the Hacienda Calatagan, covered by Transfer Certificate of Title No. T-722, and declaring the occupants Dizon, et al. possessors in good faith, entitled to remain therein until reimbursed, by the intervenor Republic of the Philippines, of the necessary expenses made on the lots in the sum of P40,000.00 and P25,000.00, respectively.

The facts of these cases, briefly stated, are as follows:

Hacienda Calatagan owned by Alfonso and Jacobo Zobel was originally covered by TCT No. T-722. In 1938, the Hacienda constructed a pier, called "Santiago Landing," about 600 meters long from the shore into the navigable waters of the Pagaspas Bay, to be used by vessels loading sugar produced by the Hacienda sugar mill. When the sugar mill ceased its operation in 1948, the owners of the Hacienda converted the pier into a fishpond dike and built additional strong dikes enclosing an area of about 30 hectares (of the Bay) and converted the same into a fishpond. The Hacienda owners also enclosed a similar area of about 37 hectares of the Bay on the other side of the pier which was also converted into a fishpond.

In 1949, the Zobels ordered the subdivision of the Hacienda by ordering the preparation of the subdivision plan Psd-27941 wherein fishpond No. 1 (with 30 hectares) was referred to as Lot No. 1 and fishpond No. 2 (with 37 hectares) was referred to as Lot No. 49. The plan was approved by the Director of Lands, and the Register of Deeds issued, from TCT No. T-722, TCT No. 2739 for lots 49 and 1 in the name of Jacobo Zobel.

In 1950, Jacobo Zobel sold to Antonino Dizon, et al. Lot 49 for which said purchasers obtained at first TCT No. T-2740 and later T-4718, Lot 1, on the other hand, was purchased by Carlos Goco, et al., who, in turn, sold one-half thereof to Manuel Sy-Juco, et al. Transfer Certificate of Title No. 4159 was issued in the names of the Gocos and Sy-Jucos.

On May 24, 1952, Miguel Tolentino filed with the Bureau of Fisheries an application for ordinary fishpond permit or lease for Lot 49, and an application for a similar permit, for Lot 1, was filed by his daughter Clemencia Tolentino.

The Dizons, Sy-Jucos, and Gocos filed a protest with the Bureau of Fisheries, claiming the properties to be private land covered by a certificate of title. This protest was dismissed by the Director of Fisheries, on the ground that the areas applied for are outside the boundaries of TCT No. T-722 of Hacienda Calatagan. This ruling was based upon the findings of the committee created by the Secretary of Agriculture and Natural Resources to look into the matter, that Lots 1 and 49 are not originally included within the boundaries of the hacienda.

On October 1, 1954, the protestants Dizons, Sy-Jucos, and Gocos filed an action in the Court of First Instance of Manila (Civ. Case No. 24237) to restrain the Director of Fisheries from issuing the fishpond permits applied for by the Tolentinos. The court dismissed this petition for non-exhaustion of administrative remedy, it appearing that petitioners had not appealed from the decision of the Director of Fisheries to the Secretary of Agriculture and Natural Resources. On appeal to this Court, the decision of the lower court was sustained (G.R. No. L-8654, promulgated April 28, 1956). The protestants then filed an appeal with the Secretary of Agriculture and Natural Resources. This time, the same was dismissed for being filed out of time.1äwphï1.ñët

On August 16, 1956, the Dizons filed Civil Case 135 and the Sy-Jucos and Gocos, Civil Case 136, in the Court of First Instance of Batangas, to quiet their titles over Lots 49 and 1. Named defendants were the Secretary of Agriculture and Natural Resources and applicants Tolentinos. The Republic of the Philippines was allowed to intervene in view of the finding by the investigating committee created by the respondent Secretary, that the lots were part of the foreshore area before their conversion into fishponds by the hacienda-owners.

On January 30, 1958, after due hearing, the Court of First Instance of Batangas promulgated a joint decision making the

finding, among others, that the subdivision plan Psd-27941 was prepared in disregard of the technical description stated in TCT No. T-722, because the surveyor merely followed the existing shoreline and placed his monuments on the southwest lateral of Lot 49, which was the pier abutting into the sea; and made the conclusion that Lots 1 and 49 of Psd-27941 were part of the foreshore lands. As the certificate of title obtained by petitioners covered lands not subject to registration, the same were declared null and void, and Lots 1 and 49 were declared properties of the public domain. Petitioners appealed to the Court of Appeals.

In its decision of October 31, 1961, as well as the resolution of August 20, 1962, the appellate court adopted the findings of the lower court, that the lots in question are part of the foreshore area and affirmed the ruling cancelling the titles to plaintiffs. Although in the decision of October 31, 1961, the Court of Appeals awarded to applicants Tolentinos damages in the amount of P200.00 per hectare from October 1, 1954, when plaintiffs were notified of the denial of their protest by the Director of Fisheries, such award was eliminated in the resolution of August 20, 1962, for the reason that plaintiffs, who relied on the efficacy of their certificates of title, cannot be considered possessors in bad faith until after the legality of their said titles has been finally determined. Appellants were thus declared entitled to retention of the properties until they are reimbursed by the landowner, the Republic of the Philippines, of the necessary expenses made on the lands, in the sums of P40,000.00 (for Lot 49) and P25,000.00 (for Lot 1). It is from this portion of the decision as thus modified that defendants Tolentinos and the intervenor Republic of the Philippines appealed (in G.R. Nos. L-20355-56), claiming that plaintiffs' possession became in bad faith when their protest against the application for lease was denied by the Director of Fisheries. In addition, the intervenor contends that being such possessors in bad faith, plaintiffs are not entitled to reimbursement of the expenses made on the properties.

In G.R. Nos. L-20300-01, plaintiffs Dizon, et al., claim that the finding that the Lots in question are part of the seashore or foreshore area was erroneous, because from defendants' own evidence, the same appear to be marshland before their conversion into fishponds.

It is noteworthy in connection with the appeal of plaintiffs, that they do not contest the existence of the pier that was used by the hacienda owners in the loading of their manufactured sugar to vessels. The fact that said pier jutted out 600 meters to the sea indicates that the area over which such cemented structure spanned was part of the sea or at least foreshore land. And, plaintiffs were not able to disprove the testimonial evidence that the fishponds in question were constructed by enclosing the areas with dikes, using the pier as one of the ends of the fishponds. It is clear that the areas thus enclosed and converted into fishponds were really part of the foreshore. This, and the fact that the subdivision plan Psd-27941 was found to have been prepared not in accordance with the technical descriptions in TCT No. T-722 but in disregard of it, support the conclusion reached by both the lower court and the Court of Appeals that Lots 49 and 1 are actually part of the territorial waters and belong to the State. And, it is an elementary principle that the incontestable and indefeasible character of a Torrens certificate of title does not operate when the land thus covered is not capable of registration.

On the matter of possession of plaintiffs-appellants, the ruling of the Court of Appeals must be upheld. There is no showing that plaintiffs are not purchasers in good faith and for value. As such title-holders, they have reason to rely on the indefeasible character of their certificates.

On the issue of good faith of the plaintiffs, the Court of Appeals reasoned out:

The concept of possessors in good faith given in Art. 526 of the Civil Code and when said possession loses this character under Art. 528, needs to be reconciled with the doctrine of indefeasibility of a Torrens Title. Such reconciliation can only be achieved by holding that the possessor with a Torrens Title is not aware of any flaw in his Title which invalidates it until his Torrens Title is declared null and void by final judgment of the Courts.

Even if the doctrine of indefeasibility of a Torrens Title were not thus reconciled, the result would be the same, considering the third paragraph of Art. 526 which provides that:

ART. 526. ...

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

The legal question whether plaintiffs-appellants' possession in good faith, under their Torrens Titles acquired in good faith, does not lose this character except in the case and from the moment their Titles are declared null and void by the Courts, a difficult one. Even the members of this Court were for a long time divided, two to one, on the answer. It was only after several sessions, where the results of exhaustive researches on both sides were thoroughly discussed, that an undivided Court finally found the answer given in the next preceding paragraph. Hence, even if it be assumed for the sake of argument that the Supreme Court would find that the law is not as we have stated it in the next preceding paragraph and that the plaintiffs-appellants made a mistake in relying thereon, such mistake on a difficult question of law may be the basis of good faith. Hence, their possession in good faith does not lose this character except in the case and from the moment their Torrens Titles are declared null and void by the Courts.

Under the circumstances of the case, especially where the subdivision plan was originally approved by the Director of Lands, we are not ready to conclude that the above reasoning of the Court of Appeals on this point is a reversible error. Needless to state, as such occupants in good faith, plaintiffs have the right to the retention of the property until they are reimbursed the necessary expenses made on the lands.

With respect to the contention of the Republic of the Philippines that the order for the reimbursement by it of such necessary expenses constitutes a judgment against the government in a suit not consented to by it, suffice it to say that the Republic, on its own initiative, asked and was permitted to intervene in the case and thereby submitted itself voluntarily to the jurisdiction of the court.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby affirmed in all respects, without costs. So ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal and Bengzon, J.P., JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 111737 October 13, 1999

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,vs.THE HONORABLE COURT OF APPEALS AND SPOUSES TIMOTEO and SELFIDA S. PIÑEDA, respondents.

GONZAGA-REYES, J.:

Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals 1 in CA-G.R. CV No. 28549 entitled "SPOUSES TIMOTEO PIÑEDA, ET. AL. vs. DEVELOPMENT BANK OF THE PHILIPPINES" which affirmed the decision

of the Regional Trial Court (RTC), Branch 16 2, Roxas City in Civil Case No. V-4590, for cancellation of certificate of title and/or specific performance, accounting and damages with a prayer for the issuance of a writ of preliminary injunction.1âwphi1.nêt

The records show that respondent spouses Piñeda (PIÑEDAS) are the registered owners of a parcel of land (Lot 11-14-1-14) situated at barangay Astorga Dumarao, Capiz containing an area of 238,406 square meters, more or less, and covered by Homestead Patent No. 0844 and Original Certificate of Title No. P-1930. On March 7, 1972, the PIÑEDAS mortgaged the above described parcel of land to petitioner, Development Bank of the Philippines (DBP) to secure their agricultural loan in the amount of P20,000.00. The PIÑEDAS failed to comply with the terms and conditions of the mortgage compelling DBP to extrajudicially foreclose on February 2, 1977. In the foreclosure sale, DBP was the highest bidder and a Sheriff Certificate of Sale was executed in its favor. In the corresponding Certificate of Sale, the sheriff indicated that "This property is sold subject to the redemption within five (5) years from the date of registration of this instrument and in the manner provided for by law applicable to this case". The certificate of sale was registered in the Register of Deeds of Capiz on April 25, 1977. On March 10, 1978, after the expiration of the one-year redemption period provided for under Section 6, ACT 3135, DBP consolidated its title over the foreclosed property by executing an Affidavit of Consolidation of Ownership. Subsequently, a Final Deed of Sale was executed in DBP's favor, which was registered together with the Affidavit of Consolidation of Ownership with the Register of Deeds of Capiz on May 30, 1978. Consequently, Original Certificate of Title No. P-1930 was cancelled and TCT No. T-15559 was issued in the name of DBP. Thereafter, DBP took possession of the foreclosed property and appropriated the produce thereof.

On July 5, 1978, the Ministry of Justice issued Opinion No. 92, Series of 1978 3 which declared that lands covered by P.D.

No. 27 4, like the herein subject property, may not be the object of foreclosure proceedings after the promulgation of said decree on Oct. 21, 1972.

On August 24, 1981, the PIÑEDAS offered to redeem the foreclosed property by offering P10,000.00 as partial redemption payment. This amount was accepted by DBP who issued O.R. No. 1665719 and through a letter, conditionally

approved the offer of redemption considering the P10,000.00 as down payment. 5 However, on November 11, 1981, DBP sent the PIÑEDAS another letter informing them that pursuant to P.D. 27, their offer to redeem and/or repurchase the

subject property could not be favorably considered for the reason that said property was tenanted. 6 On November 16, 1981, in deference to the above-mentioned opinion, DBP through Ramon Buenaflor sent a letter to the Acting Register of Deeds of Capiz requesting the latter to cancel TCT No. T-15559 and to restore Original Certificate of Title No. P-1930 in the name of the PIÑEDAS. The Acting Register of Deeds, in reply to such request, suggested that DBP file a petition in

court pursuant to Section 108 of Presidential Decree 1529 7. In compliance with said suggestion, DBP petitioned for the cancellation of TCT No. T-15559 with then Court of First Instance of Capiz, Branch II, docketed as Special Case No. 2653. The petition was favorably acted upon on February 22, 1982. Thus, the foreclosure proceeding conducted on February 2, 1977 was declared null and void and the Register of Deeds of Capiz was ordered to cancel TCT No. 15559; OCT No. 1930 was ordered revived.

Meanwhile, on December 21, 1981, the PIÑEDAS filed the instant complaint against DBP for cancellation of certificate of title and/or specific performance, accounting and damages with a prayer for the issuance of a writ of preliminary injunction averring that DBP, in evident bad faith, caused the consolidation of its title to the parcel of land in question in spite of the fact that the 5-year redemption period expressly stated in the Sheriff's Certificate of Sale had not yet lapsed and that their

offer to redeem the foreclosed property was made well within said period of redemption. 8

After trial, the RTC ruled in favor of the PIÑEDAS stating that DBP violated the stipulation in the Sheriff's Certificate of Sale which provided that the redemption period is five (5) years from the registration thereof in consonance with Section

119 9 of CA No. 141 10. DBP should therefore assume liability for the fruits that said property produced from said land considering that it prematurely took possession thereof. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against the defendant Development Bank of the Philippines as follows:

1. Condemning the defendant DBP to pay the plaintiffs P201,138.28 less whatever amount the plaintiffs still have to pay the said defendant DBP as balance of their loan account reckoned up to the date of this decision; P20,000.00 as attorney's fees; P5,000.00 as litigation expenses and costs.

SO ORDERED. 11

DBP appealed to the Court of Appeals, which affirmed the decision of the RTC. The Court of Appeals stated that since DBP was in evident bad faith when it unlawfully took possession of the property subject of the dispute and defied what was written on the Sheriff's Certificate of Sale, the PIÑEDAS were entitled to recover the fruits produced by the property or its equivalent valued at P72,000.00 per annum or a total of P216,000.00 for the three-year period. Respondent court stated that said amount was not rebutted by DBP and was fair considering the size of the land in question. The court added that any discussion with respect to the redemption period was of little significance since the foreclosure proceeding

was declared null and void in Special Civil Case No. 2653 12 on February 22, 1982. Thus, the right of the PIÑEDAS to

redeem the property has become moot and academic. Finally, the award of attorney's fees amounting to P10,000.00 13

was justified considering that the PIÑEDAS were compelled to protect their interests. 14

DBP's Motion for Reconsideration 15 was denied; hence this petition where it assigns the following errors:

Ground No. 1 — The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quo's Decision Awarding Actual Damages In The Amount Of P216,000.00 In Favor Of The Private Respondents Notwithstanding The Absence Of Evidence Substantiating Said Award. Thus, The Honorable Court Of Appeals Had Decided This Instant Case In A Way Not In Accord With Applicable Law And Jurisprudence.

2. Ground No. 2 — The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quo 's Finding That DBP Was In Bad Faith When It Took Possession Of The Property In Question Notwithstanding the Contrary Evidence Adduced By Petitioner DBP. Thus, The Honorable Court Of Appeals Departed From The Accepted And Usual Course f Judicial Proceedings.

3. Ground No. 3 — The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quo 's Decision Awarding Attorney's Fees And Litigation Costs In Favor Of The Private Respondents Notwithstanding Absence Of Evidence Proving The Same. Clearly, The Lower Court Be Committed

Misapprehension Of Facts That Can Be Considered A Question Of Law. 16

DBP maintains that the valuation of the income derived from the property in dispute allegedly amounting to P216,000.00 was not proven by the PIÑEDAS. DBP argues that they granted the PIÑEDAS a loan of P20,000.00 in March 7, 1972 and up to the time of the foreclosure of the property, the PIÑEDAS have paid only P2,000.00 on their principal. The failure of the PIÑEDAS to pay this loan is attributable to the fact that said property did not produce income amounting to P72,000.00 per annum. According to DBP, in the absence of receipts or other evidence to support such a claim, the Court of Appeals should not have granted said amount considering that the PIÑEDAS had the burden of proving actual damages. Furthermore, Selfida Piñeda herself admitted that the property never produced income amounting to P72,000.00 per annum. At any rate, the actual amount earned by the property in terms of rentals turned over by the tenant-farmers or caretakers of the land were duly receipted and were duly accounted for by the DBP.

