Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

VICENTE STO. DOMINGO BERNARDO, plaintiff-appellant,

vs.
CATALINO BATACLAN, defendant-appellant.
TORIBIO TEODORO, purchaser-appellee.

Pedro de Leon for plaintiff-appellant.

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

LAUREL, J.:

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

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

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

Por las consideraciones expuestas, se declara al demandante Vicente Santo

Domingo Bernardo dueño con derecho a la posesion del terreno que se
describe en la demanda, y al demandado Catalino Bataclan con derecho a
que del demandante le pague la suma de P1,642 por gastos utiles hechos de
buena fe en el terreno, y por el cerco y ponos de coco y abaca existentes en
el mismo, y con derecho, ademas a retener la posesion del terreno hasta que
se le pague dicha cantidad. Al demandante puede optar, en el plazo de treinta
1
 dias, a partir de la fecha en que fuere notificado de la presente, por pagar esa
suma al demandado, haciendo asi suyos el cerco y todas las plantaciones
existentes en el terreno, u obligar al demandado a pagarle el precio terreno, a
razon de trescientos pesos la hectarea. En el caso de que el demandante
optara por que el demandado le pagara el precio del terreno, el demandado
efectuara el pago en el plazo convenientes por las partes o que sera fijado por
el Juzgado. Sin costas.

Both parties appealed to this court (G. R. No. 37319). 2 The decision appealed from
was modified by allowing the defendant to recover compensation amounting to
P2,212 and by reducing the price at which the plaintiff could require the defendant to
purchase the land in question from P300 to P200 per hectare. Plaintiff was given by
this court 30 days from the date when the decision became final within which to
exercise his option, either to sell the land to the defendant or to buy the
improvements from him. On January 9, 1934, the plaintiff manifested to the lower
court his desire "to require the defendant to pay him the value of the land at the rate
of P200 per hectare or a total price of P18,000 for the whole tract of land." The
defendant informed the lower court that he was unable to pay the land and, on
January 24, 1934, an order was issued giving the plaintiff 30 days within which to
pay the defendant the sum of P2,212 stating that, in the event of failure to make
such payment, the land would be ordered sold at public auction "Para hacer pago al
demandante de la suma de P2,212 y el remanente despues de deducidos los
gastos legales de la venta en publica subasta sera entregado al demandante." On
February 21, 1934, plaintiff moved to reconsider the foregoing order so that he
would have preference over the defendant in the order of payment. The motion was
denied on March 1, 1934 but on March 16 following the court below, motu
proprio modified its order of January 24, "en el sentido de que el demandante tiene
derecho preferente al importe del terreno no se vendiere en publica subasta, a
razon de P200 por hectares y el remanente, si acaso lo hubiere se entregara al
demandado en pago de la cantidad de P2,212 por la limpieza del terreno y las
mejoras introducidas en el mismo por el citado demandado." On April 24, 1934, the
court below, at the instance of the plaintiff and without objection on the part of the
defendant, ordered the sale of the land in question at public auction. The land was
sold on April 5, 1935 to Toribio Teodoro, the highest bidder, for P8,000. In the
certificate of sale issued to said purchaser on the very day of sale, it was stated that
the period of redemption of the land sold was to expire on April 5, 1936. Upon
petition of Toribio Teodoro the court below ordered the provincial sheriff to issue
another certificate not qualified by any equity of redemption. This was complied with
by the sheriff on July 30, 1935. On September 18, 1935, Teodoro moved that he be
placed in possession of the land purchased by him. The motion was granted by
order of September 26, 1935, the dispositive part of which is as follows:

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

en posesion del terreno comprado por el en subasta publica y por el cual se le
expidio certificado de venta definitiva, reservando al demandado su derecho
de ejercitar una accion ordinaria para reclamar del demandante la cantidad de
2
 P2,212 a que tiene derecho por la limpieza y mejoras del terreno y cuya
suma, en justicia y equidad, debe ser descontada y deducida de la suma de
P8,000 que ya ha recibido el demandante.

The Civil Code confirms certain time-honored principles of the law of property. One
of these is the principle of accession whereby the owner of property acquires not
only that which it produces but that which is united to it either naturally or artificially.
(Art. 353.) Whatever is built, planted or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the land (art. 358).
Where, however, the planter, builder, or sower has acted in good faith, a conflict of
rights arises between the owners and it becomes necessary to protect the owner of
the improvements without causing injustice to the owner of the land. In view of the
impracticability of creating what Manresa calls a state of "forced coownership" (vol.
3, 4th ed., p. 213), the law has provided a just and equitable solution by giving the
owner of the land the option to acquire the improvements after payment of the
proper indemnity or to oblige the builder or planter to pay for the land and the sower
to pay the proper rent (art. 361). It is the owner of the land who is allowed to
exercise the option because his right is older and because, by the principle of
accession, he is entitled to the ownership of the accessory thing (3 Manresa, 4th
ed., p. 213). In the case before us, the plaintiff, as owner of the land, chose to
require the defendant, as owner of the improvements, to pay for the land.

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

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

The judgment of the lower court is accordingly modified by eliminating therefrom the
reservation made in favor of the defendant-appellant to recover from the plaintiff the

3
sum of P2,212. In all the respects, the same is affirmed, without pronouncement
regarding costs. So ordered.

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-2500 March 8, 1906

MARIA DE LA CONCEPCION MARTINEZ CAÑAS, plaintiff-appellee,

vs.
MARIANO TUASON, ET AL., defendants-appellants.

Palma, Gerona and Mercado for appellants.

Carlos Casademunt for appellees.

WILLARD, J.:

Maria de la Concepcion Martinez Cañas filed a petition in the Court of Land

Registration asking that she be registered as the owner of the hacienda of Payatas,
situated in the Province of Rizal. Mariano Tuason and others, the owners of the
hacienda of Mariquina, appeared in the Court of Land Registration, and objected to
the inscription asked for on the ground that they were the owners of a part of the
land included in the petition. The objection of Tuason and others was overruled, and
judgment was entered in favor of the petitioner as prayed for in her petition. Tuason
and others excepted to the judgment and moved for a new trial on the ground that
decision was not justified by the evidence. This motion was denied, to which denial
they excepted, and they have brought the case here by bill of exceptions.

The San Mateo river separates the hacienda of Payatas from the hacienda of
Mariquina, and the controversy relates to a tract of land about 30 hectares in extent,
which appellants claim formerly belonged to the hacienda of Mariquina, but which,
by the action of the river, had been carried to the hacienda of Payatas. In 1894 or
1895 the appellants took possession of the land in question, which was then on the
west, or Payatas side of the river. For the purpose of settling the conflicting claims of
the parties to this tract of land, they on the 19th day of June, 1896, made a contract
by the terms of which they agreed that each one of the respective parties should
appoint a civil engineer as expert; that the two engineers after an examination of the
land and of such evidence as might be presented to them, should make a report in
which they should set forth the causes which had occasioned the changes in the
course of the San Mateo River and also the principles of law which were applicable
4
to the case. It was provided, further, that this report should be submitted to a
member of the bar in Manila, who, as judge, should decide to whom the lands which
had been gained by the respective owners by reason of the alterations in the course
of the river, belonged. Each one of the parties, in accordance with this agreement,
appointed a civil engineer. They met, examined the ground, heard the evidence of
witnesses, and not agreeing as to the manner in which the changes in the course of
the river had been effected, filed separate reports. The expert appointed by the
owner of the hacienda of Payatas was of the opinion that the change had been
gradual, and that the land in question belonged to the owner of that estate. The
expert appointed by the owners of the hacienda of Mariquina thought that the
change in the course of the river had been sudden or abrupt, and that the land in
question belonged to the owners of the Mariquina estate. This report, together with
the testimony of the witnesses presented before the engineers, was submitted to the
arbitrator in 1897, but by reason of the disturbed condition of the country at that time
he never made any report thereon. In this case the parties agreed in the Court of
Land Registration that the case should be decided with reference to the facts agreed
upon, and documents which were submitted to the arbitrator, and that the same
effect should be given to the reports of the experts and to the testimony of the
witnesses who appeared before the experts, as if they had testified in the Court of
Land Registration. It was also admitted that since the time when the owners of the
hacienda of Mariquina had taken possession of the property in question the extent
thereof had been increasing, and that the river had eaten away and was still eating
away the opposite bank, belonging to the hacienda of Mariquina. The parties agree
that the law applicable to the case is that which now appears in articles 366, 368,
and 374 of the Civil Code. These articles are as follows:

ART. 366. The accretions which banks of rivers may gradually receive from
the effects of the currents belong to the owners of the estates bordering
thereon.

ART. 368. When the current of a river, creek, or torrent detaches from an
estate fronting thereon a known portion of land and transfers it to another
estate, the owner of the estate to which the detached part belonged retains the
ownership thereof.

ART. 374. When the current of a river divides itself into branches, leaving an
estate or part thereof isolated the owner of the same retains his ownership. He
also retains it if a portion of the land is separated from the estate by the
current.

If article 366 is applicable the judgment should be affirmed. If article 368 or 374 is
applicable, the judgment should be reversed.

The area of the land claimed by Mariquina, which is now on the Payatas side of the
river, is about 30 hectares. At what time this tract of land was on the other side of
the river, does not clearly appear. The first map of the hacienda, made in 1746, and
the one made in 1845, have been lost. There is no evidence to show when the land
5
was carried over to the Payatas side; there is no evidence that it was done at any
particular time; there is no evidence of any sudden change in the course of the river
by which it left its former bed and made a new one, nor is there any indication on the
ground of any abandoned bed. The only evidence in the case to show that this tract
of land of 30 hectares had been separated by the current and transported to the
other side of the river is the testimony of some of the witnesses examined before the
engineers in 1896. The witnesses for Mariquina then testified that they remembered
that about thirty years before the river had run upon the west side of the tract of land
in question. The witnesses for Payatas, with one exception, all testified to the
contrary.

As to the manner in which the land had been separated from the Mariquina estate,
one witness for that estate testified that the river ate away the bank piece by piece,
some of the pieces being of the size of 2 or 3 balitas. Three balitas are about equal
to 1 hectare. Two other witnesses testified that the river changed its course 4 yards
every year; another witness testified that he did not remember how the change took
place; three other witnesses testified that the river took away every year large
pieces from the Mariquina shore, of 4 or 6 yards in width; another witness limited the
size of the pieces to 2 or 4 yards. The only witness who testified to a sudden change
of the bed of the river was Pedro Trinidad, but he could not point out the former bed.
Two other witnesses testified that the river took away the east bank to the width of
10 yards, and in pieces of the superficial area of a balita, but made no islands;
another witness limited the size of the pieces to 6 yards. No one of these witnesses
declared how frequently during the year these pieces were separated. No witness
declared that any of the pieces so separated had been carried to the other side of
the river. This fact alone shows that the testimony of the witnesses is not sufficient
to bring the case under article 368. Although a piece of land of the size of a hectare
may have been separated from Mariquina, yet if it were destroyed by the river and
were not carried to Payatas, article 368 would not apply. We are inclined to think
that what the witnesses observed was, as testified by one or two of them, that the
bank was eaten away every year to a certain extent by the river — that is, that the
river, to use the word employed by the counsel for the appellants in their brief,
destroyed the bank of the river. From the evidence in the case it is impossible to say
that the current of this river has separated from the Mariquina estate a known parcel
of land and has transported it to the Payatas side. The mere fact that thirty years
ago the land now in question was on the Mariquina side of the river is not sufficient
to prove that article 368 is applicable.

It is to be observed that the engineer appointed by the Mariquina estate placed no

reliance upon the testimony of these witnesses. He based his opinion upon what he
called a scientific demonstration of the fact that the change of the river must have
been sudden and not gradual, and this is the basis of the first three items of proof
mentioned in the brief of the appellant in this case.

In this same case in the court below the pueblo of San Mateo objected to the
inscription of the land, claiming that four parcels of land which are now upon the San

6
Mateo side of the river, and which were claimed by the petitioner, belonged, not to
the petitioner, but to San Mateo. The court below decided this claim of favor of the
petitioner, basing it upon the ground that the evidence upon that part of the case
showed that the land had been transferred from the Payatas side of the river to the
San Mateo side by a sudden change in 1888. The appellant in this case insists that
the decision of the court below is inconsistent, in that it holds that in the case of San
Mateo the change of the river was sudden, while in the case of the hacienda of
Mariquina it was gradual. When the proofs in each case are examined, however, no
such inconsistency is apparent. The evidence in the case of San Mateo, presented
by San Mateo itself, showed that the river in 1888 changed its course, and that the
old bed of the river was still visible. No such evidence was presented in this part of
the case.

The judgment of the court below, so far as it relates to the opposition of Tuason et
al. is affirmed, with the costs of this instance against the appellants. After the
expiration of twenty days judgement shall be entered in accordance herewith and
the case remanded to the lower court for execution. So ordered.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 95907 April 8, 1992

JOSE REYNANTE, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, THE HON. VALENTIN CRUZ, as
Presiding Judge, Regional Trial Court of Bulacan, Branch VIII, and the HEIRS
OF LEONCIO CARLOS and DOLORES A. CARLOS, and HEIRS OF GORGONIO
CARLOS and CONCEPCION CARLOS, respondents.

PARAS, J.:

This is a petition for review on certiorari which seeks the reversal of: a) decision 1 of
the Court of Appeals dated February 28, 1990 in CA-G.R. No. 1917 entitled "JOSE
REYNANTE versus HON. VALENTIN CRUZ, Judge, RTC of Malolos, Bulacan, and
HEIRS OF LEONCIO AND DOLORES CARLOS, et al.", affirming the decision 2 of
the Regional Trial Court
of Malolos, Bulacan, Branch 8, Third Judicial Region which reversed the
decision 3 of the Municipal Trial Court of Meycauayan, Bulacan, Branch 1, Third
Judicial Region in Civil Case No. 1526 entitled "HEIRS OF LEONCIO CARLOS &
7
DOLORES A. CARLOS and HEIRS OF GORGONIO A. CARLOS & CONCEPCION
CARLOS versus JOSE REYNANTE: and b) the resolution denying the motion for
reconsideration.

The facts as culled from the records of the case are as follows:

More than 50 years ago, petitioner Jose Reynante was taken as tenant by the late
Don Cosme Carlos, owner and father-in-law of herein private respondents, over a
fishpond located at Barrio Liputan, Meycauayan, Bulacan with an area of 188.711
square meters, more or less and covered by Transfer Certificate of Title No. 25618,
Land Registry of Bulacan.

During the tenancy, petitioner Jose Reynante constructed a nipa hut where he and
his family lived and took care of the nipa palms (sasahan) he had planted on lots 1
and 2 covering an area of 5,096 square meters and 6,011 square meters
respectively. These lots are located between the fishpond covered by TCT No.
25618 and the Liputan (formerly Meycauayan) River. Petitioner harvested and sold
said nipa palms without interference and prohibition from anybody. Neither did the
late Don Cosme Carlos question his right to plant the nipa palms near the fishpond
or to harvest and appropriate them as his own.

After the death of Don Cosme Carlos, his heirs (private respondents' predecessors-
in-interest) entered into a written agreement denominated as "SINUMPAANG
SALAYSAY NG PAGSASAULI NG KARAPATAN" dated November 29, 1984 with
petitioner Jose Reynante whereby the latter for and in consideration of the sum of
P200,000.00 turned over the fishpond he was tenanting to the heirs of Don Cosme
Carlos and surrendered all his rights therein as caretaker or "bantay-kasama at
tagapamahala" (Rollo, p. 77).

Pursuant to the said written agreement, petitioner surrendered the fishpond and the
two huts located therein to private respondents. Private respondents thereafter
leased the said fishpond to one Carlos de la Cruz. Petitioner continued to live in the
nipa hut constructed by him on lots 1 and 2 and to take care of the nipa palms he
had planted therein.

On February 17, 1988, private respondents formally demanded that the petitioner
vacate said portion since according to them petitioner had already been indemnified
for the surrender of his rights as a tenant. Despite receipt thereof, petitioner refused
and failed to relinquish possession of lots 1 and 2.

Hence, on April 22, 1988, private respondents filed a complaint for forcible entry with
preliminary mandatory injunction against petitioner alleging that the latter by means
of strategy and stealth, took over the physical, actual and material possession of lots
1 and 2 by residing in one of the kubos or huts bordering the Liputan River and
cutting off and/or disposing of the sasa or nipa palms adjacent thereto.

8
On January 10, 1989, the trial court rendered its decision dismissing the complaint
and finding that petitioner had been in prior possession of lots 1
and 2.

Private respondents appealed to the Regional Trial Court and on August 8, 1989 it
rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, this Court renders judgment in favor of the plaintiffs and

against defendant and hereby reverses the decision of the Court a quo.
Accordingly, the defendant is ordered to restore possession of that piece
of land particularly described and defined as Lots 1 & 2 of the land
survey conducted by Geodetic Engineer Restituto Buan on March 2,
1983, together with the sasa or nipa palms planted thereon. No
pronouncement as to attorney's fees. Each party shall bear their
respective costs of the suit.

SO ORDERED. (Rollo, p. 55; Decision, p. 4).

From said decision, petitioner filed with the Court of Appeals a petition for review
(Rollo, p. 30; Annex "A"). On February 28, 1990, the Court of Appeals rendered its
decision, the dispositive portion of which reads as follows:

WHEREFORE, the decision of the court a quo, being consistent with law
and jurisprudence, is hereby AFFIRMED in toto. The instant petition
seeking to issue a restraining order is hereby denied.

SO ORDERED. (Rollo, p. 30; Decision, p. 3).

On November 5, 1990, the Court of Appeals denied the motion for reconsideration
filed by petitioner (Rollo, p. 35; Annex "B").

Hence, this petition.

In its resolution dated May 6, 1991, the Second Division of this court gave due
course to the petition and required both parties to file their respective memoranda
(Rollo, p. 93).

The main issues to be resolved in this case are: a) who between the petitioner and
private respondents has prior physical possession of lots 1 and 2; and b) whether or
not the disputed lots belong to private respondents as a result of accretion.

An action for forcible entry is merely a quieting process and actual title to the
property is never determined. A party who can prove prior possession can recover
such possession even against the owner himself. Whatever may be the character of
his prior possession, if he has in his favor priority in time, he has the security that
entitles him to remain on the property until he is lawfully ejected by a person having
a better right by accion publiciana oraccion reivindicatoria (German Management &
Services, Inc. v. Court of Appeals, G.R. No. 76216, September 14, 1989, 177 SCRA
9
495, 498, 499). On the other hand, if a plaintiff cannot prove prior physical
possession, he has no right of action for forcible entry and detainer even if he should
be the owner of the property (Lizo v. Carandang, 73 Phil. 469 [1942]).

Hence, the Court of Appeals could not legally restore private respondents'
possession over lots 1 and 2 simply because petitioner has clearly proven that he
had prior possession over lots 1 and 2.

The evidence on record shows that petitioner was in possession of the questioned
lots for more than 50 years. It is undisputed that he was the caretaker of the
fishpond owned by the late Don Cosme Carlos for more than 50 years and that he
constructed a nipa hut adjacent to the fishpond and planted nipa palms therein. This
fact is bolstered by the "SINUMPAANG SALAYSAY" executed by Epifanio Lucero
(Records, p. 66), Apolonio D. Morte (Records, p. 101) and Carling Dumalay
(Records, p. 103), all of whom are disinterested parties with no motive to falsify that
can be attributed to them, except their desire to tell the truth.

Moreover, an ocular inspection was conducted by the trial court dated December 2,
1988 which was attended by the parties and their respective counsels and the court
observed the following:

The Court viewed the location and the distance of the constructed nipa
hut and the subject "sasahan" which appears exists (sic) long ago,
planted and stands (sic) adjacent to the fishpond and the dikes which
serves (sic) as passage way of water river of lot 1 and lot 2. During the
course of the hearing, both counsel observed muniment of title
embedded on the ground which is located at the inner side of the "pilapil"
separating the fishpond from the subject "sasa" plant with a height of 20
to 25 feet from water level and during the ocular inspection it was
judicially observed that the controversial premises is beyond the titled
property of the plaintiffs but situated along the Liputan, Meycauayan
River it being a part of the public domain. (Rollo, p. 51; Decision, p. 12).

On the other hand, private respondents based their claim of possession over lots 1
and 2 simply on the written agreement signed by petitioner whereby the latter
surrendered his rights over the fishpond.

Evidently, the trial court did not err when it ruled that:

An examination of the document signed by the defendant (Exhibit "B"),

shows that what was surrendered to the plaintiffs was the fishpond and
not the "sasahan" or the land on which he constructed his hut where he
now lives. That is a completely different agreement in which a tenant
would return a farm or a fishpond to his landlord in return for the amount
that the landlord would pay to him as a disturbance compensation.
There is nothing that indicates that the tenant was giving other matters
not mentioned in a document like Exhibit "B". Moreover, when the
10
 plaintiffs leased the fishpond to Mr. Carlos de La Cruz there was no
mention that the lease included the hut constructed by the defendant
and the nipa palms planted by him (Exhibit "1"), a circumstance that
gives the impression that the nipa hut and the nipa palms were not
included in the lease to Mr. de la Cruz, which may not belong to the
plaintiffs. (Rollo, p. 49; Decision, p. 9).

With regard to the second issue, it must be noted that the disputed lots involved in
this case are not included in Transfer Certificate of Title No. 25618 as per
verification made by the Forest Management Bureau, Department of Environment
and Natural Resources. That tract of land situated at Barrio Liputan, Meycauayan,
Bulacan containing an area of 1.1107 hectares as described in the plan prepared
and surveyed by Geodetic Engineer Restituto Buan for Jose Reynante falls within
Alienable and Disposable Land (for fishpond development) under Project No. 15 per
B.F.L.C. Map No. 3122 dated May 8, 1987 (Rollo, p. 31; Decision, p. 2).

The respondent Court of Appeals ruled that lots 1 and 2 were created by alluvial
formation and hence the property of private respondents pursuant to Article 457 of
the New Civil Code, to wit:

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

Accretion benefits a riparian owner when the following requisites are present: (1)
that the deposit be gradual and imperceptible; (2) that it resulted from the effects of
the current of the water; and (c) that the land where accretion takes place is
adjacent to the bank of a river (Republic v. Court of Appeals, G.R. No. L-61647,
October 12, 1984, 132 SCRA 514, cited in Agustin v. Intermediate Appellate Court,
G.R. Nos. 66075-76, July 5, 1990, 187 SCRA 218).

Granting without conceding that lots 1 and 2 were created by alluvial formation and
while it is true that accretions which the banks of rivers may gradually receive from
the effect of the current become the property of the owner of the banks, such
accretion to registered land does not preclude acquisition of the additional area by
another person through prescription.

This Court ruled in the case of Ignacio Grande, et al. v. Hon. Court of Appeals, et al.,
G.R. No. L-17652, June 30, 1962, 115 Phil. 521 that:

An accretion does not automatically become registered land just

because the lot which receives such accretion is covered by a Torrens
Title. Ownership of a piece of land is one thing; registration under the
Torrens system of that ownership is another. Ownership over the
accretion received by the land adjoining a river is governed by the Civil
Code. Imprescriptibility of registered land is provided in the registration
law. Registration under the Land Registration and Cadastral Act does
11
 not vest or give title to the land, but merely confirms and, thereafter,
protects the title already possessed by the owner, making it
imprescriptible by occupation of third parties. But to obtain this
protection, the land must be placed under the operation of the
registration laws, wherein certain judicial procedures have
beenprovided.

Assuming private respondents had acquired the alluvial deposit (the lot in question),
by accretion, still their failure to register said accretion for a period of fifty (50) years
subjected said accretion to acquisition through prescription by third persons.

It is undisputed that petitioner has been in possession of the subject lots for more
than fifty (50) years and unless private respondents can show a better title over the
subject lots, petitioner's possession over the property must be respected.

PREMISES CONSIDERED, the decision of the respondent Court of Appeals dated

February 28, 1990 is REVERSED and SET ASIDE and the decision of the Municipal
Trial Court of Meycauayan, Bulacan, Branch I, is hereby REINSTATED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

VICENTE M. COLEONGCO, petitioner,

vs.
PEDRO F. REGALADO and LEONOR MONTILLA, respondents.

Jose Ur. Carbonell for petitioner.

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

JUGO, J.:

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

DECISION

FELIX, J.:
12
Antecedents. — Prior to September of 1944, Pedro F. Regalado was the
owner of lot No. 1205-A of plan Psd. 12393, G.L.R.O. cadastral record No. 55,
situated at barrio Mandalagan, Municipality of Bacolod, Province of Negros
Occidental, of which lot No. 157 of the subdivision plan Psd. 12395 was a
portion. In this lot there was erected a building which in September of 1944,
was being occupied by the forces of the Japanese Army. In that month of
September Pedro F. Regalado sold lot No. 157 to Vicente M. Coleongco who
thus became the owner of the lot, covered by transfer certificate of title No.
663 of the Land Records of Negros Occidental. The total area of the lot was
1,000 square meters, and the land occupied by the house was 245 square
meters. Until the year of 1947, the assessed value of the whole lot and the
house was P1,156 and P4,500, respectively.

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

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

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

13
2. To order the defendants to remove or clear the house from the plaintiff's
premises;

3. To pay the costs of the suit; and

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

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

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

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

plaintiff;lawphil.net

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

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

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

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

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

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

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

"Defendants are ordered to vacate the building from the portion of the lot on
which it is erected within the period of two months from the date this decision

14
becomes final, and to that end they are ordered to remove the building from
the said portion of the lot within the aforementioned period.

"The costs are taxed against the defendants."

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

1. In declaring the appellant Leonor Montilla in default;

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

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

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

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

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

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

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

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

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

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

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

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

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

"8. That the portion of the same occupied by the building existing thereon is of
an area of 245 square meters;
15
"9. That in the month of September of 1947, defendant Pedro F. Regalado
sold said building to his co-defendant Leonor Montilla for the sum of P3,500, of
which amount the vendee paid the vendor, at the time of the execution of the
deed of sale, the sum of P2,000, binding herself to pay the balance of P1,500
on or before October 31, 1947. Defendants Pedro F. Regalado and Leonor
Montilla have executed a contract supplementary to the previous deed of sale,
by virtue of which said Leonor Montilla acknowledged the existence of the
present case and assumed the obligation of paying whatever rents and of
complying with whatever obligations the court would impose on the defendant
Pedro F. Regalado."

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

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

With regard to defendant Leonor Montilla's alleged default, and despite the
considerations made by the lower court in its order of February 11, 1948, we
are of the opinion that the answer with the counterclaim filed by Attorney
Ibrado on November 3, 1947, should have been considered as submitted for
both defendants: firstly, because the attorney that filed that answer specifically
so stated; and, secondly, because the grammatical errors in the use of the
verbs in connection with the word "defendants", as for example in the
expression of "defendants alleges", should not be charged against any of them

16
who did not prepare that pleading and, under the circumstances, should not be
deprived of any right on account of the careless preparation thereof.
Notwithstanding this opinion, we hold that the ruling of the lower court on this
point is of no sequence, because both defendants had common interests and
the defenses, and the rights of appellant Leonor Montilla have been properly
attended to by her co-appellant Pedro F. Regalado.

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

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

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

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

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

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

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

"In view of this legal provisions, we have to declare that the right of the owner
of a lot to have the same vacated or cleared from any construction or
improvement belonging to another which built it in good faith, is to be
17
subordinated to and without prejudice of whatever rights the owner and builder
in good faith of the improvement may have. We, therefore, cannot now act
favorably on plaintiff's complaint for ejectment disregarding defendants' rights
either to pay for the acquisition of lot No. 157 or of being paid the value of the
building erected thereon, at the option of the plaintiff.

"As regards the amount of monthly rents that appellants were condemned to
pay the plaintiff, the following considerations must be taken into account, to
wit: (a) that although the portion of lot 157 actually occupied by the building is
of an area of 245 square meters, for the purpose of fixing the rent in this case
the assessed value of the whole lot should be had in mind, as there is no
evidence that the occupied portion of said lot had been devoted to any use
other than as site of the house in question; (b) that the amount of the rent that
defendants should have been sentenced to pay for the period of from
September, 1945, to the end of 1946 should have been fixed in accordance
with its former assessed value of P1,312.50; (c) that from January of 1947, the
assessed value of P5,625 should be the one determining the proper amount of
the rents; (d) that section 3 of Commonwealth Act No. 689 promulgated
October 15, 1945, prescribes that "in the case of the lease for the occupation
of the lot, the rents shall be presumed unjust and unreasonable if the amount
thereof per annum likewise exceeds twenty per centum of the annual
assessment value of said lot"; (e) that although Executive Order No. 62,
issued on June 21, 1947, reduced the annual rent demandable to an amount
not exceeding twelve per centum of the assessed value, said Executive Order
was declared null and void for having been issued without authority of law
(Araneta vs. Dinglasan, * 45 Off. Gaz., No. 10, p. 4411); (f) that on the
strength of the provisions of law quoted, the amount of the rent that ought to
have been fixed as monthlyrent in this case is P21.875 from September, 1944,
up to December, 1946, and P93.75 from January of 1947, up to the time of
actual removal of the building form the lot, or to the time when the parties
would come to an agreement as per article 361 of the old Civil Code; (g) that
the aggregate sum of such rents being greater than the amount fixed by the
lower court, and even greater than the amount that plaintiff prayed for in the
complaint, and as plaintiff has not appealed from the amount fixed in this
decision of the lower court, we are not in a position to increase or modify the
amount of the rents the defendants have been sentenced to pay to the
plaintiff.

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

condemns the defendants to pay to the plaintiff as monthly rents the sum of
P14.06 from September, 1945, with legal interest thereon from the date of the
filing of the complaint (July 21, 1947), from the total of which the sum of
P187.50 should be deducted. The decision is reversed as to the rest and this
case is returned to the lower court, with instructions to give the plaintiff an
opportunity to exercise his right of option granted to him by article 361 of the
old Civil Code, without pronouncement as to cost. It is so ordered.
18
 ALFONSO FELIX
Associate Justice

We concur:

M. L. DE LA ROSA EMILIO PEÑA

Associate Justice Associate Justice

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

Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to Coleongco.
Article 361 applies only in the cases where a person constructs a building on the
land of another in good or in bad faith, as the case may be. It does not apply to a
case where a person constructs a building on his own land, for then there can be no
question as to good or bad faith on the part of the builder.

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-175 April 30, 1946

DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners,

vs.

19
 ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD, Judge
of First Instance of Pangasinan, respondents.

Leoncio R. Esliza for petitioners.

Mauricio M. Monta for respondents.

MORAN, C.J.:

This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres
as plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed
Ignacio, as defendants, concerning the ownership of a parcel of land, partly rice-land
and partly residential. After the trial of the case, the lower court, presided over by
Hon. Alfonso Felix, rendered judgment holding plaintiffs as the legal owners of the
whole property but conceding to defendants the ownership of the houses and
granaries built by them on the residential portion with the rights of a possessor in
good faith, in accordance with article 361 of the Civil Code. The dispositive part of
the decision, hub of this controversy, follows:

Wherefore, judgment is hereby rendered declaring:

(1) That the plaintiffs are the owners of the whole property described in
transfer certificate of title No. 12872 (Exhibit A) issued in their name, and
entitled to the possession of the same;

(2) That the defendants are entitled to hold the position of the residential lot
until after they are paid the actual market value of their houses and granaries
erected thereon, unless the plaintiffs prefer to sell them said residential lot, in
which case defendants shall pay the plaintiffs the proportionate value of said
residential lot taking as a basis the price paid for the whole land according to
Exhibit B; and

(3) That upon defendant's failure to purchase the residential lot in question,
said defendants shall remove their houses and granaries after this decision
becomes final and within the period of sixty (60) days from the date that the
court is informed in writing of the attitude of the parties in this respect.

No pronouncement is made as to damages and costs.

Once this decision becomes final, the plaintiffs and defendants may appear
again before this court for the purpose of determining their respective rights
under article 361 of the Civil Code, if they cannot come to an extra-judicial
settlement with regard to said rights.

Subsequently, in a motion filed in the same Court of First Instance but now presided
over by the herein respondent Judge Hon. Felipe Natividad, the plaintiffs prayed for
an order of execution alleging that since they chose neither to pay defendants for

20
the buildings nor to sell to them the residential lot, said defendants should be
ordered to remove the structure at their own expense and to restore plaintiffs in the
possession of said lot. Defendants objected to this motion which, after hearing, was
granted by Judge Natividad. Hence, this petition by defendants praying for (a) a
restraint and annulment of the order of execution issued by Judge Natividad; (b) an
order to compel plaintiffs to pay them the sum of P2,000 for the buildings, or sell to
them the residential lot for P45; or (c), a rehearing of the case for a determination of
the rights of the parties upon failure of extra-judicial settlement.

The judgment rendered by Judge Felix is founded on articles 361 and 453 of the
Civil Code which are as follows:

ART. 361. The owner of land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the work,
sowing or planting, after the payment of the indemnity stated in articles 453
and 454, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent.

ART. 453. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until such expenses are made
good to him.

Useful expenses shall be refunded to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or paying the
increase in value which the thing may have acquired in consequence thereof.

The owner of the building erected in good faith on a land owned by another, is
entitled to retain the possession of the land until he is paid the value of his building,
under article 453. The owner of the land, upon the other hand, has the option, under
article 361, either to pay for the building or to sell his land to the owner of the
building. But he cannot, as respondents here did, refuse both to pay for the building
and to sell the land and compel the owner of the building to remove it from the land
where it is erected. He is entitled to such remotion only when, after having chosen to
sell his land, the other party fails to pay for the same. But this is not the case before
us.

We hold, therefore, that the order of Judge Natividad compelling defendants-

petitioners to remove their buildings from the land belonging to plaintiffs-
respondents only because the latter chose neither to pay for such buildings not to
sell the land, is null and void, for it amends substantially the judgment sought to be
executed and is, furthermore, offensive to articles 361 and 453 of the Civil Code.

There is, however, in the decision of Judge Felix a question of procedure which calls
for the clarification, to avoid uncertainty and delay in the disposition of cases. In that
decision, the rights of both parties are well defined under articles 361 and 453 of the
Civil Code, but it fails to determine the value of the buildings and of the lot where
21
they are erected as well as the periods of time within which the option may be
exercised and payment should be made, these particulars having been left for
determination apparently after the judgment has become final. This procedure is
erroneous, for after the judgment has become final, no additions can be made
thereto and nothing can be done therewith except its execution. And execution
cannot be had, the sheriff being ignorant as to how, for how much, and within what
time may the option be exercised, and certainly no authority is vested in him to settle
these matters which involve exercise of judicial discretion. Thus the judgment
rendered by Judge Felix has never become final, it having left matters to be settled
for its completion in a subsequent proceeding, matters which remained unsettled up
to the time the petition is filed in the instant case.