DBP also alleges that the mere fact that DBP took possession and administration of the property does not warrant a finding that DBP was in bad faith. First, records show that the PIÑEDAS consented to and approved the takeover of DBP.

Second, Sec. 7 17 of Act No. 3135 18 allows the mortgagee-buyer to take possession of the mortgaged property even during the redemption period. Third, DBP's act of consolidating the title of the property in its name does not constitute bad faith as there is no law which prohibits the purchaser at public auction from consolidating title in its name after the expiration of the one (1) year redemption period reckoned from the time the Certificate of Sale was registered; and neither is there any law or jurisprudence which prohibits the PIÑEDAS from exercising their right of redemption over said property within five (5) years even if title is consolidated in the name of the purchaser. When DBP consolidated title over the property in its name, the new TCT issued in its favor was subject to the lien i.e. the right of redemption of the PIÑEDAS; if there was a failure to register this in the TCT, DBP should not be faulted. Besides, even if the five (5) year period of

redemption was not indicated therein, Sec. 44 19 and 46 20 of Presidential Decree No. 1529 21 attaches such lien by operation of law even in the absence of an annotation in the title. Moreover, Sec. 119 of CA No. 141 also makes said right of redemption a statutory lien, which subsists and binds the whole world despite the absence of registration.

DBP also could not have been in bad faith when it denied the PIÑEDAS' offer to redeem the property since the denial was premised on Opinion No. 92 of the Minister of Justice series of 1978 which stated that said land was covered under P.D. 27 and could not be the subject of foreclosure proceedings. For this reason, DBP immediately filed a petition to nullify the foreclosure proceedings which was favorably acted upon prior to the service of summons and the complaint in the present case on DBP on June 30, 1982. If DBP was really in bad faith, it would not have filed said petition for said petition was against its own interests.

Further, DBP asserts that PIÑEDAS appointed DBP as their attorney-in-fact or agent in case of foreclosure of the property under Section 4 of the mortgage contract, which provides:

4. . . . In case of foreclosure, the Mortgagor hereby consents to the appointment of the mortgagee or any of its employees as receiver, without any bond, to take charge of the mortgage property at once, and to hold possession of the case and the rents and profits derived from the mortgaged property before the

sale. . . . 22

DBP was therefore entitled to take possession of the property pursuant to the mortgage contract.

Finally, considering that DBP lawfully had material possession of the property after it consolidated its title, DBP was entitled to the fruits and income thereof pursuant to Section 34, Rule 39 of the Rules of Court:

Sec. 34. Rents and Profits Pending Redemption. Statement thereof and credit therefor on redemption. — The purchaser, from the time of the sale until a redemption, and a redemptioner, from the time of his redemption until another redemption, is entitled to receive the rents of the property sold or the value of the use or occupation thereof when such property is in the possession of a tenant. . . .

Taking all this into consideration, DBP cannot be faulted for taking over possession of the property in question.

The core issue in this case is whether DBP was in bad faith when it took possession of the disputed lot.

We rule in the negative and find DBP's contentions meritorious.

A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw, which

invalidates it. 23 Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the

burden of proof. 24 It was therefore incumbent on the PIÑEDAS to prove that DBP was aware of the flaw in its title i.e. the nullity of the foreclosure. This, they failed to do.

Respondent PIÑEDAS argue that DBP's bad faith stems from the fact that DBP consolidated title over the disputed property despite the statement in the Sheriff's Certificate of Sale to the effect that said land was subject to a five year redemption period. The period of redemption of extrajudicially foreclosed land is provided under Section 6 of ACT No. 3135 to wit:

Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of sale; and such redemption shall be governed by the provisions of section four hundred and sixty-four to

four hundred and sixty-six, inclusive, of the Code of Civil Procedure, 25 in so far as these are not inconsistent with the provisions of this Act.

If no redemption is made within one year, the purchaser is entitled as a matter of right to consolidate 26 and to possess 27

the property. 28 Accordingly, DBP's act of consolidating its title and taking possession of the subject property after the expiration of the period of redemption was in accordance with law. Moreover, it was in consonance with Section 4 of the mortgage contract between DBP and the PIÑEDAS where they agreed to the appointment of DBP as receiver to take charge and to hold possession of the mortgage property in case of foreclosure. DBP's acts cannot therefore be tainted with bad faith.

The right of DBP to consolidate its title and take possession of the subject property is not affected by the PIÑEDAS' right to repurchase said property within five years from the date of conveyance granted by Section 119 of CA No. 141. In fact, without the act of DBP consolidating title in its name, the PIÑEDAS would not be able to assert their right to repurchase granted under the aforementioned section. Respondent PIÑEDAS are of the erroneous belief that said section prohibits a purchaser of homestead land in a foreclosure sale from consolidating his title over said property after the one-year period to redeem said property has expired. Section 119 does not contain any prohibition to convey homestead land but grants the homesteader, his widow or legal heirs a right to repurchase said land within a period of five years in the event that he conveys said land. This is in consonance with the policy of homestead laws to distribute disposable agricultural lands of

the State to land-destitute citizens for their home and cultivation. 29 The right to repurchase under Section 119 aims to preserve and keep in the family of the homesteader that portion of public land which the State had gratuitously given him. 30 Such right is based on the assumption that the person under obligation to reconvey the property has the full title to the property because it was voluntarily conveyed to him or that he consolidated his title thereto by reason of a redemptioner's

failure to exercise his right of redemption. 31 It is also settled that "the five-year period of redemption fixed in Section 119 of the Public Land Law of homestead sold at extrajudicial foreclosure begins to run from the day after the expiration of the

one-year period of repurchase allowed in an extrajudicial foreclosure". 32 Thus DBP's consolidation of title did not derogate from or impair the right of the PIÑEDAS to redeem the same under C.A. No. 141.

It may be argued that P.D. 27 was already in effect when DBP foreclosed the property. However, the legal propriety of the foreclosure of the land was put into question only after Opinion No. 92 series of 1978 of the Ministry of Justice declared that said land was covered by P.D. 27 and could not be subject to foreclosure proceedings. The Opinion of the Ministry of Justice was issued on July 5, 1978 or almost two months after DBP consolidated its title to the property on March 10, 1978. By law and jurisprudence, a mistake upon a doubtful or difficult question of law may properly be the basis of good

faith. 33

In the case of Maneclang vs. Baun, 34 we held that when a contract of sale is void, the possessor is entitled to keep the fruits during the period for which it held the property in good faith. Good faith of the possessor ceases when an action to

recover possession of the property is filed against him and he is served summons therefore. 35 In the present case, DBP

was served summons on June 30, 1982. 36 By that time, it was no longer in possession of the disputed land as possession thereof was given back to the PIÑEDAS after the foreclosure of DBP was declared null and void on February 22, 1982. Therefore, any income collected by DBP after it consolidated its title and took possession of the property on May 30, 1978 up to February 22, 1982 belongs to DBP as a possessor in good faith since its possession was never legally interrupted.

Finally, we delete the award for attorney's fees. Although attorney's fees may be awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the

party from whom it is sought 37, we hold that DBP's acts were clearly not unjustified.

WHEREFORE, the instant petition is hereby GRANTED, and the appealed decision of the Court of Appeals is REVERSED. The Development Bank of the Philippines is absolved from any liability to Timoteo and Selfida Piñeda in so far as it orders the DBP to pay the PIÑEDAS P216,000.00 as annual produce value of the land; P20,000.00 in attorney's fees, P5,000.00 in litigation expenses and the costs of the suit. This decision is without prejudice to whatever liability the PIÑEDAS may still have to the DBP with respect to their loan.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-50264 October 21, 1991

IGNACIO WONG, petitioner, vs.HON. LUCAS D. CARPIO, as Presiding Judge, Court of First Instance of Davao del Sur, Branch V and MANUEL MERCADO, respondents.

Rodolfo B. Quiachon for petitioner.

Jose M. Ilagan for private respondent.

 

BIDIN, J.:p

This is a petition for review on certiorari, certified to this Court by the Court of Appeals as it involves purely question of law, seeking the annulment of the September 29, 1978 decision of the then Court of First Instance ** of Davao del Sur, Branch V, in Civil Case No. 1258 which reversed the February 20, 1978 decision of the Municipal Court of Sta. Maria, *** Davao del Sur in an action for Forcible Entry (Civil Case No. 13) ordering the dismissal of the complaint as well as the counterclaim.

The undisputed facts of this case, as found by both the trial court and the then Court of First Instance of Davao del Sur, are as follows:

On the basis of the admission of parties in their respective pleadings, the oral testimonies of all witnesses for both plaintiff and defendants and the documentary evidence offered and admitted this Court finds that plaintiff Manuel Mercado acquired his rights to possess the land in litigation, particularly lot 3 (LRC) Pcs-295, (situated at Colonga, Sta. Maria, Davao del Sur) and which is particularly described and embraced in Transfer Certificate of title No. (T-4244) T-972 from William Giger by virtue of a deed of sale with right to repurchase which was executed in 1972 for a consideration of P3,500.00 (testimony of plaintiff, T.S.N., p. 3, hearing of January 7, 1977). Then, in 1973, William Giger again asked an additional amount of P2,500.00 from plaintiff and so he required William Giger to sign a new deed of Pacto de Retro Sale (Exhibit "A") on November 5,1973 at Davao City before Notary Public Gregorio C. Batiller (T.S.N., p. 5, hearing of January 7, 1977). In 1972, plaintiff began harvesting only the coconut fruits and he paid the taxes on the land (Exhibits B to E) for Mr. Giger. He went periodically to the land to make copra but he never placed any person on the land in litigation to watch it. Neither did he reside on the land as he is a businessman and storekeeper by occupation and resides at Lower Sta. Maria, Davao del Sur while the land in litigation is at Colongan, Sta. Maria. Neither did he put any sign or hut to show that he is in actual possession (p. 8, T.S.N., p. 7, hearing of January 14, 1978). He knew defendants' laborers were in the land in suit as early as August, 1976 and that they have a hut there but he did not do anything to stop them. Instead plaintiff was happy that there were people and a hut on the land in suit (p. 14, T.S.N., hearing of January 14, 1978).

Before July, 1976, defendant Ignacio Wong went to the land in litigation to find out if there were other people residing there or claiming it besides the owner and he found none. So, in July, 1976, defendant Ignacio Wong bought the parcel of land in litigation from William Giger and his wife Cecilia Valenzuela (Exhibit 5). After the execution of Exhibit 5, defendant Ignacio Wong asked for the delivery of the title to him and so he has in his possession TCT No. (T-4244) T-974 (Exhibit 6) in the name of William Giger. Mr. Wong declared the land in suit for taxation purposes in his name (Exhibit 7). He tried to register the pacto de retro sale with the Register of Deeds by paying the registration fee (Exhibit 8) but due to some technicalities, the pacto de retro sale could not be registered. The defendant Wong placed laborers on the land in suit, built a small farm house after making some clearings and fenced the boundaries. He also placed signboards (T.S.N., pp. 14-15, hearing of September 15, 1977). On September 27, 1976, plaintiff Manuel Mercado again went to the land in suit to make copras. That was the time the matter was brought to the attention of the police of Sta. Maria, Davao del Sur and the incident entered in the police blotter (Exhibit 11). Then on November 18, 1976, defendant Wong ordered the hooking of the coconuts from the land in litigation and nobody disturbed him. But on November 29, 1976, defendant received a copy of plaintiff's complaint for forcible entry with summons to answer which is the case now before the Court. During the pendency of this instant complaint for forcible entry, spouses William Giger and Cecilia Valenzuela filed a case for reformation of instrument with the Court of First Instance of Digos, Davao del Sur against plaintiff Mercado (Exhibit 4). The case pertains to Exhibit "A" of plaintiff. (pp. 1-3, CA Decision, pp. 82-84, Rollo).

On the basis of the aforestated undisputed facts, the Municipal Court of Sta. Maria, Davao del Sur in its February 20, 1978 Decision found that herein petitioner (defendant Ignacio Wong) had prior, actual and continuous physical possession of the disputed property and dismissed both the complaint and the counter-claim.

On appeal, the then Court of First Instance of Davao del Sur, in its September 29, 1978 Decision drew a completely different conclusion from the same set of facts and ruled in favor of herein private respondent (plaintiff Manuel Mercado). The decretal portion of the said decision, reads:

WHEREFORE, the Court finds the plaintiff to have taken possession of the property earlier in point of time

and defendant is an intruder and must, as he is hereby ordered to return, the possession of the land in question for the plaintiff, paying a monthly rental of P400.00 from August, 1976, till the property is returned with costs against the defendant. Judgment is reversed.

Petitioner filed the instant petition with the Court of Appeals. But the Court of Appeals, in its March 1, 1979 Resolution **** found that the only issue is a pure question of law — the correctness of the conclusion drawn from the undisputed facts and certified the case to this Court.

In its April 4, 1979 Resolution, the Second Division of this Court docketed the case in this Court and considered it submitted for decision.

Petitioner alleged two (2) errors committed by respondent judge, to wit:

A) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER IS AN INTRUDER IS WITHOUT FACTUAL AND LEGAL BASIS FOR PURPOSES OF A FORCIBLE ENTRY.

B) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER MUST PAY A MONTHLY RENTAL OF P400.00 FROM AUGUST, 1976 TILL THE PROPERTY IS RETURNED HAS NO LEGAL AND FACTUAL BASIS.

The petition is without merit.

Petitioner, in claiming that the private respondent has not established prior possession, argues that private respondent's periodic visit to the lot to gather coconuts may have been consented to and allowed or tolerated by the owner thereof for the purposes of paying an obligation that may be due to the person gathering said nuts and that a person who enters a property to gather coconut fruits and convert the same to copras may only be a hired laborer who enters the premises every harvest season to comply with the contract of labor with the true owner of the property.

The argument is untenable.

It should be stressed that "possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities for acquiring such right." (Art. 531, Civil Code; Rizal Cement Co., Inc. vs. Villareal, 135 SCRA 15 [1985]); and that the execution of a sale thru a public instrument shall be equivalent to the delivery of the thing, unless there is stipulation to the contrary . . . . If, however, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it herself, because such tenancy and enjoyment are opposed by another, then delivery has not been effected. (Paras, Civil Code of the Philippines, Vol. II, 1989 Ed., p. 400).

Applying the above pronouncements on the instant case, it is clear that possession passed from vendor William Giger to private respondent Manuel Mercado by virtue of the first sale a retro (Exhibit A), and accordingly, the later sale a retro (Exhibit 5) in favor of petitioner failed to pass the possession of the property because there is an impediment — the possession exercised by private respondent. Possession as a fact cannot be recognized at the same time in two different personalities except in the cases of co-possession. Should a question arise regarding the fact of possession, the present possessor shall be preferred; if there are two possessions, the one longer in possession, if the dates of possession are the same, the one who presents a title; and if these conditions are equal, the thing shall be placed in judicial deposit pending determination of its possession or ownership through proper proceedings (Art. 538, Civil Code).

As to petitioner's query that "Is the entry of petitioner to the property characterized by force, intimidation, threat, strategy, or stealth in order to show that private respondent has had possession so that the case is within the jurisdiction of the inferior court?" (p. 15, Petition; p. 16, Rollo). The same is answered in the affirmative.

The act of entering the property and excluding the lawful possessor therefrom necessarily implies the exertion of force over the property, and this is all that is necessary. Under the rule, entering upon the premises by strategy or stealth is equally as obnoxious as entering by force. The foundation of the action is really the forcible exclusion of the original possessor by a person who has entered without right. The words "by force, intimidation, threat, strategy, or stealth" include every situation or condition under which one person can wrongfully enter upon real property and exclude another who has had prior possession therefrom. If a trespasser enters upon land in open daylight, under the very eyes of person already clothed with lawful possession, but without the consent of the latter, and there plants himself and excludes such prior possessor from the property, the action of forcible entry and detainer can unquestionably be maintained, even though no force is used by the trespasser other than such as is necessarily implied from the mere acts of planting himself on the ground and excluding the other party. (Tolentino, Civil Code of the Philippines, Vol. II, 1983 Ed., pp. 243-244; Drilon vs. Gaurana, 149 SCRA 342 [1987]).

Anent the award of rentals in favor of private respondent, the same is in order. Petitioner's argument that there is no legal or factual basis for the payment of monthly rentals because bad faith on the part of petitioner was never proved deserves no merit.

It should be noted that possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. (Art. 528, Civil Code).

Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith. (Tolentino, Civil Code of the Philippines, Vol. II, p. 226). Such interruption takes place upon service of summons (Manotok Realty vs. Judge Tecson, 164 SCRA 587 [1988] citing Mindanao Academy, Inc. v. Yap (13 SCRA 190 [1965]). In the latter case, this Court held:

. . . Although the bad faith of one party neutralizes that of the other and hence as between themselves their rights would be as if both of them had acted in good faith at the time of the transaction, this legal fiction of Yap's good faith ceased when the complaint against him was filed, and consequently the court's declaration of liability for the rents thereafter is correct and proper. A possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted, and such interruption takes place upon

service of judicial summons (Arts. 544 and 1123, Civil Code).

A perusal of the records of the case shows that petitioner received private respondent's complaint for forcible entry with summons on November 29, 1976 (Rollo, p. 46). His good faith therefore ceased on November 29,1976. Accordingly, the computation of the payment of monthly rental should start from December, 1976, instead of August, 1976.

WHEREFORE, with the modification that the computation of the monthly rental should start from December, 1976 instead of August, 1976, the September 29, 1978 decision of respondent judge is Affirmed in all other respects, with costs against petitioner.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Davide, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-30351 September 11, 1974

AUREA BAÑEZ and RAMON BAÑEZ Substituted by their legal heir, OSCAR VIRATA BAÑEZ, Petitioners, vs. COURT OF APPEALS and PIO ARCILLA, Respondents.

ZALDIVAR, J.:

A petition for review of the decision of the Court of Appeals in C.A. G.R. No. 36227-R (Pio Arcilla, plaintiff-appellant, versus Aurea Bañez, Ramon Bañez and People's Homesite and Housing Corporation, defendants-appellees).chanroblesvirtualawlibrary chanrobles virtual law library

The pertinent facts or the case are as follows: In 1956 respondent Pio Arcilla occupied a parcel of land, later known as Lot 5, Block E-130 East Avenue Subdivision, Diliman, Quezon City, owned by the People's Homesite and Housing Corporation (hereinafter referred to as PHHC). He fenced the lot with wire, and erected a house and made some plantings thereon. His moves to apply for the acquisition of the lot from the PHHC when the same became available for disposition came to naught because the employees of the PHHC whose help he sought merely regaled him with promises that the matter would be attended to. Nevertheless, his occupancy was made a matter of record with the PHHC in connection with a census of occupants and squatters taken some time later.chanroblesvirtualawlibrary chanrobles virtual law library

Notwithstanding respondent Arcilla's occupancy, the lot was awarded, on May 20, 1960, to Cristeta L. Laquihon pursuant to a conditional contract to sell executed by the PHHC, subject to the standard resolutory conditions imposed upon grants of similar nature, including the grantee's undertaking to eject trespassers, intruders or squatters on the land, and to construct a residential house on the lot within a period of one year from the signing of the contract, non-compliance with, which conditions would result in the contract being "deemed annulled and cancelled". Respondent Arcilia had no notice of this award, and neither did the grantee nor the PHHC take any step to oust him from the premises occupied by him. It was only on April 29, 1963 that he was first required to leave the area aforesaid.chanroblesvirtualawlibrary chanrobles virtual law library

Meanwhile, on May 9, 1962, grantee Cristeta L. Laquihon died, survived by her father, Basilio Laquihon, who, on July 27, 1962, executed a deed of adjudication in his favor of the rights and interests thus far acquired by his deceased daughter over the lot in question. In said deed Basilio Laquihon also acknowledged an indebtedness of the deceased to herein petitioner Aurea V. Bañez in the sum of P3,000.00 and agreed to assign the rights thus adjudicated by way of payment of the debt. The corresponding request for the transfer of the rights from Cristeta to Basilio L. Laquihon was made by the latter to the PHHC on August 9, 1962, while an undated request for the approval of the assignment of said land to Aurea V. Bañez as above stated was similarly filed with the PHHC.chanroblesvirtualawlibrary chanrobles virtual law library

The PHHC referred the requests for transfer and for assignment to its Head Executive Assistant, Olimpio N. Epis, for study. Mr. Epis. in his memorandum, opined that, because the grantee failed, among others, to construct a residential house on the land within the period provided in the conditional contract, the grantee's rights under the contract were forfeited and, accordingly, she did not acquire any right which could be transmitted upon her death to her alleged successor, Basilio Laquihon. Hence, he recommended the disapproval of the petition for transfer. It appears, however, that the unfavorable recommendation of Mr. Epis was not acted upon by the Board of the PHHC but, instead, was returned by the General Manager to Mr. Epis with verbal instructions to restudy the matter. After a restudy, Mr. Epis changed his opinion, and considered the transfers from Cristeta L. Laquihon to Basilio Laquihon, and from the latter to Aurea V. Bañez, to be proper and meritorious, and recommended the approval of the same. This was in conformity with a previous recommendation made by PHHC's Homesite Sales Supervisor, Roman Carreaga, to the PHHC's General Manager. On November 15, 1962, PHHC's Board of Directors adopted Resolution No. 200 approving the transfer of rights from Basilio Laquihon to Aurea V. Bañez as a meritorious case. The transfer thus approved, petitioner Aurea V. Bañez continued paying the installments on the purchase price of the land.chanroblesvirtualawlibrary chanrobles virtual law library

Respondent Pio Arcilia did not know of the foregoing developments until sometime in 1963 when he was given notice to vacate the lot occupied by him. He then interposed a protest against the award and transfer to petitioner Aurea V. Bañez, claiming that the original awardee acquired no rights to the aforesaid lot and that the transferee was disqualified from acquiring lots of the PHHC. Since the PHHC's Board of Directors had theretofore approved the transfer objected to, the Administrative Investigating Committee, to whom the protest was referred for resolution, considered itself without any further power to review the action of the Board, and accordingly dismissed the protest. In the meantime, petitioner Aurea V. Bañez completed the installment payments on the land, and on October 29, 1964, the PHHC executed the corresponding deed of sale over the lot in her favor.chanroblesvirtualawlibrary chanrobles virtual law library

Thus left without recourse before the PHHC, respondent Arcilla went to court with his complaint to nullify the award of the lot in question in favor of petitioner Aurea V. Bañez and to compel the PHHC to award the same to him, with prayer for attorney's fees and costs. After trial on the merits, the court a quo found for petitioners and accordingly decreed the dismissal of respondent's complaint, without costs.chanroblesvirtualawlibrary chanrobles virtual law library

Respondent Arcilla appealed to the Court of Appeals, which rendered the decision sought to be reviewed, the dispositive portion of which decision reads thus:

WHEREFORE, the judgment appealed from is hereby reversed and, in lieu thereof, another is hereby rendered declaring null and void the transfer of rights over and award of lot 5, Block B-130, East Avenue Subdivision of appellee PHHC, in favor of appellee Aurea Bañez and ordering

appellee People's Homesite and Housing Corporation to afford appellant Pio Arcilla the opportunity, within thirty (30) days from the finality of this decision, to perfect his preferential right to purchase said lot and thereafter to execute and deliver such deed and documents necessary to consummate the sale to said appellant.

Seeking a review of the decision, petitioners filed the instant petition. During its pendency, petitioner Ramon Bañez died on March 30, 1972, and petitioner Aurea Bañez also died on August 11, 1972, and the motion to have their heir, Oscar Virata Bañez, substituted for them, was granted by this Court on October 9, 1972.chanroblesvirtualawlibrary chanrobles virtual law library

Petitioners in their Brief made assignments of error, as follows:

1. That the Court of Appeals erred in holding that the respondent Pio Arcilla has the personality to seek the annulment of the award and sale, of Lot 5, Block E-130, East Avenue Subdivision, Diliman, Quezon City, belonging to the PHHC, to the applicant Cristela L. Laquihon on May 20, 1960, by PHHC, and the transfer of her rights over the lot by her father Basilio Laquihon to the petitioner Aurea Bañez in payment of the indebtedness of Cristeta L. Laquihon to the petitioner Aurea Bañez in the amount of P3,000.00; chanrobles virtual law library

2. The Court of Appeals erred in holding that the respondent Pio Arcilla has a preferential right to purchase the lot in question, lot 5, block E-130, East Avenue Subdivision, Quezon City, of the People's Homesite and Housing Corporation; chanrobles virtual law library

3. That the Court of Appeals erred in holding that the award of the lot in question to Cristeta L. Laquihon, made on May 20, 1960 was null and void, because said awardee failed to construct a house in the lot within a period of one (1) year from the signing of the contract to sell and, therefore, upon the death of Cristeta L. Laquihon on May 9, 1962, she transferred no rights to her father Basilio Laquihon and said Basilio Laquihon could not validly sell his rights of the lot in question to the petitioners; chanrobles virtual law library

4. That the Court of Appeals erred in holding that the approval of the transfer of rights of the late Cristeta L. Laquihon by her father Basilio Laquihon to the petitioner Aurea Bañez was due to the intercession of the then Senator Estanislao Fernandez; and chanrobles virtual law library

5. That the Court of Appeals erred in holding that the petitioners are not qualified to acquire the lot in question for having allegedly a lot in San Juan, Rizal.

1. Article 1397 of the Civil Code provides that the action for annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. Hence strangers to the contract who are not bound thereby have neither the right nor the personality to bring an action to annul such contract. It cannot be gainsaid that respondent Pio Arcilla was a stranger to, and not bound principally or subsidiarily by, the conditional contract to sell executed on May 20, 1960 by the PHHC in favor of Cristeta L. Laquihon, and the transfer of rights over the same lot from Basilio Laquihon to Aurea V. Bañez. Hence respondent Pio Arcilla could not bring an action to annul the same.chanroblesvirtualawlibrary chanrobles virtual law library

There is, however, an exception to the rule laid down in Article 1397. This Court, in Teves vs. People's Homesite and

Housing Corporation, L-21498, June 27, 1968 1citing Ibañez vs. Hongkong and Shanghai Bank 2, held that "a person who is not a partly obliged principally or subsidiarily in a contract may exercise an action for nullity of the contract if he is prejudiced in his rights with respect to one of the contracting parties, and can show the detriment which would positively result to him from the contract in which he had no intervention." Pursuant to said doctrine, in order that respondent Pio Arcilla might bring an action for the nullity of the contracts aforesaid, he should have been not only prejudiced in his rights with respect to one of the contracting parties, but must have also shown the detriment which he would positively suffer from the contracts. It becomes, therefore, necessary to inquire, whether respondent Pio Arcilla's rights were prejudiced by the aforesaid contracts, and as to what detriment, if any, he suffered because of those contracts.chanroblesvirtualawlibrary chanrobles virtual law library

What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found that Pio Arcilla "makes no pretense that he entered into and built his land upon appellee PHHC's land with the consent of the latter." Pio Arcilia was, therefore, a trespasser, or a squatter, he being a person who settled or located on land, in closed or uninclosed with "no bona fide

claim or color of title and without consent of the owner." 3He began his material possession of the lot in bad faith, knowing that he did not have a right thereto, and it is presumed that his possession continued to be enjoyed in the same character

in which it was acquired, i.e. in bad faith until the contrary is proved. 4And what right can a squatter have to the land into which he has intruded against the owner of the land? The answer is not hard to find, A squatter can have no possessory rights whatsoever, and his occupancy of the land is only at the owner's sufferance, his acts are merely tolerated and

cannot affect the owner's possession. 5The squatter is necessarily bound to an implied promise, that he will vacate upon demand.chanroblesvirtualawlibrary chanrobles virtual law library

This Court, in Bernardo et al. vs. Bernardo and Court of Appeals 6, laid down the doctrine that:

In carrying out its social re-adjustment policies, the government could not simply lay aside moral standards, and aim to favor usurpers, squatters, and intruders, unmindful of the lawful or unlawful origin and character of their occupancy. Such a policy would perpetuate conflicts instead of attaining their just solution.

Respondent Pio Arcilla, having no possessory rights whatsoever, what detriment could be have suffered from the aforesaid contracts? chanrobles virtual law library

The Court of Appeals, however, held that respondent Pio Arcilia had a right to purchase the lot occupied by him. The discussion of this alleged right brings us to the second assignment of error.chanroblesvirtualawlibrary chanrobles virtual law library

2. We find merit in petitioners' second assignment of error. Relying on the decision of the Court of Appeals, respondent Arcilia anchored his alleged preferential right to purchase Lot 5, Block E-130 on Resolution No. 562 of PHHC's Board of Directors, dated June 27, 1963, which reads as follows:

(1) No preference, advantage or benefit shall be given to squatters in the allocation of PHHC residential lots by reason alone of their prior occupancy thereof, but they shall be treated on the same footing as other qualified applicants. Squatters who are found qualified and deserving shall be given preferential awards only in PHHC resettlement projects, if they voluntarily comply with PHHC rules and policies without waiting to be evicted thru court proceedings.

and on Resolution No. 558, dated April 16, 1962, which approved the recommendations of its Acting Legal Officer. The recommendations included the proposed "Application Forms No. 6-D and No. 6-F" for non-occupants and occupants or squatters, respectively, and provided, among others, that:

(6) The Sales and Management Department should have a ready and up-to- date census of all lots occupied by squatters within PHHC subdivisions open for sale or award, in order that lots occupied by squatters who are not qualified to buy the same, or who do not merit an award shall not be awarded to anybody until the PHHC has obtained a final court decision for the eviction of such squatter. (Exhibit 1-B).

It should not be lost sight of, however, that according to the decision of the Court of Appeals, "Time there may have been, perhaps, when occupancy of a lot without the consent of said appellee was not recognized at all as basis for a claim to a right to purchase said lot;" and that "on the face of the evidence presented before us in this case, we note a clear shift in policy in the disposition of lots of appellee PHHC," and the shift in policy was evidenced by the afore-quoted resolutions.chanroblesvirtualawlibrary chanrobles virtual law library

If the afore-quoted resolutions relied upon by respondent Arcilla were evidence of the shift of policy, then, it stands to reason that before the adoption of said resolutions, the policy of the PHHC was different; otherwise, there would have been no reason for a change of policy. Resolution No. 562 was dated June 27, 1963. Hence the policy before June 27, 1963 was different. In fact even the Court of Appeals noted that before said date, "occupancy of a lot" was perhaps "not recognized at all as a basis for a claim of a right to purchase said lot." Hence at the time Lot No. 5 was awarded to Cristeta L. Laquihon on May 20, 1960, and at the time the PHHC approved the transfer of original awardee's rights to herein petitioners on Nov. 15, 1962, it was not yet the policy of the PHHC to recognize mere occupancy of a lot as giving a right to purchase the same, for said Policy was adopted only later, i.e. on June 27, 1963.chanroblesvirtualawlibrary chanrobles virtual law library

Moreover, it is not stated expressly in the above-quoted resolutions, and neither can it be necessarily implied therefrom, that the occupant was given a preferential right to purchase the lot he occupied. In fact Resolution No. 562 explicitly states that although a squatter shall be treated on the same footing as other qualified applicants, said occupant has no preference at all by reason of said occupancy. In the instant case, it is not even shown, although it was taken for granted, that respondent Pio Arcilia was a qualified applicant who should be treated on the Same footing as others. The fact is that said respondent never filed an application for the lot, so he cannot be a qualified applicant. A squatter found to be qualified and deserving was to be given preferential award, not necessarily to the same lot he occupies but only in PHHC resettlement projects; and it does not appear that Lot 5, Block E-130, in question, is in a resettlement project.chanroblesvirtualawlibrary chanrobles virtual law library

Furthermore, said preferential award in resettlement projects is granted only in case the squatter is not evicted through court proceedings. In the instant case, respondent Arcilla had been ejected from the lot through court proceedings in Civil Case No. IV-11691 of the City Court of Quezon City. If a squatter was given a Preferential right to the lot he occupies, how come that the same resolution No. 562 also provided that "No administrative case shall be entertained on the basis alone of a squatter's claim of prior or actual occupancy of PHHC lot?" chanrobles virtual law library

We hold that the claim, of respondent Pio Arcilla to the alleged preferential right to purchase Lot 5, Block E-130, had not been substantiated.chanroblesvirtualawlibrary chanrobles virtual law library

3. Respondent Arcilla argues that the awardee of the lot, Cristeta L. Laquihon, did not comply with the resolutory condition of building a house; so, she acquired no rights that could be transmitted to her father.chanroblesvirtualawlibrary chanrobles virtual law library

This Court cannot sustain respondent's stand.chanroblesvirtualawlibrary chanrobles virtual law library

This Court of Appeals stated in its decision that the contract to sell, dated May 20, 1960, executed by the PHHC in favor of Cristeta L. Laquihon was.