For all the foregoing, the writ of execution issued by Judge Natividad is hereby set
aside and the lower court ordered to hold a hearing in the principal case wherein it
must determine the prices of the buildings and of the residential lot where they are
erected, as well as the period of time within which the plaintiffs-respondents may
exercise their option either to pay for the buildings or to sell their land, and, in the
last instance, the period of time within which the defendants-petitioners may pay for
the land, all these periods to be counted from the date the judgment becomes
executory or unappealable. After such hearing, the court shall render a final
judgment according to the evidence presented by the parties.

The costs shall be paid by plaintiffs-respondents.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 115814 May 26, 1995

PEDRO P. PECSON, petitioner,

vs.
COURT OF APPEALS, SPOUSES JUAN NUGUID and ERLINDA
NUGUID, respondents.

DAVIDE, JR., J.:

22
This petition for review on certiorari seeks to set aside the decision 1 of the Court of
Appeals in CA-G.R. SP No. 32679 affirming in part the order 2 of the Regional Trial
Court (RTC) of Quezon City, Branch 101, in Civil Case No. Q-41470.

The factual and procedural antecedents of this case as gathered from the record are
as follows:

Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias
Street, Quezon City, on which he built a four-door two-storey apartment building. For
his failure to pay realty taxes amounting to twelve thousand pesos (P12,000.00), the
lot was sold at public auction by the city Treasurer of Quezon City to Mamerto
Nepomuceno who in turn sold it on 12 October 1983 to the private respondents, the
spouses Juan Nuguid and Erlinda Tan-Nuguid, for one hundred three thousand
pesos (P103,000.00).

The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470
before the RTC of Quezon City. In its decision of 8 February 1989, the RTC
dismissed the complaint, but as to the private respondents' claim that the sale
included the apartment building, it held that the issue concerning it was "not a
subject of the . . . litigation." In resolving the private respondents' motion to
reconsider this issue, the trial court held that there was no legal basis for the
contention that the apartment building was included in the sale. 3

Both parties then appealed the decision to the Court of Appeals. The case was
docketed as CA-G.R. CV No. 2931. In its decision of 30 April 1992, 4 the Court of
Appeals affirmed in toto the assailed decision. It also agreed with the trial court that
the apartment building was not included in the auction sale of the commercial lot.
Thus:

Indeed, examining the record we are fully convinced that it was only the
land — without the apartment building — which was sold at the auction
sale, for plaintiff's failure to pay the taxes due thereon. Thus, in the
Certificate of Sale of Delinquent Property To Purchaser (Exh. K, p. 352,
Record) the property subject of the auction sale at which Mamerto
Nepomuceno was the purchaser is referred to as Lot No. 21-A, Block
No. K-34, at Kamias, Barangay Piñahan, with an area of 256.3 sq. m.,
with no mention whatsoever, of the building thereon. The same
description of the subject property appears in the Final Notice To
Exercise The Right of Redemption (over subject property) dated
September 14, 1981 (Exh. L, p. 353, Record) and in the Final Bill of Sale
over the same property dated April 19, 1982 (Exh. P, p. 357, Record).
Needless to say, as it was only the land without any building which
Nepomuceno had acquired at the auction sale, it was also only that land
without any building which he could have legally sold to the
Nuguids. Verily, in the Deed of Absolute Sale of Registered Land
executed by Mamerto Nepomuceno in favor of the Nuguids on October
25, 1983 (Exh. U, p. 366, Record) it clearly appears that the property
23
 subject of the sale for P103,000.00 was only the parcel of land, Lot 21-A,
Blk. K-34 containing an area of 256.3 sq. meters, without any mention of
any improvement, much less any building thereon. (emphases supplied)

The petition to review the said decision was subsequently denied by this
Court. 5 Entry of judgment was made on 23 June 1993. 6

On November 1993, the private respondents filed with the trial court a motion for
delivery of possession of the lot and the apartment building, citing article 546 of the
Civil Code. 7 Acting thereon, the trial court issued on 15 November 1993 the
challenged order 8 which reads as follows:

Submitted for resolution before this Court is an uncontroverted [sic] for

the Delivery of Possession filed by defendants Erlinda Tan, Juan
Nuguid, et al. considering that despite personal service of the Order for
plaintiff to file within five (5) days his opposition to said motion, he did
not file any.

In support of defendant's motion, movant cites the law in point as Article

546 of the Civil Code . . .

Movant agrees to comply with the provisions of the law considering that
plaintiff is a builder in good faith and he has in fact, opted to pay the cost
of the construction spent by plaintiff. From the complaint itself the plaintiff
stated that the construction cost of the apartment is much more than the
lot, which apartment he constructed at a cost of P53,000.00 in 1965
(par. 8 complaint). This amount of P53,000.00 is what the movant is
supposed to pay under the law before a writ of possession placing him in
possession of both the lot and apartment would be issued.

However, the complaint alleges in paragraph 9 that three doors of the

apartment are being leased. This is further confirmed by the affidavit of
the movant presented in support of the motion that said three doors are
being leased at a rental of P7,000.00 a month each. The movant further
alleges in his said affidavit that the present commercial value of the lot is
P10,000.00 per square meter or P2,500,000.00 and the reasonable
rental value of said lot is no less than P21,000.00 per month.

The decision having become final as per Entry of Judgment dated June
23, 1993 and from this date on, being the uncontested owner of the
property, the rents should be paid to him instead of the plaintiff collecting
them. From June 23, 1993, the rents collected by plaintiff amounting to
more than P53,000.00 from tenants should be offset from the rents due
to the lot which according to movant's affidavit is more than P21,000.00
a month.

24
 WHEREFORE, finding merit in the Motion, the Court hereby grants the
following prayer that:

1. The movant shall reimburse plaintiff the construction cost

of P53,000.00.

2. The payment of P53,000.00 as reimbursement for the

construction cost, movant Juan Nuguid is hereby entitled to
immediate issuance of a writ of possession over the Lot and
improvements thereon.

3. The movant having been declared as the uncontested

owner of the Lot in question as per Entry of Judgment of the
Supreme Court dated June 23, 1993, the plaintiff should pay
rent to the movant of no less than P21,000.00 per month
from said date as this is the very same amount paid monthly
by the tenants occupying the lot.

4. The amount of P53,000.00 due from the movant is hereby

offset against the amount of rents collected by the plaintiff
from June 23, 1993, to September 23, 1993.

SO ORDERED.

The petitioner moved for the reconsideration of the order but it was not acted upon
by the trial court. Instead, on 18 November 1993, it issued a writ of possession
directing the deputy sheriff "to place said movant Juan Nuguid in possession of
subject property located at No. 79 Kamias Road, Quezon City, with all the
improvements thereon and to eject therefrom all occupants therein, their agents,
assignees, heirs and representatives." 9

The petitioner then filed with the Court of Appeals a special civil action
for certiorari and prohibition assailing the order of 15 November 1993, which was
docketed as CA-G.R. SP No. 32679. 10 In its decision of 7 June 1994, the Court of
Appeals affirmed in part the order of the trial court citing Article 448 of the Civil
Code. In disposing of the issues, it stated:

As earlier pointed out, private respondent opted to appropriate the

improvement introduced by petitioner on the subject lot, giving rise to the
right of petitioner to be reimbursed of the cost of constructing said
apartment building, in accordance with Article 546 of the . . . Civil Code,
and of the right to retain the improvements until he is reimbursed of the
cost of the improvements, because, basically, the right to retain the
improvement while the corresponding indemnity is not paid implies the
tenancy or possession in fact of the land on which they are built . . . [2
TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1992) p. 112]. With
the facts extant and the settled principle as guides, we agree with
25
 petitioner that respondent judge erred in ordering that "the movant
having been declared as the uncontested owner of the lot in question as
per Entry of Judgment of the Supreme Court dated June 23, 1993, the
plaintiff should pay rent to the movant of no less than P21,000 per month
from said date as this is the very same amount paid monthly by the
tenants occupying the lot.

We, however, agree with the finding of respondent judge that the
amount of P53,000.00 earlier admitted as the cost of constructing the
apartment building can be offset from the amount of rents collected by
petitioner from June 23, 1993 up to September 23, 1993 which was fixed
at P7,000.00 per month for each of the three doors. Our underlying
reason is that during the period of retention, petitioner as such
possessor and receiving the fruits from the property, is obliged to
account for such fruits, so that the amount thereof may be deducted
from the amount of indemnity to be paid to him by the owner of the land,
in line with Mendoza vs. De Guzman, 52 Phil. 164 . . . .

The Court of Appeals then ruled as follows:

WHEREFORE, while it appears that private respondents have not yet

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

IT IS SO ORDERED. 11

Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition.

The parties agree that the petitioner was a builder in good faith of the apartment
building on the theory that he constructed it at the time when he was still the owner
of the lot, and that the key issue in this case is the application of Articles 448 and
456 of the Civil Code.

The trial court and the Court of Appeals, as well as the parties, concerned
themselves with the application of Articles 448 and 546 of the Civil Code. These
articles read as follows:

Art. 448. The owner of the land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his own
the works, sowing or planting, after payment of the indemnity provided
26
 for in articles 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its
value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof. (361a)

xxx xxx xxx

Art. 546. Necessary expenses shall be refunded to every possessor; but

only the possessor in good faith may retain the thing until he has been
reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith

with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses
or of paying the increase in value which the thing may have acquired by
reason thereof. (453a)

By its clear language, Article 448 refers to a land whose ownership is claimed by
two or more parties, one of whom has built some works, or sown or planted
something. The building, sowing or planting may have been made in good faith or in
bad faith. The rule on good faith laid down in Article 526 of the Civil Code shall be
applied in determining whether a builder, sower or planter had acted in good faith. 12

Article 448 does not apply to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or donation.
This Court said so in Coleongco vs. Regalado: 13

Article 361 of the old Civil Code is not applicable in this case, for
Regalado constructed the house on his own land before he sold said
land to Coleongco. Article 361 applies only in cases where a person
constructs a building on the land of another in good or in bad faith, as
the case may be. It does not apply to a case where a person constructs
a building on his own land, for then there can be no question as to good
or bad faith on the part of the builder.

Elsewise stated, where the true owner himself is the builder of works on his own
land, the issue of good faith or bad faith is entirely irrelevant.

Thus in strict point of law, Article 448 is not apposite to the case at bar.
Nevertheless, we believe that the provision therein on indemnity may be applied by
analogy considering that the primary intent of Article 448 is to avoid a state of forced
co-ownership and that the parties, including the two courts below, in the main agree

27
that Articles 448 and 546 of the Civil Code are applicable and indemnity for the
improvements may be paid although they differ as to the basis of the indemnity.

Article 546 does not specifically state how the value of the useful improvements
should be determined. The respondent court and the private respondents espouse
the belief that the cost of construction of the apartment building in 1965, and not its
current market value, is sufficient reimbursement for necessary and useful
improvements made by the petitioner. This position is, however, not in consonance
with previous rulings of this Court in similar cases. In Javier vs. Concepcion,
Jr., 14 this Court pegged the value of the useful improvements consisting of various
fruits, bamboos, a house and camarin made of strong material based on the market
value of the said improvements. In Sarmiento vs. Agana, 15 despite the finding that
the useful improvement, a residential house, was built in 1967 at a cost of between
eight thousand pesos (P8,000.00) to ten thousand pesos(P10,000.00), the
landowner was ordered to reimburse the builder in the amount of forty thousand
pesos (P40,000.00), the value of the house at the time of the trial. In the same way,
the landowner was required to pay the "present value" of the house, a useful
improvement, in the case ofDe Guzman vs. De la Fuente, 16 cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice between the
parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman
Catholic Archbishop of Manila 17 that the said provision was formulated in trying to
adjust the rights of the owner and possessor in good faith of a piece of land, to
administer complete justice to both of them in such a way as neither one nor the
other may enrich himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the improvements which should
be made the basis of reimbursement. A contrary ruling would unjustly enrich the
private respondents who would otherwise be allowed to acquire a highly valued
income-yielding four-unit apartment building for a measly amount. Consequently, the
parties should therefore be allowed to adduce evidence on the present market value
of the apartment building upon which the trial court should base its finding as to the
amount of reimbursement to be paid by the landowner.

The trial court also erred in ordering the petitioner to pay monthly rentals equal to
the aggregate rentals paid by the lessees of the apartment building. Since the
private respondents have opted to appropriate the apartment building, the petitioner
is thus entitled to the possession and enjoyment of the apartment building, until he is
paid the proper indemnity, as well as of the portion of the lot where the building has
been constructed. This is so because the right to retain the improvements while the
corresponding indemnity is not paid implies the tenancy or possession in fact of the
land on which it is built, planted or sown. 18 The petitioner not having been so paid,
he was entitled to retain ownership of the building and, necessarily, the income
therefrom.

It follows, too, that the Court of Appeals erred not only in upholding the trial court's
determination of the indemnity, but also in ordering the petitioner to account for the
rentals of the apartment building from 23 June 1993 to 23 September 1993.
28
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and
the Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon
City in Civil Case No. Q-41470 are hereby SET ASIDE.

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

No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 108894 February 10, 1997

TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner,

vs.
COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and
EDUARDO UY, respondents.

PANGANIBAN, J.:

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

29
These are the questions raised in the petition for review of the Decision 1 dated
August 28, 1992, in CA-G.R. CV No. 28293 of respondent Court 2 where the
disposition reads: 3

WHEREFORE, premises considered, the Decision of the Regional Trial

Court is hereby reversed and set aside and another one entered —

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

2. Ordering Tecnogas to pay the sum of P2,000.00 per month as

reasonable rental from October 4, 1979 until appellee vacates the land;

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

area;

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

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

fees;

6. Costs against appellee.

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

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

hereby modified deleting paragraph 4 of the dispositive portion of our
decision which reads:

4. Ordering appellee to pay the value of the land occupied by

the two-storey building.

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

merit.

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

The Facts

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

That plaintiff (herein petitioner) which is a corporation duly organized

and existing under and by virtue of Philippine laws is the registered
owner of a parcel of land situated in Barrio San Dionisio, Parañaque,
Metro Manila known as Lot 4331-A (should be 4531-A) of Lot 4531 of
30
 the Cadastral Survey of Parañaque, Metro Manila, covered by Transfer
Certificate of Title No. 409316 of the Registry of Deeds of the Province
of Rizal; that said land was purchased by plaintiff from Pariz Industries,
Inc. in 1970, together with all the buildings and improvements including
the wall existing thereon; that the defendant (herein private respondent)
is the registered owner of a parcel of land known as Lot No. 4531-B of
Lot 4531 of the Cadastral Survey of Parañaque, LRC (GLRO) Rec. No.
19645 covered by Transfer Certificate of Title No. 279838, of the
Registry of Deeds for the Province of Rizal; that said land which adjoins
plaintiff's land was purchased by defendant from a certain Enrile Antonio
also in 1970; that in 1971, defendant purchased another lot also
adjoining plaintiffs land from a certain Miguel Rodriguez and the same
was registered in defendant's name under Transfer Certificate of Title
No. 31390, of the Registry of Deeds for the Province of Rizal; that
portions of the buildings and wall bought by plaintiff together with the
land from Pariz Industries are occupying a portion of defendant's
adjoining land; that upon learning of the encroachment or occupation by
its buildings and wall of a portion of defendant's land, plaintiff offered to
buy from defendant that particular portion of defendant's land occupied
by portions of its buildings and wall with an area of 770 square meters,
more or less, but defendant, however, refused the offer. In 1973, the
parties entered into a private agreement before a certain Col. Rosales in
Malacañang, wherein plaintiff agreed to demolish the wall at the back
portion of its land thus giving to defendant possession of a portion of his
land previously enclosed by plaintiff's wall; that defendant later filed a
complaint before the office of Municipal Engineer of Parañaque, Metro
Manila as well as before the Office of the Provincial Fiscal of Rizal
against plaintiff in connection with the encroachment or occupation by
plaintiff's buildings and walls of a portion of its land but said complaint
did not prosper; that defendant dug or caused to be dug a canal along
plaintiff's wall, a portion of which collapsed in June, 1980, and led to the
filing by plaintiff of the supplemental complaint in the above-entitled case
and a separate criminal complaint for malicious mischief against
defendant and his wife which ultimately resulted into the conviction in
court of defendant's wife for the crime of malicious mischief; that while
trial of the case was in progress, plaintiff filed in Court a formal proposal
for settlement of the case but said proposal, however, was ignored by
defendant.

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

WHEREFORE, judgment is hereby rendered in favor of plaintiff and

against defendant and ordering the latter to sell to plaintiff that portion of
31
 land owned by him and occupied by portions of plaintiff's buildings and
wall at the price of P2,000.00 per square meter and to pay the former:

1. The sum of P44,000.00 to compensate for the losses in

materials and properties incurred by plaintiff through thievery
as a result of the destruction of its wall;

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

and

3. The costs of this suit.

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

The Issues

The petition raises the following issues: 8

(A)

Whether or not the respondent Court of Appeals erred in holding the

petitioner a builder in bad faith because it is "presumed to know the
metes and bounds of his property."

(B)

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

(C)

Whether or not the respondent Court of Appeals erred in ordering the

removal of the "structures and surrounding walls on the encroached
area" and in withdrawing its earlier ruling in its August 28, 1992 decision
for the petitioner "to pay for the value of the land occupied" by the
building, only because the private respondent has "manifested its choice
to demolish" it despite the absence of compulsory sale where the builder
fails to pay for the land, and which "choice" private respondent
deliberately deleted from its September 1, 1980 answer to the
supplemental complaint in the Regional Trial Court.
32
In its Memorandum, petitioner poses the following issues:

A.

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

B.

In a specific "boundary overlap situation" which involves a builder in

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

C.

The respondent court's citation of the twin cases of Tuason &

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

D.

Quite contrary to respondent Uy's reasoning, petitioner Tecnogas

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

D.(E.)

The amicable settlement between the parties should be interpreted as a

contract and enforced only in accordance with its explicit terms,
and not over and beyond that agreed upon; because the courts
do not have the power to create a contract nor expand its scope. 13

E.(F.)

As a general rule, although the landowner has the option to choose

between: (1) "buying the building built in good faith", or (2) "selling the
portion of his land on which stands the building" under Article 448 of the
Civil Code; the first option is not absolute, because an exception thereto,
33
 once it would be impractical for the landowner to choose to exercise the
first alternative, i.e. buy that portion of the house standing on his land,
for the whole building might be rendered useless. The workable solution
is for him to select the second alternative, namely, to sell to the builder
that part of his land on which was constructed a portion of the house. 14

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

1. It did not give the exact citations of cases decided by the Honorable
Supreme Court that allegedly contradicts the ruling of the Hon. Court of
Appeals based on the doctrine laid down in Tuason vs.Lumanlan case
citing also Tuason vs. Macalindong case (Supra).

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

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

The Court's Ru1ing

The petition should be granted.

Good Faith or Bad Faith

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

We disagree with respondent Court. The two cases it relied upon do not support its
main pronouncement that a registered owner of land has presumptive knowledge of
the metes and bounds of its own land, and is therefore in bad faith if he mistakenly
builds on an adjoining land. Aside from the fact that those cases had factual
moorings radically different from those obtaining here, there is nothing in those
cases which would suggest, however remotely, that bad faith is imputable to a
34
registered owner of land when a part of his building encroaches upon a neighbor's
land, simply because he is supposedly presumed to know the boundaries of his land
as described in his certificate of title. No such doctrinal statement could have been
made in those cases because such issue was not before the Supreme Court. Quite
the contrary, we have rejected such a theory in Co Tao vs. Chico, 20 where we held
that unless one is versed in the science of surveying, "no one can determine the
precise extent or location of his property by merely examining his paper title."

There is no question that when petitioner purchased the land from Pariz Industries,
the buildings and other structures were already in existence. The record is not clear
as to who actually built those structures, but it may well be assumed that petitioner's
predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code
presumes good faith, and since no proof exists to show that the encroachment over
a narrow, needle-shaped portion of private respondent's land was done in bad faith
by the builder of the encroaching structures, the latter should be presumed to have
built them in good faith. 21 It is presumed that possession continues to be enjoyed in
the same character in which it was acquired, until the contrary is proved. 22 Good
faith consists in the belief of the builder that the land he is building on is his, and his
ignorance of any defect or flaw in his title. 23 Hence, such good faith, by law, passed
on to Pariz's successor, petitioner in this case. Further, "(w)here one derives title to
property from another, the act, declaration, or omission of the latter, while holding
the title, in relation to the property, is evidence against the former." 24And
possession acquired in good faith does not lose this character except in case and
from the moment facts exist which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully. 25 The good faith ceases from the
moment defects in the title are made known to the possessor, by extraneous
evidence or by suit for recovery of the property by the true owner. 26

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

The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles
546 and 548, or to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the builder
or planter cannot be obliged to buy the land if its value is considerably
more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall fix the
terms thereof.

35
 The obvious benefit to the builder under this article is that, instead of being
outrightly ejected from the land, he can compel the landowner to make a
choice between the two options: (1) to appropriate the building by paying the
indemnity required by law, or (2) sell the land to the builder. The landowner
cannot refuse to exercise either option and compel instead the owner of the
building to remove it from the land. 27

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

We answer such question in the affirmative.

In the first place, there is no sufficient showing that petitioner was aware of the
encroachment at the time it acquired the property from Pariz Industries. We agree
with the trial court that various factors in evidence adequately show petitioner's lack
of awareness thereof. In any case, contrary proof has not overthrown the
presumption of good faith under Article 527 of the Civil Code, as already stated,
taken together with the disputable presumptions of the law on evidence. These
presumptions state, under Section 3 (a) of Rule 131 of the Rules of Court, that the
person is innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that the
law has been obeyed. In fact, private respondent Eduardo Uy himself was unaware
of such intrusion into his property until after 1971 when he hired a surveyor,
following his purchase of another adjoining lot, to survey all his newly acquired lots.
Upon being apprised of the encroachment, petitioner immediately offered to buy the
area occupied by its building — a species of conduct consistent with good faith.

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

Estoppel

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

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

36
 That the parties hereto have agreed that the rear portion of the fence
that separates the property of the complainant and respondent shall be
demolished up to the back of the building housing the machineries which
demolision (sic) shall be undertaken by the complainant at anytime.

That the fence which serve(s) as a wall housing the electroplating

machineries shall not be demolished in the mean time which portion
shall be subject to negotiation by herein parties.

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

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

A compromise is a bilateral act or transaction that is expressly

acknowledged as a juridical agreement by the Civil Code and is therein
dealt with in some detail. "A compromise," declares Article 2208 of said
Code, "is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already
commenced."

xxx xxx xxx

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

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

Options of Private Respondent

37
What then is the applicable provision in this case which private respondent may
invoke as his remedy: Article 448 or Article 450 31 of the Civil Code?

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

Where the builder, planter or sower has acted in good faith, a conflict of
rights arises between the owners, and it becomes necessary to protect
the owner of the improvements without causing injustice to the owner of
the land. In view of the impracticality of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of
the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent. It is the owner of the land who is
authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of
the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off.
Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949;
Article applied; see Cabral, et al. vs. Ibanez [S.C.] 52 Off. Gaz. 217;
Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).

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

the proper remedy, which respondent Court sustained in its assailed Decisions, is
thus legally flawed. This is not one of the remedies bestowed upon him by law. It
would be available only if and when he chooses to compel the petitioner to buy the
land at a reasonable price but the latter fails to pay such price. 33 This has not taken
place. Hence, his options are limited to: (1) appropriating the encroaching portion of
petitioner's building after payment of proper indemnity, or (2) obliging the latter to
buy the lot occupied by the structure. He cannot exercise a remedy of his own liking.

Neither is petitioner's prayer that private respondent be ordered to sell the

land 34 the proper remedy. While that was dubbed as the "more workable solution"
in Grana and Torralba vs. The Court of Appeals, et al., 35 it was not the relief granted
in that case as the landowners were directed to exercise "within 30 days from this
decision their option to either buy the portion of the petitioners' house on their land
or sell to said petitioners the portion of their land on which it stands." 36Moreover,
in Grana and Torralba, the area involved was only 87 square meters while this case
involves 520 square meters37. In line with the case of Depra vs. Dumlao, 38 this case
will have to be remanded to the trial court for further proceedings to fully implement
the mandate of Art. 448. It is a rule of procedure for the Supreme Court to strive to
settle the entire controversy in a single proceeding leaving no root or branch to bear
the seeds of future
39
litigation.

38
Petitioner, however, must also pay the rent for the property occupied by its building
as prescribed by respondent Court from October 4, 1979, but only up to the date
private respondent serves notice of its option upon petitioner and the trial court; that
is, if such option is for private respondent to appropriate the encroaching structure.
In such event, petitioner would have a right of retention which negates the obligation
to pay rent. 40 The rent should however continue if the option chosen is compulsory
sale, but only up to the actual transfer of ownership.

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

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

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

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

The trial court shall determine:

a) the present fair price of private respondent's 520 square-meter area of

land;

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

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

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

2. After said amounts shall have been determined by competent evidence, the
regional trial court shall render judgment as follows:

a) The private respondent shall be granted a period of fifteen (15) days

within which to exercise his option under the law (Article 448, Civil
Code), whether to appropriate the portion of the building as his own by
paying to petitioner its fair market value, or to oblige petitioner to pay the
price of said area. The amounts to be respectively paid by petitioner and
private respondent, in accordance with the option thus exercised by
written notice of the other party and to the court, shall be paid by the
obligor within fifteen (15) days from such notice of the option by
tendering the amount to the trial court in favor of the party entitled to
receive it;

39
 b) If private respondent exercises the option to oblige petitioner to pay
the price of the land but the latter rejects such purchase because, as
found by the trial court, the value of the land is considerably more than
that of the portion of the building, petitioner shall give written notice of
such rejection to private respondent and to the trial court within fifteen
(15) days from notice of private respondent's option to sell the land. In
that event, the parties shall be given a period of fifteen (15) days from
such notice of rejection within which to agree upon the terms of the
lease, and give the trial court formal written notice of the agreement and
its provisos. If no agreement is reached by the parties, the trial court,
within fifteen (15) days from and after the termination of the said period
fixed for negotiation, shall then fix the terms of the lease provided that
the monthly rental to be fixed by the Court shall not be less than two
thousand pesos (P2,000.00) per month, payable within the first five (5)
days of each calendar month. The period for the forced lease shall not
be more than two (2) years, counted from the finality of the judgment,
considering the long period of time since 1970 that petitioner has
occupied the subject area. The rental thus fixed shall be increased by
ten percent (10%) for the second year of the forced lease. Petitioner
shall not make any further constructions or improvements on the
building. Upon expiration of the two-year period, or upon default by
petitioner in the payment of rentals for two (2) consecutive months,
private respondent shall be entitled to terminate the forced lease, to
recover his land, and to have the portion of the building removed by
petitioner or at latter's expense. The rentals herein provided shall be
tendered by petitioner to the trial court for payment to private
respondent, and such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the said court.

c) In any event, petitioner shall pay private respondent an amount

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

d) The periods to be fixed by the trial court in its decision shall be non-
extendible, and upon failure of the party obliged to tender to the trial
court the amount due to the obligee, the party entitled to such payment
shall be entitled to an order of execution for the enforcement of payment
of the amount due and for compliance with such other acts as may be
required by the prestation due the obligee.

No costs.

40
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 149418* July 27, 2006

SPOUSES PELAGIO GULLA and PERLITA GULLA, petitioners,

vs.
HEIRS OF ALEJANDRO LABRADOR, represented by ALEX
LABRADOR, respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court
of Appeals (CA) in CA-G.R. SP No. 52176. The CA decision affirmed that of the
Regional Trial Court (RTC), Branch 69 of Iba, Zambales in Civil Case No. 1523-
I,2 which in turn affirmed the ruling of the Municipal Trial Court (MTC) of San Felipe,
Zambales in Civil Case No. 381.3

Angel Labrador, Leonardo Labrador, Fe Labrador Gamboa, Alex Labrador and

Roger Labrador filed a complaint against the spouses Pelagio and Perlita Gulla in
the RTC of Iba, Zambales for "Cancellation of Tax Declaration and Recovery of
Possession with Damages" (accion publiciana). The complaint involved a 22,590-
square-meter lot covered by Original Certificate of Title (OCT) No. P-13350, and the
562-square-meter lot abutting the titled property. The case was thereafter forwarded
to the MTC of San Felipe, Zambales pursuant to Republic Act No. 7691.4

The titled property is located in San Felipe, Zambales and identified as Lot No. 520,
Cad. 686-D. According to the Labradors, the property was declared for taxation
purposes under their names (Tax Declaration No. 010-0469A) and the
corresponding taxes were paid thereon. In 1996, the spouses Gulla occupied a
portion of the property fronting the China Sea, as well as the 562-square-meter lot
within the salvage area. The spouses Gulla then constructed a house in the
occupied property and fenced its perimeter. The Labradors pointed out that
whatever alleged claims the spouses Gulla had on the property was acquired
through a Deed of Waiver of Rights dated July 23, 1996 executed in their favor by
another "squatter" Alfonso Bactad. To verify the exact location of the portion

41
occupied by the spouses Gulla, a verification survey of the land was conducted on
August 17, 1990 in the presence of Pelagio Gulla. Geodetic Engineer Crisostomo A.
Magarro prepared a sketch indicating portions occupied by the spouses Gulla, as
well as the following report:

a. Lot A in Green color containing an area of 562 square meters is the claim of
Pelagio Gulla, Sr. which is outside the titled property of the Hrs. of Alejandro
Labrador and is within the Salvage Zone;

b. Lot B in Violet containing an area of 820 square meters is the claim of

Pelagio Gulla, Sr. and within the titled property of the Hrs. of Alejandro
Labrador and obviously within the Salvage Zone;

c. Lot C in Red color containing an area of 1,506 square meters is the claim of
Pelagio Gulla, Sr. [and] is also within the titled property of the Hrs. of Alejandro
Labrador, represented by Alex Labrador and covered by O.C.T. No. P-13350.

The Total area claimed by Pelagio Gulla, Sr. is 2,888 square meters (more or
less). 5 (Underscoring supplied)

For their part, the spouses Gulla claimed that they had been in possession of the
2,888-square-meter property, Lot A in the sketch of Engr. Magarro, since 1984 and
declared the property for taxation purposes under their names in Tax Declaration
(T.D.) No. 010-0549. On October 8, 1994, they filed an application for miscellaneous
sales patent which was certified as alienable and disposable land by
the barangay captain, former Mayor Edilberto A. Abille, and Community
Environment and Natural Resources Officer Jaime Centeno. The property was
likewise declared for taxation purposes in their names under T.D. No. 010-0550-R in
1994.

On November 3, 1998, the MTC rendered judgment in favor of the Labradors,

ordering the spouses Gulla to vacate that portion of the property covered by OCT
No. P-13350 (Lots B and C in the sketch of Engr. Magarro), and the 562-square-
meter lot within the salvage zone (Lot A). The fallo of the decision reads:

WHEREFORE, by preponderance of evidences, it is hereby ordered upon the

defendants to VACATE the portion including the 565 salvage zone actually
occupied by them immediately and to pay P1,000.00 as monthly rental from
July 1996, until they vacate the premises and P10,000.00 as actual damages
and attorney's fee of P20,000.00.

SO ORDERED.6

According to the MTC, the Labradors were able to establish ownership over the
subject property, as evidenced by the title under their name (OCT No. P-13350). For
their part, the defendant-spouses failed to overcome the evidence of the plaintiffs,

42
and not being the riparian owners of Lot A which is within the salvage zone, they
have no right to possess the same.7

On appeal, the RTC rendered judgment on March 23, 1999 affirming the appealed
decision. It ratiocinated that, as correctly observed by the court a quo, Lot A is
beyond the perimeter of the property covered by OCT No. P-13350 and is within the
salvage zone that abutted the property of plaintiffs. Applying Article 440 of the New
Civil Code, the RTC declared that the Labradors had the right to possess the land, it
being inseparably attached to the titled property as an accessory. It further held that
"economic convenience is better attained in a state of single ownership than in co-
ownership," and that "natural justice demands that the owner of the principal or
more important thing should also own the accessory."8

This prompted the spouses Gulla to file a petition for review before the CA where
they alleged the following:

xxxx

2. THE LOWER COURT ERRED IN RELYING ON THE SURVEY WHICH

WAS UNILATERALLY CONDUCTED BY THE RESPONDENTS.

3. THE LOWER COURT ERRED IN HOLDING THAT THE LAND OCCUPIED

BY PETITIONERS IS WITHIN THE LOT COVERED BY ORIGINAL
CERTIFICATE OF TITLE NO. P-13350.

4. THE LOWER COURT ERRED IN EJECTING THE PETITIONERS EVEN

FROM THE ALLEGED SALVAGE ZONE.

5. THE LOWER COURT ERRED IN AWARDING MONTHLY RENTAL,

ACTUAL DAMAGES AND ATTORNEY'S FEES.9

The spouses Gulla insisted that the trial court erred in relying on the survey report of
Engr. Magarro. In contrast, their evidence showed that Lot A, with an area of 562
square meters, is alienable and disposable, and is covered by a 1936 tax
declaration under the name of Alfonso Bactad. Since the property is located within
the salvage zone, it is res nullius, hence, could not have been acquired by the
Labradors through accession under Article 440 of the New Civil Code. They also
insisted that the trial court had no jurisdiction to declare them entitled to the
possession of Lot A since the Republic of the Philippines was not a party to the
case. The spouses Gulla concluded that they cannot be held liable for monthly
rentals, actual damages and attorney's fees, since the claimed title over the subject
property is fraudulent.

On December 11, 2000, the CA rendered judgment affirming the assailed decision.
Applying Article 440 of the New Civil Code, the appellate court declared that
although Lot A is outside the titled property of the Labradors, by analogy, as the
owners of the adjoining property, the latter have the "priority to use it." Stated
43
differently, the Labradors, although not the owners of the property within the salvage
zone, have the right to use it more than the spouses Gulla.

This prompted the aggrieved spouses to file a motion for reconsideration, which the
appellate court denied, hence, the present petition.

The sole issue in this case is whether or not petitioners are entitled to the
possession of Lot A which is located at the foreshore of San Felipe, Zambales as
indicated in the report10 of Engr. Magarro.

Petitioners point out that Lot A is not covered by any certificate of title. The free
patent issued to respondents, as well as the tax declaration covering the property,
refers only to "Lot 520," a totally different lot from what they are occupying, or Lot A.
Moreover, the lower courts erred in ruling that the salvage zone is incorporated in
the title of respondents, since the zone is res nullius and cannot be the subject of
the commerce of man, part of the public domain and intended for public use; so long
as this is so, it cannot be appropriated by any person except through express
authorization granted in due form by a competent authority.11 Petitioners insist that
the adjudication of the salvage zone is best determined at an appropriate forum.
Petitioners further allege that respondents are claiming possession over Lot A by
virtue of a fraudulently acquired patent, the validity of which is still the subject of a
pending civil case between Alfonso Bactad and herein respondents.

Petitioners reiterate that they occupied the subject land openly, notoriously, and in
the concept of owners for many years since 1986. Respondents' contention, that
they occupied the land clandestinely, is negated by the very location/nature of the
property, i.e., that it is situated in the coastal area which is very much exposed.
Considering the size of the alleged property of respondents, about 2.2 hectares, it is
impossible to "secretly" occupy the said area. It is thus more credible to state that
respondents were not actually working on or were never in possession of the
contested property. According to respondents, the lower courts should have taken
judicial notice of the alarming number of "smart individuals" who, after having
obtained title by means of connections, would suddenly file cases in courts knowing
that rulings will be issued in their favor on the basis of alleged titles.12

The petition is meritorious.

In ruling for respondents, the CA ratiocinated, thus:

The ownership of property gives the right by accession to everything which is

produced thereby, or which is incorporated or attached thereto, either naturally
or artificially (Article 440, Civil Code). Accession is the right of an owner of a
thing to the products of said thing as well as to whatever is inseparably
attached thereto as an accessory (Sanchez Roman, Vol. II, p. 89).

In the case at bar, it is undisputed that the area of 562 square meters is
outside the titled property of the respondents and is within the salvage zone
44
 adjacent to respondents' property. However, while it is true that the salvage
zone cannot be the subject of commerce, the adjoining owner thereof, the
respondents in this case, has the priority to use it. Otherwise stated, herein
respondents [do] not own the salvage zone but as an adjacent owner, he has
the right to use it more than the petitioners applying the basic rule as stated
above.

Moreover, the law provides the different modes of acquiring ownership,

namely: (a) occupation; (b) intellectual creation; (c) law; (d) donation; (e)
succession; (f) tradition, as a consequence of certain contracts; and (g)
prescription. It will be noted that accession is not one of those listed therein. It
is therefore safe to conclude that accession is not a mode of acquiring
ownership. The reason is simple: accession presupposes a previously existing
ownership by the owner over the principal. This is not necessarily so in the
other modes of acquiring ownership. Therefore, fundamentally and in the last
analysis, accession is a right implicitly included in ownership, without which it
will have no basis or existence. (p. 179, Paras, Vol. II, Thirteenth Edition
(1994), Civil Code). In general, the right to accession is automatic (ipso jure),
requiring no prior act on the part of the owner of the principal (Villanueva v.
Claustro, 23 Phil. 54).

In the light of the foregoing, the lower court therefore is correct in ejecting the
petitioners even if the portion occupied by them is in the salvage zone.13

The trial court, the RTC and the CA were one in ruling that the 562-square-meter
property, Lot A, is part of the public domain, hence, beyond the commerce of men
and not capable of registration. In fact, the land is within the salvage zone fronting
the China Sea as well as the property covered by OCT No. P-13350 in the name of
respondents. The provision relied upon is Article 440 of the New Civil Code, which
states that "[t]he ownership of property gives the right by accession to everything
which is produced thereby, or which is incorporated or attached thereto, either
naturally or artificially." The provision, however, does not apply in this case,
considering that Lot A is a foreshore land adjacent to the sea which is alternately
covered and left dry by the ordinary flow of the tides. Such property belongs to the
public domain and is not available for private ownership until formally declared by
the government to be no longer needed for public use.14 Respondents thus have no
possessory right over the property unless upon application, the government, through
the then Bureau of Lands, had granted them a permit.15

There is no question that no such permit was issued or granted in favor of

respondents. This being the case, respondents have no cause of action to cause
petitioners' eviction from the subject property. The real party-in-interest to file a
complaint against petitioners for recovery of possession of the subject property and
cause petitioner's eviction therefrom is the Republic of the Philippines, through the
Office of the Solicitor General. Consequently, petitioners cannot be required to pay
any rentals to respondents for their possession of the property.

45
IN LIGHT OF ALL THE FOREGOING, the petition is partially GRANTED. The
Decision of the Court of Appeals CA-G.R. SP No. 52176 is AFFIRMED WITH THE
MODIFICATION that the complaint of respondents isDISMISSED insofar as Lot A
with an area of 562 square meters is concerned. The Municipal Trial Court of San
Felipe, Zambales, is ORDERED to dismiss the complaint of the plaintiffs in Civil
Case No. 381 insofar as Lot A with an area of 562 square meters is concerned
without prejudice to the right of the Republic of the Philippines to take such
appropriate action for the recovery of said lot from petitioners.

Let a copy of this decision be served on the Office of the Solicitor General for
appropriate action.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 178411 June 23, 2010

OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY

ADMINISTRATOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF
PARAÑAQUE CITY, OFFICE OF THE CITY PLANNING AND DEVELOPMENT
COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN AND SANGGUNIANG
PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA A.
GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL
M. ARGOTE, CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L.
GONZALES, ESTER C. ASEHAN, MANUEL A. FUENTES, and MYRNA P.
ROSALES, Petitioners,
vs.
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO,
EDUARDO V. EBIO, RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V.
EBIO, and ARNEL V. EBIO, Respondents.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the January 31, 2007 Decision1 and June 8,
2007 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly
for being contrary to law and jurisprudence. The CA had reversed the Order3 of the

46
Regional Trial Court (RTC) of Parañaque City, Branch 196, issued on April 29, 2005
in Civil Case No. 05-0155.

Below are the facts.

Respondents claim that they are the absolute owners of a parcel of land consisting
of 406 square meters, more or less, located at 9781 Vitalez Compound in Barangay
Vitalez, Parañaque City and covered by Tax Declaration Nos. 01027 and 01472 in
the name of respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek.
Respondents assert that the original occupant and possessor of the said parcel of
land was their great grandfather, Jose Vitalez. Sometime in 1930, Jose gave the
land to his son, Pedro Vitalez. From then on, Pedro continuously and exclusively
occupied and possessed the said lot. In 1966, after executing an affidavit declaring
possession and occupancy,4 Pedro was able to obtain a tax declaration over the
said property in his name.5Since then, respondents have been religiously paying
real property taxes for the said property.6

Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida.

Upon Pedro’s advice, the couple established their home on the said lot. In April
1964 and in October 1971, Mario Ebio secured building permits from the Parañaque
municipal office for the construction of their house within the said compound. 7 On
April 21, 1987, Pedro executed a notarized Transfer of Rights8 ceding his claim over
the entire parcel of land in favor of Mario Ebio. Subsequently, the tax declarations
under Pedro’s name were cancelled and new ones were issued in Mario Ebio’s
name.9

On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed
Resolution No. 08, series of 199910 seeking assistance from the City Government of
Parañaque for the construction of an access road along Cut-cut Creek located in the
said barangay. The proposed road, projected to be eight (8) meters wide and sixty
(60) meters long, will run from Urma Drive to the main road of Vitalez
Compound11 traversing the lot occupied by the respondents. When the city
government advised all the affected residents to vacate the said area, respondents
immediately registered their opposition thereto. As a result, the road project was
temporarily suspended.12

In January 2003, however, respondents were surprised when several officials from
the barangay and the city planning office proceeded to cut eight (8) coconut trees
planted on the said lot. Respondents filed letter-complaints before the Regional
Director of the Bureau of Lands, the Department of Interior and Local Government
and the Office of the Vice Mayor.13 On June 29, 2003, the Sangguniang Barangay of
Vitalez held a meeting to discuss the construction of the proposed road. In the said
meeting, respondents asserted their opposition to the proposed project and their
claim of ownership over the affected property.14 On November 14, 2003,
respondents attended another meeting with officials from the city government, but
no definite agreement was reached by and among the parties.15

47
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents
ordering them to vacate the area within the next thirty (30) days, or be physically
evicted from the said property.16 Respondents sent a letter to the Office of the City
Administrator asserting, in sum, their claim over the subject property and expressing
intent for a further dialogue.17 The request remained unheeded.1avvphi1

Threatened of being evicted, respondents went to the RTC of Parañaque City on

April 21, 2005 and applied for a writ of preliminary injunction against petitioners.18 In
the course of the proceedings, respondents admitted before the trial court that they
have a pending application for the issuance of a sales patent before the Department
of Environment and Natural Resources (DENR).19

On April 29, 2005, the RTC issued an Order20 denying the petition for lack of merit.
The trial court reasoned that respondents were not able to prove successfully that
they have an established right to the property since they have not instituted an
action for confirmation of title and their application for sales patent has not yet been
granted. Additionally, they failed to implead the Republic of the Philippines, which is
an indispensable party.

Respondents moved for reconsideration, but the same was denied.21

Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31,
2007, the Court of Appeals issued its Decision in favor of the respondents.
According to the Court of Appeals--

The issue ultimately boils down to the question of ownership of the lands adjoining
Cutcut Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion
beside RL 8.

The evidentiary records of the instant case, shows that RL 8 containing an area of
291 square meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-
62176. The same RL 8 appears to have been donated by the Guaranteed Homes to
the City Government of Parañaque on 22 March 1966 and which was accepted by
the then Mayor FLORENCIO BERNABE on 5 April 1966. There is no evidence
however, when RL 8 has been intended as a road lot.

On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed
the accreted property since 1930 per his Affidavit dated 21 March 1966 for the
purpose of declaring the said property for taxation purposes. The property then
became the subject of Tax Declaration No. 20134 beginning the year 1967 and the
real property taxes therefor had been paid for the years 1966, 1967, 1968, 1969,
1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998, 1999, 2000, 2001,
2002, 2003, and 2004. Sometime in 1964 and 1971, construction permits were
issued in favor of Appellant MARIO EBIO for the subject property. On 21 April 1987,
PEDRO VITALEZ transferred his rights in the accreted property to MARIO EBIO and
his successors-in-interest.

48
Applying [Article 457 of the Civil Code considering] the foregoing documentary
evidence, it could be concluded that Guaranteed Homes is the owner of the
accreted property considering its ownership of the adjoining RL 8 to which the
accretion attached. However, this is without the application of the provisions of the
Civil Code on acquisitive prescription which is likewise applicable in the instant case.

xxxx

The subject of acquisitive prescription in the instant case is the accreted portion
which [was] duly proven by the Appellants. It is clear that since 1930, Appellants
together with their predecessor-in-interest, PEDRO VITALEZ[,] have been in
exclusive possession of the subject property and starting 1964 had introduced
improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of the
property in question since 1930 even if the adjoining RL 8 was subsequently
registered in the name of Guaranteed Homes. x x x.

xxxx

Further, it was only in 1978 that Guaranteed Homes was able to have RL 8
registered in its name, which is almost fifty years from the time PEDRO VITALEZ
occupied the adjoining accreted property in 1930. x x x.

xxxx

We likewise note the continuous payment of real property taxes of Appellants which
bolster their right over the subject property. x x x.

xxxx

In sum, We are fully convinced and so hold that the Appellants [have] amply proven
their right over the property in question.

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The

challenged Order of the court a quo is REVERSED and SET ASIDE.

SO ORDERED.22

On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration.
Hence, this petition raising the following assignment of errors:

I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE

COURT OF APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN
ACCORD WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;]

II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE

HONORABLE COURT OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE

49
FOR ACQUISITIVE PRESCRIPTION IS IN ACCORD WITH THE LAW AND
ESTABLISHED JURISPRUDENCE[;] AND

III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE

COMPLAINT … FILED BY RESPONDENTS IN THE LOWER COURT.23

The issues may be narrowed down into two (2): procedurally, whether the State is
an indispensable party to respondents’ action for prohibitory injunction; and
substantively, whether the character of respondents’ possession and occupation of
the subject property entitles them to avail of the relief of prohibitory injunction.

The petition is without merit.

An action for injunction is brought specifically to restrain or command the

performance of an act.24 It is distinct from the ancillary remedy of preliminary
injunction, which cannot exist except only as part or as an incident to an
independent action or proceeding. Moreover, in an action for injunction, the auxiliary
remedy of a preliminary prohibitory or mandatory injunction may issue.25

In the case at bar, respondents filed an action for injunction to prevent the local
government of Parañaque City from proceeding with the construction of an access
road that will traverse through a parcel of land which they claim is owned by them by
virtue of acquisitive prescription.

Petitioners, however, argue that since the creek, being a tributary of the river, is
classified as part of the public domain, any land that may have formed along its
banks through time should also be considered as part of the public domain. And
respondents should have included the State as it is an indispensable party to the
action.

We do not agree.

It is an uncontested fact that the subject land was formed from the alluvial deposits
that have gradually settled along the banks of Cut-cut creek. This being the case,
the law that governs ownership over the accreted portion is Article 84 of the Spanish
Law of Waters of 1866, which remains in effect,26 in relation to Article 457 of
the Civil Code.

Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over
alluvial deposits along the banks of a creek. It reads:

ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams,
rivers, and lakes, by accessions or sediments from the waters thereof, belong to the
owners of such lands.27

Interestingly, Article 457 of the Civil Code states:

50
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.

It is therefore explicit from the foregoing provisions that alluvial deposits along the
banks of a creek do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been added.
The only restriction provided for by law is that the owner of the adjoining property
must register the same under the Torrens system; otherwise, the alluvial property
may be subject to acquisition through prescription by third persons.28

In contrast, properties of public dominion cannot be acquired by prescription. No

matter how long the possession of the properties has been, there can be no
prescription against the State regarding property of public domain.29Even a city or
municipality cannot acquire them by prescription as against the State.30

Hence, while it is true that a creek is a property of public dominion,31 the land which
is formed by the gradual and imperceptible accumulation of sediments along its
banks does not form part of the public domain by clear provision of law.

Moreover, an indispensable party is one whose interest in the controversy is such

that a final decree would necessarily affect his/her right, so that the court cannot
proceed without their presence.32 In contrast, a necessary party is one whose
presence in the proceedings is necessary to adjudicate the whole controversy but
whose interest is separable such that a final decree can be made in their absence
without affecting them.33

In the instant case, the action for prohibition seeks to enjoin the city government of
Parañaque from proceeding with its implementation of the road construction project.
The State is neither a necessary nor an indispensable party to an action where no
positive act shall be required from it or where no obligation shall be imposed upon it,
such as in the case at bar. Neither would it be an indispensable party if none of its
properties shall be divested nor any of its rights infringed.

We also find that the character of possession and ownership by the respondents
over the contested land entitles them to the avails of the action.

A right in esse means a clear and unmistakable right.34 A party seeking to avail of an
injunctive relief must prove that he or she possesses a right in esse or one that is
actual or existing.35 It should not be contingent, abstract, or future rights, or one
which may never arise.36

In the case at bar, respondents assert that their predecessor-in-interest, Pedro

Vitalez, had occupied and possessed the subject lot as early as 1930. In 1964,
respondent Mario Ebio secured a permit from the local government of Parañaque for
the construction of their family dwelling on the said lot. In 1966, Pedro executed an
affidavit of possession and occupancy allowing him to declare the property in his
name for taxation purposes. Curiously, it was also in 1966 when Guaranteed
51
Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which adjoins the land
occupied by the respondents, donated RL 8 to the local government of Parañaque.

From these findings of fact by both the trial court and the Court of Appeals, only one
conclusion can be made: that for more than thirty (30) years, neither Guaranteed
Homes, Inc. nor the local government of Parañaque in its corporate or private
capacity sought to register the accreted portion. Undoubtedly, respondents are
deemed to have acquired ownership over the subject property through prescription.
Respondents can assert such right despite the fact that they have yet to register
their title over the said lot. It must be remembered that the purpose of land
registration is not the acquisition of lands, but only the registration of title which the
applicant already possessed over the land. Registration was never intended as a
means of acquiring ownership.37 A decree of registration merely confirms, but does
not confer, ownership.38

Did the filing of a sales patent application by the respondents, which remains
pending before the DENR, estop them from filing an injunction suit?

We answer in the negative.

Confirmation of an imperfect title over a parcel of land may be done either through
judicial proceedings or through administrative process. In the instant case,
respondents admitted that they opted to confirm their title over the property
administratively by filing an application for sales patent.

Respondents’ application for sales patent, however, should not be used to prejudice
or derogate what may be deemed as their vested right over the subject property.
The sales patent application should instead be considered as a mere superfluity
particularly since ownership over the land, which they seek to buy from the State, is
already vested upon them by virtue of acquisitive prescription. Moreover, the State
does not have any authority to convey a property through the issuance of a grant or
a patent if the land is no longer a public land.39

Nemo dat quod dat non habet. No one can give what he does not have. Such
principle is equally applicable even against a sovereign entity that is the State.

WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007
Decision, as well as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R.
SP No. 91350 are hereby AFFIRMED.

With costs against petitioners.

SO ORDERED.

52
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 98045 June 26, 1996

DESAMPARADO VDA. DE NAZARENO and LETICIA NAZARENO

TAPIA, petitioners,
vs.
THE COURT OF APPEALS, MR. & MRS. JOSE SALASALAN, MR. & MRS. LEO
RABAYA, AVELINO LABIS, HON. ROBERTO G. HILARIO, ROLLEO I. IGNACIO,
ALBERTO M. GILLERA and HON. ABELARDO G. PALAD, JR., in their official
and/or private capacities, respondents.

ROMERO, J.:p

Petitioners Desamparado Vda. de Nazareno and Leticia Nazareno Tapia challenge

the decision of the Court of Appeals which affirmed the dismissal of petitioners'
complaint by the Regional Trial Court of Misamis Oriental, Branch 22. The complaint
was for annulment of the verification, report and recommendation, decision and
order of the Bureau of Lands regarding a parcel of public land.

The only issue involved in this petition is whether or not petitioners exhausted
administrative remedies before having recourse to the courts.

The subject of this controversy is a parcel of land situated in Telegrapo, Puntod,

Cagayan de Oro City. Said land was formed as a result of sawdust dumped into the
dried-up Balacanas Creek and along the banks of the Cagayan river.

Sometime in 1979, private respondents Jose Salasalan and Leo Rabaya leased the
subject lots on which their houses stood from one Antonio Nazareno, petitioners'
predecessor-in-interest. In the latter part of 1982, private respondents allegedly
stopped paying rentals. As a result, Antonio Nazareno and petitioners filed a case
for ejectment with the Municipal Trial Court of Cagayan de Oro City, Branch 4. A
decision was rendered against private respondents, which decision was affirmed by
the Regional Trial Court of Misamis Oriental, Branch 20.

The case was remanded to the municipal trial court for execution of judgment after
the same became final and executory. Private respondents filed a case for
annulment of judgment before the Regional Trial Court of Misamis Oriental, Branch
24 which dismissed the same. Antonio Nazareno and petitioners again moved for
execution of judgment but private respondents filed another case for certiorari with
53
prayer for restraining order and/or writ of preliminary injunction with the Regional
Trial Court of Misamis Oriental, Branch 25 which was likewise dismissed. The
decision of the lower court was finally enforced with the private respondents being
ejected from portions of the subject lots they occupied..

Before he died, Antonio Nazareno caused the approval by the Bureau of Lands of
the survey plan designated as Plan Csd-106-00571 with a view to perfecting his title
over the accretion area being claimed by him. Before the approved survey plan
could be released to the applicant, however, it was protested by private respondents
before the Bureau of Lands.

In compliance with the order of respondent District Land Officer Alberto M. Gillera,
respondent Land Investigator Avelino G. Labis conducted an investigation and
rendered a report to the Regional Director recommending that Survey Plan No. MSI-
10-06-000571-D (equivalent to Lot No. 36302, Cad. 237) in the name of Antonio
Nazareno, be cancelled and that private respondents be directed to file appropriate
public land applications.

Based on said report, respondent Regional Director of the Bureau of Lands Roberto
Hilario rendered a decision ordering the amendment of the survey plan in the name
of Antonio Nazareno by segregating therefrom the areas occupied by the private
respondents who, if qualified, may file public land applications covering their
respective portions.

Antonio Nazareno filed a motion for reconsideration with respondent Rolleo Ignacio,
Undersecretary of the Department of Natural Resources and Officer-in-Charge of
the Bureau of Lands who denied the motion. Respondent Director of Lands
Abelardo Palad then ordered him to vacate the portions adjudicated to private
respondents and remove whatever improvements they have introduced thereon. He
also ordered that private respondents be placed in possession thereof.

Upon the denial of the late Antonio Nazareno's motion for reconsideration,
petitioners Desamparado Vda. de Nazareno and Leticia Tapia Nazareno, filed a
case before the RTC, Branch 22 for annulment of the following: order of
investigation by respondent Gillera, report and recommendation by respondent
Labis, decision by respondent Hilario, order by respondent Ignacio affirming the
decision of respondent Hilario and order of execution by respondent Palad. The
RTC dismissed the complaint for failure to exhaust administrative remedies which
resulted in the finality of the administrative decision of the Bureau of Lands.

On appeal, the Court of Appeals affirmed the decision of the RTC dismissing the
complaint. Applying Section 4 of C.A. No. 141, as amended, it contended that the
approval of the survey plan belongs exclusively to the Director of Lands. Hence,
factual findings made by the Metropolitan Trial Court respecting the subject land
cannot be held to be controlling as the preparation and approval of said survey
plans belong to the Director of Lands and the same shall be conclusive when
approved by the Secretary of Agriculture and Natural resources. 1
54
Furthermore, the appellate court contended that the motion for reconsideration filed
by Antonio Nazareno cannot be considered as an appeal to the Office of the
Secretary of Agriculture and Natural Resources, as mandated by C.A. No. 141
inasmuch as the same had been acted upon by respondent Undersecretary Ignacio
in his capacity as Officer-in-charge of the Bureau of Lands and not as
Undersecretary acting for the Secretary of Agriculture and Natural Resources. For
the failure of Antonio Nazareno to appeal to the Secretary of Agriculture and Natural
Resources, the present case does not fall within the exception to the doctrine of
exhaustion of administrative remedies. It also held that there was no showing of
oppressiveness in the manner in which the orders were issued and executed..

Hence, this petition.

Petitioners assign the following errors:

I. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL,

ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION
OF THE LOWER COURT WHICH IS CONTRARY TO THE
PREVAILING FACTS AND THE LAW ON THE MATTER;

II. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL,

ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION
OF THE LOWER COURT DISMISSING THE ORIGINAL CASE WHICH
FAILED TO CONSIDER THAT THE EXECUTION ORDER OF PUBLIC
RESPONDENT ABELARDO G. PALAD, JR., DIRECTOR OF LANDS,
MANILA, PRACTICALLY CHANGED THE DECISION OF PUBLIC
RESPONDENT ROBERTO HILARIO, REGIONAL DIRECTOR,
BUREAU OF LANDS, REGION 10, THUS MAKING THE CASE
PROPER SUBJECT FOR ANNULMENT WELL WITHIN THE
JURISDICTION OF THE LOWER COURT.

The resolution of the above issues, however, hinges on the question of whether or
not the subject land is public land. Petitioners claim that the subject land is private
land being an accretion to his titled property, applying Article 457 of the Civil Code
which provides:

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.

In the case of Meneses v. CA, 2 this Court held that accretion, as a mode of
acquiring property under Art. 457 of the Civil Code, requires the concurrence of
these requisites : (1) that the deposition of soil or sediment be gradual and
imperceptible; (2) that it be the result of the action of the waters of the river (or sea);
and (3) that the land where accretion takes place is adjacent to the banks of rivers
(or the sea coast). These are called the rules on alluvion which if present in a case,
give to the owners of lands adjoining the banks of rivers or streams any accretion
gradually received from the effects of the current of waters.
55
For petitioners to insist on the application of these rules on alluvion to their case, the
above-mentioned requisites must be present. However, they admit that the accretion
was formed by the dumping of boulders, soil and other filling materials on portions of
the Balacanas Creek and the Cagayan River bounding their land. 3 It cannot be
claimed, therefore, that the accumulation of such boulders, soil and other filling
materials was gradual and imperceptible, resulting from the action of the waters or
the current of the Balacanas Creek and the Cagayan River. In Hilario v. City of
Manila, 4 this Court held that the word "current" indicates the participation of the
body of water in the ebb and flow of waters due to high and low tide. Petitioners'
submission not having met the first and second requirements of the rules on
alluvion, they cannot claim the rights of a riparian owner.

In any case, this court agrees with private respondents that petitioners are estopped
from denying the public character of the subject land, as well as the jurisdiction of
the Bureau of Lands when the late Antonio Nazareno filed his Miscellaneous Sales
Application MSA (G-6) 571. 5 The mere filing of said Application constituted an
admission that the land being applied for was public land, having been the subject of
Survey Plan No. MSi-10-06-000571-D (Equivalent to Lot No. 36302, Cad-237) which
was conducted as a consequence of Antonio Nazareno's Miscellaneous Sales
Application wherein said land was described as an orchard. Said description by
Antonio Nazareno was, however, controverted by respondent Labis in his
investigation report to respondent Hilario based on the findings of his ocular
inspection that said land actually covers a dry portion of Balacanas Creek and a
swampy portion of Cagayan River. The investigation report also states that, except
for the swampy portion which is fully planted to nipa palms, the whole area is fully
occupied by a part of a big concrete bodega of petitioners and several residential
houses made of light materials, including those of private respondents which were
erected by themselves sometime in the early part of 1978. 6

Furthermore, the Bureau of Lands classified the subject land as an accretion area
which was formed by deposits of sawdust in the Balacanas Creek and the Cagayan
river, in accordance with the ocular inspection conducted by the Bureau of
Lands. 7 This Court has often enough held that findings of administrative agencies
which have acquired expertise because their jurisdiction is confined to specific
matters are generally accorded not only respect but even finality.8 Again, when said
factual findings are affirmed by the Court of Appeals, the same are conclusive on
the parties and not reviewable by this Court. 9

It is this Court's irresistible conclusion, therefore, that the accretion was man-made
or artificial. In Republic v. CA,10 this Court ruled that the requirement that the deposit
should be due to the effect of the current of the river is indispensable. This excludes
from Art. 457 of the Civil Code all deposits caused by human intervention. Putting it
differently, alluvion must be the exclusive work of nature. Thus, in Tiongco
v. Director of Lands, et al., 11 where the land was not formed solely by the natural
effect of the water current of the river bordering said land but is also the

56
consequence of the direct and deliberate intervention of man, it was deemed a man-
made accretion and, as such, part of the public domain.

In the case at bar, the subject land was the direct result of the dumping of sawdust
by the Sun Valley Lumber Co. consequent to its sawmill
12
operations. Even if this Court were to take into consideration petitioners'
submission that the accretion site was the result of the late Antonio Nazareno's labor
consisting in the dumping of boulders, soil and other filling materials into the
Balacanas Creek and Cagayan River bounding his land, 13 the same would still be
part of the public domain.

Having determined that the subject land is public land, a fortiori, the Bureau of
Lands, as well as the Office of the Secretary of Agriculture and Natural Resources
have jurisdiction over the same in accordance with the Public Land Law.
Accordingly, the court a quo dismissed petitioners' complaint for non-exhaustion of
administrative remedies which ruling the Court of Appeals affirmed.

However, this Court agrees with petitioners that administrative remedies have been
exhausted. Petitioners could not have intended to appeal to respondent Ignacio as
an Officer-In-Charge of the Bureau of Lands. The decision being appealed from was
the decision of respondent Hilario who was the Regional Director of the Bureau of
Lands. Said decision was made "for and by authority of the Director of Lands". 14 It
would be incongruous to appeal the decision of the Regional Director of the Bureau
of Lands acting for the Director of the Bureau of Lands to an Officer-In-Charge of the
Bureau of Lands.

In any case, respondent Rolleo Ignacio's official designation was "Undersecretary of

the Department of Agriculture and Natural Resources." He was only an "Officer-In-
Charge" of the Bureau of Lands. When he acted on the late Antonio Nazareno's
motion for reconsideration by affirming or adopting respondent Hilario's decision, he
was acting on said motion as an Undersecretary on behalf of the Secretary of the
Department. In the case ofHamoy v. Secretary of Agriculture and Natural
Resources, 15 this Court held that the Undersecretary of Agriculture and Natural
Resources may modify, adopt, or set aside the orders or decisions of the Director of
Lands with respect to questions involving public lands under the administration and
control of the Bureau of Lands and the Department of Agriculture and Natural
Resources. He cannot, therefore, be said to have acted beyond the bounds of his
jurisdiction under Sections 3, 4 and 5 of Commonwealth Act No. 141 16

As borne out by the administrative findings, the controverted land is public land,
being an artificial accretion of sawdust. As such, the Director of Lands has
jurisdiction, authority and control over the same, as mandated under Sections 3 and
4 of the Public Land Law (C.A. No. 141) which states, thus:

Sec. 3. The Secretary of Agriculture and Natural Resources shall be the

exclusive officer charged with carrying out the provisions of this Act
through the Director of Lands who shall act under his immediate control.
57
 Sec. 4. Subject to said control, the Director of Lands shall have direct
executive control of the survey, classification, lease, sale or any other
form of concession or disposition and management of the lands of the
public domain, and his decisions as to questions of fact shall be
conclusive when approved by the Secretary of Agriculture and Natural
Resources.

In connection with the second issue, petitioners ascribe whim, arbitrariness or

capriciousness in the execution order of public respondent Abelardo G. Palad, the
Director of Lands. This Court finds otherwise since said decision was based on the
conclusive finding that the subject land was public land. Thus, this Court agrees with
the Court of Appeals that the Director of Lands acted within his rights when he
issued the assailed execution order, as mandated by the aforecited provisions.

Petitioners' allegation that respondent Palad's execution order directing them to

vacate the subject land practically changed respondent Hilario's decision is
baseless. It is incorrect for petitioners to assume that respondent Palad awarded
portions of the subject land to private respondents Salasalans and Rabayas as they
had not yet been issued patents or titles over the subject land. The execution order
merely directed the segregation of petitioners' titled lot from the subject land which
was actually being occupied by private respondents before they were ejected from
it. Based on the finding that private respondents were actually in possession or were
actually occupying the subject land instead of petitioners, respondent Palad, being
the Director of Lands and in the exercise of his administrative discretion, directed
petitioners to vacate the subject land on the ground that private respondents have a
preferential right, being the occupants thereof.

While private respondents may not have filed their application over the land
occupied by them, they nevertheless filed their protest or opposition to petitioners'
Miscellaneous Sales Application, the same being preparatory to the filing of an
application as they were in fact directed to do so. In any case, respondent Palad's
execution order merely implements respondent Hilario's order. It should be noted
that petitioners' own application still has to be given due course. 17

As Director of Lands, respondent Palad is authorized to exercise executive control

over any form of concession, disposition and management of the lands of the public
domain. 18 He may issue decisions and orders as he may see fit under the
circumstances as long as they are based on the findings of fact.

In the case of Calibo v. Ballesteros, 19 this Court held that where, in the disposition
of public lands, the Director of Lands bases his decision on the evidence thus
presented, he clearly acts within his jurisdiction, and if he errs in appraising the
evidence, the error is one of judgment, but not an act of grave abuse of discretion
annullable by certiorari. Thus, except for the issue of non-exhaustion of
administrative remedies, this Court finds no reversible error nor grave abuse of
discretion in the decision of the Court of Appeals.

58
WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 161030 September 14, 2011

JOSE FERNANDO, JR., ZOILO FERNANDO, NORMA FERNANDO BANARES,

ROSARIO FERNANDO TANGKENCGO, HEIRS OF TOMAS FERNANDO,
represented by ALFREDO V. FERNANDO, HEIRS OF GUILLERMO FERNANDO,
represented by Ronnie H. Fernando, HEIRS OF ILUMINADA FERNANDO,
represented by Benjamin Estrella and HEIRS OF GERMOGENA
FERNANDO, Petitioners,
vs.
LEON ACUNA, HERMOGENES FERNANDO, HEIRS OF SPOUSES ANTONIO
FERNANDO AND FELISA CAMACHO, represented by HERMOGENES
FERNANDO, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure seeking to reverse and set aside the Decision1 dated November 24, 2003
of the Court of Appeals in CA-G.R. CV No. 75773, entitled "Jose Fernando, Jr., et al.
v. Heirs of Germogena Fernando, et al.," which reversed and set aside the
Decision2dated May 16, 2002 of Branch 84, Regional Trial Court (RTC) of Malolos,
Bulacan in Civil Case No. 256-M-97.

At the heart of this controversy is a parcel of land covered by Original Certificate of

Title (OCT) No. RO-487 (997)3 registered in the names of Jose A. Fernando,
married to Lucila Tinio, and Antonia A. Fernando, married to Felipe Galvez, and
located in San Jose, Baliuag, Bulacan. When they died intestate, the property
remained undivided. Petitioners herein – namely, Jose Fernando, Jr., Zoilo
Fernando, Norma Fernando Banares, Rosario Fernando Tangkencgo, the heirs of
Tomas Fernando, the heirs of Guillermo Fernando, the heirs of Iluminada Fernando
and the heirs of Germogena Fernando – are the heirs and successors-in-interest of
the deceased registered owners. However, petitioners failed to agree on the division

59
of the subject property amongst themselves, even after compulsory conciliation
before the Barangay Lupon.

Thus, petitioners, except for the heirs of Germogena Fernando, filed a

Complaint4 for partition on April 17, 1997 against the heirs of Germogena Fernando.
In the Complaint, plaintiffs alleged, among others, that they and defendants are
common descendants and compulsory heirs of the late spouses Jose A. Fernando
and Lucila Tinio, and the late spouses Antonia A. Fernando and Felipe Galvez. They
further claimed that their predecessors-in-interest died intestate and without
instructions as to the disposition of the property left by them covered by OCT No.
RO-487 (997). There being no settlement, the heirs are asking for their rightful and
lawful share because they wish to build up their homes or set up their business in
the respective portions that will be allotted to them. In sum, they prayed that the
subject property be partitioned into eight equal parts, corresponding to the
hereditary interest of each group of heirs.

In their Answer5 filed on May 20, 1997, defendants essentially admitted all of the
allegations in the complaint. They alleged further that they are not opposing the
partition and even offered to share in the expenses that will be incurred in the
course of the proceedings.

In his Complaint in Intervention6 filed on January 12, 1998, respondent Leon Acuna
(Acuna) averred that in the Decision7 dated November 29, 1929 of the Cadastral
Court of Baliuag, Bulacan, the portion of the property identified as Lot 1303 was
already adjudicated to: (a) Antonio Fernando, married to Felisa Camacho; (b)
spouses Jose Martinez and Gregoria Sison; (c) spouses Ignacio de la Cruz and
Salud Wisco; and (d) Jose Fernando, married to Lucila Tinio, the petitioners’
predecessor-in-interest. He likewise claimed that in a 1930 Decision of the Cadastral
Court, the portion identified as Lot 1302 was also already adjudicated to other
people as well.