Subject to the standard resolutory conditions imposed upon grants of similar nature, including the grantee's undertaking to eject trespassers, intruders or squatters on the land and to 'construct a residential house on the lot and shall complete the same within a period of (1) year from the signing of this contract with no extension,' the non-compliance with which results in the contract being 'deemed annulled and cancelled (Exhibit 7).

Because no residential house, continued the Court of Appeals, was ever erected by the awardee on the premises - not even until she died on May 9, 1962, "she failed to comply with a condition of the award, the non-compliance with which has a resolutory effect upon the award," such that when Cristeta L. Laquihon died, she acquired no vested right in the

land, and she transmitted nothing to her father, Basilio Laquihon, who, on his part, could not have transferred any right to petitioners Bañez.chanroblesvirtualawlibrary chanrobles virtual law library

It is granted that by virtue of the resolutory condition, the resolution of the contract took place by force of law and that there was no need of judicial declaration to resolve the contract. Civilists, however, are not agreed on whether the injured party retains the option of demanding fulfillment or rescission of the obligation as provided in Article 1191 or not. Thus Collin y Capitant, Curson Elemental de Derecho Civil, Vol. III, p. 750 says:

En la hipotesis de una clausula del contrato que pronuncie una resolucion eventual, hay que proclamar la validez de tal clausula en el Derecho espanol siempre que no aparezca por sus circumstancias como contraria a la ley o a las buenas costumbres.chanroblesvirtualawlibrary chanrobles virtual law library

El efecto de tal clausula sera que la resolucion se produzca de pleno derecho, sin intervencion judicial; pero entendemos que, a pesar de ella el acreedor conservara el derecho de opcion que le concede el art. 1124 [Art. 1191 of the Civil Code of the Philippines] a no ser que la clausula misma resulte otra cosa.

Manresa, in Commentaries al Codigo Civil Espanol, 1967, Vol. VIII, p. 416, however, says that the stipulated resolution of the contract in case one of the parties does not comply with his undertaking is produced by force of law, but the option of the injured party disappears.chanroblesvirtualawlibrary chanrobles virtual law library

If the creditor could still demand, in spite of the resolution ipso jure of the contract, then the resolution would not be mandatory on the creditor and the resolution would produce its effect when the creditor notified the debtor of his decision. (Tolentino, Civil Code of the Philippines, Vol. IV, p. 175.) chanrobles virtual law library

It is certain, therefore, that the said contract to sell in the instant case was by virtue of the stipulated resolutory conditions resolved by operation of law. But the Court of Appeals overlooked in the instant case the express provision of the contract to sell that said resolution becomes effective only from the date written notice thereof is sent by the PHHC to the applicant. Thus paragraph 12 of the contract to sell (Exhibit 7) provides:

12. Should the APPLICANT violate, refuse or fail to comply with any of the terms and conditions stipulated herein or default in the payment of three monthly installments as provided for in paragraph 1 hereof, this contract shall be deemed annulled and cancelled and the CORPORATION shall be at liberty to dispose of said property to any other person in the same manner as if the contract had never been made ... The annulment and cancellation and the right of the CORPORATION to repossess the property shall become effective from the date written notice thereof is sent by the CORPORATION to the APPLICANT at his last known post-office address ...

The record does not show, and the decision of the Court of Appeals does not state, that the PHHC ever notified in writing the awardee of the cancellation of the contract to sell. Hence, the resolution of the contract never became effective. Consequently, whatever rights the original awardee Cristeta Laquihon had over the disputed lot were transmitted upon her death to her only legal and compulsory heir, her father Basilio (Art. 777, Civil Code) which rights the latter could also convey to herein petitioners.chanroblesvirtualawlibrary chanrobles virtual law library

But even if it be assumed gratia argumenti, that the original awardee Cristeta Laquihon acquired no vested right to the lot upon her death because of her failure to comply with the resolutory condition of constructing a house on the lot, and the lot had to revert to the PHHC, still it cannot be denied that the PHHC waived the effects of said resolutory condition when its Board of Directors approved, on November 15, 1962, the transfer to Aurea Bañez. In consenting to the transfer, the PHHC necessarily waived any right that might have accrued to it by virtue of the resolution of the contract before the transfer.chanroblesvirtualawlibrary chanrobles virtual law library

Regarding the other resolutory condition mentioned by the decision sought to be reviewed, and emphasized by private respondent, that the original awardee did not file an action for ejectment, it is to be noted that the awardee was not obliged to file said ejectment suit against respondent, the latter having squatted on the land since 1956 and the award to Cristeta Laquihon having been made only on May 20, 1960. On this matter, the Constitutional Contract to Sell (Exhibit 7) explicitly provides that:

3. ... The applicant shall undertake the ejectment of any trespasser, intruder or squatter who shall build on the lot or who shall deprive him of the right to possess the same from the date of this contract.

The awardee was obliged to eject squatters 44 who shall build on the lot ... from the date of this contract." Hence, respondent Arcilla having built his house or squatted on the land very much before, i.e. 4 years before the land was awarded to awardee, the latter was not under contractual obligation to eject him.chanroblesvirtualawlibrary chanrobles virtual law library

Resolution No. 558 does not require, furthermore, that the applicant for, or transferee of, a PHHC lot should reside in Quezon City. What the Resolution requires is that he should have his "permanent residence or principal place of work or business in Quezon City, Manila or suburbs ..." San Juan, the address of petitioners herein, is certainly included in the term "suburbs."

4. In support of their fourth assignment of error, that the Court of Appeals erred in holding that the approval of the transfer of the rights to the lot to petitioners was due to the intercession of the then Senator Estanislao Fernandez, petitioners argued that the issue of whether the letter of Senator Fernandez influenced the approval of the transfer was not assigned as error in respondent Arcilla's brief in the Court of Appeals, and neither was such influence alleged in the

complaint, hence the Court of Appeals could not decide said issue; and that the Board of Directors, uninfluenced by politicians, used its discretion in approving the transfer.

Section 7 of Rule 51 of the Rules of Court provides that in order that a question may be considered by the Court of Appeals, said question must be stated in the assignment of errors and it must be properly argued in the brief. (Traders Insurance and Surety Co. vs. Golangco, et al., 95 Phil. 824, 830; Tan Si Kick v. Tiacho, 79 Phil. 696, 698.) We note that there were only two errors assigned in appellant's brief in the Court of Appeals, namely: that the trial court erred in holding that (1) the claim of plaintiff that defendant was disqualified to acquire lot 5 for she already owned lot in San Juan was not substantiated, and (2) there was a valid perfected contract of sale between the PHHC and the late Cristeta Laquihon, and between the PHHC and Aurea Bañez and Ramon Bañez, and that they are bound by the terms and conditions thereof. Hence the alleged intercession of the then Senator Estanislao Fernandez in the transfer of right by Basilio Laquihon to petitioners, which was not stated in the assignment of errors and not argued in the brief, should have not been considered by the Court of Appeals.chanroblesvirtualawlibrary chanrobles virtual law library

Moreover, the evidence on which the finding of the Court of Appeals that the PHHC accommodated petitioners because of the intercession of whoever wrote "Exhibit C, has no evidentiary basis, for Exhibit C was rejected by the trial court "for being immaterial, irrelevant, impertinent and not properly identified (TSN, Nov. 4, 1964, p. 90)." The party introducing it did not even ask permission from the Court that the same be attached to the record so that the appellate court may review the ruling of the trial court (U.S. vs. Cabaraban, 36 Phil. 251, 253-254; Velez vs. Chaves, 50 Phil. 676, 678-679). Evidence ruled out at the trial of the case cannot be taken into consideration in the decision, for that would infringe the constitutional right of the adverse party to due process of law (Tinsay vs. Yusay and Yusay, 47 Phil. 639, 643). Documents forming no part of the proofs before the appellate court will not be considered in disposing of the issues of an action (De Castro v. Court of Appeals, 75 Phil., 824, 835, citing Dayrit v. Gonzalez, 7 Phil. 182; 5 Encyc. of Evidence, 469). Although said letter was written on stationery bearing the letterhead of the then Senator Fernandez, it does not conclusively follow that it was Senator Fernandez himself who wrote the letter. Even the signature of the letter was "illegible".chanroblesvirtualawlibrary chanrobles virtual law library

But assuming that the letter was written by Senator Fernandez, it cannot be implied from the facts of the case that the transfer of rights from Basilio Laquihon to petitioners herein was approved solely on the strength of such letter, for the approval of the transfer was recommended as "extremely meritorious" by the Head Executive Assistant (Exh. "2"), and by the Homesite Sales Supervisor (Exh. F). Neither can it be said that the approval of the transfer by the Board of Directors was vitiated by undue influence or that it was illegal. That letter, even if it was written really by Senator Fernandez, could not destroy the free agency of the PHHC Board of Directors, and it could not have interfered with the exercise of Board's independent discretion. This Court has already said that solicitation, importunity, argument and persuasion are not undue influence, and a contract is not to be set aside merely because one party used these means to obtain the consent of the others. Influence obtained by persuasion or argument or by appeals to the affections is not prohibited either in law or morals, and i s not obnoxious even in courts of equity. Such may be termed "due influence." (Martinez vs. Hongkong and Shanghai Bank, 15 Phil. 252, 270.) chanrobles virtual law library

5. In support of their fifth assignment of error, petitioners argued that the Court of Appeals erred in relying merely on the certification of the Municipal Treasurer of San Juan to the effect that his office "has a record of real property holding of Ramon and Aurea Bañez" consisting of a lot located at M. J. Paterno Street and assessed at P31,190.00 under Tax Declaration No. 23804 of the land records of said municipality, for a tax declaration is not evidence of title of property, and respondent Arcilla did not present any other evidence to prove that petitioners are really owners of a lot in San Juan, Rizal; that even granting that they are owners of a lot, still as maintained by the PHHC, they are not disqualified to acquire the lot in question as they merely stepped into the shoes of the original purchaser Cristeta Laquihon; that R. A. No. 498, relied upon by respondent in his complaint in asserting that the award of the lot to petitioner Aurea Bañez was null and void, is not applicable to the case and could not therefore have been violated.chanroblesvirtualawlibrary chanrobles virtual law library

In the decision under review, the Court of Appeals said that to be an awardee of PHHC's lots, one must not "already own or hold under a contract to buy residential lot or lots in any subdivision situated in ... San Juan ... (Exhibits D-2 and Z)." chanrobles virtual law library

Paragraph 9 of the Conditional Contract to Sell (Exhibit 7) also provides that "any transfer that may be authorized or permitted by the CORPORATION shall be under the condition that the transferee is qualified to acquire a lot under the rules and regulations of the CORPORATION ..." chanrobles virtual law library

The sole evidence submitted by respondent Arcilla to prove that petitioners herein were disqualified to be transferees of the lot in question was the certification of the Treasurer of San Juan (Exhibit I) that there is a tax declaration No. 23804 of the land records of said municipality in the name of Ramon and Aurea Bañez. Said Tax declaration is insufficient to prove ownership. It has been held anent this matter that -

Assessment alone is of little value as proof of title. Mere tax declaration does not vest ownership of the property in the declarant" (Province of Camarines Sur vs. Director of Lands, 64 Phil. 600, 613 citing Evangelista vs. Tabayuyong, 7 Phil., 607; Casimiro vs. Fernandez, 9 Phil., 562; Elumbaring vs. Elumbaring, 12 Phil. 384).

It is well-settled that neither tax receipts nor declaration of ownership for taxation purposes are evidence of ownership or of the right to possess realty when not supported by other effective proofs. (Elumbaring vs. Elumbaring, 12 Phil. 384, 388389).chanroblesvirtualawlibrary chanrobles virtual law library

It has not been proven, therefore, that petitioners herein are owners of a lot in San Juan, and consequently disqualified to be transferees of the questioned lot.chanroblesvirtualawlibrary chanrobles virtual law library

R.A. No. 498, relied upon by herein respondent in his complaint, in asserting that the award to petitioners was null and void, is not applicable to the instant case. Said Act authorizes cities, municipalities and provinces to purchase and/or expropriate home sites and landed estates and subdivide them for resale at cost, and provides in Section 3 that 14 no

such lot shall be sold to any person, who already owns a residential lot, and any sale made to such person shall be void." The PHHC not being a city, municipality, or province, it is apparent that Act is not applicable to the instant case.chanroblesvirtualawlibrary chanrobles virtual law library

IN VIEW OF THE FOREGOING, the decision of the Court of Appeals, dated January 9, 1969, in CA-G. R. No. 36227-R, is set aside, and the decision of the Court of First Instance of Quezon City in Civil Case No. Q-7679, is affirmed. Costs against respondent Pio Arcilla.chanroblesvirtualawlibrary chanrobles virtual law library

IT IS SO ORDERED.

Fernando, Barredo, Antonio and Aquino, JJ., concur.chanroblesvirtualawlibrary chanrobles virtual law library

Fernandez, J., took no part.

Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

H

EIRS OF ANACLETOB. NIETO, namely, SIXTA P. NIETO, EULALIO P.NIETO, GAUDENCIO P. NIETO, and CORAZON P. NIETO-IGNACIO, represented byEULALIO P. NIETO,

Petitioners,

- versus -

MUNICIPALITY OF MEYCAUAYAN, BULACAN, represented by MAYOR EDUARDO ALARILLA,

 

Respondent. G.R. No. 150654

Present:

YNARES-SANTIAGO, J.,

Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

REYES, JJ.

Promulgated:

December 13, 2007

x--------------------------------------------------------------x

D E C I S I O N

 

NACHURA, J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals, dated October 30, 2001, which dismissed the petition for review of the Decision of the Regional Trial Court (RTC) of Malolos, Bulacan. The latter dismissed a complaint to recover possession of a registered land on the ground of prescription and laches.

The antecedents are as follows:

Anacleto Nieto was the registered owner of a parcel of land, consisting of 3,882 square meters, situated at Poblacion, Meycauayan, Bulacan and covered by TCT No. T-24.055 (M). The property is being used by respondent, Municipality of Meycauayan, Bulacan, which constructed an extension of the public market therein.

Upon Anacleto’s death on July 26, 1993, his wife, Sixta P. Nieto, and their three children, namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-Ignacio, herein petitioners, collated all the documents pertaining to his estate.  When petitioners failed to locate the owner’s duplicate copy of TCT No. T-24.055 (M), they filed a petition for the issuance of a second owner’s copy with the RTC, Malolos, Bulacan. In that case, petitioners discovered that the missing copy of the title was in the possession of the respondent. Consequently, petitioners withdrew the petition and demanded from  respondent the return of property and the certificate of title.

On February 23, 1994, petitioners formally demanded from  respondent the return of the possession and full control of the property, and payment of a monthly rent with interest from January 1964.  Respondent did not comply with petitioners’ demand.[2]

On December 28, 1994, petitioners filed a complaint[3] for recovery of possession and damages against respondent alleging that the latter was in possession of the owner’s copy of TCT No. T-24.055 (M). They averred that, in 1966, respondent occupied the subject property by making it appear that it would expropriate the same. Respondent then used the land as a public market site and leased the stalls therein to several persons without paying Anacleto Nieto the value of the land or rent therefor. Petitioners prayed that respondent be ordered to surrender to them the owner’s copy of TCT No. T-24.055 (M), vacate the property, and pay them the rents thereon from 1966 until the date of the filing of the complaint for the total of P1,716,000.00, and P10,000.00 a month thereafter, as well as P300,000.00 as moral damages,  and P100,000.00 as attorney’s fees.

In its Answer,[4] respondent alleged that the property was donated to it and that the action was already time-barred because 32 years had elapsed since it possessed the property.

Respondent and counsel failed to appear during the scheduled pre-trial conference.[5] Upon petitioners’ motion, respondent was declared as in default and petitioners were allowed to present evidence ex parte.  Respondent filed a motion for reconsideration which the RTC granted.   Respondent was then allowed to cross-examine petitioners’ lone witness and present its own evidence. However, despite notice, respondent failed again to appear during the scheduled hearing. Hence, the RTC considered respondent to have waived its right to cross-examine petitioners’ witness and present its own evidence. The case was then submitted for decision.

On August 1, 1995, the RTC rendered a Decision dismissing the complaint as well as respondent’s counterclaims for damages. For lack of proof, the RTC disregarded respondent’s claim that Anacleto Nieto donated the property to it in light of the fact that the title remained in the name of Anacleto. Nonetheless, the RTC did not rule in favor of petitioners because of its finding that the case was already barred by prescription. It held that the imprescriptibility of actions to recover land covered by the Torrens System could only be invoked by the registered owner, Anacleto Nieto, and that the action was also barred by laches.