Respondent Acuna further alleged that Salud Wisco, through her authorized
attorney-in-fact, Amador W. Cruz, sold her lawful share denominated as Lot 1303-D
with an area of 3,818 square meters to Simeon P. Cunanan,8who in turn sold the
same piece of land to him as evidenced by a Deed of Sale.9 He also belied
petitioners’ assertion that the subject property has not been settled by the parties
after the death of the original owners in view of the Decision10 dated July 30, 1980 of
the Court of First Instance (CFI) of Baliuag, Bulacan, in LRC Case No. 80-389 which
ordered the Register of Deeds of Bulacan to issue the corresponding certificates of
title to the claimants of the portion of the subject property designated as Lot
1302.11 Norma Fernando, one of the petitioners in the instant case, even testified in
LRC Case No. 80-389. According to respondent Acuna, this circumstance betrayed
bad faith on the part of petitioners in filing the present case for partition.

Respondent Acuna likewise averred that the action for partition cannot prosper since
the heirs of the original owners of the subject property, namely Rosario, Jose Jr.,
Norma, Tomas, Guillermo, Leopoldo, Hermogena, Illuminada and Zoilo, all
60
surnamed Fernando, and Lucila Tinio, purportedly had already sold their respective
one-tenth (1/10) share each in the subject property to Ruperta Sto. Domingo
Villasenor for the amount of P35,000.00 on January 25, 1978 as evidenced by a
"Kasulatan sa Bilihang Patuluyan."12 He added that he was in possession of the
original copy of OCT No. RO-487 (997) and that he had not commenced the
issuance of new titles to the subdivided lots because he was waiting for the owners
of the other portions of the subject property to bear their respective shares in the
cost of titling.

Subsequently, a Motion for Intervention13 was filed on June 23, 1998 by respondent
Hermogenes Fernando (Hermogenes), for himself and on behalf of the heirs of the
late spouses, Antonio A. Fernando and Felisa Camacho. According to him, in the
July 30, 1980 Decision of the CFI of Bulacan, their predecessors-in-interest had
already been adjudged owners of Lots 1302-A, 1302-F, 1302-G,14 1302-H and
1302-J of OCT No. RO-487 (997) and any adverse distribution of the properties
would cause respondents damage and prejudice. He would also later claim, in his
Answer-in-Intervention,15 that the instant case is already barred by res judicata and,
should be dismissed.

In the interest of substantial justice, the trial court allowed the respondents to
intervene in the case.

The plaintiffs and defendants jointly moved to have the case submitted for judgment
on the pleadings on May 7, 1999.16 However, the trial court denied said motion in a
Resolution17 dated August 23, 1999 primarily due to the question regarding the
ownership of the property to be partitioned, in light of the intervention of respondents
Acuna and Hermogenes who were claiming legal right thereto.

In their Manifestation18 filed on April 12, 2000, petitioners affirmed their execution of
a Deed of Sale in favor of Ruperta Sto. Domingo Villasenor in 1978, wherein they
sold to her 1,000 square meters from Lot 1303 for the sum of P 35,000.00.

After the pre-trial conference, trial ensued. On September 19, 2000, petitioner
Elizabeth Alarcon testified that they (plaintiffs) are not claiming the entire property
covered by OCT No. RO-487 (997) but only the area referred to as Lot 1303 and
Sapang Bayan. She also admitted that Lot 1302 had already been divided into ten
(10) sublots and allocated to various owners pursuant to the July 30, 1980 Decision
of the CFI of Baliuag, Bulacan and these owners already have their own titles. She
likewise claimed that the entire area consisting of Lot 1303 and Sapang Bayan is
based on the subdivision plan of Lot 1303. She admitted that plaintiffs’ predecessor-
in-interest was only allocated a portion of Lot 1303 based on the said plan.
However, she claimed that the November 29, 1929 Decision subdividing Lot 1303
was never implemented nor executed by the parties.19

Petitioner Norma Fernando testified on October 3, 2000 that she is one of the
children of Jose A. Fernando and Lucila Tinio. She affirmed that plaintiffs were only
claiming Lot 1303 and Sapang Bayan. She also testified that Sapang Bayan was
61
supposedly included in Lot 1302 and was previously a river until it dried up. Unlike
Lot 1302, the rest of the property was purportedly not distributed. She likewise
averred that she is aware of a November 29, 1929 Decision concerning the
distribution of Lot 1303 issued by the cadastral court but insisted that the basis of
the claims of the petitioners over Lot 1303 is the title in the name of her ascendants
and not said Decision.20

On November 16, 2000, as previously directed by the trial court and agreed to by
the parties, counsel for respondent Hermogenes prepared and submitted an English
translation of the November 29, 1929 Decision. The same was admitted and marked
in evidence as Exhibit "X"21 as a common exhibit of the parties. The petitioners also
presented Alfredo Borja, the Geodetic Engineer who conducted a relocation survey
of the subject property.

After plaintiffs rested their case, respondent Hermogenes testified on December 7,

2000. In his testimony, he claimed to know the plaintiffs and defendants as they
were allegedly his relatives and neighbors. He confirmed that according to the
November 29, 1929 Decision, portions of Lot 1303 was designated as Lots 1303-A,
1303-B, 1303-C and 1303-D which were adjudicated to certain persons, including
Jose Fernando, while the rest of Lot 1303 was adjudicated to his parents, Antonio A.
Fernando married to Felisa Camacho. According to respondent Hermogenes, his
family’s tenant and the latter’s children occupied the portion of Lot 1303 allotted to
his (Hermogenes) parents while the rest of Lot 1303 was occupied by the persons
named in the said November 29, 1929 Decision. He admitted, however, that nobody
among the purported possessors of Lot 1303 registered the lots assigned to them in
the Decision.22

On January 18, 2001, respondent Hermogenes presented a witness, Engineer

Camilo Vergara who testified that the subject land is divided into Lots 1302 and
1303 with a creek dividing the two lots known as Sapang Bayan. He also identified a
Sketch Plan numbered as PSD-45657 and approved on November 11,
1955.23 During the hearing on January 30, 2001, respondent Hermogenes made an
oral offer of his evidence and rested his case. On the same date, respondent Acuna,
in lieu of his testimony, offered for the parties to simply stipulate on the due
execution and authenticity of the Deeds of Sale dated April 6, 1979 and December
28, 1980, showing the transfer of Lot 1303-D from Salud Wisco to Simeon Cunanan
and subsequently to respondent Acuna. When counsel for plaintiffs and defendants
agreed to the stipulation, albeit objecting to the purpose for which the deeds of sale
were offered, the trial court admitted Acuna’s exhibits and Acuna rested his case.24

On February 15, 2001, plaintiffs recalled Norma Fernando as a rebuttal witness. In

her rebuttal testimony, she identified the tax declaration25 over the said property in
the name of Jose A. Fernando; an official receipt26 dated October 3, 1997 issued by
the Office of the Treasurer of the Municipality of Baliuag, Bulacan for payment of
real property taxes from 1991 to 1997; and a real property tax clearance27 dated
October 6, 1997, to show that plaintiffs have allegedly been paying the real property
taxes on the entire property covered by OCT No. RO-487 (997). However, she
62
further testified that they were now willing to pay taxes only over the portion with an
area of 44,234 square meters, which is included in their claim.28

In a Decision dated May 16, 2002, the trial court ruled that plaintiffs and defendants
(petitioners herein) were indeed the descendants and successors-in-interest of the
registered owners, Jose A. Fernando (married to Lucila Tinio) and Antonia Fernando
(married to Felipe Galvez), of the property covered by OCT No. RO-487 (997). After
finding that the parties admitted that Lot 1302 was already distributed and titled in
the names of third persons per the July 30, 1980 Decision of the CFI of Baliuag,
Bulacan the trial court proceeded to rule on the allocation of Lot 1303 and Sapang
Bayan.

With respect to Lot 1303, the trial court found that the November 29, 1929 Decision
of the Cadastral Court, adjudicating said lot to different persons and limiting Jose
Fernando’s share to Lot 1303-C, was never implemented nor executed despite the
lapse of more than thirty years. Thus, the said decision has already prescribed and
can no longer be executed. The trial court ordered the reversion of Lot 1303 to the
ownership of spouses Jose A. Fernando and Lucila Tinio and spouses Antonia A.
Fernando and Felipe Galvez under OCT No. RO-487 (997) and allowed the partition
of Lot 1303 among petitioners as successors-in-interest of said registered owners.
Excluded from the partition, however, were the portions of the property which
petitioners admitted had been sold or transferred to Ruperta Sto. Domingo
Villasenor and respondent Acuna.

As for the ownership of Sapang Bayan, the trial court found that the same had not
been alleged in the pleadings nor raised as an issue during the pre-trial conference.
Also, according to the trial court, the parties failed to clearly show whether Sapang
Bayan was previously a dry portion of either Lot 1302 or Lot 1303. Neither was there
any proof that Sapang Bayan was a river that just dried up or that it was an
accretion which the adjoining lots gradually received from the effects of the current
of water. It was likewise not established who were the owners of the lots adjoining
Sapang Bayan. The trial court concluded that none of the parties had clearly and
sufficiently established their claims over Sapang Bayan.

The dispositive portion of the May 16, 2002 Decision of the trial court reads:

WHEREFORE, all the foregoing considered, judgment is hereby rendered ordering

the reversion of Lot 1303, except the portions allotted to Acuna and Ruperta Sto.
Domingo Villasenor, to the ownership of Jose Fernando and Lucia Tinio and Antonia
Fernando and Felipe Galvez under OCT No. 997 and thereafter allowing the
partition of said Lot 1303 among the plaintiffs and the defendants as successors-in-
interest of Jose and Lucia as well as Antonia and Felipe after the settlement of any
inheritance tax, fees, dues and/or obligation chargeable against their estate.29

All the parties, with the exception of respondent Acuna, elevated this case to the
Court of Appeals which rendered the assailed November 24, 2003 Decision, the
dispositive portion of which reads:
63
WHEREFORE, premises considered, the decision dated May 16, 2002, of the
Regional Trial Court of Malolos, Bulacan, Third Judicial Region, Branch 84, in Civil
Case No. 256-M-97, is hereby REVERSED and SET ASIDE and the complaint
dated April 17, 1997 filed by plaintiffs-appellants is dismissed. Costs against
plaintiffs-appellants.30

Hence, plaintiffs and defendants in the court a quo elevated the matter for our
review through the instant petition.

Petitioner raises the following issues for consideration:

1. Whether or not the ownership of Lot 1303 and the Sapang Bayan portion of
the piece of land covered by O.C.T. No. RO-487 (997) or Plan Psu-39080
should revert to the descendants and heirs of the late spouses Jose Fernando
and Lucila Tinio and Antonia Fernando, married to Felipe Galvez;

2. Whether or not a title registered under the Torrens system, as the subject
original certificate of title is the best evidence of ownership of land and is a
notice against the world.31

The petition is without merit.

Petitioners based their claims to the disputed areas designated as Lot 1303 and
Sapang Bayan on their ascendants’ title, OCT No. RO-487 (997), which was issued
on February 26, 1927 in the name of Jose A. Fernando married to Lucila Tinio and
Antonia A. Fernando married to Felipe Galvez. The Court now rules on these claims
in seriatim.

Petitioners’ claim with respect to Lot 1303

As the records show, in the November 29, 1929 Decision of the Cadastral Court of
Baliuag, Bulacan (in Cadastral Record No. 14, GLRO Cad. Record No. 781) which
was written in Spanish, Lot 1303 had already been divided and adjudicated to
spouses Jose A. Fernando and Lucila Tinio; spouses Antonia A. Fernando and
Felipe Galvez; spouses Antonio A. Fernando and Felisa Camacho; spouses Jose
Martinez and Gregoria Sison; and spouses Ignacio de la Cruz and Salud Wisco from
whom respondent Acuna derived his title. The English translation of the said
November 29, 1929 Decision was provided by respondent Hermogenes and was
adopted by all the parties as a common exhibit designated as Exhibit "X." The
agreed English translation of said Decision reads:

Lot No. 1303 – This lot is decreed in record No. 448, G.L.R.O. Record No. 25414
and actually with Original Certificate No. 997 (exhibited today) in the name of Jose
A. Fernando and Antonia A. Fernando, who now pray that said lot be subdivided in
accordance with the answers recorded in the instant cadastral record, and the
sketch, Exh. "A", which is attached to the records.

64
A part or portion of the lot has been claimed by Antonio A. Fernando, of legal age,
married to Felisa Camacho; another portion by the spouses Jose Martinez and
Gregoria Sison; another portion by Antonia A. Fernando, of legal age, married to
Felipe Galvez; another portion by Jose A. Fernando, of legal age, married to Lucila
Tinio; and another portion by the spouses Ignacio de la Cruz and Salud Wisco, both
of legal age. The part claimed by the spouses Jose A. Martinez and Gregoria Sison
is Lot 1303-A of Exh. A; the part claimed by Antonia A. Fernando is Lot 1303-B of
said exhibit; the part claimed by Jose A. Fernando is Lot 1303-C of said exhibit, and
the part claimed by the spouses Ignacio de la Cruz and Salud Wisco is Lot 1303-D
of the aforementioned Exhibit.

The subdivision of said lot is hereby ordered, separating from the same the portions
that correspond to each of the claimants, which portions are known as Lots 1303-A,
1303-B, 1303-C, and 1303-D in the sketch, Exh. "A", and once subdivided, are
adjudicated in favor of the spouses, Jose Martinez and Gregoria Sison, of legal age,
Lot No. 1303-A, in favor of Antonia A. Fernando, of legal age, married to Felipe
Galvez, Lot No. 1303-B; in favor of Jose A. Fernando, of legal age, married to Lucila
Tinio, Lot 1303-C; in favor of the spouses Ignacio de la Cruz and Salud Wisco, of
legal age, Lot 1303-D; and the rest of Lot 1303 is adjudged in favor of Antonio A.
Fernando married to Felisa Camacho. It is likewise ordered that once the
subdivision plan is approved, the same be forwarded by the Director of Lands to this
Court for its final decision.

It is ordered that the expense for mentioned subdivision, shall be for the account of
the spouses Jose Martinez and Gregoria Sison, Antonia A. Fernando, Jose A.
Fernando, the spouses Ignacio de la Cruz and Salud Wisco, and Antonio A.
Fernando.32

From the foregoing, it would appear that petitioners’ ascendants themselves

petitioned for the cadastral court to divide Lot 1303 among the parties to the 1929
case and they were only allocated Lots 1303-B and 1303-C. Still, as the trial court
noted, the November 29, 1929 Decision was never fully implemented in the sense
that the persons named therein merely proceeded to occupy the lots assigned to
them without having complied with the other directives of the cadastral court which
would have led to the titling of the properties in their names. Nonetheless, it is
undisputed that the persons named in the said November 29, 1929 Decision and,
subsequently, their heirs and assigns have since been in peaceful and uncontested
possession of their respective lots for more than seventy (70) years until the filing of
the suit for partition on April 17, 1997 by petitioners which is the subject matter of
this case. Respondent Hermogenes, who testified that petitioners were his relatives
and neighbors, further affirmed before the trial court that the persons named in the
November 29, 1929 Decision took possession of their respective lots:

ATTY. VENERACION:

Q – This Jose A. Fernando married to Lucila Tinio, you testified earlier are the
parents of the plaintiffs. Did they take possession of lot 1303-C?
65
A – Yes, sir. They took possession.

Q – Did they take possession of the other lots?

A – No. Yes, the portion…

Q – The other lots in the name of the other persons. Did they take possession of
that?

A – Yes, they took took possession of the other… No, sir.

Q – I am asking you whether they took possession, the children…

ATTY. SANTIAGO:

The questions are already answered, your Honor.

ATTY. VENERACION:

What is the answer?

ATTY. SANTIAGO:

It’s in the record.

COURT:

The persons named in the Decision already took possession of the lots allotted to
them as per that Decision. So that was already answered. Anything else?

ATTY. VENERACION;

No more question, Your Honor.33

It is noteworthy that petitioners do not dispute that the November 29, 1929 Decision
of the cadastral court already adjudicated the ownership of Lot 1303 to persons
other than the registered owners thereof. Petitioners would, nonetheless, claim that
respondents’ purported failure to execute the November 29, 1929 Decision over Lot
1303 (i.e., their failure to secure their own titles) meant that the entire Lot 1303
being still registered in the name of their ascendants rightfully belongs to them. This
is on the theory that respondents’ right to have the said property titled in their names
have long prescribed.

On this point, we agree with the appellate court.

Section 47 of Presidential Decree No. 1529, otherwise known as the Property

Registration Decree, states that "[n]o title to registered land in derogation of the title
of the registered owner shall be acquired by prescription or adverse possession."

66
Thus, the Court has held that the right to recover possession of registered land is
imprescriptible because possession is a mere consequence of ownership.34

However, in Heirs of Anacleto B. Nieto v. Municipality of Meycauayan,

Bulacan,35 the Court had recognized the jurisprudential thread regarding the
exception to the foregoing doctrine 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.

Thus, in Heirs of Batiog Lacamen v. Heirs of Laruan,36 the Court had held that while
a person may not acquire title to the registered property through continuous adverse
possession, in derogation of the title of the original registered owner, the heir of the
latter, however, may lose his right to recover back the possession of such property
and the title thereto, by reason of laches.

In the more recent case of Bartola M. Vda. De Tirona v. Encarnacion, 37 we similarly

held that while jurisprudence is settled on the imprescriptibility and indefeasibility of
a Torrens title, there is equally an abundance of cases where we unequivocally
ruled that registered owners may lose their right to recover possession of property
through the equitable principle of laches.

Laches means the failure or neglect for an unreasonable and unexplained length of
time to do that which, by observance of 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 either has
abandoned or declined to assert it. Laches thus operates as a bar in equity. 38 The
essential elements of laches are: (a) conduct on the part of the defendant, or of one
under whom he claims, giving rise to the situation complained of; (b) delay in
asserting complainant’s rights after he had knowledge of defendant’s acts and after
he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that
the complainant will assert the right on which he bases his suit; and (d) injury or
prejudice to the defendant in the event the relief is accorded to the complainant.39

In view of respondents’ decades long possession and/or ownership of their

respective lots by virtue of a court judgment and the erstwhile registered owners’
inaction and neglect for an unreasonable and unexplained length of time in pursuing
the recovery of the land, assuming they retained any right to recover the same, it is
clear that respondents’ possession may no longer be disturbed. The right of the
registered owners as well as their successors-in-interest to recover possession of
the property is already a stale demand and, thus, is barred by laches.

In the same vein, we uphold the finding of the Court of Appeals that the title of
petitioners’ ascendants wrongfully included lots belonging to third persons.40 Indeed,
petitioners’ ascendants appeared to have acknowledged this fact as they were even
the ones that prayed for the cadastral court to subdivide Lot 1303 as evident in the
November 29, 1929 Decision. We concur with the Court of Appeals that petitioners’

67
ascendants held the property erroneously titled in their names under an implied trust
for the benefit of the true owners. Article 1456 of the Civil Code provides:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.

As aptly observed by the appellate court, the party thus aggrieved has the right to
recover his or their title over the property by way of reconveyance while the same
has not yet passed to an innocent purchaser for value.41 As we held in Medizabel v.
Apao,42 the essence of an action for reconveyance is that the certificate of title is
respected as incontrovertible. What is sought is the transfer of the property, in this
case its title, which has been wrongfully or erroneously registered in another
person's name, to its rightful owner or to one with a better right. It is settled in
jurisprudence that mere issuance of the certificate of title in the name of any person
does not foreclose the possibility that the real property may be under co-ownership
with persons not named in the certificate or that the registrant may only be a trustee
or that other parties may have acquired interest subsequent to the issuance of the
certificate of title.43

We cannot subscribe to petitioners’ argument that whatever rights or claims

respondents may have under the November 29, 1929 Decision has prescribed for
their purported failure to fully execute the same. We again concur with the Court of
Appeals in this regard. An action for reconveyance of registered land based on
implied trust prescribes in ten (10) years, the point of reference being the date of
registration of the deed or the date of the issuance of the certificate of title over the
property. However, this Court has ruled that the ten-year prescriptive period applies
only when the person enforcing the trust is not in possession of the property. If a
person claiming to be its owner is in actual possession of the property, the right to
seek reconveyance, which in effect seeks to quiet title to the property, does not
prescribe. The reason is that the one who is in actual possession of the land
claiming to be its owner may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right.44

Petitioners’ claim with respect to Sapang Bayan

As for the issue of the ownership of Sapang Bayan, we sustain the appellate court
insofar as it ruled that petitioners failed to substantiate their ownership over said
area. However, we find that the Court of Appeals erred in ruling that the principle of
accretion is applicable. The said principle is embodied in Article 457 of the Civil
Code which states that "[t]o 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." We have held that for Article 457 to apply the following requisites must
concur: (1) that the deposit be gradual and imperceptible; (2) that it be made
through the effects of the current of the water; and (3) that the land where accretion
takes place is adjacent to the banks of rivers.45The character of the Sapang Bayan
property was not shown to be of the nature that is being referred to in the provision
68
which is an accretion known as alluvion as no evidence had been presented to
support this assertion.

In fact from the transcripts of the proceedings, the parties could not agree how
Sapang Bayan came about. Whether it was a gradual deposit received from the
river current or a dried-up creek bed connected to the main river could not be
ascertained.

Even assuming that Sapang Bayan was a dried-up creek bed, under Article 420,
paragraph 146 and Article 502, paragraph 147 of the Civil Code, rivers and their
natural beds are property of public dominion. In the absence of any provision of law
vesting ownership of the dried-up river bed in some other person, it must continue to
belong to the State.

We ruled on this issue in Republic v. Court of Appeals,48 to wit:

The lower court cannot validly order the registration of Lots 1 and 2 in the names of
the private respondents. These lots were portions of the bed of the Meycauayan
river and are therefore classified as property of the public domain under Article 420
paragraph 1 and Article 502, paragraph 1 of the Civil Code of the Philippines. They
are not open to registration under the Land Registration act. The adjudication of the
lands in question as private property in the names of the private respondents is null
and void.49 1avvphi1

Furthermore, in Celestial v. Cachopero,50 we similarly ruled that a dried-up creek

bed is property of public dominion:

A creek, like the Salunayan Creek, is a recess or arm extending from a river and
participating in the ebb and flow of the sea. As such, under Articles 420(1) and
502(1) of the Civil Code, the Salunayan Creek, including its natural bed, is property
of the public domain which is not susceptible to private appropriation and acquisitive
prescription. And, absent any declaration by the government, that a portion of the
creek has dried-up does not, by itself, alter its inalienable character.51

Therefore, on the basis of the law and jurisprudence on the matter, Sapang Bayan
cannot be adjudged to any of the parties in this case.

WHEREFORE, premises considered, the petition is hereby DENIED. The assailed

Decision dated November 24, 2003 of the Court of Appeals in CA-G.R. CV No.
75773 is hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

69
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 82220 July 14, 1995

PABLITO MENESES and LORENZO MENESES, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, EDUARDO QUISUMBING,
NORBERTO QUISUMBING, HEIRS OF EMILIO QUISUMBING (Carlos, Manuel
and Paz, all surnamed Quisumbing), HEIRS OF FERNANDO QUISUMBING
(Perla, Josefina, Napoleon, Honorato, Remedios and Alfonso, all surnamed
Quisumbing), HEIRS OF MANUEL QUISUMBING, SR. (Petrona, Natividad,
Manuel, Jr., Dolores and Lilia, all surnamed Quisumbing) and HEIRS OF
FRANCISCO QUISUMBING (Fe, Johnny, Ma. Luisa, Norberto, Jimmy, Ma.
Victoria, Elsa and Oscar, all surnamed Quisumbing), all represented by Atty.
Galileo Brion, respondents.

G.R. No. 82251 July 14, 1995

CESAR ALMENDRAL, petitioner,

vs.
EDUARDO QUISUMBING, respondent.

G.R. No. 83059 July 14, 1995

EDUARDO QUISUMBING, NORBERTO QUISUMBING, HEIRS OF EMILIO

QUISUMBING (Carlos, Manuel and Paz, all surnamed Quisumbing), HEIRS OF
FERNANDO QUISUMBING, (Perla, Josefina, Napoleon, Honorato, Remedios
and Alfonso, all surnamed Quisumbing), HEIRS OF MANUEL QUISUMBING,
SR. (Petrona, Natividad, Manuel, Jr., Dolores and Lilia, all surnamed
Quisumbing) and HEIRS OF FRANCISCO QUISUMBING (Fe, Johnny, Ma.
Victoria, Elsa and Oscar, all surnamed Quisumbing), petitioners,
vs.
HON. COURT OF APPEALS, PABLITO MENESES, LORENZO MENESES and
BRAULIO C. DARUM,respondents.

QUIASON, J.:

For review in these consolidated petitions is the Decision dated August 31, 1987 of
the Court of Appeals in CA-G.R. CV No. 07049 affirming the Decision dated March
26, 1984 of the Regional Trial Court, Branch 37, Calamba, Laguna, in Civil Case No.
70
474-83-C which declared as null and void the original certificates of title and free
patents issued to Pablito Meneses over lots found by the court to be accretion lands
forming parts of the bigger accretion land owned by Ciriaca Arguelles Vda. de
Quisumbing.

On March 1, 1977, Braulio C. Darum, then the District Land Officer of Los Baños,
Laguna, issued to Pablito Meneses Free Patent No. (IV-5) P-12807 and Original
Certificate of Title No. P-1268 covering Lot 1585 with an area of 417 square meters,
and Free Patent No (IV-5) 12808 and Original Certificate of Title No P-1269 for Lot
190 with an area of 515 square meters. Both lots are located in Los Baños, Laguna.

Pablito Meneses acquired said property from Silverio Bautista through a Deed of
Waiver and Transfer of Rights executed on May 5, 1975 in consideration of
Bautista's "love and affection" for and "some monetary obligations" in favor of
Pablito Meneses (Rollo, p. 45). After the execution of said document, Pablito
Meneses took possession of the land, introduced improvements thereon, declared
the land as his own for tax purposes and paid the corresponding realty taxes. In
turn, Bautista acquired the 900-square-meter land from his aunt, Sergia (Gliceria) M.
Almeda. He had been occupying the land since 1956.

On the other hand, the Quisumbing family traces ownership of the land as far back
as September 6, 1919 when their matriarch, Ciriaca Arguelles Vda. de Quisumbing
was issued Original Certificate of Title No. 989 covering a lot with an area of 859
square meters located in Los Baños, Laguna with the Laguna de Bay as its
northwestern boundary. The same parcel of land was registered on August 14, 1973
under Transfer Certificate of Title No. T-33393 in the names of Ciriaca's heirs:
Emilio, Manuel, Eduardo, Norberto, Perla, Josefina, Napoleon, Honorato, Remedios
and Alfonso, all surnamed Quisumbing.

In 1962, the Quisumbing instituted and accion publiciana in the then Court of First
Instance of Biñan, Laguna to recover possession over a portion of the property from
Dominga Villamor and Lorenzo Lanuzo docketed as Civil Case No. B-350. On
January 3, 1966, the case was decided in favor of the Quisumbings. On appeal, the
Court of Appeals sustained the Quisumbings' right over the property.

In LRC Case No. B-327, the Quisumbings applied for registration and confirmation
of title over an additional area of 2,387 square meters which had gradually accrued
to their property by the natural action of the waters of Laguna de Bay. In its Decision
of September 28, 1978, the Court of First Instance of Biñan confirmed the
Quisumbings' title thereto which, after it was duly surveyed, was identified as Psu-
208327. The additional area was divided into two lots in the survey plan approved
by the Director of Lands on November 16, 1964. In ordering the confirmation and
registration of title on favor of the Quisumbings, the land registration court said:

71
 . . . There is no doubt that the applicants' right to the property was
bolstered by the unappealed decision of the Court of Appeals in Civil
Case No. B-350 of this Court when the properties applied for were
classified as accretions made by the waters of the Laguna Lake. . . .
(G.R. No. 82229, Rollo, p. 20).

On April 17, 1979, the Quisumbings filed Civil Case No. 07049 before the Court of
First Instance of Laguna, Branch VI, Calamba against Lorenzo and Pablito
Meneses, Braulio C. Darum and Cesar B. Almendral for nullification of the free
patents and titles issued to Pablito Meneses. They alleged that Lorenzo Menesis,
then the Mayor of Los Baños, using his brother Pablito as a "tool and dummy,"
illegally occupied their "private accretion land" an August 6, 1976, and,
confederating with District Land Officer Darum and Land Inspector Cesar Almendral,
obtained free patents and original certificates of title to the land.

On March 26, 1984, the trial court rendered the decision finding that the lands
registered by the Meneses brothers are accretion lands to which the Quisumbings
have a valid right as owners of the riparian land to which nature had gradually
deposited the disputed lots. In so holding, the trial court relied heavily on the
decision of the Court of Appeals in Civil Case No. B-350, and quoted the following
portions of the appellate court's decision:

Plaintiffs-appellees are titled owners of a (sic) 859 square meters of land

under TCT No. 25978 of the Laguna Land Registry, the northwest
boundary of which is the Laguna de Bay.

It is ascertained that the northwest portion of Quisumbing's lot is

bounded by the Laguna de Bay. The nature of the Laguna de Bay has
long been settled in the case of Government of the Philippines v.
Colegio de San Jose (55 Phil. 423) when it held that:

Laguna de Bay is a body of water formed in depression of

the earth; it contains fresh water coming from rivers and
brooks and springs, and is connected with Manila Bay by the
Pasig River. According to the definition first quoted, Laguna
de Bay is a lake.

Consequently, since Laguna de Bay is a lake, the authorities cited by the

appellants referring to seashore would not apply. The provision of the
law on waters will govern in determining the natural bed or basin of
the lake. And accordingly, to Art. 84 of the Law of Waters of August 3,
1866:

Accretions deposited gradually upon land contiguous to

creeks, streams, rivers andlakes by accessions or sediments
from the waters thereof, belong to the owners of such lands.

72
 Since the title indicate(s) that the northwest portion of the property is
bounded by Laguna de Bay, which is a lake, even if the area where
Lanuza's house and Villamor's house for that matter is located is not
included within the title, it must necessarily be an accretion upon
appellees' land by accessions or sediments from the waters thereof
which should belong to the owner of the adjacent land. The authorities
cited by the appellants treat of the ownership of accretions by water of
the sea under Title I. Lakewaters being terrestrial waters, their ownership
is governed by Title II of the Law of Waters. As held in the Colegio de
San Jose case, the provisions of the Law of Waters regulating the
ownership and use of sea water are not applicable to the ownership and
use of lakes which are governed by different provisions. As pointed out
by the lower court, no act of appropriation is necessary in order to
acquire ownership of the alluvial formation as the law does not require
the same (Ignacio Grande, et al. vs. Hon. Court of Appeals, et al., G.R.
No. L-17652, June 30, 1962 citing Roxas vs. Tuazon, 9 Phil. 408; Cortez
vs. City of Manila, 10 Phil. 567 and 3 Manresa, C.C. pp. 321-326, pp. 4-
5) (Records, pp. 80-84).

The trial court also found that the free patents issued to Pablito Meneses had been
procured through fraud, deceit and bad faith, citing the following facts as bases for
its conclusion: (1) The Deed of Waiver and Transfer of Rights allegedly executed by
Silverio Bautista in favor of Pablito Meneses was a simulated contract for lack of
consideration; (2) The said instrument was sworn to before Mayor Lorenzo Meneses
who had no authority to notarize deeds of conveyances; (3) Although the lots
subject of the deed of conveyance were placed in his brother's name, Mayor
Meneses actually exercised rights of ownership thereto; (4) Land Inspector Cesar
Almendral admitted having anomalously prepared the documents to support the free
patent applications of Pablito Meneses and, having personally filled up the blank
forms, signed them in the absence of the persons concerned; (5) Almendral kept the
documents in his possession from 1979 to 1980 despite orders from the Director of
Lands to produce and surrender the same; (6) District Land Officer Braulio Darum
approved the free patent applications and issued the questioned titles without the
required cadastral survey duly approved by the Director of Lands and despite the
pendency of LRC Case No. B-327 involving the contested lots; (7) Darum
represented the Bureau of Lands in LRC Case No. B-327 without authority from the
Director of Lands and after he had withdrawn his appearance in said case, persisted
in filing a motion to set aside the order for the issuance of a decree in favor of the
Quisumbings; (8) Darum and Almendral in bad faith, refused to produce the missing
original records of the free patent applications and their supporting documents; and
(9) When Darum was not yet an oppositor in LRC Case No. B-327, he admitted in
his letter to the Land Registration Commission that the contested lots are portions of
the land being claimed by the Quisumbings contrary to his later representation in the
joint answer to the petition that the subject lots are not portions of Lots 1 and 2, Psu-
208327 owned by the Quisumbings. Accordingly, the trial court disposed of the case
as follows:
73
 WHEREFORE, judgment is hereby rendered:

1. Declaring that the lands covered by Pablito Meneses' Original

Certificate of Title No. P-1268/Free Patent No. 12807 (Exh. "J"),
covering Lot No. 1585, consisting of 417 square meters and Original
Certificate of Title No. P-1269/Free Patent No. 12808 (Exh. "H"),
covering Lot No. 190, consisting of 515 square meters, both located at
Los Baños, Laguna, as accretion lands forming parts of a bigger
accretion land owned by plaintiffs as declared in a final judgment (Exh.
"A"), rendered by the Court of First Instance of Biñan, Laguna, in LRC
Case No. B-327, which bigger accretion land is directly adjacent to or at
the back of plaintiffs' riparian land, and consequently, declaring as null
and void and cancelled Original Certificate of Title No. P-1268/Free
Patent No. 12807 and Original Certificate of Title No. P-1269/Free
Patent No. 12808;

2. Directing that the Register of Deeds of Laguna or his Deputy at

Calamba, Laguna, to make the corresponding entries of cancellation in
his Registry of the above mentioned Original Certificate of Titles/Free
Patents;

3. Directing defendants Lorenzo Meneses and Pablito Meneses and all

persons acting in their behalves to vacate the subject lands and
surrender the possession thereof to the plaintiffs immediately; and

4. Directing the defendants to pay jointly and severally, the plaintiffs the
sums of:

a) P20,000.00, plus P500.00 per month from January, 1977,

until the subject property is completely vacated, as actual
and compensatory damages;

b) P350,000.00, as moral damages;

c) P70,000.00 as exemplary damages;

d) P40,000.00, as attorney's fees; and

e) the costs (Rollo, pp. 41-42).