Petitioners appealed the case to the Court of Appeals (CA). On October 30, 2001, the CA rendered a Decision dismissing the case for lack of jurisdiction. According to the CA, the petition involved a pure question of law; hence, petitioners should have filed a petition directly with this Court.[6]

Accordingly, petitioners elevated the case to this Court through a petition for review on certiorari, raising the following issues:

A. Are lands covered by the Torrens System subject to prescription?

B. May the defense of [l]aches be invoked in this specific case?

C. May the defense of imprescriptibility only be invoked by the registered owner to the exclusion of his legitimate heirs?[7]

The petition is meritorious.

Respondent argues that the action of petitioner to recover possession of the property is already barred by prescription.

We do not agree.

An action to recover possession of a registered land never prescribes in view of the provision of Section 44 of Act No. 496 to the effect that no title to registered land in derogation of that of a registered owner shall be acquired by prescription or adverse possession.[8] It follows that an action by the registered owner to recover a real property registered under the Torrens System does not prescribe.

Despite knowledge of this avowed doctrine, the trial court ruled that petitioners’ cause of action had already prescribed  on the ground that the imprescriptibility to recover lands registered under the Torrens System can only be invoked by the person under whose name the land is registered.

Again, we do not agree. It is well settled that the rule on imprescriptibility of registered lands not only applies to the registered owner but extends to the heirs of the registered owner as well.[9] Recently in Mateo v. Diaz,[10] the Court held that prescription is unavailing not only against the registered owner, but also against his hereditary successors because the latter step into the shoes of the decedent by operation of law and are the continuation of the personality of their predecessor-in-interest. Hence,  petitioners, as heirs of Anacleto Nieto, the registered owner, cannot be barred by prescription from claiming the property.

Aside from finding that petitioners’ cause of action was barred by prescription, the trial court reinforced its dismissal of the case by holding that the action was likewise barred by laches.

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert his right has either abandoned or declined to assert it.[11]

In a number of cases, the Court has held that an action to recover registered land covered by the Torrens System may not be barred by laches.[12] Laches cannot be set up to resist the enforcement of an imprescriptible legal right.[13] Laches, which is a principle based on equity, may not prevail against a specific provision of law, because equity, which has been defined as “justice outside legality,” is applied in the absence of and not against statutory law or rules of procedure.[14]

In recent cases, [15] however, the Court held that while it is true that a Torrens title is indefeasible and imprescriptible, the registered landowner may lose his right to recover possession of his registered property by reason of laches.

Yet, even if we apply the doctrine of laches to registered lands, it would still not bar petitioners’ claim. It should be stressed that laches is not concerned only with the mere lapse of time.[16] The following elements must be present in order to constitute laches:

(1)   conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy;

(2)    delay in asserting the complainant’s rights, the complainant having had knowledge or notice, of the defendant’s conduct and having been afforded an opportunity to institute a suit;

(3)   lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and

(4)    injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred.[17]

We note that the certificate of title in the name of Anacleto Nieto was found in respondent’s possession but there was no evidence that ownership of the property was transferred to the municipality either through a donation or by expropriation, or that any compensation was paid by respondent for the use of the property. Anacleto allegedly surrendered the certificate of title to respondent upon the belief that the property would be expropriated. Absent any showing that this certificate of title was fraudulently obtained by respondent, it can be presumed that Anacleto voluntarily delivered the

same to respondent.  Anacleto’s delivery of the certificate of title to respondent could, therefore, be taken to mean acquiescence to respondent’s plan to expropriate the property, or a tacit consent to the use of the property pending its expropriation.

This Court has consistently held that those who occupy the land of another at the latter’s tolerance or permission, without any contract between them, are necessarily bound by an implied promise that the occupants will vacate the property upon demand.[18] The status of the possessor is analogous to that of a lessee or tenant whose term of lease has expired but whose occupancy continues by tolerance of the owner. In such case, the unlawful deprivation or withholding of possession is to be counted from the date of the demand to vacate.[19] Upon the refusal to vacate the property, the owner’s cause of action accrues.

In this case, the first element of laches occurred the moment respondent refused to vacate the property, upon petitioners demand, on February 23, 1994.  The filing of the complaint on December 28, 1994, after the lapse of a period of only ten months, cannot be considered as unreasonable delay amounting to laches.

Moreover, case law teaches that if the claimant’s possession of the land is merely tolerated by its lawful owner, the latter’s right to recover possession is never barred by laches. Even if it be supposed that petitioners were aware of respondent’s occupation of the property, and regardless of the length of that possession, the lawful owners have a right to demand the return of their property at any time as long as the possession was unauthorized or merely tolerated, if at all.[20]

Furthermore, the doctrine of laches cannot be invoked to defeat justice or to perpetrate fraud and injustice. It is the better rule that courts, under the principle of equity, will not be guided or bound strictly by the statute of limitations or the doctrine of laches when by doing so, manifest wrong or injustice would result.[21]

Finally, we find that the rentals being prayed for by petitioners are reasonable considering the size and location of the subject property.  Accordingly, the award of rentals is warranted.

WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Regional Trial Court of Malolos, Bulacan, dated  August 1, 1995, is REVERSED and SET ASIDE.  Respondent is ORDERED (a) to vacate and surrender peaceful possession of the property to petitioners, or pay the reasonable value of the property; (b) to pay P1,716,000.00 as reasonable compensation for the use of the property from 1966 until the filing of the complaint and P10,000.00 monthly rental thereafter until it vacates the property, with 12% interest from the filing of the complaint until fully paid; and (c) to return to petitioners the duplicate copy of TCT No. T-24.055 (M).

SO ORDERED.

 

 

ANTONIO EDUARDO B. NACHURA

Associate Justice

 

 

 

WE CONCUR:

 

 

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

 

 

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

 

 

RUBEN T. REYES

Associate Justice

 

 

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson, Third Division

 

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-54526 August 25, 1986

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs.THE COURT OF APPEALS and THE CITY OF DAGUPAN, respondents.

Miguel T. Caguioa, Ireneo B. Orlino and Manuel D. Victorio for respondent City of Dagupan.

 

FERIA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed the decision of the then Court of First Instance of Pangasinan. The lower court had declared respondent City of Dagupan the lawful owner of the Dagupan Waterworks System and held that the National Waterworks and Sewerage Authority, now petitioner Metropolitan Waterworks and Sewerage System, was a possessor in bad faith and hence not entitled to indemnity for the useful improvements it had introduced.

Before proceeding further, it may be necessary to invite attention to the common error of joining the court (be it a Regional Trial Court, the Intermediate Appellate Court, or the Sandiganbayan) as a party respondent in an appeal by certiorari to this Court under Rule 45 of the Rules of Court. The only parties in an appeal by certiorari are the appellant as petitioner and the appellee as respondent. (Cf. Elks Club vs. Rovira, 80 Phil. 272) The court which rendered the judgment appealed from is not a party in said appeal. It is in the special civil action of certiorari under Section 5 of Rule 65 of the Rules of Court where the court or judge is required to be joined as party defendant or respondent. The joinder of the Intermediate Appellate Court or the Sandiganbayan as party respondent in an appeal by certiorari is necessary in cases where the petitioner-appellant claims that said court acted without or in excess of its jurisdiction or with grave abuse of discretion. An example of this is a case where the petitioner-appellant claims that the Intermediate Appellate Court or the Sandiganbayan acted with grave abuse of discretion in making its findings of fact, thus justifying the review by this court of said findings of fact. (See the exceptions to the rule of conclusiveness of the findings of fact of the Intermediate Appellate Court or the Sandiganbayan in the case of Sacay vs. Sandiganbayan, G.R. Nos. 66497-98, July 10, 1986.) In such a case, the petition for review on certiorari under Rule 45 of the Rules of Court is at the same time a petition for certiorari under Rule 65, and the joinder of the Intermediate Appellate Court or the Sandiganbayan becomes necessary. (Cf. Lianga Lumber Company vs. Lianga Timber Co., Inc., March 31, 1977, 76 SCRA 197).

The City of Dagupan (hereinafter referred to as the CITY) filed a complaint against the former National Waterworks and Sewerage Authority (hereinafter referred to as the NAWASA), now the Metropolitan Waterworks and Sewerage System (hereinafter referred to as MWSS), for recovery of the ownership and possession of the Dagupan Waterworks System. NAWASA interposed as one of its special defenses R.A. 1383 which vested upon it the ownership, possession and control of all waterworks systems throughout the Philippines and as one of its counterclaims the reimbursement of the expenses it had incurred for necessary and useful improvements amounting to P255,000.00. Judgment was rendered by the trial court in favor of the CITY on the basis of a stipulation of facts. The trial court found NAWASA to be a possessor in bad faith and hence not entitled to the reimbursement claimed by it. NAWASA appealed to the then Court of Appeals and argued in its lone assignment of error that the CITY should have been held liable for the amortization of the balance of the loan secured by NAWASA for the improvement of the Dagupan Waterworks System. The appellate court affirmed the judgment of the trial court and ruled as follows:

However, as already found above, these useful expenses were made in utter bad faith for they were instituted after the complaint was filed and after numerous Supreme Court decisions were promulgated declaring unconstitutional the taking by NAWASA of the patrimonial waterworks systems of cities, municipalities and provinces without just compensation.

Under Article 546 of the New Civil Code cited by the appellant, it is clear that a builder or a possessor in bad faith is not entitled to indemnity for any useful improvement on the premises. (Santos vs. Mojica, L-25450, Jan. 31, 1969). In fact, he is not entitled to any right regarding the useful expenses (II Paras (1971) 387). He shall not have any right whatsoever. Consequently, the owner shall be entitled to all of the useful improvements without any obligation on his part (Jurado, Civil Law Reviewer (1974) 223).

Petitioner-Appellant MWSS, successor-in-interest of the NAWASA, appealed to this Court raising the sole issue of whether or not it has the right to remove all the useful improvements introduced by NAWASA to the Dagupan Waterworks System, notwithstanding the fact that NAWASA was found to be a possessor in bad faith. In support of its claim for removal of said useful improvements, MWSS argues that the pertinent laws on the subject, particularly Articles 546, 547 and 549 of the Civil Code of the Philippines, do not definitely settle the question of whether a possessor in bad faith has the right to remove useful improvements. To bolster its claim MWSS further cites the decisions in the cases of Mindanao Academy, Inc. vs. Yap (13 SCRA 190) and Carbonell vs. Court of Appeals (69 SCRA 99).

The CITY in its brief questions the raising of the issue of the removal of useful improvements for the first time in this Court, inasmuch as it was not raised in the trial court, much less assigned as an error before the then Court of Appeals. The

CITY further argues that petitioner, as a possessor in bad faith, has absolutely no right to the useful improvements; that the rulings in the cases cited by petitioner are not applicable to the case at bar; that even assuming that petitioner has the right to remove the useful improvements, such improvements were not actually identified, and hence a rehearing would be required which is improper at this stage of the proceedings; and finally, that such improvements, even if they could be identified, could not be separated without causing substantial injury or damage to the Dagupan Waterworks System.

The procedural objection of the CITY is technically correct. NAWASA should have alleged its additional counterclaim in the alternative-for the reimbursement of the expenses it had incurred for necessary and useful improvements or for the removal of all the useful improvements it had introduced.

Petitioner, however, argues that although such issue of removal was never pleaded as a counterclaim nevertheless it was joined with the implied consent of the CITY, because the latter never filed a counter-manifestation or objection to petitioner's manifestation wherein it stated that the improvements were separable from the system, and quotes the first part of Sec. 5 of Rule 10 of the Rules of Court to support its contention. Said provision reads as follows:

SEC. 5. Amendment to conform to or authorize presentation of evidence.-When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. ...

This argument is untenable because the above-quoted provision is premised on the fact that evidence had been introduced on an issue not raised by the pleadings without any objection thereto being raised by the adverse party. In the case at bar, no evidence whatsoever had been introduced by petitioner on the issue of removability of the improvements and the case was decided on a stipulation of facts. Consequently, the pleadings could not be deemed amended to conform to the evidence.

However, We shall overlook this procedural defect and rule on the main issue raised in this appeal, to wit: Does a possessor in bad faith have the right to remove useful improvements? The answer is clearly in the negative. Recognized authorities on the subject are agreed on this point. *

Article 449 of the Civil Code of the Philippines provides that "he who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity." As a builder in bad faith, NAWASA lost whatever useful improvements it had made without right to indemnity (Santos vs. Mojica, Jan. 31, 1969, 26 SCRA 703).

Moreover, under Article 546 of said code, only a possessor in good faith shall be refunded for useful expenses with the right of retention until reimbursed; and under Article 547 thereof, only a possessor in good faith may remove useful improvements if this can be done without damage to the principal thing and if the person who recovers the possession does not exercise the option of reimbursing the useful expenses. The right given a possessor in bad faith is to remove improvements applies only to improvements for pure luxury or mere pleasure, provided the thing suffers no injury thereby and the lawful possessor does not prefer to retain them by paying the value they have at the time he enters into possession (Article 549, Id.).

The decision in the case of Mindanao Academy, Inc. vs. Yap (13 SCRA 190) cited by petitioner does not support its stand. On the contrary, this Court ruled in said case that "if the defendant constructed a new building, as he alleges, he cannot recover its value because the construction was done after the filing of the action for annulment, thus rendering him a builder in bad faith who is denied by law any right of reimbursement." What this Court allowed appellant Yap to remove were the equipment, books, furniture and fixtures brought in by him, because they were outside of the scope of the judgment and may be retained by him.

Neither may the decision in the case of Carbonell vs. Court of Appeals (69 SCRA 99), also cited by petitioner, be invoked to modify the clear provisions of the Civil Code of the Philippines that a possessor in bad faith is not entitled to reimbursement of useful expenses or to removal of useful improvements.

In said case, both the trial court and the Court of Appeals found that respondents Infantes were possessors in good faith. On appeal, the First Division of this Court reversed the decision of the Court of Appeals and declared petitioner Carbonell to have the superior right to the land in question. On the question of whether or not respondents Infantes were possessors in good faith four Members ruled that they were not, but as a matter of equity allowed them to remove the useful improvements they had introduced on the land. Justice Teehankee (now Chief Justice) concurred on the same premise as the dissenting opinion of Justice Munoz Palma that both the conflicting buyers of the real property in question, namely petitioner Carbonell as the first buyer and respondents Infantes as the second buyer, may be deemed purchasers in good faith at the respective dates of their purchase. Justice Munoz Palma dissented on the ground that since both purchasers were undoubtedly in good faith, respondents Infantes' prior registration of the sale in good faith entitled them to the ownership of the land. Inasmuch as only four Members concurred in ruling that respondents Infantes were possessors in bad faith and two Members ruled that they were possessors in good faith said decision does not establish a precedent. Moreover, the equitable consideration present in said case are not present in the case at bar.

WHEREFORE, the decision of the appellate court is affirmed with costs against petitioner.

SO ORDERED.

Fernan, Gutierrez, Jr., Paras and Cruz, JJ., concur.

Alampay, ** J., took no part.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 77266 July 19, 1989

ARTHUR PAJUNAR and INVENCIA PAJUNAR, petitioners, vs.HON. COURT OF APPEALS, MAURO ELUNA and TEOFILA ELUNA, respondents.

 

PARAS, J.:

This is a petition for review on certiorari seeking to set aside the decision of the Second Division of the Court of Appeals ** in C.A. G.R. No. SP. 02247 (UDK 7544), entitled "Arthur & Invencia Pajunar v. Hon. Pedro Gabaton, Judge, RTC, Branch XLI, Negros Oriental, Mauro Eluna and Teofila Eluna" for Recovery of Personal Property with Writ of Replevin which affirmed the Order of the aforenamed Regional Trial Court of Negros Oriental *** which reads:

This is a case of Recovery of Personal Property with a Writ of Replevin filed by one Arthur and Invencia Pajunar as plaintiffs, against one Mauro and Teofila Eluna as defendants, tried and decided by the Municipal Court of Siaton.

The decision is in favor of the defendants and against the plaintiffs apparently based primarily on the preponderance of evidence and prescription.

Upon close reading of the exhaustive memorandum submitted by each of the parties in this case and a close perusal of all the evidences on record and checking them against the decision itself appealed, this court is of the opinion and so holds that the grounds upon which this decision is based are well taken, so that there is nothing that this court can add neither can deduct for the same conforms to the thinking of this court.

WHEREFORE, premises considered, the appealed decision of the above-entitled case rendered by the Municipal Court of Siaton is hereby affirmed. (Rollo, p. 9)

The facts of the case as found by public respondent Court of Appeals are as follows:

Sometime in 1969, respondent Mauro Eluna bartered his three-year old male cow for one year old female carabao then in the possession of Aurelio Enopia. The female carabao, which is the one in question, bore the brand "ART" in her front and hind legs at the time she was acquired by Mauro. Although the animal was branded, said respondent did not or could not register the transfer to him.