Thereafter, the Quisumbings filed a motion for execution pending appeal which the
trial court granted in its Order of September 7, 1984 subject to the posting by the
Quisumbings of a bond in the amount of P500,000.00. The defendants
unsuccessfully moved for the reconsideration of said order.

The Quisumbings also filed before the Sandiganbayan a complaint against Pablito
Meneses, Silverio Bautista, Pablo Silva, Virgilio Cruz and Cesar Almendral for
violation of paragraphs (e) and (j), Section 3 of Republic Act No. 3019, for conspiring
74
in the approval and grant of the free patents over portions of Lots 1 & 2 of Psu-
208327 owned by the heirs of Ciriaca Arguelles Vda. de Quisumbing. In due course,
the Sandiganbayan rendered a decision finding the defendants guilty as charged.
The case was elevated to this Court but on August 27, 1987, the judgment of
conviction was affirmed (Meneses v. People, 153 SCRA 303 [1987]).

Meanwhile, the Meneses brothers and Darum appealed the decision in Civil Case
No. 07049 to the Court of Appeals. On August 31, 1987, the Court of Appeals found
the appeal to be without merit and affirmed in toto the lower court's decision.

The defendants-appellants filed two motions for the reconsideration of the appellate
court's decision but it was denied in the Resolution of February 23, 1988 which in
pertinent part stated:

However, for humanitarian considerations, and considering the appeal of

the defendants-appellants for a reduction of the moral and exemplary
damages, We favor the reduction of the moral damages from
P350,000.00 to P50,000.00 and the exemplary damages from
P70,000.00 to P5,000.00. In all other respects, We find no justification
for modifying the dispositive portion of the decision of the lower court
(G.R. No. 82220, Rollo, p. 67).

Pablito and Lorenzo Meneses filed the instant petition for review on certiorari, which
was docketed as G.R. No. 82220. Cesar Almendral filed a motion in G.R. No. 82251
for a 45-day extension within which to file a petition for review on certiorari. After this
Court had granted them a 30-day extension, Almendral still failed to file any petition.
The Quisumbings also filed a petition for review on certiorari, docketed as G.R. No.
83059, solely on the issue of the propriety of the reduction of the amount of
damages in the Court of Appeals' Resolution of February 23, 1988. Upon motion of
petitioners in G.R. No. 83059, the three petitions were consolidated in the
Resolution of August 1, 1988.

Petitioners in G.R. No. 82220 retell the same errors they had raised before the Court
of Appeals, contending in the main: (1) that the lands in question were not accretion
lands but lands of the public domain; (2) that no conspiracy to commit fraud, deceit
and bad faith attended the issuance of the free patent and titles to Pablito Meneses;
and (3) that the Deed of Waiver and Transfer of Rights was founded on a valid
consideration.

As regards the issue of whether the lands in question are accretion lands,
petitioners relied on the Decision of the Court of Appeals in Republic of the
Philippines v. Braga, CA-G.R. No. 55390-R, October 23, 1980, holding that the
property involved therein was part of the natural bed of the Laguna de Bay and
therefore what had to be determined was whether said property was covered by
water when the lake was at its highest depth.

75
Petitioners' assigned errors in G.R. No. 82220 are evidently factual issues which
have been thoroughly passed upon and settled both by the trial court and the
appellate court. Factual findings of the Court of Appeals are conclusive on the
parties and not reviewable by this Court (Coca-Cola Bottlers Philippines, Inc. v.
Court of Appeals, 229 SCRA 533 [1994]) and they carry even more weight when the
Court of Appeals affirms the factual findings of the trial court (Binalay v. Manalo, 195
SCRA 374 [1991]). The jurisdiction of this Court is thus limited to reviewing errors of
law unless there is a showing that the findings complained of are totally devoid of
support in the record or that they are so glaringly erroneous as to constitute serious
abuse of discretion (BA Finance Corporation v. Court of Appeals, 229 SCRA 566
[1941]). We find no such showing in this case.

Petitioners' protestations notwithstanding the final decision of the Court of Appeals

in Civil Case No. B-350 has a bearing in the resolution of this case for while the lots
occupied by Villamor and Lanuzo may not be the very same lots petitioners are
claiming here, the two cases refer to the same accretion lands northwest of the
original land owned by the Quisumbings.

In the same vein, the decision of the land registration court in LRC Case No. B-327
ordering the confirmation and registration of title in favor of the Quisumbings over
2,387 square meters of accretion land is binding on petitioners in G.R. No. 82220.
As correctly pointed out by the Court of Appeals, said decision, being the result of a
proceeding in rem, binds the whole world, more so because it became final and
executory upon the Bureau of Lands' failure to interpose an appeal.

Since petitioners in G.R. No. 82220 claim that "the foreshore land known as Lots
190 and 1585 are part of Laguna de Bay" and therefore the Quisumbings "have no
legal right to claim the same as accretion land," we quote the following pertinent
portions of the decision in Republic v. Court of Appeals, 131 SCRA 532 (1984)
which, although the case deals with the registration of a reclaimed land along the
Laguna de Bay, is nonetheless enlightening:

Laguna de Bay is a lake. While the waters of a lake are also subject to
the same gravitational forces that cause the formation of tides in seas
and oceans, this phenomenon is not a regular daily occurrence in the
case of lakes. Thus, the alternation of high tides and low tides, which is
an ordinary occurrence, could hardly account for the rise in the water
level of the Laguna de Bay as observed four to five months a year during
the rainy season. Rather, it is the rains which bring about the inundation
of a portion of the land in question. Since the rise in the water level
which causes the submersion of the land occurs during a shorter period
(four to five months a year) than the level of the water at which the land
is completely dry, the latter should be considered as the "highest
ordinary depth" of Laguna de Bay. Therefore, the land sought to be
registered is not part of the bed or basin of Laguna de Bay. Neither can
it be considered as foreshore land. The Brief for the Petitioner Director of
Lands cites an accurate definition of a foreshore land, to wit:
76
 . . . . that part of (the land) which is between high and low
water and left dry by the flux and reflux of the tides.

The strip of land that lies between the high and low water
marks and that is alternately wet and dry according to the
flow of the tide.

As aptly found by the Court a quo, the submersion in water of a portion

of the land in question is due to the rains "falling directly on or flowing
into Laguna de Bay from different sources." Since the inundation of a
portion of the land is not due to "flux and reflux of tides" it cannot be
considered a foreshore land within the meaning of the authorities cited
by petitioner Director of Lands. The land sought to be registered not
being part of the bed or basin of Laguna de Bay, nor a foreshore land as
claimed by the Director of Lands, it is not a public land and therefore
capable of registration as private property provided that the applicant
proves that he has a registerable title (at pp. 538-539).

Accretion as a mode of acquiring property under Article 457 of the Civil Code
requires the concurrence of these requisites: (1) that the deposition of soil or
sediment be gradual and imperceptible; (2) that it be the result of the action of the
waters of the river (or sea); and (3) that the land where accretion takes place is
adjacent to the banks of rivers (or the sea coast). While the trial court mainly relied
on the findings in Civil Case No. B-350 that the lands in controversy are accretion
lands and it has not determined on its own the presence of said requisites, it is too
late now for petitioners in G.R. No. 82220 to claim otherwise. Consequently, the
lands held to be accretion lands could only benefit the Quisumbings, who own the
property adjacent to the lands in controversy (Cruz v. Court of Appeals, 216 SCRA
350 [1992]).

Petitioners in G.R. No. 82220 also assert that the principle of indefeasibility of title
should favor them as the one-year period provided for by law to impugn their title
had elapsed. They also urged that, having been granted by the state, their title is
superior to that of the Quisumbings. We hold, however, that in the light of the fraud
attending the issuance of the free patents and titles of Pablito Meneses, said
assertions crumble. Such fraud was confirmed by this Court in Meneses v. People,
153 SCRA 303 (1987) which held the petitioners therein liable for violation of the
Anti-Graft and Corrupt Practices Act in the issuance of the same free patents and
titles.

Unlike the petition in G.R. No. 82220, the petition in G.R. No. 83059 (questioning the
reduction of the damages awarded to the Quisumbings by the Court of Appeals in
the Resolution of February 23, 1988) is meritorious. The task of fixing the amount of
damages is primarily with the trial court (Air France v. Carrascoso, 18 SCRA 155
[1966]). While it is the appellate court's duty to review the same, a reduction of the
award of damages must pass the test of reasonableness. The Court of Appeals can
only modify or change the amount awarded as damages when they are palpably or
77
scandalously and reasonably excessive (Philippine Airlines, Inc. v. Court of Appeals,
226 SCRA 423 [1993]; Prudenciano v. Alliance Transport System, Inc., 148 SCRA
440 [1987]).

There is no justification for the radical reduction by the Court of Appeals of the
damages awarded by the trial court. Its action was premise merely on "humanitarian
considerations" and the plea of the defendants-appellants. We may agree with the
Court of Appeals in reducing the award after scrutinizing its factual findings only if
such findings are diametrically opposed to that of the trial court (Prudenciado v.
Alliance Transport System, Inc., supra). But as it is, the Court of Appeals affirmed
point by point the factual findings if the lower court upon which the award of
damages had been based.

We, therefore, see no reason to modify the award of damages made by the trial
court. Respondent Braulio C. Darum in G.R. No. 83059 must also be solidarily liable
for said damages in his capacity as a public officer. A public official is by law not
immune from damages in his personal capacity for acts done in bad faith which,
being outside the scope of his authority, are no longer protected by the mantle of
immunity for official actions (Vidad v. RTC of Negros, Br. 42, 227 SCRA 271 [1993]).

WHEREFORE, the petition in G.R. No. 82220 is DENIED while the petition in G.R.
No. 83059 is GRANTED. The Decision dated August 31, 1987 of the Court of
Appeals is AFFIRMED while its Resolution of February 23, 1988 insofar as it
reduces the amount of damages awarded to the Quisumbing family is SET ASIDE.
Costs against petitioners in G.R. No. 82220 and respondent Braulio Darum in G.R.
No. 83059.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 68166 February 12, 1997

HEIRS OF EMILIANO NAVARRO, petitioner,

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

78
 HERMOSISIMA, JR., J.:

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

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

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

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

Before us is a petition for review of: (1) the decision 1 and (2) two subsequent
resolutions 2 of the Intermediate Appellate Court 3 (now the Court of Appeals) in
Land Registration Case No. N-84, 4 the application over which was filed by private
respondents' predecessor-in-interest, Sinforoso Pascual, now deceased, before the
Court of First Instance 5 (now the Regional Trial Court) of Balanga, Bataan.

There is no dispute as to the following facts:

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

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

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

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

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

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

79
On the other hand, sometime in the early part of 1960, Sinforoso Pascual flied an
application to register and confirm his title to a parcel of land, situated in Sibocon,
Balanga, Bataan, described in Plan Psu-175181 and said to have an area of
146,611 square meters. Pascual claimed that this land is an accretion to his
property, situated in Barrio Puerto Rivas, Balanga, Bataan, and covered by Original
Certificate of Title No. 6830. It is bounded on the eastern side by the Talisay River,
on the western side by the Bulacan River, and on the northern side by the Manila
Bay. The Talisay River as well as the Bulacan River flow downstream and meet at
the Manila Bay thereby depositing sand and silt on Pascual's property resulting in an
accretion thereon. Sinforoso Pascual claimed the accretion as the riparian owner.

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

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

Upon motion of Emiliano Navarro, however, the order of general default was lifted
and, on February 13, 1961, Navarro thereupon filed an opposition to Pascual's
application. Navarro claimed that the land sought to be registered has always been
part of the public domain, it being a part of the foreshore of Manila Bay; that he was
a lessee and in possession of a part of the subject property by virtue of a fishpond
permit issued by the Bureau of Fisheries and confirmed by the Office of the
President; and that be bad already converted the area covered by the lease into a
fishpond.

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

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

80
During the pendency of the trial of the consolidated cases, Emiliano Navarro died on
November 1, 1961 and was substituted by his heirs, the herein petitioners.

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

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

The decision's dispositive portion reads:

WHEREFORE, judgment is rendered:

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

complaint for ejectment in Civil Case No. 2873;

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

over the land in question; and

(3) Directing said Sinforoso Pascual, through his heirs, as plaintiff in Civil
Case No. 2873 and as applicant in Land Registration Case No. N-84 to
pay costs in both instances." 6

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

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

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

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

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

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

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

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

The respondent appellate court explained the reversal in this wise:

81
The paramount issue to be resolved in this appeal as set forth by the
parties in their respective briefs is — whether or not the land sought to
be registered is accretion or foreshore land, or, whether or not said land
was formed by the action of the two rivers of Talisay and Bulacan or by
the action of the Manila Bay. If formed by the action of the Talisay and
Bulacan rivers, the subject land is accretion but if formed by the action of
the Manila Bay then it is foreshore land.

xxx xxx xxx

It is undisputed that applicants-appellants [private respondents] owned

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

This makes this case quite unique because while it is undisputed that
the subject land is immediately attached to appellants' [private
respondents'] land and forms the tip thereof, at the same time, said land
immediately faces the Manila Bay which is part of the sea. We can
understand therefore the confusion this case might have caused the
lower court, faced as it was with the uneasy problem of deciding whether
or not the subject land was formed by the action of the two rivers or by
the action of the sea. Since the subject land is found at the shore of the
Manila Bay facing appellants' [private respondents'] land, it would be
quite easy to conclude that it is foreshore and therefore part of the
patrimonial property of the State as the lower court did in fact rule . . . .

xxx xxx xxx

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

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

It is, therefore, difficult to see how the Manila Bay could have been the
cause of the deposit thereat for in the natural course of things, the
waves of the sea eat the land on the shore, as they suge [sic] inland. It
would not therefore add anything to the land but instead subtract from it
due to the action of the waves and the wind. It is then more logical to
82
believe that the two rivers flowing towards the bay emptied their cargo of
sand, silt and clay at their mouths, thus causing appellants' [private
respondents'] land to accumulate therein.

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

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

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

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

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

finding. While it is true that the subject land is found at the shore of the
Manila Bay fronting appellants' [private respondents'] land, said land is
not foreshore but an accretion from the action of the Talisay and
Bulacan rivers. In fact, this is exactly what the Bureau of Lands found
out, as shown in the following report of the Acting Provincial Officer,
Jesus M. Orozco, to wit:

"Upon ocular inspection of the land subject of this registration

made on June 11, 1960, it was found out that the said land is
. . . . sandwitched [sic] by two big rivers . . . . These two
rivers bring down considerable amount of soil and sediments
during floods every year thus raising the soil of the land
adjoining the private property of the applicant [private
respondents]. About four-fifth [sic] of the area applied for is
now dry land whereon are planted palapat trees thickly
growing thereon. It is the natural action of these two rivers
that has caused the formation of said land . . . . subject of
this registration case. It has been formed, therefore, by
83
 accretion. And having been formed by accretion, the said
land may be considered the private property of the riparian
owner who is the applicant herein [private respondents] . . . .

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

government should be withdrawn, except for the portion
recommended by the land investigator in his report dated
May 2, 1960, to be excluded and considered foreshore. . . ."

Because of this report, no less than the Solicitor General representing

the Bureau of Lands withdrew his opposition dated March 25, 1960, and
limited "the same to the northern portion of the land applied for,
compromising a strip 50 meters wide along the Manila Bay, which should
be declared public land as part of the foreshore" . . . . 8

Pursuant to the aforecited decision, the respondent appellate court ordered

the issuance of the corresponding decree of registration in the name of private
respondents and the reversion to private respondents of the possession of the
portion of the subject property included in Navarro's fishpond permit.

On December 20, 1978, petitioners filed a motion for reconsideration of the

aforecited decision. The Director of Forestry also moved for the reconsideration of
the same decision. Both motions were opposed by private respondents on January
27, 1979.

On November 21, 1980, respondent appellate court promulgated a resolution

denying the motion for reconsideration filed by the Director of Forestry. It, however,
modified its decision, to read, viz:

(3). Ordering private oppositors Heirs of Emiliano Navarro to vacate that

portion included in their fishpond permit covered by Plan Psu-175181
and hand over possession of said portion to applicants-appellants, if the
said portion is not within the strip of land fifty (50) meters wide along
Manila Bay on the northern portion of the land subject of the registration
proceedings and which area is more particularly referred to as fifty (50)
meters from corner 2 towards corner 1; and fifty (50) meters from corner
5 towards corner 6 of Plan Psu-175181. . . . 9

On December 15, 1980, we granted the Solicitor General, acting as counsel for the
Director of Forestry, an extension of time within which to file in this court, a petition
for review of the decision dated November 29, 1978 of the respondent appellate
court and of the aforecited resolution dated November 21, 1980.

Thereafter, the Solicitor General, in behalf of the Director of Forestry, filed a petition
for review entitled, "The Director of Forestry vs. the Court of Appeals." 10 We,
however, denied the same in a minute resolution dated July 20, 1981, such petition
having been prematurely filed at a time when the Court of Appeals was yet to
84
resolve petitioners' pending motion to set aside the resolution dated November 21,
1980.

On October 9, 1981, respondent appellate court denied petitioners' motion for

reconsideration of the decision dated November 29, 1978.

On October 17, 1981, respondent appellate court made an entry of judgment stating
that the decision dated November 29, 1978 had become final and executory as
against herein petitioners as oppositors in L.R.C. Case No. N-84 and Civil Case No.
2873 of the Court of First Instance (now the Regional Trial Court) of Balanga,
Bataan.

On October 26, 1981, a second motion for reconsideration of the decision dated
November 29, 1978 was filed by petitioners' new counsel.

On March 26, 1982, respondent appellate court issued a resolution granting

petitioners' request for leave to file a second motion for reconsideration.

On July 13, 1984, after hearing, respondent appellate court denied petitioners'
second motion for reconsideration on the ground that the same was filed out of time,
citing Rule 52, Section 1 of the Rules of Court which provides that a motion for
reconsideration shall be made ex-parte and filed within fifteen (15) days from the
notice of the final order or judgment.

Hence this petition where the respondent appellate court is imputed to have
palpably erred in appreciating the fact of the case and to have gravely misapplied
statutory and case law relating to accretion, specifically, Article 457 of the Civil
Code.

We find no merit in the petition.

The disputed property was brought forth by both the withdrawal of the waters
of Manila Bay and the accretion formed on the exposed foreshore land by the
action of the sea which brought soil and sand sediments in turn trapped by the
palapat and bakawan trees planted thereon by petitioner Sulpicio Pascual in
1948

Anchoring their claim of ownership on Article 457 of the Civil Code, petitioners
vigorously argue that the disputed 14-hectare land is an accretion caused by the
joint action of the Talisay and Bulacan Rivers which run their course on the eastern
and western boundaries, respectively, of petitioners' own tract of land.

Accretion as a mode of acquiring property under said Article 457, requires the
concurrence of the following requisites: (1) that the accumulation of soil or sediment
be gradual and imperceptible; (2) that it be the result of the action of the waters of
the river; and (3) that the land where the accretion takes place is adjacent to the
bank of the river. 11 Accretion is the process whereby the soil is deposited, while

85
alluvium is the soil deposited on the estate fronting the river bank 12; the owner of
such estate is called the riparian owner. Riparian owners are, strictly speaking,
distinct from littoral owners, the latter being owners of lands bordering the shore of
the sea or lake or other tidal waters. 13The alluvium, by mandate of Article 457 of the
Civil Code, is automatically owned by the riparian owner from the moment the soil
deposit can be seen 14 but is not automatically registered property, hence, subject to
acquisition through prescription by third persons 15.

Petitioners' claim of ownership over the disputed property under the principle of
accretion, is misplaced.

First, the title of petitioners' own tract of land reveals its northeastern boundary to be
Manila Bay. Petitioners' land, therefore, used to adjoin, border or front the Manila
Bay and not any of the two rivers whose torrential action, petitioners insist, is to
account for the accretion on their land. In fact, one of the petitioners, Sulpicio
Pascual, testified in open court that the waves of Manila Bay used to hit the disputed
land being part of the bay's foreshore but, after he had planted palapat and
bakawan trees thereon in 1948, the land began to
16
rise.

Moreover, there is no dispute as to the location of: (a) the disputed land; (b)
petitioners' own tract of land; (c) the Manila Bay; and, (d) the Talisay and Bulacan
Rivers. Petitioners' own land lies between the Talisay and Bulacan Rivers; in front of
their land on the northern side lies now the disputed land where before 1948, there
lay the Manila Bay. If the accretion were to be attributed to the action of either or
both of the Talisay and Bulacan Rivers, the alluvium should have been deposited on
either or both of the eastern and western boundaries of petitioners' own tract of land,
not on the northern portion thereof which is adjacent to the Manila Bay. Clearly
lacking, thus, is the third requisite of accretion, which is, that the alluvium is
deposited on the portion of claimant's land which is adjacent to the river bank.

Second, there is no dispute as to the fact that petitioners' own tract of land adjoins
the Manila Bay. Manila Bay is obviously not a river, and jurisprudence is already
settled as to what kind of body of water the Manila Bay is. It is to be remembered
that we held that:

Appellant next contends that . . . . Manila Bay cannot be considered as a

sea. We find said contention untenable. A bay is part of the sea, being a
mere indentatiom of the same:

"Bay. — An opening into the land where the water is shut in

on all sides except at the entrance; an inlet of the sea; an
arm of the sea, distinct from a river, a bending or curbing of
the shore of the sea or of a lake. " 7 C.J. 1013-1014." 17

The disputed land, thus, is an accretion not on a river bank but on a sea bank, or on
what used to be the foreshore of Manila Bay which adjoined petitioners' own tract of
86
land on the northern side. As such, the applicable law is not Article 457 of to Civil
Code but Article 4 of the Spanish Law of Waters of 1866.

The process by which the disputed land was formed, is not difficult to discern from
the facts of the case. As the trial court correctly observed:

A perusal of the survey plan . . . . of the land subject matter of these

cases shows that on the eastern side, the property is bounded by
Talisay River, on the western side by Bulacan River, on the southern
side by Lot 1436 and on the northern side by Manila Bay. It is not correct
to state that the Talisay and Bulacan Rivers meet a certain portion
because the two rivers both flow towards Manila Bay. The Talisay River
is straight while the Bulacan River is a little bit meandering and there is
no portion where the two rivers meet before they end up at Manila Bay.
The land which is adjacent to the property belonging to Pascual cannot
be considered an accretion [caused by the action of the two rivers].

Applicant Pascual . . . . has not presented proofs to convince the Court

that the land he has applied for registration is the result of the settling
down on his registered land of soil, earth or other deposits so as to be
rightfully be considered as an accretion [caused by the action of the two
rivers]. Said Art. 457 finds no applicability where the accretion must have
been caused by action of the bay. 18

The conclusion formed by the trial court on the basis of the aforegoing observation
is that the disputed land is part of the foreshore of Manila Bay and therefore, part of
the public domain. The respondent appellate court, however, perceived the fact that
petitioners' own land lies between the Talisay and Bulacan Rivers, to be basis to
conclude that the disputed land must be an accretion formed by the action of the two
rivers because petitioners' own land acted as a barricade preventing the two rivers
to meet and that the current of the two rivers carried sediments of sand and silt
downwards to the Manila Bay which accumulated somehow to a 14-hectare land.
These conclusions, however, are fatally incongruous in the light of the one
undisputed critical fact: the accretion was deposited, not on either the eastern or
western portion of petitioners' land where a river each runs, but on the northern
portion of petitioners' land which adjoins the Manila Bay. Worse, such conclusions
are further eroded of their practical logic and consonance with natural experience in
the light of Sulpicio Pascual's admission as to having planted palapat and bakawan
trees on the northern boundary of their own land. In amplification of this, plainly
more reasonable and valid are Justice Mariano Serrano's observations in his
dissenting opinion when he stated that:

As appellants' (titled) land . . . . acts as a barricade that prevents the two

rivers to meet, and considering the wide expanse of the boundary
between said land and the Manila Bay, measuring some 593.00 meters .
. . . it is believed rather farfetched for the land in question to have been
formed through "sediments of sand and salt [sic] . . . . deposited at their
87
 [rivers'] mouths." Moreover, if "since the flow of the two rivers is
downwards to the Manila Bay the sediments of sand and silt are
deposited at their mouths," why then would the alleged cargo of sand,
silt and clay accumulate at the northern portion of appellants' titled land
facing Manila Bay instead of merely at the mouths and banks of these
two rivers? That being the case, the accretion formed at said portion of
appellants' titled [land] was not caused by the current of the two rivers
but by the action of the sea (Manila Bay) into which the rivers empty.

The conclusion . . . . is not supported by any reference to the evidence

which, on the contrary, shows that the disputed land was formed by the
action of the sea. Thus, no less than Sulpicio Pascual, one of the heirs
of the original applicant, testified on cross-examination that the land in
dispute was part of the shore and it was only in 1948 that he noticed that
the land was beginning to get higher after he had planted trees thereon
in
1948. . . . .

. . . . it is established that before 1948 sea water from the Manila Bay at
high tide could reach as far as the dike of appellants' fishpond within
their titled property, which dike now separates this titled property from
the land in question. Even in 1948 when appellants had already
planted palapat andbakawan trees in the land involved, inasmuch as
these trees were yet small, the waves of the sea could still reach the
dike. This must be so because in . . . . the survey plan of the titled
property approved in 1918, said titled land was bounded on the north by
Manila Bay. So Manila Bay was adjacent to it on the north. It was only
after the planting of the aforesaid trees in 1948 that the land in question
began to rise or to get higher in elevation.

The trees planted by appellants in 1948 became a sort of strainer of the

sea water and at the same time a kind of block to the strained sediments
from being carried back to the sea by the very waves that brought them
to the former shore at the end of the dike, which must have caused the
shoreline to recede and dry up eventually raising the former shore
leading to the formation of the land in question." 19

In other words, the combined and interactive effect of the planting of palapat
and bakawan trees, the withdrawal of the waters of Manila Bay eventually
resulting in the drying up of its former foreshore, and the regular torrential
action of the waters of Manila Bay, is the formation of the disputed land on the
northern boundary of petitioners' own tract of land.

The disputed property is an accretion on a sea bank, Manila Bay being an inlet
or an arm of the sea; as such, the disputed property is, under Article 4 of the
Spanish Law of Waters of 1866, part of the public domain

88
At the outset, there is a need to distinguish between Manila Bay and Laguna de
Bay.

While we held in the case of Ignacio v. Director of Lands and

Valeriano 20 that Manila Bay is considered a sea for purposes of determining which
law on accretion is to be applied in multifarious situations, we have ruled differently
insofar as accretions on lands adjoining the Laguna de Bay are concerned.

In the cases of Government of the P.I v. Colegio de San Jose 21, Republic v. Court
of Appeals 22, Republic v. Alagad23, and Meneses v. Court of
24
Appeals , we categorically ruled that Laguna de Bay is a lake the accretion on
which, by the mandate of Article 84 of the Spanish Law of Waters of 1866, belongs
to the owner of the land contiguous thereto.

The instant controversy, however, brings a situation calling for the application of
Article 4 of the Spanish Law of Waters of 1866, the disputed land being an accretion
on the foreshore of Manila Bay which is, for all legal purposes, considered a sea.

Article 4 of the Spanish Law of Waters of August 3, 1866 provides as follows:

Lands added to the shores by accretions and alluvial deposits caused by

the action of the sea, form part of the public domain. When they are no
longer washed by the waters of the sea and are not necessary for
purposes of public utility, or for the establishment of special industries, or
for the coast-guard service, the Government shall declare them to be the
property of the owners of the estates adjacent thereto and as increment
thereof.

In the light of the aforecited vintage but still valid law, unequivocal is the public
nature of the disputed land in this controversy, the same being an accretion on a
sea bank which, for all legal purposes, the foreshore of Manila Bay is. As part of the
public domain, the herein disputed land is intended for public uses, and "so long as
the land in litigation belongs to the national domain and is reserved for public uses, it
is not capable of being appropriated by any private person, except through express
authorization granted in due form by a competent authority." 25 Only the executive
and possibly the legislative departments have the right and the power to make the
declaration that the lands so gained by action of the sea is no longer necessary for
purposes of public utility or for the cause of establishment of special industries or for
coast guard services. 26 Petitioners utterly fail to show that either the executive or
legislative department has already declared the disputed land as qualified, under
Article 4 of the Spanish Law of Waters of 1866, to be the property of petitioners as
owners of the estates adjacent thereto.

WHEREFORE, the instant Petition for Review is hereby DENIED and DISMISSED.

Costs against petitioners.

89
SO ORDERED.

Padilla, Bellosillo and Kapunan, JJ., c

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 160453 November 12, 2012

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
ARCADIO IVAN A. SANTOS III, and ARCADIO C. SANTOS, JR., Respondents.

DECISION

BERSAMIN, J.:

By law, accretion - the gradual and imperceptible deposit made through the effects
of the current of the water- belongs to the owner of the land adjacent to the banks of
rivers where it forms. The drying up of the river is not accretion. Hence, the dried-up
river bed belongs to the State as property of public dominion, not to the riparian
owner, unless a law vests the ownership in some other person.

Antecedents

Alleging continuous and adverse possession of more than ten years, respondent
Arcadio Ivan A. Santos III (Arcadio Ivan) applied on March 7, 1997 for the
registration of Lot 4998-B (the property) in the Regional Trial Court (RTC) in
Parafiaque City. The property, which had an area of 1,045 square meters, more or
less, was located in Barangay San Dionisio, Parañaque City, and was bounded in
the Northeast by Lot 4079 belonging to respondent Arcadio C. Santos, Jr. (Arcadio,
Jr.), in the Southeast by the Parañaque River, in the Southwest by an abandoned
road, and in the Northwest by Lot 4998-A also owned by Arcadio Ivan.1

On May 21, 1998, Arcadio Ivan amended his application for land registration to
include Arcadio, Jr. as his co-applicant because of the latter’s co-ownership of the
property. He alleged that the property had been formed through accretion and had
been in their joint open, notorious, public, continuous and adverse possession for
more than 30 years.2

The City of Parañaque (the City) opposed the application for land registration,
stating that it needed the property for its flood control program; that the property was
within the legal easement of 20 meters from the river bank; and that assuming that
90
the property was not covered by the legal easement, title to the property could not
be registered in favor of the applicants for the reason that the property was an
orchard that had dried up and had not resulted from accretion.3

Ruling of the RTC

On May 10, 2000,4 the RTC granted the application for land registration, disposing:

WHEREFORE, the Court hereby declares the applicants, ARCADIO IVAN A.

SANTOS, III and ARCADIO C. SANTOS, JR., both Filipinos and of legal age, as the
TRUE and ABSOLUTE OWNERS of the land being applied for which is situated in
the Barangay of San Dionisio, City of Parañaque with an area of one thousand forty
five (1045) square meters more or less and covered by Subdivision Plan Csd-00-
000343, being a portion of Lot 4998, Cad. 299, Case 4, Parañaque Cadastre, LRC
Rec. No. and orders the registration of Lot 4998-B in their names with the following
technical description, to wit:

xxxx

Once this Decision became (sic) final and executory, let the corresponding Order for
the Issuance of the Decree be issued.

SO ORDERED.

The Republic, through the Office of the Solicitor General (OSG), appealed.

Ruling of the CA

In its appeal, the Republic ascribed the following errors to the RTC,5 to wit:

THE TRIAL COURT ERRED IN RULING THAT THE PROPERTY SOUGHT TO BE

REGISTERED IS AN ACCRETION TO THE ADJOINING PROPERTY OWNED BY
APPELLEES DESPITE THE ADMISSION OF APPELLEE ARCADIO C. SANTOS
JR. THAT THE SAID PROPERTY WAS NOT FORMED AS A RESULT OF THE
GRADUAL FILLING UP OF SOIL THROUGH THE CURRENT OF THE RIVER.

II

THE TRIAL COURT ERRED IN GRANTING THE APPLICATION FOR LAND

REGISTRATION DESPITE APPELLEE’S FAILURE TO FORMALLY OFFER IN
EVIDENCE AN OFFICIAL CERTIFICATION THAT THE SUBJECT PARCEL OF
LAND IS ALIENABLE AND DISPOSABLE.

III

91
THE TRIAL COURT ERRED IN RULING THAT APPELLEES HAD SUFFICIENTLY
ESTABLISHED THEIR CONTINUOUS, OPEN, PUBLIC AND ADVERSE
OCCUPATION OF THE SUBJECT PROPERTY FOR A PERIOD OF MORE THAN
THIRTY (30) YEARS.

On May 27, 2003, the CA affirmed the RTC.6

The Republic filed a motion for reconsideration, but the CA denied the motion on
October 20, 2003.7

Issues

Hence, this appeal, in which the Republic urges that:8

RESPONDENTS’ CLAIM THAT THE SUBJECT PROPERTY IS AN ACCRETION

TO THEIR ADJOINING LAND THAT WOULD ENTITLE THEM TO REGISTER IT
UNDER ARTICLE 457 OF THE NEW CIVIL CODE IS CONTRADICTED BY THEIR
OWN EVIDENCE.

II

ASSUMING THAT THE LAND SOUGHT TO BE REGISTERED WAS

"PREVIOUSLY A PART OF THE PARAÑAQUE RIVER WHICH BECAME AN
ORCHARD AFTER IT DRIED UP," THE REGISTRATION OF SAID PROPERTY IN
FAVOR OF RESPONDENTS CANNOT BE ALTERNATIVELY JUSTIFIED UNDER
ARTICLE 461 OF THE CIVIL CODE.

III

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT RULING

THAT THE FAILURE OF RESPONDENTS TO FORMALLY OFFER IN EVIDENCE
AN OFFICIAL CERTIFICATION THAT THE SUBJECT PROPERTY IS ALIENABLE
AND DISPOSABLE IS FATAL TO THEIR APPLICATION FOR LAND
REGISTRATION.

IV

THE FINDING OF THE COURT OF APPEALS THAT RESPONDENTS HAVE

CONTINUOUSLY, OPENLY, PUBLICLY AND ADVERSELY OCCUPIED THE
SUBJECT PROPERTY FOR MORE THAN THIRTY (30) YEARS IS NOT
SUPPORTED BY WELL-NIGH INCONTROVERTIBLE EVIDENCE.

To be resolved are whether or not Article 457 of the Civil Code was applicable
herein; and whether or not respondents could claim the property by virtue of
acquisitive prescription pursuant to Section 14(1) of Presidential Decree No. 1529
(Property Registration Decree).
92
Ruling

The appeal is meritorious.

I.

The CA grossly erred in applying Article 457 of the Civil Code to respondents’
benefit

Article 457 of the Civil Code provides that "(t)o the owners of lands adjoining the
banks of rivers belong the accretion which they gradually receive from the effects of
the currents of the waters."