In March, 1980, petitioner Arthur Pajunar learned that the disputed carabao was in the possession of respondent Eluna. Claiming that he was the original owner of the carabao which got lost in 1974, petitioner demanded her return. He demanded also the delivery to him of the two offsprings of the carabao which were five years and eight months old at the time they were registered in 1980. When Eluna refused to do so despite repeated demands, petitioner went to court to recover possession (Rollo, pp. 10-11).

From the adverse order of the Regional Trial Court, plaintiff appealed to public respondent Court of Appeals.

In its decision dated October 30, 1986, the Court of Appeals affirmed the decision of the lower court, with appellate tribunal declaring:

Consequently, since respondent Eluna had possessed the carabao since 1969, that is, for more than ten (10) years, he acquired ownership by prescription under Article 1132 of the Civil Code.

ART. 1132. The ownership of movables prescribes through uninterrupted possession for four years in good faith.

The ownership of personal property also prescribes through uninterrupted possession for eight years, without need of any other condition.

With regard to the right of the owner to recover personal property lost or of which he has been illegally deprived, as well as with respect to movables acquired in a public sale, fair or market, or from a merchant's store, the provisions of articles 559 and 1505 of this Code shall be observed. (1955a).

On March 23, 1987, the Court resolved, after considering the pleadings filed by both respondent and petitioner, to give due course to the petition.

The three assignments of error raised by the petitioner (Rollo, p. 4) in this case, may be reduced to one main issue:

Whether or not the findings of the lower court which were affirmed by the Court of Appeals are supported by substantial evidence.

Petitioner contends that private respondent Eluna has failed to establish his ownership of the mestisa carabao found in his possession. Since the female carabao bears the brand "ART" on the fore and hind legs of the animal as branded by

petitioners before it got lost (Rollo, p. 4), failure of defendant Mauro Eluna to register in his name the said carabao, constitutes a flaw in his ownership as required by law (Rollo, pp. 10-11).

Private respondents claim that the female carabao has been in their possession for more than ten (10) years as the subject carabao was acquired by the defendants now respondents through barter from one Aurelio Enopia in 1969. The incident was discovered by the plaintiffs only in March, 1980. Hence respondents acquired ownership of said carabao by prescription under Article 1132 of the Civil Code (Rollo, p. 12) as found by public respondent Court of Appeals.

The trial court's findings of facts carry great weight for having the advantage of having examined the deportment and demeanor of the witnesses. The only exception to the rule is when the trial court plainly overlooked certain facts and circumstances of weight and influence which, if considered, will materially alter the result of the case (People v. Ramos, 153 SCRA 276 [1987]; People v. Camay, 152 SCRA 401 [1987]).

A careful examination of the records shows that there are circumstances of substance and value which were overlooked and which affect the result of the case.

This can be gleaned from the decision of the Court of Appeals, when it stated:

In issuing the foregoing order, the respondent Judge apparently relied on the findings of fact and conclusions of law made by the Municipal Court of Siaton, Negros Oriental. Unfortunately, the decision of the Municipal Court was wanting in many respects particularly in its findings. It failed, for instance, to make a determination of certain factual matters which could have helped in the faster disposition of the case. Instead of general statements explaining why he was adopting the decision of the Municipal Court, it would have been better if the respondent Judge had made his own finding and analysis of the evidence on record. This was called for because the respondent Judge was acting in the exercise of the appellate jurisdiction of his court. (Emphasis supplied) (Rollo, p. 10)

Well-settled is the rule that findings of facts of the Appellate Court are generally binding on this Court (People v. Atanacio, 128 SCRA 22 [1984] Aguirre v. People, 155 SCRA 337 [1987]; Cue Bie v. Intermediate Appellate Court, 154 SCRA 599 [1987]). However, there are exceptions to the general rule that findings of facts of the Court of Appeals are binding upon the Supreme Court as when the Court of Appeals clearly misconstrued and misapplied the law, drawn from incorrect conclusions of fact established by evidence and otherwise at certain conclusions which are based on misapprehension of facts and pure conjectures, and made inferences which are manifestly mistaken and absurd (Chase v. Buencamino, Jr., 136 SCRA 365 [1985]; Baliwag Transit, Inc. v. CA, 147 SCRA 82 [1987]; International Harvester, Inc. v. Joson & CA, 149 SCRA 641 [1987]; Maclan v. Santos, 156 SCRA 542 [1987]; Mendoza v. CA, 156 SCRA 597 [1987]).

From the records it is clear that although the animal was branded "ART" in her front and hind legs at the time she was acquired by respondent Mauro, said respondent did not or could not register the transfer to him in accordance with Section 529 of the Revised Administrative Code (Rollo, p. 11).

Section 529 of the Revised Administrative Code provides:

Registration necessary to validity of transfer. No transfer shall be valid unless the same is registered and a certificate of transfer obtained as herein provided, but the large cattle under two years of age may be registered and branded gratis for the purpose of effecting a valid transfer, if the registration and transfer are made at the same time.

The records show that respondents did not comply with this requirement (Petition, p. 2; Rollo, p. 3). Respondents are not possessors in good faith, as a possessor in good faith is one not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Furthermore, failure of a party to exercise precaution to acquaint himself with the defects in the title of his vendor precludes him claiming possession in good faith (Caram v. Laureta, 103 SCRA [1981] cited in Manotok Realty, Inc. v. Court of Appeals, 134 SCRA 325 [1985]).

This duty to make a closer inquiry into the certificate of registration of the female carabao which was the subject of the barter, defendant Mauro Eluna should have performed but did not. Thus, his being in bad faith, in acquiring the carabao from his vendor, Aurelio Enopia.

Thus, as has been stressed by this Court:

A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of the eyes to the possibility of the existence of a defect in his vendor's title will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective and it appears that he had such notice of the defect would have led to its discovery had he acted with the measure of precaution which may reasonably be required of a prudent man in a like situation. (Leung Lee v. Strong, 37 Phil. 644, see also Emos v. Zusuarregui, 53 Phil. 197, cited in Francisco v. Court of Appeals, 153 SCRA 330).

It is clear from the foregoing that possession in good faith for four (4) years is not applicable, neither can possession in bad faith of eight (8) years benefit respondents, for when the owner of a movable has lost or has been illegally deprived of his property he can recover the same without need to reimburse the possessor, as provided in Art. 559 of the Civil Code which states:

Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. (464a)

Neither can Art. 716 of the Civil Code apply, for this article evidently refers to a possessor in good faith. Art. 716 say:

The owner of a swarm of bees shall have a right to pursue them to another's land, indemnifying the possessor of the latter for the damage. If the owner has not pursued the swarm, or ceases to do so within two consecutive days, the possessor of the land may occupy or retain the same. The owner of domesticated animals may also claim them within twenty days to be counted from their occupation by another person. This period having expired, they shall pertain to him who has caught and kept them. (612a)

PREMISES CONSIDERED, the decision of the Court of Appeals in CA-G.R. SP No. 02247 is REVERSED and SET ASIDE and petitioners Arthur Pajunar and Invencia Pajunar are declared the owners of the carabaos in question.

SO ORDERED.

Melencio-Herrera, (Chairperson), Padilla, Sarmiento and Regalado, JJ., concur.

 

Footnotes

** Penned by Justice Ricardo L. Pronove, Jr., concurred in by Justices Crisolito Pascual and Luis A. Javellana.

*** Rendered by Hon. Pedro Gabaton, Judge, RTC Branch XLI, Negros Oriental.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 80298 April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs.THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents.

Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

Cendana Santos, Delmundo & Cendana for private respondents.

 

CRUZ, J.:

The case before us calls for the interpretation of Article 559 of the Civil Code and raises the particular question of when a person may be deemed to have been "unlawfully deprived" of movable property in the hands of another. The article runs in full as follows:

Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the petitioner by an impostor who sold it to the private respondents. Ownership of the books was recognized in the private respondents by the Municipal Trial Court, 1 which was sustained by the Regional Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to declare that all these courts have erred and should be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by

telephone with the petitioner company for 406 books, payable on delivery. 4 EDCA prepared the corresponding invoice

and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. 5

On October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's

ownership from the invoice he showed her, paid him P1,700.00. 6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Further verification revealed that Cruz had no more account or deposit with the Philippine Amanah

Bank, against which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Peña and his sale of 120 of the books he had ordered from EDCA to the private

respondents. 8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN Avenue, which forced their way into the store of the private respondents and threatened Leonor Santos with prosecution for buying stolen property. They seized the 120 books without warrant, loading them in a van belonging to EDCA, and thereafter turned

them over to the petitioner. 9

Protesting this high-handed action, the private respondents sued for recovery of the books after demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally

surrendered the books to the private respondents. 10 As previously stated, the petitioner was successively rebuffed in the three courts below and now hopes to secure relief from us.

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking the law into its own hands and forcibly recovering the disputed books from the private respondents. The circumstance that it did so with the assistance of the police, which should have been the first to uphold legal and peaceful processes, has compounded the wrong even more deplorably. Questions like the one at bar are decided not by policemen but by judges and with the use not of brute force but of lawful writs.

Now to the merits

It is the contention of the petitioner that the private respondents have not established their ownership of the disputed books because they have not even produced a receipt to prove they had bought the stock. This is unacceptable.

Precisely, the first sentence of Article 559 provides that "the possession of movable property acquired in good faith is equivalent to a title," thus dispensing with further proof.

The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling them for a discount because he was in financial need. Private respondents are in the business of buying and selling books and often deal with hard-up sellers who urgently have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and selling books to buy them at a discount and resell them for a profit.

But the real issue here is whether the petitioner has been unlawfully deprived of the books because the check issued by the impostor in payment therefor was dishonored.

In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of personal property is entitled to its recovery except only where the property was purchased at a public sale, in which event its return is subject to reimbursement of the purchase price. The petitioner is begging the question. It is putting the cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been unlawfully deprived of the books.

The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According to the Civil Code:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts.

xxx xxx xxx

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price.

It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another.

In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive Asiatic the Court of Appeals declared:

Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things that "one who has been unlawfully deprived of personal property may recover it from any person possessing it." We do not believe that the plaintiff has been unlawfully deprived of the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted with them pursuant to a contract of purchase and sale. The circumstance that the price was not subsequently paid did not render illegal a transaction which was valid and legal at the beginning.

In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held:

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was induced to part with it by reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by which Warner L. Feist induced her to part with it is illegal and is punished by law. But does this "unlawful deprivation" come within the scope of Article 559 of the New Civil Code?

xxx xxx xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual restitution follows as a consequence (Article 1398,

N.C.C.).

However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist. Of course, the title that Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided and he therefore conferred a good title on the latter, provided he bought the car in good faith, for value and without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith.

The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to the case before us.

Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books.

One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the manner suggested by the petitioner. A person relying on the seller's title who buys a movable property from him would have to surrender it to another person claiming to be the original owner who had not yet been paid the purchase price therefor. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for on delivery. By contrast, EDCA was less than cautious — in fact, too trusting in dealing with the impostor. Although it had never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the buyer.

Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz was presumed under Article 559 by his mere possession of the books, these being movable property, Leonor Santos nevertheless demanded more proof before deciding to buy them.

It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz.

While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but against Tomas de la Peña, who has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain.

WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against the petitioner.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. L-30817 September 29, 1972

DOMINADOR DIZON, doing business under the firm name "Pawnshop of Dominador Dizon", petitioner, vs.LOURDES G. SUNTAY, respondent.

Andres T. Velarde for petitioner.

Rafael G. Suntay for respondent.

 

FERNANDO, J.:p

In essence there is nothing novel in this petition for review of a decision of the Court of Appeals affirming a lower court judgment sustaining the right of an owner of a diamond ring, respondent Lourdes G. Suntay, as against the claim of petitioner Dominador Dizon, who owns and operates a pawnshop. The diamond ring was turned over to a certain Clarita R. Sison, for sale on commission, along with other pieces of jewelry of respondent Suntay. It was then pledged to petitioner. Since what was done was violative of the terms of the agency, there was an attempt on her part to recover possession thereof from petitioner, who refused. She had to file an action then for its recovery. She was successful, as noted above, both in the lower court and thereafter in the Court of Appeals. She prevailed as she had in her favor the protection accorded by Article 559 of the Civil

Code. 1 The matter was then elevated to us by petitioner. Ordinarily, our discretion would have been exercised against giving due course to such petition for review. The vigorous plea however, grounded on estoppel, by his counsel, Atty. Andres T. Velarde, persuaded us to act otherwise. After a careful perusal of the respective contentions of the parties, we fail to perceive any sufficient justification for a departure from the literal language of the applicable codal provision as uniformly interpreted by this Court in a number of decisions. The invocation of estoppel is therefore unavailing. We affirm.

The statement of the case as well as the controlling facts may be found in the Court of Appeals decision penned by Justice Perez. Thus: "Plaintiff is the owner of a three-carat diamond ring valued at P5,500.00. On June 13, 1962, the plaintiff and Clarita R. Sison entered into a transaction wherein the plaintiff's ring was delivered to Clarita R. Sison for sale on commission. Upon receiving the ring, Clarita R. Sison executed and delivered to the plaintiff the receipt ... . The plaintiff had already previously known Clarita R. Sison as the latter is a close friend of the plaintiff's cousin and they had frequently met each other at the place of the plaintiff's said cousin. In fact, about one year before their transaction of June 13, 1962 took place, Clarita R. Sison received a piece of jewelry from the plaintiff to be sold for P500.00, and when it was sold, Clarita R. Sison gave the price to the plaintiff. After the lapse of a considerable time without Clarita R. Sison having returned to the plaintiff the latter's ring, the plaintiff made demands on Clarita R. Sison for the return of her ring but the latter could not comply with the demands because, without the knowledge of the plaintiff, on June 15, 1962 or three days after the ring above-mentioned was received by Clarita R. Sison from the plaintiff, said ring was pledged by Melia Sison, niece of the husband of Clarita R. Sison, evidently in connivance with the latter, with the defendant's pawnshop for

P2,600.00 ... ." 2 Then came this portion of the decision under review: "Since the plaintiff insistently demanded from Clarita R. Sison the return of her ring, the latter finally delivered to the former the pawnshop ticket ... which is the receipt of the pledge with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out that Clarita R. Sison pledged, she took steps to file a case of estafa against the latter with the fiscal's office. Subsequently thereafter, the plaintiff, through her lawyer, wrote a letter ... dated September 22, 1962, to the defendant asking for the delivery to the plaintiff of her ring pledged with defendant's pawnshop under pawnshop receipt serial-B No. 65606, dated June 15, 1962 ... . Since the defendant refused to return the ring, the plaintiff filed the present action with the Court of First Instance of Manila for the recovery of said ring, with P500.00 as attorney's fees and costs. The plaintiff asked for the provisional remedy of replevin by the delivery of the ring to her, upon her filing the requisite bond, pending the final determination of the action. The lower court issued the writ of replevin prayed for by plaintiff and the latter was able to take possession of the ring

during the pendency of the action upon her filing the requisite bond." 3 It was then noted that the lower court rendered judgment declaring that plaintiff, now respondent Suntay, had the right to the possession of the ring in question. Petitioner Dizon, as defendant, sought to have the judgment reversed by the Court of Appeals. It did him no good. The decision of May 19, 1969, now on review, affirmed the decision of the lower court.

In the light of the facts as thus found by the Court of Appeals, well-nigh conclusive on use, with the applicable law being what it is, this petition for review cannot prosper. To repeat, the decision of the Court of Appeals stands.

1. There is a fairly recent restatement of the force and effect of the governing codal norm in De Gracia v. Court of Appeals. 4 Thus: "The controlling provision is Article 559 of the Civil Code. It reads thus: 'The possession of movable property

acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.' Respondent Angelina D. Guevara, having been unlawfully deprived of the diamond ring in question, was entitled to recover it from petitioner Consuelo S. de Garcia who was found in possession of the same. The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the owner cannot obtain its return without reimbursing the price. As authoritatively interpreted in Cruz v. Pahati, the right of the owner cannot be defeated even by proof that there was good faith in the acquisition by the possessor. There is a reiteration of this principle in Aznar v. Yapdiangco. Thus: 'Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that were one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article

559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction." " 5

2. It must have been a recognition of the compulsion exerted by the above authoritative precedents that must have caused petitioner to invoke the principle of estoppel. There is clearly a misapprehension. Such a contention is devoid of any persuasive force.