In ruling for respondents, the RTC pronounced as follows:

On the basis of the evidence presented by the applicants, the Court finds that
Arcadio Ivan A. Santos III and Arcadio C. Santos, Jr., are the owners of the land
subject of this application which was previously a part of the Parañaque River which
became an orchard after it dried up and further considering that Lot 4 which adjoins
the same property is owned by applicant, Arcadio C. Santos, Jr., after it was
obtained by him through inheritance from his mother, Concepcion Cruz, now
deceased. Conformably with Art. 457 of the New Civil Code, it is provided that:

"Article 457. To the owners of the lands adjoining the bank of rivers belong the
accretion which they gradually receive from the effects of the current of the waters."9

The CA upheld the RTC’s pronouncement, holding:

It could not be denied that "to the owners of the lands adjoining the banks of rivers
belong the accretion which they gradually receive from the effects of the current of
the waters" (Article 457 New Civil Code) as in this case, Arcadio Ivan Santos III and
Arcadio Santos, Jr., are the owners of the land which was previously part of the
Parañaque River which became an orchard after it dried up and considering that Lot
4 which adjoins the same property is owned by the applicant which was obtained by
the latter from his mother (Decision, p. 3; p. 38 Rollo).10

The Republic submits, however, that the application by both lower courts of Article
457 of the Civil Code was erroneous in the face of the fact that respondents’
evidence did not establish accretion, but instead the drying up of the Parañaque
River.

The Republic’s submission is correct.

Respondents as the applicants for land registration carried the burden of proof to
establish the merits of their application by a preponderance of evidence, by which is
meant such evidence that is of greater weight, or more convincing than that offered
in opposition to it.11 They would be held entitled to claim the property as their own

93
and apply for its registration under the Torrens system only if they established that,
indeed, the property was an accretion to their land.

Accretion is the process whereby the soil is deposited along the banks of
rivers.12 The deposit of soil, to be considered accretion, must be: (a) gradual and
imperceptible; (b) made through the effects of the current of the water; and (c) taking
place on land adjacent to the banks of rivers.13

Accordingly, respondents should establish the concurrence of the elements of

accretion to warrant the grant of their application for land registration.

However, respondents did not discharge their burden of proof. They did not show
that the gradual and imperceptible deposition of soil through the effects of the
current of the river had formed Lot 4998-B. Instead, their evidence revealed that the
property was the dried-up river bed of the Parañaque River, leading both the RTC
and the CA to themselves hold that Lot 4998-B was "the land which was previously
part of the Parañaque River xxx (and) became an orchard after it dried up."

Still, respondents argue that considering that Lot 4998-B did not yet exist when the
original title of Lot 4 was issued in their mother’s name in 1920, and that Lot 4998-B
came about only thereafter as the land formed between Lot 4 and the Parañaque
River, the unavoidable conclusion should then be that soil and sediments had
meanwhile been deposited near Lot 4 by the current of the Parañaque River,
resulting in the formation of Lot 4998-B.

The argument is legally and factually groundless. For one, respondents thereby
ignore that the effects of the current of the river are not the only cause of the
formation of land along a river bank. There are several other causes, including the
drying up of the river bed. The drying up of the river bed was, in fact, the uniform
conclusion of both lower courts herein. In other words, respondents did not establish
at all that the increment of land had formed from the gradual and imperceptible
deposit of soil by the effects of the current. Also, it seems to be highly improbable
that the large volume of soil that ultimately comprised the dry land with an area of
1,045 square meters had been deposited in a gradual and imperceptible manner by
the current of the river in the span of about 20 to 30 years – the span of time
intervening between 1920, when Lot 4 was registered in the name of their deceased
parent (at which time Lot 4998-B was not yet in existence) and the early 1950s
(which respondents’ witness Rufino Allanigue alleged to be the time when he knew
them to have occupied Lot 4988-B). The only plausible explanation for the
substantial increment was that Lot 4988-B was the dried-up bed of the Parañaque
River. Confirming this explanation was Arcadio, Jr.’s own testimony to the effect that
the property was previously a part of the Parañaque River that had dried up and
become an orchard.

We observe in this connection that even Arcadio, Jr.’s own Transfer Certificate of
Title No. 44687 confirmed the uniform conclusion of the RTC and the CA that Lot
4998-B had been formed by the drying up of the Parañaque River. Transfer
94
Certificate of Title No. 44687 recited that Lot 4 of the consolidated subdivision plan
Pcs-13-002563, the lot therein described, was bounded "on the SW along line 5-1
by Dried River Bed."14

That boundary line of "SW along line 5-1" corresponded with the location of Lot
4998-B, which was described as "bounded by Lot 4079 Cad. 299, (Lot 1, Psu-
10676), in the name of respondent Arcadio Santos, Jr. (Now Lot 4, Psd-13-002563)
in the Northeast."15

The RTC and the CA grossly erred in treating the dried-up river bed as an accretion
that became respondents’ property pursuant to Article 457 of the Civil Code. That
land was definitely not an accretion. The process of drying up of a river to form dry
land involved the recession of the water level from the river banks, and the dried-up
land did not equate to accretion, which was the gradual and imperceptible
deposition of soil on the river banks through the effects of the current. In accretion,
the water level did not recede and was more or less maintained. Hence,
respondents as the riparian owners had no legal right to claim ownership of Lot
4998-B. Considering that the clear and categorical language of Article 457 of the
Civil Code has confined the provision only to accretion, we should apply the
provision as its clear and categorical language tells us to. Axiomatic it is, indeed,
that where the language of the law is clear and categorical, there is no room for
interpretation; there is only room for application.16 The first and fundamental duty of
courts is then to apply the law.17

The State exclusively owned Lot 4998-B and may not be divested of its right of
ownership. Article 502 of the Civil Code expressly declares that rivers and their
natural beds are public dominion of the State.18 It follows that the river beds that dry
up, like Lot 4998-B, continue to belong to the

State as its property of public dominion, unless there is an express law that provides
that the dried-up river beds should belong to some other person.19

II

Acquisitive prescription was

not applicable in favor of respondents

The RTC favored respondents’ application for land registration covering Lot 4998-B
also because they had taken possession of the property continuously, openly,
publicly and adversely for more than 30 years based on their predecessor-in-interest
being the adjoining owner of the parcel of land along the river bank. It rendered the
following ratiocination, viz:20

In this regard, the Court found that from the time the applicants became the owners
thereof, they took possession of the same property continuously, openly, publicly
and adversely for more than thirty (30) years because their predecessors-in-interest
95
are the adjoining owners of the subject parcel of land along the river bank.
Furthermore, the fact that applicants paid its realty taxes, had it surveyed per
subdivision plan Csd-00-000343 (Exh. "L") which was duly approved by the Land
Management Services and the fact that Engr. Chito B. Cainglet, OIC–Chief, Surveys
Division Land Registration Authority, made a Report that the subject property is not
a portion of the Parañaque River and that it does not fall nor overlap with Lot 5000,
thus, the Court opts to grant the application.

Finally, in the light of the evidence adduced by the applicants in this case and in
view of the foregoing reports of the Department of Agrarian Reforms, Land
Registration Authority and the Department of Environment and Natural Resources,
the Court finds and so holds that the applicants have satisfied all the requirements
of law which are essential to a government grant and is, therefore, entitled to the
issuance of a certificate of title in their favor. So also, oppositor failed to prove that
the applicants are not entitled thereto, not having presented any witness.

In fine, the application is GRANTED.

As already mentioned, the CA affirmed the RTC.

Both lower courts erred.

The relevant legal provision is Section 14(1) of Presidential Decree No. 1529
(Property Registration Decree), which pertinently states:

Section 14. Who may apply. — The following persons may file in the proper
[Regional Trial Court] an application for registration of title to land, whether
personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in

open, continuous, exclusive and notorious possession and occupation of alienable
and disposable lands of the public domain under a bona fide claim of ownership
since June 12, 1945, or earlier.

xxxx

Under Section 14(1), then, applicants for confirmation of imperfect title must prove
the following, namely: (a) that the land forms part of the disposable and alienable
agricultural lands of the public domain; and (b) that they have been in open,
continuous, exclusive, and notorious possession and occupation of the land under a
bona fide claim of ownership either since time immemorial or since June 12, 1945.21

The Republic assails the findings by the lower courts that respondents "took
possession of the same property continuously, openly, publicly and adversely for
more than thirty (30) years."22

Although it is well settled that the findings of fact of the trial court, especially when
affirmed by the CA, are accorded the highest degree of respect, and generally will
96
not be disturbed on appeal, with such findings being binding and conclusive on the
Court,23 the Court has consistently recognized exceptions to this rule, including the
following, to wit: (a) when the findings are grounded entirely on speculation,
surmises, or conjectures; (b) when the inference made is manifestly mistaken,
absurd, or impossible; (c) when there is grave abuse of discretion; (d) when the
judgment is based on a misapprehension of facts; (e) when the findings of fact are
conflicting; (f) when in making its findings the CA went beyond the issues of the
case, or its findings are contrary to the admissions of both the appellant and the
appellee; (g) when the findings are contrary to those of the trial court; (h) when the
findings are conclusions without citation of specific evidence on which they are
based; (i) when the facts set forth in the petition as well as in the petitioner’s main
and reply briefs are not disputed by respondent; and (j) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence
on record.24

Here, the findings of the RTC were obviously grounded on speculation, surmises, or
conjectures; and that the inference made by the RTC and the CA was manifestly
mistaken, absurd, or impossible. Hence, the Court should now review the findings.

In finding that respondents had been in continuous, open, public and adverse
possession of the land for more than 30 years, the RTC declared:

In this regard, the Court found that from the time the applicant became the owners
thereof, they took possession of the same property continuously, openly, publicly
and adversely for more than thirty years because their predecessor in interest are
the adjoining owners of the subject parcel of land along the river banks.
Furthermore, the fact that the applicant paid its realty taxes, had it surveyed per
subdivision plan Csd-00-000343 (Exh. "L") which was duly approved by the Land
Management Services and the fact that Engr. Chito B. Cainglet, OIC – Chief,
Surveys Division Land Registration Authority, made a Report that the subject
property is not a portion of the Parañaque River and that it does not fall nor overlap
with Lot 5000, thus, the Court opts to grant the application.

The RTC apparently reckoned respondents’ period of supposed possession to be

"more than thirty years" from the fact that "their predecessors in interest are the
adjoining owners of the subject parcel of land." Yet, its decision nowhere indicated
what acts respondents had performed showing their possession of the property
"continuously, openly, publicly and adversely" in that length of time. The decision
mentioned only that they had paid realty taxes and had caused the survey of the
property to be made. That, to us, was not enough to justify the foregoing findings,
because, firstly, the payment of realty taxes did not conclusively prove the payor’s
ownership of the land the taxes were paid for,25 the tax declarations and payments
being mere indicia of a claim of ownership;26 and, secondly, the causing of surveys
of the property involved was not itself an of continuous, open, public and adverse
possession.

97
The principle that the riparian owner whose land receives the gradual deposits of
soil does not need to make an express act of possession, and that no acts of
possession are necessary in that instance because it is the law itself that
pronounces the alluvium to belong to the riparian owner from the time that the
deposit created by the current of the water becomes manifest27 has no applicability
herein. This is simply because Lot 4998-B was not formed through accretion.
Hence, the ownership of the land adjacent to the river bank by respondents’
predecessor-in-interest did not translate to possession of Lot 4998-B that would
ripen to acquisitive prescription in relation to Lot 4998-B.

On the other hand, the claim of thirty years of continuous, open, public and adverse
possession of Lot 4998-B was not even validated or preponderantly established.
The admission of respondents themselves that they declared the property for
taxation purposes only in 1997 and paid realty taxes only from 199928 signified that
their alleged possession would at most be for only nine years as of the filing of their
application for land registration on March 7, 1997.

Yet, even conceding, for the sake of argument, that respondents possessed Lot
4998-B for more than thirty years in the character they claimed, they did not thereby
acquire the land by prescription or by other means without any competent proof that
the land was already declared as alienable and disposable by the Government.
Absent that declaration, the land still belonged to the State as part of its public
dominion.

Article 419 of the Civil Code distinguishes property as being either of public
dominion or of private ownership. Article 420 of the Civil Code lists the properties
considered as part of public dominion, namely: (a) those intended for public use,
such as roads, canals, rivers, torrents, ports and bridges constructed by the State,
banks, shores, roadsteads, and others of similar character; and (b) those which
belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. As earlier mentioned, Article
502 of the Civil Code declares that rivers and their natural beds are of public
dominion.

Whether the dried-up river bed may be susceptible to acquisitive prescription or not
was a question that the Court resolved in favor of the State in Celestial v.
Cachopero,29 a case involving the registration of land found to be part of a dried-up
portion of the natural bed of a creek. There the Court held:

As for petitioner’s claim of ownership over the subject land, admittedly a dried-up
bed of the Salunayan Creek, based on (1) her alleged long term adverse possession
and that of her predecessor-in-interest, Marcelina Basadre, even prior to October
22, 1966, when she purchased the adjoining property from the latter, and (2) the
right of accession under Art. 370 of the Spanish Civil Code of 1889 and/or Article
461 of the Civil Code, the same must fail.

98
Since property of public dominion is outside the commerce of man and not
susceptible to private appropriation and acquisitive prescription, the adverse
possession which may be the basis of a grant of title in the confirmation of an
imperfect title refers only to alienable or disposable portions of the public domain. It
is only after the Government has declared the land to be alienable and disposable
agricultural land that the year of entry, cultivation and exclusive and adverse
possession can be counted for purposes of an imperfect title.

A creek, like the Salunayan Creek, is a recess or arm extending from a river and
participating in the ebb and flow of the sea. As such, under Articles 420(1) and
502(1) of the Civil Code, the Salunayan Creek, including its natural bed, is property
of the public domain which is not susceptible to private appropriation and acquisitive
prescription. And, absent any declaration by the government, that a portion of the
creek has dried-up does not, by itself, alter its inalienable character.

xxxx

Had the disputed portion of the Salunayan Creek dried up after the present Civil
Code took effect, the subject land would clearly not belong to petitioner or her
predecessor-in-interest since under the aforementioned provision of Article 461,
"river beds which are abandoned through the natural change in the course of the
waters ipso facto belong to the owners of the land occupied by the new course," and
the owners of the adjoining lots have the right to acquire them only after paying their
value.

And both Article 370 of the Old Code and Article 461 of the present Civil Code are
applicable only when "river beds are abandoned through the natural change in the
course of the waters." It is uncontroverted, however, that, as found by both the
Bureau of Lands and the DENR Regional Executive Director, the subject land
became dry as a result of the construction an irrigation canal by the National
Irrigation Administration. Thus, in Ronquillo v. Court of Appeals, this Court held:

The law is clear and unambiguous. It leaves no room for interpretation. Article 370
applies only if there is a natural change in the course of the waters. The rules on
alluvion do not apply to man-made or artificial accretions nor to accretions to lands
that adjoin canals or esteros or artificial drainage systems. Considering our earlier
finding that the dried-up portion of Estero Calubcub was actually caused by the
active intervention of man, it follows that Article 370 does not apply to the case at
bar and, hence, the Del Rosarios cannot be entitled thereto supposedly as riparian
owners.

The dried-up portion of Estero Calubcub should thus be considered as forming part
of the land of the public domain which cannot be subject to acquisition by private
ownership. xxx (Emphasis supplied)

Furthermore, both provisions pertain to situations where there has been a change in
the course of a river, not where the river simply dries up. In the instant Petition, it is
99
not even alleged that the Salunayan Creek changed its course. In such a situation,
commentators are of the opinion that the dry river bed remains property of public
dominion. (Bold emphases supplied)

Indeed, under the Regalian doctrine, all lands not otherwise appearing to be clearly
within private ownership are presumed to belong to the State.30 No public land can
be acquired by private persons without any grant, express or implied, from the
Government. It is indispensable, therefore, that there is a showing of a title from the
State.31Occupation of public land in the concept of owner, no matter how long,
cannot ripen into ownership and be registered as a title.32

Subject to the exceptions defined in Article 461 of the Civil Code (which declares
river beds that are abandoned through the natural change in the course of the
waters as ipso facto belonging to the owners of the land occupied by the new
course, and which gives to the owners of the adjoining lots the right to acquire only
the abandoned river beds not ipso facto belonging to the owners of the land affected
by the natural change of course of the waters only after paying their value), all river
beds remain property of public dominion and cannot be acquired by acquisitive
prescription unless previously declared by the Government to be alienable and
disposable. Considering that Lot 4998-B was not shown to be already declared to be
alienable and disposable, respondents could not be deemed to have acquired the
property through prescription.

Nonetheless, respondents insist that the property was already classified as alienable
and disposable by the Government. They cite as proof of the classification as
alienable and disposable the following notation found on the survey plan, to wit: 33

NOTE

ALL CORNERS NOT OTHERWISE DESCRIBED ARE OLD BL CYL. CONC. MONS
15 X 60CM

All corners marked PS are cyl. conc. mons 15 x 60 cm

Surveyed in accordance with Survey Authority NO. 007604-48 of the Regional

Executive Director issued by the CENR-OFFICER dated Dec. 2, 1996.

This survey is inside L.C. Map No. 2623, Proj. No. 25 classified as
alienable/disposable by the Bureau of Forest Dev’t. on Jan. 3, 1968.

Lot 4998-A = Lot 5883} Cad 299

Lot 4998-B = Lot 5884} Paranaque Cadastre.

Was the notation on the survey plan to the effect that Lot 4998-B was "inside" the
map "classified as alienable/disposable by the Bureau of Forest Development on 03
Jan. 1968" sufficient proof of the property’s nature as alienable and disposable
public land?
100
To prove that the land subject of an application for registration is alienable, an
applicant must conclusively establish the existence of a positive act of the
Government, such as a presidential proclamation, executive order, administrative
action, investigation reports of the Bureau of Lands investigator, or a legislative act
or statute. Until then, the rules on confirmation of imperfect title do not apply.

As to the proofs that are admissible to establish the alienability and disposability of
public land, we said in Secretary of the Department of Environment and Natural
Resources v. Yap34 that:

The burden of proof in overcoming the presumption of State ownership of the lands
of the public domain is on the person applying for registration (or claiming
ownership), who must prove that the land subject of the application is alienable or
disposable. To overcome this presumption, incontrovertible evidence must be
established that the land subject of the application (or claim) is alienable or
disposable.There must still be a positive act declaring land of the public domain as
alienable and disposable. To prove that the land subject of an application for
registration is alienable, the applicant must establish the existence of a positive act
of the government such as a presidential proclamation or an executive order; an
administrative action; investigation reports of Bureau of Lands investigators; and a
legislative act or a statute. The applicant may also secure a certification from the
government that the land claimed to have been possessed for the required number
of years is alienable and disposable.

In the case at bar, no such proclamation, executive order, administrative action,

report, statute, or certification was presented to the Court. The records are bereft of
evidence showing that, prior to 2006, the portions of Boracay occupied by private
claimants were subject of a government proclamation that the land is alienable and
disposable. Absent such well-nigh incontrovertible evidence, the Court cannot
accept the submission that lands occupied by private claimants were already open
to disposition before 2006. Matters of land classification or reclassification cannot be
assumed. They call for proof." (Emphasis supplied)

In Menguito v. Republic,35 which we reiterated in Republic v. Sarmiento,36 we

specifically resolved the issue of whether the notation on the survey plan was
sufficient evidence to establish the alienability and disposability of public land, to wit:

To prove that the land in question formed part of the alienable and disposable lands
of the public domain, petitioners relied on the printed words which read: "This survey
plan is inside Alienable and Disposable Land Area, Project No. 27-B as per L.C.
Map No. 2623, certified by the Bureau of Forestry on January 3, 1968," appearing
on Exhibit "E" (Survey Plan No. Swo-13-000227).

This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides:
"All lands of the public domain, waters, minerals, coal, petroleum, and other mineral
oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. x x x."
101
For the original registration of title, the applicant (petitioners in this case) must
overcome the presumption that the land sought to be registered forms part of the
public domain. Unless public land is shown to have been reclassified or alienated to
a private person by the State, it remains part of the inalienable public domain.
Indeed, "occupation thereof in the concept of owner, no matter how long, cannot
ripen into ownership and be registered as a title." To overcome such presumption,
incontrovertible evidence must be shown by the applicant. Absent such evidence,
the land sought to be registered remains inalienable.

In the present case, petitioners cite a surveyor-geodetic engineer’s notation in

Exhibit "E" indicating that the survey was inside alienable and disposable land. Such
notation does not constitute a positive government act validly changing the
classification of the land in question. Verily, a mere surveyor has no authority to
reclassify lands of the public domain. By relying solely on the said surveyor’s
assertion, petitioners have not sufficiently proven that the land in question has been
declared alienable. (Emphasis supplied)

In Republic v. T.A.N. Properties, Inc.,37 we dealt with the sufficiency of the

certification by the Provincial Environmental Officer (PENRO) or Community
Environmental Officer (CENRO) to the effect that a piece of public land was
alienable and disposable in the following manner, viz:

x x x it is not enough for the PENRO or CENRO to certify that a land is alienable and
disposable. The applicant for land registration must prove that the DENR Secretary
had approved the land classification and released the land of the public domain as
alienable and disposable, and that the land subject of the application for registration
falls within the approved area per verification through survey by the PENRO or
CENRO. In addition, the applicant for land registration must present a copy of the
original classification approved by the DENR Secretary and certified as a true copy
by the legal custodian of the official records. These facts must be established to
prove that the land is alienable and disposable. Respondent failed to do so because
the certifications presented by respondent do not, by themselves, prove that the
land is alienable and disposable.

Only Torres, respondent’s Operations Manager, identified the certifications

submitted by respondent.1âwphi1 The government officials who issued the
certifications were not presented before the trial court to testify on their contents.
The trial court should not have accepted the contents of the certifications as proof of
the facts stated therein. Even if the certifications are presumed duly issued and
admissible in evidence, they have no probative value in establishing that the land is
alienable and disposable.

xxxx

The CENRO and Regional Technical Director, FMS-DENR, certifications do not

prove that Lot 10705-B falls within the alienable and disposable land as proclaimed
by the DENR Secretary. Such government certifications do not, by their mere
102
issuance, prove the facts stated therein. Such government certifications may fall
under the class of documents contemplated in the second sentence of Section 23 of
Rule 132. As such, the certifications are prima facie evidence of their due execution
and date of issuance but they do not constitute prima facie evidence of the facts
stated therein. (Emphasis supplied)

These rulings of the Court indicate that the notation on the survey plan of Lot 4998-
B, Cad-00-000343 to the effect that the "survey is inside a map classified as
alienable/disposable by the Bureau of Forest Dev’t" did not prove that Lot 4998-B
was already classified as alienable and disposable. Accordingly, respondents could
not validly assert acquisitive prescription of Lot 4988-B.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of
Appeals promulgated on May 27, 2003; DISMISSES the application for registration
of Arcadio C. Santos, Jr. and Arcadio Ivan S. Santos III respecting Lot 4998-B with a
total area of 1,045 square meters, more or less, situated in Barangay San Dionisio,
Parañaque City, Metro Manila; and DECLARES Lot 4998-B as exclusively belonging
to the State for being part of the dried--up bed of the Parat1aque River.

Respondents shall pay the costs of suit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 150666 August 3, 2010

LUCIANO BRIONES and NELLY BRIONES, Petitioners,

vs.
JOSE MACABAGDAL, FE D. MACABAGDAL and VERGON REALTY
INVESTMENTS CORPORATION,Respondents.

DECISION

VILLARAMA, JR., J.:

On appeal under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is the
Decision1 dated December 11, 2000 of the Court of Appeals (CA) in CA-G.R. CV
No. 48109 which affirmed the September 29, 1993 Decision2 of the Regional Trial
Court (RTC) of Makati City, Branch 135, ordering petitioners Luciano and Nelly
Briones to remove the improvements they have made on the disputed property or to

103
pay respondent-spouses Jose and Fe Macabagdal the prevailing price of the land
as compensation.

The undisputed factual antecedents of the case are as follows:

Respondent-spouses purchased from Vergon Realty Investments Corporation

(Vergon) Lot No. 2-R, a 325-square-meter land located in Vergonville Subdivision
No. 10 at Las Piñas City, Metro Manila and covered by Transfer Certificate of Title
No. 62181 of the Registry of Deeds of Pasay City. On the other hand, petitioners are
the owners of Lot No. 2-S, which is adjacent to Lot No. 2-R.

Sometime in 1984, after obtaining the necessary building permit and the approval of
Vergon, petitioners constructed a house on Lot No. 2-R which they thought was Lot
No. 2-S. After being informed of the mix up by Vergon’s manager, respondent-
spouses immediately demanded petitioners to demolish the house and vacate the
property. Petitioners, however, refused to heed their demand. Thus, respondent-
spouses filed an action to recover ownership and possession of the said parcel of
land with the RTC of Makati City.3

Petitioners insisted that the lot on which they constructed their house was the lot
which was consistently pointed to them as theirs by Vergon’s agents over the seven
(7)-year period they were paying for the lot. They interposed the defense of being
buyers in good faith and impleaded Vergon as third-party defendant claiming that
because of the warranty against eviction, they were entitled to indemnity from
Vergon in case the suit is decided against them.4

The RTC ruled in favor of respondent-spouses and found that petitioners’ house
was undoubtedly built on Lot No. 2-R. The dispositive portion of the trial court’s
decision reads as follows:

PREMISES CONSIDERED, let judgment be rendered declaring, to wit:

1. That plaintiffs are the owners of Lot No. 2-R of subdivision plan (LRC) Psd-
147392 at Vergonville Subdivision, No. 10, Las Piñas, Metro Manila covered
by TCT No. 62181 of the Registry of Deeds of Pasay City on which defendants
have constructed their house;

2. Defendants, jointly and severally, are ordered to demolish their house and
vacate the premises and return the possession of the portion of Lot No. 2-R as
above-described to plaintiffs within thirty (30) days from receipt of this
decision, or in the alternative, plaintiffs should be compensated by defendants,
jointly and severally, by the payment of the prevailing price of the lot involved
as Lot No. 2-R with an area of 325 square meters which should not be less
than P1,500.00 per square meter, in consideration of the fact that prices of
real estate properties in the area concerned have increased rapidly;

104
 3. Defendants, jointly and severally, pay to plaintiffs for moral damages with
plaintiffs’ plans and dreams of building their own house on their own lot being
severely shattered and frustrated due to defendants’ incursion as interlopers of
Lot No. 2-R in the sum of P50,000.00;

4. Defendants, jointly and severally, to pay plaintiffs in the amount

of P30,000.00 as attorney’s fees; and,

5. to pay the costs of the proceedings.

Defendants’ counterclaim against plaintiffs is dismissed for lack of merit and with no
cause of action.

Defendants’ third-party complaint against third-party defendant Vergonville Realty

and Investments Corporation is likewise ordered dismissed for lack of cause of
action and evidently without merit.

On the other hand, defendants, jointly and severally, are liable for the litigation
expenses incurred by Vergonville Realty by way of counterclaim, which is also
proven by the latter with a mere preponderance of evidence, and are hereby
ordered to pay the sum of P20,000.00 as compensatory damage; and attorney’s
fees in the sum ofP10,000.00

SO ORDERED.5

On appeal, the CA affirmed the RTC’s finding that the lot upon which petitioners built
their house was not the one (1) which Vergon sold to them. Based on the
documentary evidence, such as the titles of the two (2) lots, the contracts to sell,
and the survey report made by the geodetic engineer, petitioners’ house was built
on the lot of the respondent-spouses.6 There was no basis to presume that the error
was Vergon’s fault. Also the warranty against eviction under Article 1548 of the Civil
Code was not applicable as there was no deprivation of property: the lot on which
petitioners built their house was not the lot sold to them by Vergon, which remained
vacant and ready for occupation.7 The CA further ruled that petitioners cannot use
the defense of allegedly being a purchaser in good faith for wrongful occupation of
land.8

Aggrieved, petitioners filed a motion for reconsideration, but it was denied by the
appellate court.9 Hence, this petition for review on certiorari.

Petitioners raise the following assignment of errors:

I.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE

CONTRARY TO LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT
IN AFFIRMING THE DECISION OF THE TRIAL COURT ORDERING
PETITIONERS TO DEMOLISH THEIR ONLY HOUSE AND VACATE THE LOT
105
AND TO PAY MORAL AND COMPENSATORY DAMAGES AS WELL AS
ATTORNEY’S FEE IN THE TOTAL AMOUNT OF PS[P] 110,000; AND

II.

THE COURT OF APPEALS SANCTIONED THE DEPARTURE OF THE LOWER

COURT FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION.10

In the main, it is petitioners’ position that they must not bear the damage alone.
Petitioners insist that they relied with full faith and confidence in the reputation of
Vergon’s agents when they pointed the wrong property to them. Even the President
of Vergon, Felix Gonzales, consented to the construction of the house when he
signed the building permit.11 Also, petitioners are builders in good faith.12

The petition is partly meritorious.

At the outset, we note that petitioners raise factual issues, which are beyond the
scope of a petition for review on certiorari under Rule 45 of the Rules. Well settled is
the rule that the jurisdiction of this Court in cases brought to it from the CA via a
petition for review on certiorari under Rule 45 is limited to the review of errors of law.
The Court is not bound to weigh all over again the evidence adduced by the parties,
particularly where the findings of both the trial court and the appellate court coincide.
The resolution of factual issues is a function of the trial court whose findings on
these matters are, as a general rule, binding on this Court, more so where these
have been affirmed by the CA.13 We note that the CA and RTC did not overlook or
fail to appreciate any material circumstance which, when properly considered, would
have altered the result of the case. Indeed, it is beyond cavil that petitioners
mistakenly constructed their house on Lot No. 2-R which they thought was Lot No.
2-S.

However, the conclusiveness of the factual findings notwithstanding, we find that the
trial court nonetheless erred in outrightly ordering petitioners to vacate the subject
property or to pay respondent spouses the prevailing price of the land as
compensation. Article 52714 of the Civil Code presumes good faith, and since no
proof exists to show that the mistake was done by petitioners in bad faith, the latter
should be presumed to have built the house in good faith.

When a person builds in good faith on the land of another, Article 448 of the Civil
Code governs. Said article provides,

ART. 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
106
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall fix the terms thereof.
(Emphasis ours.)

The above-cited article covers cases in which the builders, sowers or planters
believe themselves to be owners of the land or, at least, to have a claim of title
thereto.15 The builder in good faith can compel the landowner to make a choice
between appropriating the building by paying the proper indemnity or obliging the
builder to pay the price of the land. The choice belongs to the owner of the land, a
rule that accords with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. However, even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. He must choose one. 16 He
cannot, for instance, compel the owner of the building to remove the building from
the land without first exercising either option. It is only if the owner chooses to sell
his land, and the builder or planter fails to purchase it where its value is not more
than the value of the improvements, that the owner may remove the improvements
from the land. The owner is entitled to such remotion only when, after having chosen
to sell his land, the other party fails to pay for the same.17

Moreover, petitioners have the right to be indemnified for the necessary and useful
expenses they may have made on the subject property. Articles 546 and 548 of
the Civil Code provide,

ART. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

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

ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the
possessor in good faith; but he may remove the ornaments with which he has
embellished the principal thing if it suffers no injury thereby, and if his successor in
the possession does not prefer to refund the amount expended.

Consequently, the respondent-spouses have the option to appropriate the house on

the subject land after payment to petitioners of the appropriate indemnity or to oblige
petitioners to pay the price of the land, unless its value is considerably more than
the value of the structures, in which case petitioners shall pay reasonable rent.

In accordance with Depra v. Dumlao,18 this case must be remanded to the RTC
which shall conduct the appropriate proceedings to assess the respective values of
the improvement and of the land, as well as the amounts of reasonable rentals and
indemnity, fix the terms of the lease if the parties so agree, and to determine other
107
matters necessary for the proper application of Article 448, in relation to Articles 546
and 548, of the Civil Code.

As to the liability of Vergon, petitioners failed to present sufficient evidence to show

negligence on Vergon’s part. Petitioners’ claim is obviously one (1) for tort, governed
by Article 2176 of the Civil Code, which provides:

ART. 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence,
if there is no preexisting contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter. (Emphasis ours.)

Under this provision, it is the plaintiff who 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.19 This the petitioners failed to do. The President of Vergon signed the
building permit as a precondition for its approval by the local government, but it did
not guarantee that petitioners were constructing the structure within the metes and
bounds of petitioners’ lot. The signature of the President of Vergon on the building
permit merely proved that petitioners were authorized to make constructions within
the subdivision project of Vergon. And while petitioners acted in good faith in
building their house on Lot No. 2-R, petitioners did not show by what authority the
agents or employees of Vergon were acting when they pointed to the lot where the
construction was made nor was petitioners’ claim on this matter corroborated by
sufficient evidence.

One (1) last note on the award of damages. Considering that petitioners acted in
good faith in building their house on the subject property of the respondent-spouses,
there is no basis for the award of moral damages to respondent-spouses. Likewise,
the Court deletes the award to Vergon of compensatory damages and attorney’s
fees for the litigation expenses Vergon had incurred as such amounts were not
specifically prayed for in its Answer to petitioners’ third-party complaint. Under
Article 220820 of the Civil Code, attorney’s fees and expenses of litigation are
recoverable only in the concept of actual damages, not as moral damages nor
judicial costs. Hence, such must be specifically prayed for—as was not done in this
case—and may not be deemed incorporated within a general prayer for "such other
relief and remedy as this court may deem just and equitable."21 It must also be noted
that aside from the following, the body of the trial court’s decision was devoid of any
statement regarding attorney’s fees. In Scott Consultants & Resource Development
Corporation, Inc. v. Court of Appeals,22 we reiterated that attorney’s fees are not to
be awarded every time a party wins a suit. The power of the court to award
attorney’s fees under Article 2208 of the Civil Code demands factual, legal, and
equitable justification; its basis cannot be left to speculation or conjecture. Where
granted, the court must explicitly state in the body of the decision, and not only in
the dispositive portion thereof, the legal reason for the award of attorney’s
fees.1avvphi1
108
WHEREFORE, the Decision dated December 11, 2000 of the Court of Appeals in
CA-G.R. CV No. 48109 is AFFIRMED WITH MODIFICATION. The award of moral
damages in favor of respondent-spouses Jose and Fe Macabagdal and the award of
compensatory damages and attorney’s fees to respondent Vergon Realty
Investments Corporation are DELETED. The case is REMANDED to the Regional
Trial Court of Makati City, Branch 135, for further proceedings consistent with the
proper application of Articles 448, 546 and 548 of the Civil Code, as follows:

1. The trial court shall determine:

a. the present fair price of the respondent-spouses’ lot;

b. the amount of the expenses spent by petitioners for the building of

their house;

c. the increase in value ("plus value") which the said lot may have
acquired by reason thereof; and

d. whether the value of said land is considerably more than that of the
house built thereon.

2. After said amounts shall have been determined by competent evidence, the
Regional Trial Court shall render judgment, as follows:

a. The trial court shall grant the respondent-spouses a period of fifteen

(15) days within which to exercise their option under Article 448 of
the Civil Code, whether to appropriate the house as their own by paying
to petitioners either the amount of the expenses spent by petitioners for
the building of the house, or the increase in value ("plus value") which
the said lot may have acquired by reason thereof, or to oblige petitioners
to pay the price of said land. The amounts to be respectively paid by the
respondent-spouses and petitioners, in accordance with the option thus
exercised by written notice of the other party and to the Court, shall be
paid by the obligor within fifteen (15) days from such notice of the option
by tendering the amount to the Court in favor of the party entitled to
receive it;

b. The trial court shall further order that if the respondent-spouses

exercises the option to oblige petitioners to pay the price of the land but
the latter rejects such purchase because, as found by the trial court, the
value of the land is considerably more than that of the house, petitioners
shall give written notice of such rejection to the respondent-spouses and
to the Court within fifteen (15) days from notice of the respondent-
spouses’ option to sell the land. In that event, the parties shall be given a
period of fifteen (15) days from such notice of rejection within which to
agree upon the terms of the lease, and give the Court formal written
notice of such agreement and its provisos. If no agreement is reached
109
 by the parties, the trial court, within fifteen (15) days from and after the
termination of the said period fixed for negotiation, shall then fix the
terms of the lease, payable within the first five (5) days of each calendar
month. The period for the forced lease shall not be more than two (2)
years, counted from the finality of the judgment, considering the long
period of time since petitioners have occupied the subject area. The
rental thus fixed shall be increased by ten percent (10%) for the second
year of the forced lease. Petitioners shall not make any further
constructions or improvements on the house. Upon expiration of the two
(2)-year period, or upon default by petitioners in the payment of rentals
for two (2) consecutive months, the respondent-spouses shall be entitled
to terminate the forced lease, to recover their land, and to have the
house removed by petitioners or at the latter’s expense. The rentals
herein provided shall be tendered by petitioners to the Court for payment
to the respondent-spouses, and such tender shall constitute evidence of
whether or not compliance was made within the period fixed by the
Court.

c. In any event, petitioners shall pay the respondent-spouses reasonable

compensation for the occupancy of the respondent-spouses’ land for the
period counted from the year petitioners occupied the subject area, up to
the commencement date of the forced lease referred to in the preceding
paragraph;

d. The periods to be fixed by the trial court in its Decision shall be

inextendible, and upon failure of the party obliged to tender to the trial
court the amount due to the obligee, the party entitled to such payment
shall be entitled to an order of execution for the enforcement of payment
of the amount due and for compliance with such other acts as may be
required by the prestation due the obligee.

No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 176791 November 14, 2012

COMMUNITIES CAGAYAN, INC., Petitioner,

vs.
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 SPOUSES ARSENIO (Deceased) and ANGELES NANOL AND ANYBODY
CLAIMING RIGHTS UNDER THEM,Respondents.

DECISION

DEL CASTILLO, J.:

LAWS fill the gap in a contract.

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails
the December 29. 2006 Decision2 and the February 12, 2007 Order3 of the Regional
Trial Court (RTC), Cagayan De Oro City, Branch 18, in Civil Case No. 2005-158.

Factual Antecedents

Sometimes in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a

Contract to Sell4 with petitioner Communities Cagayan, Inc.,5 whereby the latter
agreed to sell to respondent-spouses a house and Lots 17 and 196 located at Block
16, Camella Homes Subdivision, Cagayan de Oro City, 7 for the price of
P368,000.00.8 Respondent-spouses, however, did not avail of petitioner’s inhouse
financing due to its high interest rates.9 Instead, they obtained a loan from Capitol
Development Bank, a sister company of petitioner, using the property as
collateral.10 To facilitate the loan, a simulated sale over the property was executed
by petitioner in favor of respondent-spouses.11 Accordingly, titles were transferred in
the names of respondent-spouses under Transfer Certificates of Title (TCT) Nos.
105202 and 105203, and submitted to Capitol Development Bank for loan
processing.12 Unfortunately, the bank collapsed and closed before it could release
the loan.13

Thus, on November 30, 1997, respondent-spouses entered into another Contract to

Sell14 with petitioner over the same property for the same price of
P368,000.00.15 This time, respondent-spouses availed of petitioner’s in-house
financing16thus, undertaking to pay the loan over four years, from 1997 to 2001.17

Sometime in 2000, respondent Arsenio demolished the original house and

constructed a three-story house allegedly valued at P3.5 million, more or less.18

In July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles,
to pay for the monthly amortizations.19

On September 10, 2003, petitioner sent respondent-spouses a notarizedNotice of

Delinquency and Cancellation of Contract to Sell20 due to the latter’s failure to pay
the monthly amortizations.

In December 2003, petitioner filed before Branch 3 of the Municipal Trial Court in
Cities of Cagayan de Oro City, an action for unlawful detainer, docketed as C3-Dec-
2160, against respondent-spouses.21 When the case was referred for mediation,
respondent Angeles offered to pay P220,000.00 to settle the case but petitioner
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refused to accept the payment.22 The case was later withdrawn and consequently
dismissed because the judge found out that the titles were already registered under
the names of respondent-spouses.23

Unfazed by the unfortunate turn of events, petitioner, on July 27, 2005, filed before
Branch 18 of the RTC, Cagayan de Oro City, a Complaint for Cancellation of Title,
Recovery of Possession, Reconveyance and Damages,24 docketed as Civil Case
No. 2005-158, against respondent-spouses and all persons claiming rights under
them. Petitioner alleged that the transfer of the titles in the names of respondent-
spouses was made only in compliance with the requirements of Capitol
Development Bank and that respondent-spouses failed to pay their monthly
amortizations beginning January 2000.25 Thus, petitioner prayed that TCT Nos. T-
105202 and T-105203 be cancelled, and that respondent Angeles be ordered to
vacate the subject property and to pay petitioner reasonable monthly rentals from
January 2000 plus damages.26

In her Answer,27 respondent Angeles averred that the Deed of Absolute Sale is
valid, and that petitioner is not the proper party to file the complaint because
petitioner is different from Masterplan Properties, Inc.28 She also prayed for
damages by way of compulsory counterclaim.29

In its Reply,30 petitioner attached a copy of its Certificate of Filing of Amended

Articles of Incorporation31 showing that Masterplan Properties, Inc. and petitioner
are one and the same. As to the compulsory counterclaim for damages, petitioner
denied the same on the ground of "lack of knowledge sufficient to form a belief as to
the truth or falsity of such allegation."32

Respondent Angeles then moved for summary judgment and prayed that petitioner
be ordered to return the owner’s duplicate copies of the TCTs.33

Pursuant to Administrative Order No. 59-2005, the case was referred for
mediation.34 But since the parties failed to arrive at an amicable settlement, the case
was set for preliminary conference on February 23, 2006.35

On July 7, 2006, the parties agreed to submit the case for decision based on the
pleadings and exhibits presented during the preliminary conference.36

Ruling of the Regional Trial Court

On December 29, 2006, the RTC rendered judgment declaring the Deed of Absolute
Sale invalid for lack of consideration.37 Thus, it disposed of the case in this wise:

WHEREFORE, the Court hereby declares the Deed of Absolute Sale VOID.
Accordingly, Transfer Certificates of Title Nos. 105202 and 105203 in the names of
the [respondents], Arsenio (deceased) and Angeles Nanol, are
ordered CANCELLED. The [respondents] and any person claiming rights under
them are directed to turn-over the possession of the house and lot to [petitioner],
112
Communities Cagayan, Inc., subject to the latter’s payment of their total monthly
installments and the value of the new house minus the cost of the original house.

SO ORDERED.38

Not satisfied, petitioner moved for reconsideration of the Decision but the
Motion39 was denied in an Order40dated February 12, 2007.

Issue

Instead of appealing the Decision to the Court of Appeals (CA), petitioner opted to
file the instant petition directly with this Court on a pure question of law, to wit:

WHETHER X X X THE ACTION OF THE RTC BRANCH 18 X X X IN ORDERING

THE RECOVERY OF POSSESSION BY PETITIONER ‘subject to the latter’s
payment of their total monthly installments and the value of the new house minus
the cost of the original house’ IS CONTRARY TO LAW AND JURISPRUDENCE X X
X.41

Petitioner’s Arguments

Petitioner seeks to delete from the dispositive portion the order requiring petitioner
to reimburse respondent-spouses the total monthly installments they had paid and
the value of the new house minus the cost of the original house.42 Petitioner claims
that there is no legal basis for the RTC to require petitioner to reimburse the cost of
the new house because respondent-spouses were in bad faith when they renovated
and improved the house, which was not yet their own.43 Petitioner further contends
that instead of ordering mutual restitution by the parties, the RTC should have
applied Republic Act No. 6552, otherwise known as the Maceda Law,44 and that
instead of awarding respondent-spouses a refund of

all their monthly amortization payments, the RTC should have ordered them to pay
petitioner monthly rentals.45

Respondent Angeles’ Arguments

Instead of answering the legal issue raised by petitioner, respondent Angeles asks
for a review of the Decision of the RTC by interposing additional issues. 46 She
maintains that the Deed of Absolute Sale is valid.47 Thus, the RTC erred in
cancelling TCT Nos. 105202 and 105203.

Our Ruling

The petition is partly meritorious.

At the outset, we must make it clear that the issues raised by respondent Angeles
may not be entertained. For failing to file an appeal, she is bound by the Decision of
the RTC. Well entrenched is the rule that "a party who does not appeal from a
113
judgment can no longer seek modification or reversal of the same. He may oppose
the appeal of the other party only on grounds consistent with the judgment."48 For
this reason, respondent Angeles may no longer question the propriety and
correctness of the annulment of the Deed of Absolute Sale, the cancellation of TCT
Nos. 105202 and 105203, and the order to vacate the property.

Hence, the only issue that must be resolved in this case is whether the RTC erred in
ordering petitioner to reimburse respondent-spouses the "total monthly installments
and the value of the new house minus the cost of the original house."49 Otherwise
stated, the issues for our resolution are:

1) Whether petitioner is obliged to refund to respondent-spouses all the

monthly installments paid; and

2) Whether petitioner is obliged to reimburse respondent-spouses the value of

the new house minus the cost of the original house.

Respondent-spouses are entitled to the

cash surrender value of the payments
on the property equivalent to 50% of the
total payments made.

Considering that this case stemmed from a Contract to Sell executed by the
petitioner and the respondent-spouses, we agree with petitioner that the Maceda
Law, which governs sales of real estate on installment, should be applied.

Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer,
to wit:

Section 3. In all transactions or contracts involving the sale or financing of real

estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act
Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two
years of installments, the buyer is entitled to the following rights in case he defaults
in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the
total grace period earned by him which is hereby fixed at the rate of one month
grace period for every one year of installment payments made: Provided, That
this right shall be exercised by the buyer only once in every five years of the
life of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
percent of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the total
114
 payments made: Provided, That the actual cancellation of the contract shall
take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made. (Emphasis
supplied.)

Section 4. In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date the
installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the
notice of cancellation or the demand for rescission of the contract by a notarial act.

Section 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or
assign the same to another person or to reinstate the contract by updating the
account during the grace period and before actual cancellation of the contract. The
deed of sale or assignment shall be done by notarial act.

In this connection, we deem it necessary to point out that, under the Maceda Law,
the actual cancellation of a contract to sell takes place after 30 days from receipt by
the buyer of the notarized notice of cancellation,50 and upon full payment of the cash
surrender value to the buyer.51 In other words, before a contract to sell can be
validly and effectively cancelled, the seller has (1) to send a notarized notice of
cancellation to the buyer and (2) to refund the cash surrender value.52 Until and
unless the seller complies with these twin mandatory requirements, the contract to
sell between the parties remains valid and subsisting.53 Thus, the buyer has the right
to continue occupying the property subject of the contract to sell, 54 and may "still
reinstate the contract by updating the account during the grace period and before
the actual cancellation"55 of the contract.

In this case, petitioner complied only with the first condition by sending a notarized
notice of cancellation to the respondent-spouses. It failed, however, to refund the
cash surrender value to the respondent-spouses. Thus, the Contract to Sell remains
valid and subsisting and supposedly, respondent-spouses have the right to continue
occupying the subject property. Unfortunately, we cannot reverse the Decision of the
RTC directing respondent-spouses to vacate and turnover possession of the subject
property to petitioner because respondent-spouses never appealed the order. The
RTC Decision as to respondent-spouses is therefore considered final.

In addition, in view of respondent-spouses’ failure to appeal, they can no longer

reinstate the contract by updating the account. Allowing them to do so would be
unfair to the other party and is offensive to the rules of fair play, justice, and due
process. Thus, based on the factual milieu of the instant case, the most that we can
115
do is to order the return of the cash surrender value. Since respondent-spouses paid
at least two years of installment,56 they are entitled to receive the cash surrender
value of the payments they had made which, under Section 3(b) of the Maceda Law,
is equivalent to 50% of the total payments made.

Respondent-spouses are entitled to

reimbursement of the improvements
made on the property.

Petitioner posits that Article 448 of the Civil Code does not apply and that
respondent-spouses are not entitled to reimbursement of the value of the
improvements made on the property because they were builders in bad faith. At the
outset, we emphasize that the issue of whether respondent-spouses are builders in
good faith or bad faith is a factual question, which is beyond the scope of a petition
filed under Rule 45 of the Rules of Court.57 In fact, petitioner is deemed to have
waived all factual issues since it appealed the case directly to this Court,58 instead of
elevating the matter to the CA. It has likewise not escaped our attention that after
their failed preliminary conference, the parties agreed to submit the case for
resolution based on the pleadings and exhibits presented. No trial was conducted.
Thus, it is too late for petitioner to raise at this stage of the proceedings the factual
issue of whether respondent-spouses are ilders in bad faith. Hence, in view of the
special circumstances obtaining in this case, we are constrained to rely on the
presumption of good faith on the part of the respondent-spouses which the petitioner
failed to rebut. Thus, respondent-spouses being presumed builders in good faith, we
now rule on the applicability of Article 448 of the Civil Code.

As a general rule, Article 448 on builders in good faith does not apply where there is
a contractual relation between the parties,59 such as in the instant case. We went
over the records of this case and we note that the parties failed to attach a copy of
the Contract to Sell. As such, we are constrained to apply Article 448 of the Civil
Code, which provides viz:

ART. 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms
of the lease and in case of disagreement, the court shall fix the terms thereof.

Article 448 of the Civil Code applies when the builder believes that he is the owner
of the land or that by some title he has the right to build thereon,60 or that, at least,
he has a claim of title thereto.61 Concededly, this is not present in the instant case.
The subject property is covered by a Contract to Sell hence ownership still remains
with petitioner being the seller. Nevertheless, there were already instances where
116
this Court applied Article 448 even if the builders do not have a claim of title over the
property. Thus:

This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to have
a claim of title thereto. It does not apply when the interest is merely that of a holder,
such as a mere tenant, agent or usufructuary. From these pronouncements, good
faith is identified by the belief that the land is owned; or that – by some title – one
has the right to build, plant, or sow thereon.

However, in some special cases, this Court has used Article 448 by recognizing
good faith beyond this limited definition. Thus, in Del Campo v. Abesia, this
provision was applied to one whose house – despite having been built at the time he
was still co-owner – overlapped with the land of another. This article was also
applied to cases wherein a builder had constructed improvements with the consent
of the owner. The Court ruled that the law deemed the builder to be in good faith. In
Sarmiento v. Agana, the builders were found to be in good faith despite their
reliance on the consent of another, whom they had mistakenly believed to be the
owner of the land.62

The Court likewise applied Article 448 in Spouses Macasaet v. Spouses

Macasaet63 notwithstanding the fact that the builders therein knew they were not the
owners of the land. In said case, the parents who owned the land allowed their son
and his wife to build their residence and business thereon. As found by this Court,
their occupation was not by mere tolerance but "upon the invitation of and with the
complete approval of (their parents), who desired that their children would occupy
the premises. It arose from familial love and a desire for family solidarity x x
x."64 Soon after, conflict between the parties arose. The parents demanded their son
and his wife to vacate the premises. The Court thus ruled that as owners of the
property, the parents have the right to possession over it. However, they must
reimburse their son and his wife for the improvements they had introduced on the
property because they were considered builders in good faith even if they knew for a
fact that they did not own the property, thus:

Based on the aforecited special cases, Article 448 applies to the present factual
milieu. The established facts of this case show that respondents fully consented to
the improvements introduced by petitioners. In fact, because the children occupied
the lots upon their invitation, the parents certainly knew and approved of the
construction of the improvements introduced thereon. Thus, petitioners may be
deemed to have been in good faith when they built the structures on those lots.

The instant case is factually similar to Javier v. Javier. In that case, this Court
deemed the son to be in good faith for building the improvement (the house) with the
knowledge and consent of his father, to whom belonged the land upon which it was
built. Thus, Article 448 was applied.65

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In fine, the Court applied Article 448 by construing good faith beyond its limited
definition. We find no reason not to apply the Court’s ruling in Spouses Macasaet v.
Spouses Macasaet in this case. We thus hold that Article 448 is also applicable to
the instant case. First, good faith is presumed on the part of the respondent-
spouses. Second, petitioner failed to rebut this presumption. Third, no evidence was
presented to show that petitioner opposed or objected to the improvements
introduced by the respondent-spouses. Consequently, we can validly presume that
petitioner consented to the improvements being constructed. This presumption is
bolstered by the fact that as the subdivision developer, petitioner must have given
the respondent-spouses permits to commence and undertake the construction.
Under Article 453 of the Civil Code, "it is understood that there is bad faith on the
part of the landowner whenever the act was done with his knowledge and without
opposition on his part."

In view of the foregoing, we find no error on the part of the RTC in requiring
petitioner to pay respondent-spouses the value of the new house minus the cost of
the old house based on Article 448 of the Civil Code, subject to succeeding
discussions.

Petitioner has two options under Article

448 and pursuant to the ruling in
66
Tuatis v. Escol.

In Tuatis, we ruled that the seller (the owner of the land) has two options under
Article 448: (1) he may appropriate the improvements for himself after reimbursing
the buyer (the builder in good faith) the necessary and useful expenses under
Articles 54667 and 54868 of the Civil Code; or (2) he may sell the land to the buyer,
unless its value is considerably more than that of the improvements, in which case,
the buyer shall pay reasonable rent.69 Quoted below are the pertinent portions of our
ruling in that case:

Taking into consideration the provisions of the Deed of Sale by Installment and
Article 448 of the Civil Code, Visminda has the following options:

Under the first option, Visminda may appropriate for herself the building on the
subject property after indemnifying Tuatis for the necessary and useful
expenses the latter incurred for said building, as provided in Article 546 of the
Civil Code.

It is worthy to mention that in Pecson v. Court of Appeals, the Court

pronounced that the amount to be refunded to the builder under Article 546 of
the Civil Code should be the current market value of the improvement, thus:

xxxx

Until Visminda appropriately indemnifies Tuatis for the building constructed by the
latter, Tuatis may retain possession of the building and the subject property.
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Under the second option, Visminda may choose not to appropriate the building
and, instead, oblige Tuatis to pay the present or current fair value of the
land. The P10,000.00 price of the subject property, as stated in the Deed of Sale on
Installment executed in November 1989, shall no longer apply, since Visminda will
be obliging Tuatis to pay for the price of the land in the exercise of Visminda’s rights
under Article 448 of the Civil Code, and not under the said Deed. Tuatis’ obligation
will then be statutory, and not contractual, arising only when Visminda has chosen
her option under Article 448 of the Civil Code.

Still under the second option, if the present or current value of the land, the
subject property herein, turns out to be considerably more than that of the
building built thereon, Tuatis cannot be obliged to pay for the subject
property, but she must pay Visminda reasonable rent for the same. Visminda
and Tuatis must agree on the terms of the lease; otherwise, the court will fix
the terms.

Necessarily, the RTC should conduct additional proceedings before ordering the
execution of the judgment in Civil Case No. S-618. Initially, the RTC should
determine which of the aforementioned options Visminda will choose. Subsequently,
the RTC should ascertain: (a) under the first option, the amount of indemnification
Visminda must pay Tuatis; or (b) under the second option, the value of the subject
property vis-à-vis that of the building, and depending thereon, the price of, or the
reasonable rent for, the subject property, which Tuatis must pay Visminda.

The Court highlights that the options under Article 448 are available to Visminda, as
the owner of the subject property. There is no basis for Tuatis’ demand that, since
the value of the building she constructed is considerably higher than the subject
property, she may choose between buying the subject property from Visminda and
selling the building to Visminda for P502,073.00. Again, the choice of options is for
Visminda, not Tuatis, to make. And, depending on Visminda’s choice, Tuatis’ rights
as a builder under Article 448 are limited to the following: (a) under the first option, a
right to retain the building and subject property until Visminda pays proper
indemnity; and (b) under the second option, a right not to be obliged to pay for the
price of the subject property, if it is considerably higher than the value of the
building, in which case, she can only be obliged to pay reasonable rent for the
same.

The rule that the choice under Article 448 of the Civil Code belongs to the owner of
the land is in accord with the principle of accession, i.e., that the accessory follows
the principal and not the other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. The landowner cannot
refuse to exercise either option and compel instead the owner of the building to
remove it from the land.

The raison d’etre for this provision has been enunciated thus: Where the builder,
planter or sower has acted in good faith, a conflict of rights arises between the
owners, and it becomes necessary to protect the owner of the improvements without
119
causing injustice to the owner of the land. In view of the impracticability of creating a
state of forced co-ownership, the law has provided a just solution by giving the
owner of the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land and the sower
the proper rent. He cannot refuse to exercise either option. It is the owner of the land
who is authorized to exercise the option, because his right is older, and because, by
the principle of accession, he is entitled to the ownership of the accessory thing.

Visminda’s Motion for Issuance of Writ of Execution cannot be deemed as an

expression of her choice to recover possession of the subject property under the
first option, since the options under Article 448 of the Civil Code and their respective
consequences were also not clearly presented to her by the 19 April 1999 Decision
of the RTC. She must then be given the opportunity to make a choice between the
options available to her after being duly informed herein of her rights and obligations
under both.70 (Emphasis supplied.)

In conformity with the foregoing pronouncement, we hold that petitioner, as

landowner, has two options. It may appropriate the new house by reimbursing
respondent Angeles the current market value thereof minus the cost of the old
house. Under this option, respondent Angeles would have "a right of retention which
negates the obligation to pay rent."71 In the alternative, petitioner may sell the lots to
respondent Angeles at a price equivalent to the current fair value thereof. However,
if the value of the lots is considerably more than the value of the improvement,
respondent Angeles cannot be compelled to purchase the lots. She can only be
obliged to pay petitioner reasonable rent.

In view of the foregoing disquisition and in accordance with Depra v. Dumlao 72 and
Technogas Philippines Manufacturing Corporation v. Court of Appeals,73 we find it
necessary to remand this case to the court of origin for the purpose of determining
matters necessary for the proper application of Article 448, in relation to Articles 546
and 548 of the Civil Code.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The assailed

Decision dated December 29, 2006 and the Order dated February 12, 2007 of the
Regional Trial Court, Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158
are hereby AFFIRMED with MODIFICATION that petitioner Communities Cagayan,
Inc. is hereby ordered to RETURN the cash surrender value of the payments made
by respondent-spouses on the properties, which is equivalent to 50% of the total
payments made, in ccordance with Section 3(b) of Republic Act No. 6552, otherwise
known as the Maceda Law.

The case is hereby REMANDED to the Regional Trial Court, Cagayan de Oro City,
Branch 18, for further proceedings consistent with the proper application of Articles
448, 546 and 548 of the Civil Code, as follows:

1. The trial court shall determine:

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 a) the present or current fair value of the lots;

b) the current market value of the new house;

c) the cost of the old house; and

d) whether the value of the lots is considerably more than the current market
value of the new house minus the cost of the old house.

2. After said amounts shall have been determined by competent evidence, the trial
court shall render judgment as follows:

a) Petitioner shall be granted a period of 15 days within which to exercise its

option under the law (Article 448, Civil Code), whether to appropriate the new
house by paying to respondent Angeles the current market value of the new
house minus the cost of the old house, or to oblige respondent Angeles to pay
the price of the lots. The amounts to be respectively paid by the parties, in
accordance with the option thus exercised by written notice to the other party
and to the court, shall be paid by the obligor within 15 days from such notice of
the option by tendering the amount to the trial court in favor of the party
entitled to receive it.

b) If petitioner exercises the option to oblige respondent Angeles to pay the

price of the lots but the latter rejects such purchase because, as found by the
trial court, the value of the lots is considerably more than the value of the new
house minus the cost of the old house, respondent Angeles shall give written
notice of such rejection to petitioner and to the trial court within 15 days from
notice of petitioner’s option to sell the land. In that event, the parties shall be
given a period of 15 days from such notice of rejection within which to agree
upon the terms of the lease, and give the trial court formal written notice of the
agreement and its provisos. If no agreement is reached by the parties, the trial
court, within 15 days from and after the termination of the said period fixed for
negotiation, shall then fix the period and terms of the lease, including the
monthly rental, which shall be payable within the first five days of each
calendar month. Respondent Angeles shall not make any further constructions
or improvements on the building. Upon expiration of the period, or upon
default by respondent Angeles in the payment of rentals for two consecutive
months, petitioner shall be entitled to terminate the forced lease, to recover its
land, and to have the new house removed by respondent Angeles or at the
latter’s expense.

c) In any event, respondent Angeles shall pay petitioner reasonable

compensation for the occupancy of the property for the period counted from
the time the Decision dated December 29, 2006 became final as to
respondent Angeles or 15 days after she received a copy of the said Decision
up to the date petitioner serves notice of its option to appropriate the
encroaching structures, otherwise up to the actual transfer of ownership to
121
 respondent Angeles or, in case a forced lease has to be imposed, up to the
commencement date of the forced lease referred to in the preceding
paragraph.1âwphi1

d) The periods to be fixed by the trial court in its decision shall be

nonextendible, and upon failure of the party obliged to tender to the trial court
the amount due to the obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of payment of the amount
due and for compliance with such other acts as may be required by the
prestation due the obligee.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 120303 July 24, 1996

FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO,

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

DAVIDE, JR. J.:p

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

It appears that Lot No. 3765-B-1 containing an area of 314 square meters was
originally owned by the petitioners' mother, Paulina
Amado vda. de Geminiano. On a 12-square-meter portion of that lot stood the
122
petitioners' unfinished bungalow, which the petitioners sold in November 1978
to the private respondents for the sum of P6,000.00, with an alleged promise
to sell to the latter that portion of the lot occupied by the house. Subsequently,
the petitioners' mother executed a contract of lease over a 126 square-meter
portion of the lot, including that portion on which the house stood, in favor of
the private respondents for P40.00 per month for a period of seven years
commencing on 15 November 1978. 1 The private respondents then
introduced additional improvements and registered the house in their names.
After the expiration of the lease contract in November 1985, however, the
petitioners' mother refused to accept the monthly rentals.

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

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

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

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

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

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

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

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

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

123
that such should be litigated in a proper case before the proper forum, not an
ejectment case where the only issue was physical possession of the property.

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

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

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

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

On appeal, this time by the petitioners, the Court of Appeals affirmed the
decision of the RTC 7 and denied 8the petitioners' motion for reconsideration.
Hence, the present petition.

The Court is confronted with the issue of which provision of law governs the
case at bench: Article 448 or Article 1678 of the Civil Code? The said articles
read as follows:

Art 448. The owner of the land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his own
the works, sowing or planting, after payment of the indemnity provided
for in articles 546 and 548, or to oblige the one who built or planted to
124
 pay the price of the land, and the one who sowed, the proper rent.
However, the builder or plantercannot be obliged to buy the land if its
value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case if
disagreement, the court shall fix the terms thereof.

xxx xxx xxx

Art 1678. If the lessee makes, in good faith, useful improvements which
are suitable to the use for which the lease is intended, without altering
the form or substance of the property leased, the lessor upon the
termination of the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to reimburse said
amount, the lessee may remover the improvements, even though the
principal thing may suffer damage thereby. He shall not, however, cause
any more impairment upon the property leased than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to

any reimbursed, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose
to retain them by paying their value at the time the lease is extinguished.

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

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

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

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

125
It is undisputed that the private respondents came into possession of 126
square-meter portion of the said lot by virtue of contract of lease executed by
the petitioners' mother as lessor, and the private respondents as lessees, is
therefore well-established, and carries with it a recognition of the lessor's
title. 13 The private respondents, as lessees who had undisturbed possession
for the entire term under the lease, are then estopped to deny their landlord's
title, or to assert a better title not only in themselves, but also in some third
person while they remain in possession of the leased premises and until they
surrender possession to the landlord. 14 This estoppel applies even though the
lessor had no title at the time the relation of lessor and lessee was
created, 15 and may be asserted not only by the original lessor, but also by
those who succeed to his title. 16

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

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

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

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

indemnity as was done in Pecson vs.Court of Appeals, 19 because the situation
sought to be avoided and which would justify the application of that provision,
is not present in this case. Suffice it to say, "a state of forced coownership"
would not be created between the petitioners and the private respondents.
126
 For, as correctly pointed out by the petitioners, the right of the private
respondents as lessees are governed by Article 1678 of the Civil Code which
allows reimbursement to the extent of one-half of the value of the useful
improvements.

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

WHEREFORE, judgment is hereby rendered GRANTING the instant petition,

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

Cost against the private respondents.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 153625 July 31, 2006

Heirs of MARCELINO CABAL, represented by VICTORIA CABAL, petitioner,

vs.
1
Spouses LORENZO CABAL and ROSITA CABAL, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure assailing the Decision2 of the Court of Appeals (CA) dated
September 27, 2001 in CA-G.R. SP No. 64729 which affirmed in toto the Decision of
the Regional Trial Court, Branch 70, Iba, Zambales (RTC) dated August 10, 2000 in
Civil Case No. RTC-1489-I; and the CA Resolution3 dated May 22, 2002 which
denied the Motion for Reconsideration of Marcelino Cabal (Marcelino).
127
The factual background of the case is as follows:

During his lifetime, Marcelo Cabal (Marcelo) was the owner of a 4,234-square meter
parcel of land situated at Barrio Palanginan, Iba, Zambales, described as Lot G and
covered by Original Certificate of Title (OCT) No. 29 of the Registry of Deeds of
Zambales.

Sometime in August 1954,4 Marcelo died, survived by his wife Higinia Villanueva
(Higinia) and his children:Marcelino, Daniel, Cecilio, Natividad, Juan,
Margarita, Lorenzo, Lauro and Anacleto.5 It appears that sometime in 1949, five
years before he died, Marcelo allowed his son, Marcelino, to build his house on a
portion of Lot G, now the southernmost portion of Lot 1-E of Transfer Certificate of
Title (TCT) No. 43419.6 Since then, Marcelino resided thereon.7 Later, Marcelino's
son also built his house on the disputed property.8

On August 17, 1964, Marcelo's heirs extra-judicially settled among themselves Lot G
into undivided equal shares of 423.40-square meters each and Transfer Certificate
of Title (TCT) No. T-8635 was issued in their names.9

On September 17, 1973, Daniel sold 380 square meters of his 423.40-square meter
undivided share to spouses Oscar Merete and Clarita Ebue.10

On September 12, 1976, the heirs subdivided Lot G into Lot G-1 in favor of
Marcelino, resulting in the issuance of TCT No. T-22656;11 and Lot G-2 in favor of
Higinia, Daniel, Natividad, Juan, Cecilio, Margarita, Lorenzo, Lauro and Anacleto,
resulting in the issuance of TCT No. 22657.12

On March 1, 1977, Marcelino mortgaged his share, as described under TCT No.
22656, to the Rural Bank of San Antonio (Zambales), Inc.13 The mortgage on the
property was subsequently released on December 19, 1983.14

In the interim, based on consolidated subdivision plan (LRC) Pcd-24078, Lot G-2
was further subdivided and the remaining portion, known as Lot 1 of the subdivision
plan, comprising 3387.20 square meters, became subject of TCT No. T-24533 with
Higinia, Margarita, Natividad, Lorenzo, Daniel, Oscar Merete, Cecilio, Carmelita C.
Pagar, and Anacleto as co-owners.

On August 3, 1978, the co-owners of Lot 1 executed a Deed of Agreement of

Partition with Sale. Lot 1 was subdivided among the co-owners with Higinia,
Margarita, Natividad, Lorenzo, Cecilio, Carmelita C. Pagar and Anacleto, receiving
423.40 square meters each; Daniel, with 43.4 square meters; and Oscar Merete,
with 380 square meters.15 In the same deed, Lorenzo bought the shares of Higinia,
Margarita, Daniel and Natividad.16Thus, Lorenzo's share in the co-ownership
amounted to 1,737 square meters. Likewise, in the same deed, Cecilio sold his
share to a certain Marcela B. Francia.17

128
On January 13, 1982, a land survey was conducted on Lot 1 by Geodetic Engineer
Dominador L. Santos and Junior Geodetic Engineer Eufemio A. Abay and based on
the survey, they submitted subdivision survey plan (LRC) Psd-307100, designating
the shares of Carmelita C. Pagar, Marcela B. Francia, spouses Oscar Merete and
Clarita Ebue, Anacleto, and Lorenzo as Lots 1-A, 1-B, 1-C, 1-D and 1-E,
respectively.18 The subdivision survey plan of Lot 1 was approved by the Director of
the Bureau of Lands on May 7, 1982.19 On June 7, 1990, the co-owners of Lot 1
executed a Subdivision Agreement designating their shares based on the approved
subdivision plan.20 On July 13, 1993, TCT No. 43419 covering Lot 1-E was issued in
the name of Lorenzo.21

In the meantime, since the subdivision plan revealed that Marcelino and his son
occupied and built their houses on a 423-square meter area located on the
southernmost portion of Lot 1-E and not the adjacent lot designated as Lot G-1
under TCT No. T-22656,22 the spouses Lorenzo and Rosita Cabal (respondents)
confronted Marcelino on this matter which resulted to an agreement on March 1,
1989 to a re-survey and swapping of lots for the purpose of reconstruction of land
titles.23 However, the agreed resurvey and swapping of lots did not materialize24 and
efforts to settle the dispute in the barangay level proved futile.25

Hence, on August 10, 1994, respondents filed a complaint for Recovery of

Possession with Damages against Marcelino before the Municipal Trial Court of Iba,
Zambales (MTC), docketed as Civil Case No. 735. They alleged that Marcelino
introduced improvements in bad faith on their land with knowledge that the adjacent
lot is titled in his name.26

On August 26, 1994, Marcelino filed his Answer with Counterclaim, contending that
respondents have no cause of action against him because he has been in
possession in good faith since 1949 with the respondents' knowledge and
acquiescence. He further avers that acquisitive prescription has set in.27

On January 24, 1997, during the pendency of the trial of the case, Lorenzo died.
Following trial on the merits, the MTC rendered on November 19, 1997 its
Decision28 in favor of Marcelino, the dispositive portion of which reads:

WHEREFORE, on the basis of the foregoing premises as adduced by this

Court the plaintiff or their representatives are hereby directed to relinquish the
possession of said property subject matter of this case and deliver the
peaceful possession of the same to the herein defendant or his authorized
representatives, to remove the improvements made thereon within fifteen (15)
days from the receipt of this decision, otherwise, this Court would remove
and/or destroy the same with cost against the plaintiff, further the plaintiff is
hereby ordered to pay the amount of Ten Thousand Pesos (P10,000.00),
Philippine Currency representing moral damages and exemplary damages in
the amount of Five Thousand Pesos (P5,000.00), Philippine Currency, and the
amount of Twenty Thousand Pesos (P20,000.00), Philippine Currency,
representing attorney's fees.
129
 SO ORDERED.29

The MTC reasoned that prescription or the length of time by which Marcelino has
held or possessed the property has barred the respondents from filing a claim.