Estoppel as known to the Rules of Court 6 and prior to that to the Court of Civil Procedure, 7 has its roots in equity. Good

faith is its basis. 8 It is a response to the demands of moral right and natural justice. 9 For estoppel to exist though, it is indispensable that there be a declaration, act or omission by the party who is sought to be bound. Nor is this all. It is equally a requisite that he, who would claim the benefits of such a principle, must have altered his position, having been so intentionally and deliberately led to comport himself thus, by what was declared or what was done or failed to be done. If thereafter a litigation arises, the former would not be allowed to disown such act, declaration or omission. The principle comes into full play. It may successfully be relied upon. A court is to see to it then that there is no turning back on one's word or a repudiation of one's act. So it has been from our earliest decisions. As Justice Mapa pointed out in the first case,

a 1905 decision, Rodriguez v. Martinez, 10 a party should not be permitted "to go against his own acts to the prejudice of

[another]. Such a holding would be contrary to the most rudimentary principles of justice and law." 11 He is not, in the

language of Justice Torres, in Irlanda v. Pitargue, 12 promulgated in 1912, "allowed to gainsay [his] own acts or deny

rights which [he had] previously recognized." 13 Some of the later cases are to the effect that an unqualified and

unconditional acceptance of an agreement forecloses a claim for interest not therein provided. 14 Equally so the circumstance that about a month after the date of the conveyance, one of the parties informed the other of his being a minor, according to Chief Justice Paras, "is of no moment, because [the former's] previous misrepresentation had already

estopped him from disavowing the contract. 15 It is easily understandable why, under the circumstances disclosed, estoppel is a frail reed to hang on to. There was clearly the absence of an act or omission, as a result of which a position had been assumed by petitioner, who if such elements were not lacking, could not thereafter in law be prejudiced by his

belief in what had been misrepresented to him. 16 As was put by Justice Labrador, "a person claimed to be estopped must have knowledge of the fact that his voluntary acts would deprive him of some rights because said voluntary acts are

inconsistent with said rights." 17 To recapitulate, there is this pronouncement not so long ago, from the pen of Justice Makalintal, who reaffirmed that estoppel "has its origin in equity and, being based on moral right and natural justice, finds

applicability wherever and whenever the special circumstances of a case so demand." 18

How then can petitioner in all seriousness assert that his appeal finds support in the doctrine of estoppel? Neither the promptings of equity nor the mandates of moral right and natural justice come to his rescue. He is engaged in a business where presumably ordinary prudence would manifest itself to ascertain whether or not an individual who is offering a jewelry by way of a pledge is entitled to do so. If no such care be taken, perhaps because of the difficulty of resisting opportunity for profit, he should be the last to complain if thereafter the right of the true owner of such jewelry should be recognized. The law for this sound reason accords the latter protection. So it has always been since Varela v.

Finnick, 19 a 1907 decision. According to Justice Torres: "In the present case not only has the ownership and the origin of the jewels misappropriated been unquestionably proven but also that the accused, acting fraudulently and in bad faith, disposed of them and pledged them contrary to agreement, with no right of ownership, and to the prejudice of the injured party, who was thereby illegally deprived of said jewels; therefore, in accordance with the provisions of article 464, the

owner has an absolute right to recover the jewels from the possession of whosoever holds them, ... ." 20 There have been

many other decisions to the same effect since then. At least nine may be cited. 21 Nor could any other outcome be

expected, considering the civil code provisions both in the former Spanish legislation 22 and in the present Code. 23

Petitioner ought to have been on his guard before accepting the pledge in question. Evidently there was no such precaution availed of. He therefore, has only himself to blame for the fix he is now in. It would be to stretch the concept of estoppel to the breaking point if his contention were to prevail. Moreover, there should have been a realization on his part that courts are not likely to be impressed with a cry of distress emanating from one who is in a business authorized to impose a higher rate of interest precisely due to the greater risk assumed by him. A predicament of this nature then does not suffice to call for less than undeviating adherence to the literal terms of a codal provision. Moreover, while the activity he is engaged in is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of the necessities precisely of that element of our population whose lives are blighted by extreme poverty. From whatever angle the question is viewed then, estoppel certainly cannot be justly invoked.

WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is affirmed, with costs against petitioner.

Concepcion, C.J., Zaldivar, Makasiar, Antonio and Esguerra, JJ., concur.

Makalintal and Barredo, JJ., took no part.

Castro, J., reserves his vote.

 

 

 

Separate Opinions

 

TEEHANKEE, J., concurring:

I concur in the main opinion of Mr. Justice Fernando, tracing and confirming the long settled and uniform jurisprudence since 1905 based on the express statutory provision of article 559 of our Civil Code (formerly article 464 of the old Civil Code) that the owner "who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same," the only exception expressly provided in the codal article being that "if the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner

cannot obtain its return without reimbursing the price paid therefor." 1

Senator Tolentino's submittal in his commentaries on the Civil Code "that the better view is to consider 'unlawfully deprived' as limited to unlawful taking, such as theft or robbery, and should not include disposition through abuse of confidence. Thus, if the owner has entrusted personal property to a bailee, such as for transportation, pledge, loan or deposit, without transmitting ownership, and the latter alienates it to a third person who acquires it in good faith, the owner cannot recover it from such third person, "is, as he himself admits, based on the express provision of the French Code which allows the true owner of personal property to recover it from the possessor in good faith without reimbursement only "if it has been stolen from him." He concedes likewise that "our Code, following the Spanish code, uses broader language than that used in the French code" — since our Code provides that the owner who has been "unlawfully deprived" of personal property may recover it from the possessor without reimbursement, with the sole exception where the possessor

acquired the article in good faith at a public sale. 2

He thus concedes finally that "(T)here are writers who believe that the phrase 'unlawfully deprived' in our Code does not have the same meaning as stolen in the French code; that it is used in the general sense, and is not used in the specific sense of deprivation by robbery or theft. Under this view, it extends to all cases where there has been no valid transmission of ownership, including the case where the proprietor has entrusted the thing to a borrower, depositary, or lessee who has sold the same. It is believed that the owner in such case is undoubtedly unlawfully deprived of his property, and may recover the same from a possessor in good faith" (citing De Buen: 2-II Colin & Capitant 1008; 1 Bonet

234) 3 and cites the long unbroken line of decisions of the Court of Appeals and of this Court upholding the import of the broader language of the codal article in question.

Indeed, if our legislature had intended to narrow the scope of the term "unlawfully deprived" to "stolen" as advocated by Tolentino, it certainly would have adopted and used such a narrower term rather than the broad language of article 464 of the old Spanish Civil Code with its long-established and accepted meaning in accordance with our jurisprudence.

Petitioner's contentions at bar had long been disposed of in the Court's 1911 decision of Arenas vs. Raymundo, 4 per Mr. Justice Florentino Torres, reiterating the doctrine of the earlier cases and holding that

Even supposing that the defendant Raymundo had acted in good faith in accepting the pledge of the jewelry in litigation, even then he would not be entitled to retain it until the owner thereof reimburse him for the amount loaned to the embezzler, since the said owner of the jewelry, the plaintiff, did not make any contract with the pledgee, that would obligate him to pay the amount loaned to Perello, and the trial record does not disclose any evidence, even circumstantial, that the plaintiff Arenas consented to or had knowledge of the pledging of her jewelry in the pawnshop of the defendant.

For this reason, and because Concepcion Perello was not the legitimate owner of the jewelry which she pledged to the defendant Raymundo, for a certain sum that she received from the latter as a loan, the contract of pledge entered into by both, is of course, null and void, and, consequently the jewelry so pawned can not serve as security for the payment of the sum loaned, nor can the latter be collected out of the value of the said jewelry.

Article 1857 of the Civil Code prescribes as one of the essential requisites of the contracts of pledge and of mortgage, that the thing pledged or mortgaged must belong to the person who pledges or mortgages it. This essential requisite for the contract of pledge between Perello and the defendant being absent as the former was not the owner of the jewelry given in pledge, the contract is as devoid of value and force as if it had not been made, and as it was executed with marked violation of an express provision of the law, it can not confer upon the defendant any rights in the pledged jewelry, nor impose any obligation toward him on the part of the owner thereof, since the latter was deprived of her possession by means of the illegal pledging of the said jewelry, a criminal act.

Between the supposed good faith of the defendant Raymundo and the undisputed good faith of the plaintiff Arenas, the owner of the jewelry, neither law nor justice permit that the latter, after being the victim of embezzlement, should have to choose one of the two extremes of a dilemma, both of which, without legal ground or reason, are injurious and prejudicial to her interests and rights, that is, she must either lose her jewelry or pay a large sum received by the embezzler as a loan from the defendant, when the plaintiff Arenas is not related to the latter by any legal or contractual bond out of which legal obligations arise.

xxx xxx xxx

The business of pawnshops, in exchange for the high and onerous interest which constitutes its enormous

profits, is always exposed to the contingency of receiving in pledge or security for the loans, jewels and other articles that have been robbed, stolen, or embezzled from their legitimate owners; and as the owner of the pawnshop accepts the pledging of jewelry from the first bearer who offers the same and asks for money on it, without assuring himself whether such bearer is or is not the owner thereof, he can not, by such procedure, expect from the law better and more preferential protection than the owner of the jewels or other articles, who was deprived thereof by means of a crime and is entitled to be excused by the courts.

Antonio Matute, the owner of another pawnshop, being convinced that he was wrong, refrained from appealing from the judgment wherein he was sentenced to return, without redemption, to the plaintiffs, another jewel of great value which had been pledged to him by the same Perello. He undoubtedly had in mind some of the previous decisions of this court, one of which was against himself.

By the same token, the contention that the owner may recover the lost article of which he has been unlawfully deprived without reimbursement of the sum received by the embezzler from the pawnshop only after a criminal conviction of the embezzler, is to add a requirement that is not in the codal article and to unduly prejudice the victim of embezzlement, as pointed out by the Court in Arenas, supra.

The civil action that the owner must resort to for the recovery of his personal property of which he has been unlawfully deprived as against the possessor (where the latter refuses to honor the claim, presumably on same valid doubts as to the genuineness of the claim) gives the possessor every adequate protection and opportunity to contest the owner's claim of recovery. The owner must therein establish by competent evidence his lawful claim, and show to the court's satisfaction his lawful ownership of the article claimed and that he had been unlawfully deprived thereof.

I therefore find no reason to set aside the long settled interpretation given by our jurisprudence to article 559 (formerly article 464) of our Civil Code in accordance with its clear and unambiguous language, as reaffirmed in the case at bar.

 

 

Separate Opinions

TEEHANKEE, J., concurring:

I concur in the main opinion of Mr. Justice Fernando, tracing and confirming the long settled and uniform jurisprudence since 1905 based on the express statutory provision of article 559 of our Civil Code (formerly article 464 of the old Civil Code) that the owner "who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same," the only exception expressly provided in the codal article being that "if the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner

cannot obtain its return without reimbursing the price paid therefor." 1

Senator Tolentino's submittal in his commentaries on the Civil Code "that the better view is to consider 'unlawfully deprived' as limited to unlawful taking, such as theft or robbery, and should not include disposition through abuse of confidence. Thus, if the owner has entrusted personal property to a bailee, such as for transportation, pledge, loan or deposit, without transmitting ownership, and the latter alienates it to a third person who acquires it in good faith, the owner cannot recover it from such third person, "is, as he himself admits, based on the express provision of the French Code which allows the true owner of personal property to recover it from the possessor in good faith without reimbursement only "if it has been stolen from him." He concedes likewise that "our Code, following the Spanish code, uses broader language than that used in the French code" — since our Code provides that the owner who has been "unlawfully deprived" of personal property may recover it from the possessor without reimbursement, with the sole exception where the possessor

acquired the article in good faith at a public sale. 2

He thus concedes finally that "(T)here are writers who believe that the phrase 'unlawfully deprived' in our Code does not have the same meaning as stolen in the French code; that it is used in the general sense, and is not used in the specific sense of deprivation by robbery or theft. Under this view, it extends to all cases where there has been no valid transmission of ownership, including the case where the proprietor has entrusted the thing to a borrower, depositary, or lessee who has sold the same. It is believed that the owner in such case is undoubtedly unlawfully deprived of his property, and may recover the same from a possessor in good faith" (citing De Buen: 2-II Colin & Capitant 1008; 1 Bonet

234) 3 and cites the long unbroken line of decisions of the Court of Appeals and of this Court upholding the import of the broader language of the codal article in question.

Indeed, if our legislature had intended to narrow the scope of the term "unlawfully deprived" to "stolen" as advocated by Tolentino, it certainly would have adopted and used such a narrower term rather than the broad language of article 464 of the old Spanish Civil Code with its long-established and accepted meaning in accordance with our jurisprudence.

Petitioner's contentions at bar had long been disposed of in the Court's 1911 decision of Arenas vs. Raymundo, 4 per Mr. Justice Florentino Torres, reiterating the doctrine of the earlier cases and holding that

Even supposing that the defendant Raymundo had acted in good faith in accepting the pledge of the jewelry in litigation, even then he would not be entitled to retain it until the owner thereof reimburse him for the amount loaned to the embezzler, since the said owner of the jewelry, the plaintiff, did not make any contract with the pledgee, that would obligate him to pay the amount loaned to Perello, and the trial record does not disclose any evidence, even circumstantial, that the plaintiff Arenas consented to or had knowledge of the pledging of her jewelry in the pawnshop of the defendant.

For this reason, and because Concepcion Perello was not the legitimate owner of the jewelry which she pledged to the defendant Raymundo, for a certain sum that she received from the latter as a loan, the contract of pledge entered into by both, is of course, null and void, and, consequently the jewelry so pawned can not serve as security for the payment of the sum loaned, nor can the latter be collected out of

the value of the said jewelry.

Article 1857 of the Civil Code prescribes as one of the essential requisites of the contracts of pledge and of mortgage, that the thing pledged or mortgaged must belong to the person who pledges or mortgages it. This essential requisite for the contract of pledge between Perello and the defendant being absent as the former was not the owner of the jewelry given in pledge, the contract is as devoid of value and force as if it had not been made, and as it was executed with marked violation of an express provision of the law, it can not confer upon the defendant any rights in the pledged jewelry, nor impose any obligation toward him on the part of the owner thereof, since the latter was deprived of her possession by means of the illegal pledging of the said jewelry, a criminal act.

Between the supposed good faith of the defendant Raymundo and the undisputed good faith of the plaintiff Arenas, the owner of the jewelry, neither law nor justice permit that the latter, after being the victim of embezzlement, should have to choose one of the two extremes of a dilemma, both of which, without legal ground or reason, are injurious and prejudicial to her interests and rights, that is, she must either lose her jewelry or pay a large sum received by the embezzler as a loan from the defendant, when the plaintiff Arenas is not related to the latter by any legal or contractual bond out of which legal obligations arise.

xxx xxx xxx

The business of pawnshops, in exchange for the high and onerous interest which constitutes its enormous profits, is always exposed to the contingency of receiving in pledge or security for the loans, jewels and other articles that have been robbed, stolen, or embezzled from their legitimate owners; and as the owner of the pawnshop accepts the pledging of jewelry from the first bearer who offers the same and asks for money on it, without assuring himself whether such bearer is or is not the owner thereof, he can not, by such procedure, expect from the law better and more preferential protection than the owner of the jewels or other articles, who was deprived thereof by means of a crime and is entitled to be excused by the courts.

Antonio Matute, the owner of another pawnshop, being convinced that he was wrong, refrained from appealing from the judgment wherein he was sentenced to return, without redemption, to the plaintiffs, another jewel of great value which had been pledged to him by the same Perello. He undoubtedly had in mind some of the previous decisions of this court, one of which was against himself.

By the same token, the contention that the owner may recover the lost article of which he has been unlawfully deprived without reimbursement of the sum received by the embezzler from the pawnshop only after a criminal conviction of the embezzler, is to add a requirement that is not in the codal article and to unduly prejudice the victim of embezzlement, as pointed out by the Court in Arenas, supra.

The civil action that the owner must resort to for the recovery of his personal property of which he has been unlawfully deprived as against the possessor (where the latter refuses to honor the claim, presumably on same valid doubts as to the genuineness of the claim) gives the possessor every adequate protection and opportunity to contest the owner's claim of recovery. The owner must therein establish by competent evidence his lawful claim, and show to the court's satisfaction his lawful ownership of the article claimed and that he had been unlawfully deprived thereof.

I therefore find no reason to set aside the long settled interpretation given by our jurisprudence to article 559 (formerly article 464) of our Civil Code in accordance with its clear and unambiguous language, as reaffirmed in the case at bar.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

 

G.R. No. L-20264 January 30, 1971

CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners, vs.HON. COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B. GUEVARA, respondents.

Deogracias T. Reyes and Jose M. Luison for petitioners.

Tolentino and Garcia and D.R. Cruz for private respondents.

 

FERNANDO, J.:

This petition for certiorari to review a decision of respondent Court of Appeals was given due course because it was therein vigorously asserted that legal questions of gravity and of moment, there being allegations of an unwarranted departure from and a patent misreading of applicable and controlling decisions, called for determination by this Tribunal. The brief for petitioners-spouses, however, failed to substantiate such imputed failings of respondent Court. The performance did not live up to the promise. On the basis of the facts as duly found by respondent Court, which we are not at liberty to disregard, and the governing legal provisions, there is no basis for reversal. We affirm.

The nature of the case presented before the lower court by private respondent Angelina D. Guevara, assisted by her spouse, Juan B. Guevara, as plaintiffs, was noted in the decision of respondent Court of Appeals thus: "Plaintiff seeks recovery of `one (1) lady's diamond ring 18 cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4)

brills 0.10 cts. total weight' which she bought on October 27, 1947 from R. Rebullida, Inc."1 Then came a summary of now respondent Guevara of her evidence: "Plaintiff's evidence tends to show that around October 11, 1953 plaintiff while talking to Consuelo S. de Garcia, owner of La Bulakeña restaurant recognized her ring in the finger of Mrs. Garcia and inquired where she bought it, which the defendant answered from her comadre. Plaintiff explained that that ring was stolen from her house in February, 1952. Defendant handed the ring to plaintiff and it fitted her finger. Two or three days later, at the request of plaintiff, plaintiff, her husband Lt. Col. Juan Guevara, Lt. Cementina of Pasay PD, defendant and her attorney proceeded to the store of Mr. Rebullida to whom they showed the ring in question. Mr. Rebullida a examined the ring with the aid of high power lens and after consulting the stock card thereon, concluded that it was the very ring that plaintiff bought from him in 1947. The ring was returned to defendant who despite a written request therefor failed to deliver the ring to plaintiff. Hence, this case. Later on when the sheriff tried to serve the writ of seizure (replevin),

defendant refused to deliver the ring which had been examined by Mr. Rebullida, claiming it was lost."2

How the defendant, Consuelo S. de Garcia, the present petitioner before us, along with her husband Anastacio Garcia, sought to meet plaintiff's claim was narrated thus: "On the other hand, defendant denied having made any admission before plaintiff or Mr. Rebullida or the sheriff. Her evidence tends to show that the ring (Exhibit 1) was purchased by her from Mrs. Miranda who got it from Miss Angelita Hinahon who in turn got it from the owner, Aling Petring, who was boarding in her house; that the ring she bought could be similar to, but not the same ring plaintiff purchased from Mr. Rebullida which was stolen; that according to a pawn-shop owner the big diamond on Exhibit 1 was before the trial never

dismantled. When dismantled, defendant's diamond was found to weigh 2.57 cts."3

Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with the judgment of the lower court being reversed. It is this decision now under review.

These are the facts as found by respondent Court of Appeals: "That the ring brought by the parties for examination by Rafael Rebullida on December 14, 1953 was the same ring purchased by plaintiff from R. Rebullida, Inc. on October 27, 1947 and stolen in February, 1952 has been abundantly established by plaintiff's evidence. Before plaintiff lost the ring, she had been wearing it for six years and became familiar with it. Thus, when she saw the missing ring in the finger of defendant, she readily and definitely identified it. Her identification was confirmed by Mr. Rafael Rebullida, whose candid testimony is entitled to great weight, with his 30 years experience behind him in the jewelry business and being a disinterested witness since both parties are his customers. Indeed, defendant made no comment when in her presence Rebullida after examining the ring and stock card told plaintiff that that was her ring, nor did she answer plaintiff's letter of demand, ... asserting ownership. Further confirmation may be found in the extra-judicial admissions, contained in

defendant's original and first amended answers ..."4

These further facts likewise appeal therein: "The foregoing proof is not counter-balanced by the denial on the part of defendant or the presentation of the ring, Exhibit I, which has a diamond-solitaire 2.57 cts., or much heavier than the lost

diamond weighing 2.05 cts. only. It is noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from whom the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss Hinahon did not even know her true and full name, nor her forwarding address. She appeared from nowhere, boarded three months in the house of Miss Hinahon long enough to sell her diamond ring, disappearing from the scene a week thereafter. Indeed, the case was terminated without any hearing on the third-party and fourth-party complaints, which would have shown up the falsity of defendant's theory. Moreover, Mrs. Baldomera Miranda, third-party defendant, who tried to corroborate defendant on the latter's alleged attempt to exchange the ring defendant bought through her, is [belied] by her judicial admission in her Answer that appellee `suggested that she would make alterations to the mounting and structural design of the ring to hide the true identity and appearance of the original one' (Cunanan vs. Amparo, 45 O.G. 3796). Finally, defendant is refuted by her own extra-judicial admissions ... although made by defendant's counsel. For an attorney who acts as counsel of record and is permitted to act such, has the authority to manage the cause, and this includes the authority to make admission for the purpose of the litigation... Her proffered explanation that her counsel misunderstood her is puerile because the liability to error as to the identity of the vendor and the exchange of the ring with another ring of the same

value, was rather remote."5

It is in the light of the above facts as well as the finding that the discrepancy as to the weight between the diamond-solitaire in Exhibit I and the lost diamond was due to defendant having "substituted a diamond-solitaire of plaintiff with a heavier stone" that the decision was rendered, respondent Court reversing the lower court and ordering defendant, now petitioner Consuelo S. de Garcia, to return plaintiff's ring or fact value of P1,000.00 and costs, as well as to pay plaintiff P1,000.00 as attorney's fee and P1,000.00 as exemplary damages. Hence this appeal.

To repeat, there is no occasion to reverse respondent Court. It correctly applied the law to the facts as found.

1. The controlling provision is Article 559 of the Civil Code. It reads thus: "The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it from the person in possession of the same. If the possessor of a movable lost of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor." Respondent Angelina D. Guevara, having been unlawfully deprived of the diamond ring in question, was entitled to recover it from petitioner Consuelo S. de Garcia who was found in possession of the same. The only exception the law allows is when there is acquisition in good faith of the possessor at a public sale, in which case the

owner cannot obtain its return without reimbursing the price. As authoritative interpreted in Cruz v. Pahati, 6 the right of the owner cannot be defeated even by proof that there was good faith by the acquisition by the possessor. There is a

reiteration of this principle in Aznar v. Yapdiangco.7 Thus: "Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by the another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a

common law principle and statutory provision, the latter must prevail in this jurisdiction."8

2. It is thus immediately apparent that there is no merit to the contention raised in the first assigned error that her possession in good faith, equivalent to title, sufficed to defeat respondent Guevara's claim. As the above cases demonstrate, even on that assumption the owner can recover the same once she can show illegal deprivation. Respondent Court of Appeals was so convinced from the evidence submitted that the owner of the ring in litigation is such respondent. That is a factual determination to which we must pay heed. Instead of proving any alleged departure from legal norms by respondent Court, petitioner would stress Article 541 of the Civil Code, which provides: 'A possessor in the concept of owner has in his favor the legal presumption that he possesses with a just title and he cannot be obliged to show or prove it." She would accord to it a greater legal significance than that to which under the controlling doctrines it is entitled.lâwphî1.ñèt The brief for respondents did clearly point out why petitioner's assertion is lacking in support not only from the cases but even from commentators. Thus: "Actually, even under the first clause, possession in good faith does not really amount to title, for the reason that Art. 1132 of the Code provides for a period of acquisitive prescription for movables through `uninterrupted possession for four years in good faith' (Art. 1955 of the old Spanish Code, which provided a period of three years), so that many Spanish writers, including Manresa, Sanchez Roman, Scaevola, De Buen, and Ramos, assert that under Art. 464 of the Spanish Code (Art. 559 of the New Civil Code), the title of the possessor is not that of ownership, but is merely a presumptive title sufficient to serve as a basis of acquisitive prescription (II Tolentino, Civil Code of the Phil. p. 258: IV Manresa, Derecho Civil Español, 6th Ed., p. 380). And it is for the very reason that the title established by the first clause of Art. 559 is only a presumptive title sufficient to serve as a basis for acquisitive prescription, that the clause immediately following provides that `one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.' As stated by the Honorable Justice Jose B. L. Reyes of this Court in Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec. 1947: `Article 559 in fact assumes that possessor is as yet not the owner; for it is obvious that where the possessor has come to acquire indefeasible title by, let us say, adverse possession for the necessary period, no proof of loss or illegal deprivation could avail the former owner of

the chattel. He would no longer be entitled to recover it under any condition.' "9

The second assigned error is centered on the alleged failure to prove the identity of the diamond ring. Clearly the question raised is one of the fact. What the Court of Appeals found is conclusive. Again, petitioner could not demonstrate that in reaching such a conclusion the Court of Appeals acted in an arbitrary manner. As made mention of in the brief for respondents two disinterested witnesses, Mr. Rafael Rebullida as well as Lt. Col. Reynaldo Cementina of the Pasay City Police Department, both of whom could not be accused of being biased in favor of respondent Angelina D. Guevara, did testify as to the identity of the ring.

The third assigned error of petitioners would find fault with respondent Court relying "on the weakness of the title or evidence" of petitioner Consuelo S. de Garcia. It is true, in the decision under review, mention was made of petitioner Consuelo S. de Garcia making no comment when in her presence Rebullida, after examining the ring the stock card, told respondent Angelina L. Guevara that that was her ring, nor did petitioner answer a letter of the latter asserting ownership. It was likewise stated in such decision that there were extra-judicial admissions in the original and first amended answers of petitioner. In the appraisal of her testimony, respondent Court likewise spoke of her giving a rather dubious source of

her ring, the person from whom she allegedly bought it turning out "to be a mysterious and ephemeral figure." As a matter of fact, as set forth a few pages back, respondent Court did enumerate the flaws in the version given by petitioner. From the weakness of the testimony offered which, as thus made clear, petitioner, did not even seek to refute, she would raise the legal question that respondent Court relied on the "weakness of [her] title or evidence" rather than on the proof justifying respondent Angelina D. Guevara's claim of ownership. Petitioner here would ignore the finding of fact of respondent Court that such ownership on her part "has been abundantly established" by her evidence. Again here, in essence, the question raised is one of fact, and there is no justification for us to reverse respondent Court.

The legal question raised in the fourth assignment of error is that the matter of the substitution of the diamond on the ring was a question raised for the first time on appeal as it was never put in issue by the pleadings nor the subject of reception of evidence by both parties and not touched upon in the decision of the lower court. Why no such question could be raised in the pleadings of respondent Angelina D. Guevara was clarified by the fact that the substitution came after it was brought for examination to Mr. Rebullida. After the knowledge of such substitution was gained, however, the issue was raised at the trial according to the said respondent resulting in that portion of the decision where the lower court reached a negative conclusion. As a result, in the motion for reconsideration, one of the points raised as to such decision being contrary to the evidence is the finding that there was no substitution. It is not necessary to state that respondent Court, exercising its appellate power reversed the lower court. What was held by it is controlling. What is clear is that there is no factual basis for the legal arguments on which the fourth assigned error is predicated.

What is said takes care of the fifth assigned error that respondent Court was mistaken in its finding that there was such a substitution. Again petitioner would have us pass on a question of credibility which is left to respondent Court of Appeals. The sixth assigned error would complain against the reversal of the lower court judgment as well as petitioner Consuelo S. de Garcia being made to pay respondent Angelina D. Guevara exemplary damages, attorney's fees and costs. The reversal is called for in the light of the appraisal of the evidence of record as meticulously weighed by respondent Court. As to the attorney's fees and exemplary damages, this is what respondent Court said in the decision under review: "Likewise, plaintiff is entitled to recover reasonable attorney's fees in the sum of P1,000, it being just and equitable under the circumstances, and another P1,000 as exemplary damages for the public good to discourage litigants from resorting to fraudulent devices to frustrate the ends of justice, as defendant herein tried to substitute the ring, Exhibit 1, for plaintiff's

ring." 10 Considering the circumstances, the cursory discussion of the sixth assigned error on the matter by petitioner fails to demonstrate that respondent Court's actuation is blemished by legal defects.

WHEREFORE, the decision of respondent Court of Appeals of August 6, 1962 is hereby affirmed. With costs.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Barredo, Villamor and Makasiar JJ., concur.

Reyes, J.B.L., J., concurs in the result, Art. 85 of the Code of Commerce not being applicable.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-18536             March 31, 1965

JOSE B. AZNAR, plaintiff-appellant, vs.RAFAEL YAPDIANGCO, defendant-appellee; TEODORO SANTOS, intervenor-appellee.

Florentino M. Guanlao for plaintiff-appellant.Rafael Yapdiangco in his own behalf as defendant-appellee.Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.

REGALA, J.:

This is an appeal, on purely legal questions, from a decision of the Court of First Instance of Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the possession of the car in dispute.

The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28, 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to answer the ad. However, Teodoro Santos was out during this call and only the latter's son, Irineo Santos, received and talked with De Dios. The latter told the young Santos that he had come in behalf of his uncle, Vicente Marella, who was interested to buy the advertised car.

On being informed of the above, Teodoro Santos instructed his son to see the said Vicente Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting, Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name.

Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City where the registration of the car in Marella's name was effected. Up to this stage of the transaction, the purchased price had not been paid.

From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former demanded the payment from Vicente Marella. Marella said that the amount he had on hand then was short by some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to the said sister and suggested that Irineo Santos go with him. At the same time, he requested the registration papers and the deed of sale from Irineo Santos on the pretext that he would like to show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded to the alleged house of Marella's sister.

At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of him. For, after a considerable length of time waiting in vain for De Dios to return, Irineo went down to discover that neither the car nor their unidentified companion was there anymore. Going back to the house, he inquired from a woman he saw for L. De Dios and he was told that no such name lived or was even known therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see Marella. He found the house closed and Marella gone. Finally, he reported the matter to his father who promptly advised the police authorities.

That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the above incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar acquired the said car from Vicente Marella in good faith, for a valuable consideration and without notice of the defect appertaining to the vendor's title.

While the car in question was thus in the possession of Jose B. Aznar and while he was attending to its registration in his name, agents of the Philippine Constabulary seized and confiscated the same in consequence of the report to them by Teodoro Santos that the said car was unlawfully taken from him.

In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized the car in question Claiming ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos moved and was allowed to intervene by the lower court.

At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle to the intervenor-appellee,

Teodoro Santos. In brief, it ruled that Teodoro Santos had been unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiff-appellant traced his right. Consequently, although the plaintiff-appellant acquired the car in good faith and for a valuable consideration from Vicente Marella, the said decision concluded, still the intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the New Civil Code which provides:

ART. 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

From this decision, Jose B. Aznar appeals.

The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant, Jose B. Aznar, who has a better right to the possession of the disputed automobile?

We find for the intervenor-appellee, Teodoro Santos.

The plaintiff-appellant accepts that the car in question originally belonged to and was owned by the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the same by Vicente Marella. However, the appellant contends that upon the facts of this case, the applicable provision of the Civil Code is Article 1506 and not Article 559 as was held by the decision under review. Article 1506 provides:

ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title.

The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should have a voidable title at least. It is very clearly inapplicable where, as in this case, the seller had no title at all.

Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the car to him.

Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).

For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.)

So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the method of acquiring it being different in our law. (Gonzales v. Roxas, 16 Phil. 51)

In the case on hand, the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession of the subject matter thereof by stealing the same while it was in the custody of the latter's son.

There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the car to the unidentified person who went with him and L. De Dios to the place on Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified companion only so that he may drive Irineo Santos and De Dios to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of delivering the thing. (10 Manresa 132)

The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber. The said article establishes two exceptions to the general rule of irrevindicability, to wit, when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.)

In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled that —

Under Article 559 of the new Civil Code, a person illegally deprived of any movable may recover it from the person in possession of the same and the only defense the latter may have is if he has acquired it in good faith at a public sale, in which case, the owner cannot obtain its return without reimbursing the price paid therefor. In the present case, plaintiff has been illegally deprived of his car through the ingenious scheme of defendant B to enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover possession of the car even if it is in the possession of a third party who had acquired it in good faith from defendant B. The maxim that

"no man can transfer to another a better title than he had himself" obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28 Phil. 147)

Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella, he, the intervenor-appellee, should be made to suffer the consequences arising therefrom, following the equitable principle to that effect. Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz v. Pahati, supra)

UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the lower court affirmed in full. Costs against the appellant.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.