On December 12, 1997, respondents filed a Motion for Reconsideration30 but the
MTC denied it in its Order dated February 5, 1998.31

Dissatisfied, respondents filed an appeal with the RTC Branch 70, Iba, Zambales,
docketed as RTC-1489-I. On August 10, 2000, the RTC rendered its Decision
setting aside the Decision of the MTC.32 The dispositive portion of the Decision
states:

WHEREFORE, the appealed Decision of the Municipal Trial Court is hereby

REVERSED and SET ASIDE ordering the defendant Marcelino Cabal and all
other persons claiming interest under him to vacate and deliver peaceful
possession of the disputed area of 423 sq. m. within Lot 1-E embraced in TCT
No. T-43419 to the plaintiffs-appellants; to remove all improvements therein
introduced by said defendant or by persons under his direction and authority;
to pay the plaintiffs-appellants P10,000.00 and P5,000.00 by way of moral and
exemplary damages, respectively; to pay plaintiff-appellants attorney's fee in
the sum ofP20,000.00 and cost of this suit.

SO ORDERED.33

In reversing the MTC, the RTC held that Marcelino's possession was in the concept
of a co-owner and therefore prescription does not run in his favor; that his
possession, which was tolerated by his co-owners, does not ripen into ownership.

On August 30, 2000, Marcelino filed a Motion for Reconsideration34 but the RTC
denied it in its Order dated May 3, 2001.35

On May 18, 2001, Marcelino filed a petition for review with the CA, docketed as CA-
G.R. SP No. 64729.36Marcelino, however, died during the pendency of the case. On
September 27, 2001, the CA rendered its Decision affirming in toto the Decision of
the RTC.37

In sustaining the RTC, the CA held that Marcelino may have been in good faith
when he started to occupy the disputed portion in 1949 but his occupation in good
faith diminished after Lot G was surveyed when he was apprised of the fact that the
portion he was occupying was not the same as the portion titled in his name; that
from the tenor of the petition for review Marcelino would like to hold on to both the
lot he occupies and Lot G-1, which cannot be allowed since it will double his
inheritance to the detriment of his brother Lorenzo.

On November 13, 2001, Marcelino's counsel filed a Motion for Reconsideration38 but
the CA denied it in its Resolution dated May 22, 2002.39

130
On June 6, 2002, the heirs of Marcelino (petitioners), represented by his widow,
Victoria Cabal, filed the present petition anchored on the following grounds:

I. CONTRARY TO THE COURT OF APPEALS' FINDINGS AND

CONCLUSION, PETITIONER NEVER INTENDED AND NEITHER DOES HE
INTEND TO HOLD ON TO BOTH THE 423 SQUARE METER WITHIN LOT 1-
E WHICH HE IS OCCUPYING AND LOT 1-G (sic). PETITIONER IS ONLY
INTERESTED IN THE DISPUTED PROPERTY, THAT IS, A PORTION OF
LOT 1-E BECAUSE THIS IS WHERE HE INTRODUCED CONSIDERABLE
IMPROVEMENTS IN GOOD FAITH.

II. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE

ERROR WHEN IT RULED THAT THE GOOD FAITH OF PETITIONER ON
THE DISPUTED PROPERTY BEGAN TO DIMINISH AFTER LOT-G WAS
SURVEYED.40

Anent the first ground, petitioners contend that since 1949 Marcelino has claimed no
other portion as his inheritance from Marcelo, except the disputed lot; that Marcelino
believed in good faith that the disputed lot is Lot G-1; that Marcelino never intended
to hold on to both lots since he did not introduce any improvement on Lot G-1 and
he even agreed to a resurvey, swapping of lots and reconstruction of title after
discovery of the mistake in 1989; that Marcelino wanted the disputed lot because he
has introduced considerable improvements thereon.

On the second ground, petitioners maintain that Marcelino became aware of the flaw
in his title only before the execution of the swapping agreement in March 1, 1989,
long after he had introduced considerable improvements in the disputed lot; that
Marcelino should not be faulted for believing that the disputed lot is his titled
property because he is a layman, not versed with the technical description of
properties; that Marcelino should be adjudged a builder in good faith of all the
improvements built on the disputed property immediately prior to the execution of
the swapping agreement and accorded all his rights under the law or, alternatively,
the swapping of lots be ordered since no improvements have been introduced on
Lot G-1.

Respondents, on the other hand, submit that Marcelino cannot be adjudged a

builder in good faith since he exhibited blatant and deliberate bad faith in dealing
with respondents.

The Court rules in favor of the petitioners.

As a general rule, in petitions for review, the jurisdiction of this Court in cases
brought before it from the CA is limited to reviewing questions of law which involves
no examination of the probative value of the evidence presented by the litigants or
any of them.41 The Supreme Court is not a trier of facts; it is not its function to
analyze or weigh evidence all over again.42 Accordingly, findings of fact of the
appellate court are generally conclusive on the Supreme Court.43
131
Nevertheless, jurisprudence has recognized several exceptions in which factual
issues may be resolved by this Court, such as: (1) when the findings are
grounded entirely on speculation, surmises or conjectures; (2)when the
inference made is manifestly mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when
in making its findings the CA went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in
the petition as well as in the petitioner's main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; (11) when the CA manifestly
overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.44 The Court finds that
exceptions (1), (2), (4) and (11) apply to the present petition.

It is undisputed that Marcelino built his house on the disputed property in 1949 with
the consent of his father. Marcelino has been in possession of the disputed lot since
then with the knowledge of his co-heirs, such that even before his father died in
1954, when the co-ownership was created, his inheritance or share in the co-
ownership was already particularly designated or physically segregated. Thus, even
before Lot G was subdivided in 1976, Marcelino already occupied the disputed
portion and even then co-ownership did not apply over the disputed lot. Elementary
is the rule that there is no co-ownership where the portion owned is concretely
determined and identifiable, though not technically described,45 or that said portion
is still embraced in one and the same certificate of title does make said portion less
determinable or identifiable, or distinguishable, one from the other, nor that dominion
over each portion less exclusive, in their respective owners.46

Thus, since Marcelino built a house and has been occupying the disputed portion
since 1949, with the consent of his father and knowledge of the co-heirs,47 it would
have been just and equitable to have segregated said portion in his favor and not
one adjacent to it. Undoubtedly, the subdivision survey effected in 1976 spawned
the dilemma in the present case. It designated Lot G-1 as Marcelino's share in the
inheritance notwithstanding his possession since 1949 of a definite portion of Lot G,
now the southernmost portion of Lot 1-E.

Marcelino raised the defense of acquisitive prescription, in addition to possession in

good faith, in his Answer to the Complaint in the MTC. Prescription, in general, is a
mode of acquiring or losing ownership and other real rights through the lapse of time
in the manner and under conditions laid down by law, namely, that the possession
should be in the concept of an owner, public, peaceful, uninterrupted and
adverse.48 Acquisitive prescription is either ordinary or extraordinary.49 Ordinary
acquisitive prescription requires possession in good faith and with just title 50 for ten
years.51 In extraordinary prescription ownership and other real rights over

132
immovable property are acquired through uninterrupted adverse possession thereof
for thirty years, without need of title or of good faith.52

In the present case, the evidence presented during the trial proceedings in the MTC
were sorely insufficient to prove that acquisitive prescription has set in with regards
to the disputed lot. The tax declaration53 and receipts54presented in evidence
factually established only that Marcelino had been religiously paying realty taxes on
Lot G-1. Tax declarations and receipts can only be the basis of a claim of ownership
through prescription when coupled with proof of actual possession.55 Evidently,
Marcelino declared and paid realty taxes on property which he did not actually
possess as he took possession of a lot eventually identified as the southernmost
portion of Lot 1-E of subdivision plan (LRC) Psd-307100.

Furthermore, the Court notes that Marcelino no longer invoked prescription in his
pleadings before the RTC56and CA;57 neither did herein petitioners raise prescription
in their petition58 and memorandum59 before this Court. They only extensively
discussed the defense of possession in good faith. They are thus deemed to have
abandoned the defense of prescription.

The Court shall now delve on the applicability of the principle of possession in good
faith.

It has been said that good faith is always presumed, and upon him who alleges bad
faith on the part of the possessor rests the burden of proof. 60 Good faith is an
intangible and abstract quality with no technical meaning or statutory definition, and
it encompasses, among other things, an honest belief, the absence of malice and
the absence of design to defraud or to seek an unconscionable advantage. An
individual's personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of
intention, and freedom from knowledge of circumstances which ought to put the
holder upon inquiry.61The essence of good faith lies in an honest belief in the validity
of one's right, ignorance of a superior claim, and absence of intention to overreach
another.62 Applied to possession, one is considered in good faith if he is not aware
that there exists in his title or mode of acquisition any flaw which invalidates it. 63

In the present case, Marcelino's possession of the disputed lot was based on a
mistaken belief that Lot G-1 is the same lot on which he has built his house with the
consent of his father. There is no evidence, other than bare allegation, that
Marcelino was aware that he intruded on respondents' property when he continued
to occupy and possess the disputed lot after

partition was effected in 1976.

Moreover, the fact that in 1977 Marcelino mortgaged Lot G-1 subject of TCT No.
22656 is not an indication of bad faith since there is no concrete evidence that he
was aware at that time that the property covered by the title and the one he was
occupying were not the same. There is also no evidence that he introduced
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improvements on Lot G-1. In fact, the agreement on March 1, 1989 to a resurvey
and swapping of lots for the purpose of reconstructing the land titles is substantial
proof of Marcelino's good faith, sincerity of purpose and lack of intention to hold on
to two lots.

Thus, the CA's conclusion that Marcelino intended to hold on to both the disputed lot
and Lot G-1 is pure speculation, palpably unsupported by the evidence on record.
Marcelino is deemed a builder in good faith64 at least until the time he was informed
by respondents of his encroachment on their property.65

When a person builds in good faith on the land of another, the applicable provision
is Article 448, which reads:

Article 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles
54666 and 548,67 or to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable rent, if the
owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

Thus, the owner of the land on which anything has been built, sown or planted in
good faith shall have the right to appropriate as his own the building, planting or
sowing, after payment to the builder, planter or sower of the necessary and useful
expenses, and in the proper case, expenses for pure luxury or mere pleasure. The
owner of the land may also oblige the builder, planter or sower to purchase and pay
the price of the land. If the owner chooses to sell his land, the builder, planter or
sower must purchase the land, otherwise the owner may remove the improvements
thereon. The builder, planter or sower, however, is not obliged to purchase the land
if its value is considerably more than the building, planting or sowing. In such case,
the builder, planter or sower must pay rent to the owner of the land. If the parties
cannot come to terms over the conditions of the lease, the court must fix the terms
thereof. The right to choose between appropriating the improvement or selling the
land on which the improvement stands to the builder, planter or sower, is given to
the owner of the land.68

In accordance with Depra v. Dumlao, 69 this case must be remanded to the trial
court to determine matters necessary for the proper application of Article 448 in
relation to Articles 546 and 548. Such matters include the option that respondents
would take and the amount of indemnity that they would pay, should they decide to
appropriate the improvements on the lots.

The Court notes that petitioners' alternative prayer that swapping of lots be ordered
because no improvements have been introduced on Lot G-1. This cannot be
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granted. Respondents and Marcelino, petitioners' predecessor-in-interest, did not
pray for swapping of lots in all their pleadings below. Both parties also did not allege
the existence of a swapping agreement in their initial pleadings, much less pursue
the enforcement of the swapping agreement. They are deemed to have renounced
or abandoned any enforceable right they had under the swapping agreement and
the parties cannot be compelled to a swapping of lots.

WHEREFORE, the instant petition is GRANTED. The assailed Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 64729
are REVERSED and SET ASIDE. The case is REMANDED to the court of origin for
further proceedings to determine the facts essential to the proper application of
Article 448 in relation to Articles 546 and 548 of the Civil Code.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 154391-92 September 30, 2004

Spouses ISMAEL and TERESITA MACASAET, petitioners,

vs.
Spouses VICENTE and ROSARIO MACASAET, respondents.

DECISION

PANGANIBAN, J.:

The present case involves a dispute between parents and children. The children
were invited by the parents to occupy the latter’s two lots, out of parental love and a
desire to foster family solidarity. Unfortunately, an unresolved conflict terminated this
situation. Out of pique, the parents asked them to vacate the premises. Thus, the
children lost their right to remain on the property. They have the right, however, to
be indemnified for the useful improvements that they constructed thereon in good
faith and with the consent of the parents. In short, Article 448 of the Civil Code
applies.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the
March 22, 2002 Decision2and the June 26, 2002 Resolution3 of the Court of Appeals
135
(CA) in CA-GR SP Nos. 56205 & 56467. The challenged Decision disposed as
follows:

"WHEREFORE, the assailed Decision is AFFIRMED with the following

MODIFICATIONS:

‘1. Vicente and Rosario should reimburse Ismael and Teresita one-half
of the value of the useful improvements introduced in the premises prior
to demand, which is equivalent to P475,000.00. In case the former
refuse to reimburse the said amount, the latter may remove the
improvements, even though the land may suffer damage thereby. They
shall not, however, cause any more impairment upon the property
leased than is necessary.

‘2. The award of attorney’s fees is DELETED.

‘3. The records of these consolidated cases are REMANDED to the

Court of origin for further proceedings to determine the option to be
taken by Vicente and Rosario and to implement the same with
dispatch."4

The assailed Resolution denied petitioners’ Motion for Reconsideration.

The Facts

Petitioners Ismael and Teresita5 Macasaet and Respondents Vicente and Rosario
Macasaet are first-degree relatives. Ismael is the son of respondents, and Teresita
is his wife.6

On December 10, 1997, the parents filed with the Municipal Trial Court in Cities
(MTCC) of Lipa City an ejectment suit against the children.7 Respondents alleged
that they were the owners of two (2) parcels of land covered by Transfer Certificate
of Title (TCT) Nos. T-78521 and T-103141, situated at Banay-banay, Lipa City; that
by way of a verbal lease agreement, Ismael and Teresita occupied these lots in
March 1992 and used them as their residence and the situs of their construction
business; and that despite repeated demands, petitioners failed to pay the agreed
rental of P500 per week.8

Ismael and Teresita denied the existence of any verbal lease agreement. They
claimed that respondents had invited them to construct their residence and business
on the subject lots in order that they could all live near one other, employ Marivic
(the sister of Ismael), and help in resolving the problems of the family. 9 They added
that it was the policy of respondents to allot the land they owned as an advance
grant of inheritance in favor of their children. Thus, they contended that the lot
covered by TCT No. T-103141 had been allotted to Ismael as advance inheritance.
On the other hand, the lot covered by TCT No. T-78521 was allegedly given to

136
petitioners as payment for construction materials used in the renovation of
respondents’ house.10

The MTCC11 ruled in favor of respondents and ordered petitioners to vacate the
premises. It opined that Ismael and Teresita had occupied the lots, not by virtue of a
verbal lease agreement, but by tolerance of Vicente and Rosario.12 As their stay was
by mere tolerance, petitioners were necessarily bound by an implied promise to
vacate the lots upon demand.13 The MTCC dismissed their contention that one lot
had been allotted as an advance inheritance, on the ground that successional rights
were inchoate. Moreover, it disbelieved petitioners’ allegation that the other parcel
had been given as payment for construction materials.14

On appeal, the regional trial court15 (RTC) upheld the findings of the MTCC.
However, the RTC allowed respondents to appropriate the building and other
improvements introduced by petitioners, after payment of the indemnity provided for
by Article 448 in relation to Articles 546 and 548 of the Civil Code.16 It added that
respondents could oblige petitioners to purchase the land, unless its value was
considerably more than the building. In the latter situation, petitioners should pay
rent if respondents would not choose to appropriate the building.17

Upon denial of their individual Motions for Reconsideration, the parties filed with the
CA separate Petitions for Review, which were later consolidated. 18

Ruling of the Court of Appeals

The CA sustained the finding of the two lower courts that Ismael and Teresita had
been occupying the subject lots only by the tolerance of Vicente and
Rosario.19 Thus, possession of the subject lots by petitioners became illegal upon
their receipt of respondents’ letter to vacate it.20

Citing Calubayan v. Pascual,21 the CA further ruled that petitioners’ status was
analogous to that of a lessee or a tenant whose term of lease had expired, but
whose occupancy continued by tolerance of the owner.22Consequently, in
ascertaining the right of petitioners to be reimbursed for the improvements they had
introduced on respondents’ properties,23 the appellate court applied the Civil Code’s
provisions on lease. The CA modified the RTC Decision by declaring that Article 448
of the Civil Code was inapplicable. The CA opined that under Article 1678 of the
same Code, Ismael and Teresita had the right to be reimbursed for one half of the
value of the improvements made.24

Not satisfied with the CA’s ruling, petitioners brought this recourse to this Court.25

The Issues

Petitioners raise the following issues for our consideration:

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 "1. a) Whether or not Section 17[,] Rule 70 of the Rules of Court on Judgment
should apply in the rendition of the decision in this case;

b) Whether or not the Complaint should have been dismissed;

c) Whether or not damages including attorney’s fees should have been

awarded to herein petitioners;

"2. a) Whether or not the rule on appearance of parties during the Pretrial
should apply on appearance of parties during Preliminary Conference in an
unlawful detainer suit;

b) Whether or not the case of Philippine Pryce Assurance Corporation

vs. Court of Appeals (230 SCRA 164) is applicable to appearance of
parties in an unlawful detainer suit;

"3. Whether or not Article 1678 of the Civil Code should apply to the case on
the matters of improvements, or is it Article 447 of the Civil Code in relation to
the Article 453 and 454 thereof that should apply, if ever to apply the Civil
Code;

"4. Whether or not the [D]ecision of the Court of Appeals is supported by

evidence, appropriate laws, rules and jurisprudence;

"5. Whether or not Assisting Judge Norberto Mercado of the MTCC Lipa City
should be held accountable in rendering the MTCC [D]ecision;

"6. Whether or not Atty. Glenn Mendoza and Atty. Andrew Linatoc of the same
[l]aw office should be held accountable for pursuing the [e]jectment case[.]" 26

The Court’s Ruling

The Petition is partly meritorious.

First Issue:

Ejectment

Who is entitled to the physical or material possession of the premises? At the outset,
we stress that this is the main issue in ejectment proceedings.27 In the present case,
petitioners failed to justify their right to retain possession of the subject lots, which
respondents own. Since possession is one of the attributes of
ownership,28respondents clearly are entitled to physical or material possession.

Allegations of the Complaint

Petitioners allege that they cannot be ejected from the lots, because respondents
based their Complaint regarding the nonpayment of rentals on a verbal lease
138
agreement, which the latter failed to prove.29 Petitioners contend that the lower
courts erred in using another ground (tolerance of possession) to eject them.

In actions for unlawful detainer, possession that was originally lawful becomes
unlawful upon the expiration or termination of the defendant’s right to possess,
arising from an express or implied contract.30 In other words, the plaintiff’s cause of
action comes from the expiration or termination of the defendant’s right to continue
possession.31 The case resulting therefrom must be filed within one year from the
date of the last demand.

To show a cause of action in an unlawful detainer, an allegation that the defendant

is illegally withholding possession from the plaintiff is sufficient. The complaint may
lie even if it does not employ the terminology of the law, provided the said pleading
is couched in a language adequately stating that the withholding of possession or
the refusal to vacate has become unlawful.32 It is equally settled that the jurisdiction
of the court, as well as the nature of the action, is determined from the averments of
the complaint.33

In the present case, the Complaint alleged that despite demands, petitioners
"refused to pay the accrued rentals and [to] vacate the leased premises."34 It prayed
that judgment be rendered "[o]rdering [petitioners] and all those claiming rights
under them to vacate the properties x x x and remove the structures x x x
constructed thereon."35Effectively then, respondents averred that petitioners’ original
lawful occupation of the subject lots had become unlawful.

The MTCC found sufficient cause to eject petitioners. While it disbelieved the
existence of a verbal lease agreement, it nevertheless concluded that petitioners’
occupation of the subject lots was by mere tolerance of respondents. Basing its
conclusion on the fact that the parties were close relatives, the MTCC ruled thus:

"x x x [T]he parties herein are first degree relatives. Because of this
relationship, this Court takes judicial notice of the love, care, concern and
protection imbued upon the parents towards their [children], i.e., in the instant
case, the love, care, concern and protection of the [respondents] to the
[petitioners]. With this in mind, this Court is inclined to believe the position of
the [petitioners] that there was no such verbal lease agreement between the
parties herein that took place in 1992. x x x.

"From the allegations of the [petitioners], this Court is convinced that their stay
and occupancy of the subject premises was by mere tolerance of the
[respondents], and not by virtue of a verbal lease agreement between them."36

Having found a cause of action for unlawful detainer, the MTCC (as well as the RTC
and the CA) did not err in ordering the ejectment of petitioners as prayed for by
respondents. There was no violation of Section 17 of Rule 7037 of the Rules of
Court. As earlier explained, unlawful detainer was sufficiently alleged in the
Complaint and duly proven during the trial. Significantly, the issue of whether there
139
was enough ground to eject petitioners was raised during the preliminary
conference.38

Not Merely Tolerated

Possession

Petitioners dispute the lower courts’ finding that they occupied the subject lots on
the basis of mere tolerance. They argue that their occupation was not under such
condition, since respondents had invited, offered and persuaded them to use those
properties.39

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.40 A summary action for ejectment is the proper remedy to enforce this
implied obligation.41 The unlawful deprivation or withholding of possession is to be
counted from the date of the demand to vacate.42

Toleration is defined as "the act or practice of permitting or enduring something not

wholly approved of."43 Sarona v. Villegas44 described what tolerated acts means, in
this language:

"Professor Arturo M. Tolentino states that acts merely tolerated are ‘those
which by reason of neighborliness or familiarity, the owner of property allows
his neighbor or another person to do on the property; they are generally those
particular services or benefits which one’s property can give to another without
material injury or prejudice to the owner, who permits them out of friendship or
courtesy.’ x x x. And, Tolentino continues, even though ‘this is continued for a
long time, no right will be acquired by prescription." x x x. Further expounding
on the concept, Tolentino writes: ‘There is tacit consent of the possessor to the
acts which are merely tolerated. Thus, not every case of knowledge and
silence on the part of the possessor can be considered mere tolerance. By
virtue of tolerance that is considered as an authorization, permission or
license, acts of possession are realized or performed. The question reduces
itself to the existence or non-existence of the permission."45

We hold that the facts of the present case rule out the finding of possession by mere
tolerance. Petitioners were able to establish that respondents had invited them to
occupy the subject lots in order that they could all live near one other and help in
resolving family problems.46 By occupying those lots, petitioners demonstrated their
acceptance of the invitation. Hence, there was a meeting of minds, and an
agreement regarding possession of the lots impliedly arose between the parties.

The occupancy of the subject lots by petitioners was not merely "something not
wholly approved of" by respondents. Neither did it arise from what Tolentino refers
to as "neighborliness or familiarity." In point of fact, their possession was upon the
140
invitation of and with the complete approval of respondents, who desired that their
children would occupy the premises. It arose from familial love and a desire for
family solidarity, which are basic Filipino traits.

Right to Use the Lots Terminated

That Ismael and Teresita had a right to occupy the lots is therefore clear. The issue
is the duration of possession. In the absence of a stipulation on this point, Article
1197 of the Civil Code allows the courts to fix the duration or the period.

"Article 1197. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may fix
the duration thereof.

"The courts shall also fix the duration of the period when it depends upon the
will of the debtor.

"In every case the courts shall determine such period as may under the
circumstances have been probably contemplated by the parties. Once fixed by
the courts, the period cannot be changed by them."

Article 1197, however, applies to a situation in which the parties intended a period.
Such qualification cannot be inferred from the facts of the present case.

To repeat, when Vicente and Rosario invited their children to use the lots, they did
so out of parental love and a desire for solidarity expected from Filipino parents. No
period was intended by the parties. Their mere failure to fix the duration of their
agreement does not necessarily justify or authorize the courts to do so.47

Based on respondents’ reasons for gratuitously allowing petitioners to use the lots, it
can be safely concluded that the agreement subsisted as long as the parents and
the children mutually benefited from the arrangement. Effectively, there is a
resolutory condition in such an agreement.48 Thus, when a change in the condition
existing between the parties occurs -- like a change of ownership, necessity, death
of either party or unresolved conflict or animosity -- the agreement may be deemed
terminated. Having been based on parental love, the agreement would end upon the
dissipation of the affection.

When persistent conflict and animosity overtook the love and solidarity between the
parents and the children, the purpose of the agreement ceased.49 Thus, petitioners
no longer had any cause for continued possession of the lots. Their right to use the
properties became untenable. It ceased upon their receipt of the notice to vacate.
And because they refused to heed the demand, ejectment was the proper remedy
against them. Their possession, which was originally lawful, became unlawful when
the reason therefor -- love and solidarity -- ceased to exist between them.

No Right to Retain

141
Possession

Petitioners have not given this Court adequate reasons to reverse the lower courts’
dismissal of their contention that Lots T-78521 and T-103141, respectively, were
allegedly allotted to them as part of their inheritance and given in consideration for
past debts.

The right of petitioners to inherit from their parents is merely inchoate and is vested
only upon the latters’ demise. Indisputably, rights of succession are transmitted only
from the moment of death of the decedent.50 Assuming that there was an "allotment"
of inheritance, ownership nonetheless remained with respondents. Moreover, an
intention to confer title to certain persons in the future is not inconsistent with the
owners’ taking back possession in the meantime for any reason deemed
sufficient.51 Other than their self-serving testimonies and their affidavits, petitioners
offered no credible evidence to support their outlandish claim of inheritance
"allocation."

We also agree with the lower courts that petitioners failed to prove the allegation
that, through a dation in payment, Lot T-78521 had been transferred to the latter as
payment for respondents’ debts.52 The evidence presented by petitioners related
only to the alleged indebtedness of the parents arising from the latter’s purported
purchases and advances.53 There was no sufficient proof that respondents had
entered into a contract of dation to settle the alleged debt. Petitioners even stated
that there was a disagreement in the accounting of the purported debt, 54 a fact that
disproves a meeting of the minds with the parents.

Petitioners also admitted that a portion of the alleged debt is the subject matter of a
collection case against respondents (Civil Case No. 0594-96).55 Thus, the former’s
allegation that the indebtedness has been paid through a dation cannot be given
credence, inconsistent as it is with their action to recover the same debt.

Despite their protestations, petitioners recognized the right of the parents to recover
the premises when they admitted in their Position Paper filed with the MTCC that
respondents had a title to the lots.

"The [respondents] want to get their property because the title is theirs, the
[petitioners] do not object but what is due the [petitioners] including the
reparation for the tarnish of their dignity and honor must be given the
[petitioners] for the benefits of their children before the premises will be turned
over."56

As a rule, the right of ownership carries with it the right of possession.

Second Issue:

Appearance at the Preliminary Conference

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Section 8 of Rule 70 of the Rules of Court requires the appearance of the plaintiff
and the defendant during the preliminary conference. On the basis of this provision,
petitioners claim that the MTCC should have dismissed the case upon the failure of
respondents to attend the conference. However, petitioners do not dispute that an
attorney-in-fact with a written authorization from respondents appeared during the
preliminary conference.57 The issue then is whether the rules on ejectment allow a
representative to substitute for a party’s personal appearance.

Unless inconsistent with Rule 70, the provisions of Rule 18 on pretrial applies to the
preliminary conference.58Under Section 4 of this Rule, the nonappearance of a party
may be excused by the showing of a valid cause; or by the appearance of a
representative, who has been fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute resolution, and to enter into
stipulations or admissions of facts and of documents.59

Section 4 of Rule 18 may supplement Section 8 of Rule 70. Thus, the spirit behind
the exception to personal appearance under the rules on pretrial is applicable to the
preliminary conference. If there are valid reasons or if a representative has a
"special authority," a party’s appearance may be waived. As petitioners are
challenging only the applicability of the rules on pretrial to the rule on preliminary
conference, the written authorization from respondents can indeed be readily
considered as a "special authorization."

Third Issue:

Rights of a Builder in Good Faith

As applied to the present case, accession refers to the right of the owner to
everything that is incorporated or attached to the property.60 Accession industrial --
building, planting and sowing on an immovable -- is governed by Articles 445 to 456
of the Civil Code.

Articles 447 and 1678 of the

Civil Code Inapplicable

To buttress their claim of reimbursement for the improvements introduced on the

property, petitioners cite Article 447.61 They allege that the CA erred in applying
Article 1678, since they had no lease agreement with respondents.

We clarify. Article 447 is not applicable, because it relates to the rules that apply
when the owner of the property uses the materials of another. It does not refer to the
instance when a possessor builds on the property of another, which is the factual
milieu here.

In view of the unique factual setting of the instant case, the contention of petitioners
regarding the inapplicability of Article 1678 deserves attention. The CA applied the

143
provisions on lease, because it found their possession by mere tolerance
comparable with that of a lessee, per the pronouncement in Calubayan v.
Pascual,62 from which we quote:

"x x x. It has been held that a person who occupies the land of another at the
latter’s tolerance or permission, without any contract between them, is
necessarily bound by an implied promise that he will vacate upon demand,
failing which a summary action for ejectment is the proper remedy against
them. The status of defendant is analogous to that of a lessee or tenant whose
term of lease has expired but whose occupancy continued by tolerance of the
owner. In such a case, the unlawful deprivation or withholding of possession is
to be counted from the date of the demand to vacate."63 (Emphasis in the
original.)

As explained earlier, Ismael and Teresita’s possession of the two lots was not by
mere tolerance, a circumstance that negates the applicability of Calubayan.

Article 448 Applicable

On the other hand, when a person builds in good faith on the land of another, the
applicable provision is Article 448, which reads:64

"Article 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably more than that of
the building or trees. In such case, he shall pay reasonable rent, if the owner
of the land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof."

This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to have
a claim of title thereto.65 It does not apply when the interest is merely that of a
holder, such as a mere tenant, agent or usufructuary.66 From these
pronouncements, good faith is identified by the belief that the land is owned; or that -
- by some title -- one has the right to build, plant, or sow thereon.67

However, in some special cases, this Court has used Article 448 by recognizing
good faith beyond this limited definition. Thus, in Del Campo v. Abesia,68 this
provision was applied to one whose house -- despite having been built at the time
he was still co-owner -- overlapped with the land of another.69 This article was also
applied to cases wherein a builder had constructed improvements with the consent
of the owner. The Court ruled that the law deemed the builder to be in good
faith.70 In Sarmiento v. Agana,71 the builders were found to be in good faith despite
144
their reliance on the consent of another, whom they had mistakenly believed to be
the owner of the land.72

Based on the aforecited special cases, Article 448 applies to the present factual
milieu. The established facts of this case show that respondents fully consented to
the improvements introduced by petitioners. In fact, because the children occupied
the lots upon their invitation, the parents certainly knew and approved of the
construction of the improvements introduced thereon.73 Thus, petitioners may be
deemed to have been in good faith when they built the structures on those lots.

The instant case is factually similar to Javier v. Javier.74 In that case, this Court
deemed the son to be in good faith for building the improvement (the house) with the
knowledge and consent of his father, to whom belonged the land upon which it was
built. Thus, Article 44875 was applied.

Rule on Useful Expenses

The structures built by petitioners were "useful" improvements, because they

augmented the value or income of the bare lots.76 Thus, the indemnity to be paid by
respondents under Article 448 is provided for by Article 546, which we quote:

"Art. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has been reimbursed
therefor.

"Useful expenses shall be refunded only to the possessor in good faith with
the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or of
paying the increase in value which the thing may have acquired by reason
thereof."

Consequently, respondents have the right to appropriate -- as their own -- the

building and other improvements on the subject lots, but only after (1) refunding the
expenses of petitioners or (2) paying the increase in value acquired by the
properties by reason thereof. They have the option to oblige petitioners to pay the
price of the land, unless its value is considerably more than that of the structures --
in which case, petitioners shall pay reasonable rent.

In accordance with Depra v. Dumlao,77 this case must be remanded to the trial court
to determine matters necessary for the proper application of Article 448 in relation to
Article 546. Such matters include the option that respondents would take and the
amount of indemnity that they would pay, should they decide to appropriate the
improvements on the lots. We disagree with the CA’s computation of useful
expenses, which were based only on petitioners’ bare allegations in their Answer.78

Ruling on Improvement Justified

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While, ordinarily, the jurisdiction of the MTCC on ejectment proceedings is limited to
the issue of physical or material possession of the property in question, this Court
finds it necessary to abbreviate the issue on the improvements in relation to Article
448. First, the determination of the parties’ right to those improvements is intimately
connected with the MTCC proceedings in the light of the ejectment of petitioners.
Second, there is no dispute that while they constructed the improvements,
respondents owned the land. Third, both parties raised no objection when the RTC
and the CA ruled accordingly on this matter.

Equitable considerations compel us to settle this point immediately, pro hoc vice, to
avoid needless delay. Both parties have already been heard on this issue; to
dillydally or equivocate would not serve the cause of substantial justice.

Other Issues Raised

Given the foregoing rulings, it is no longer necessary to address petitioners’

allegation that the MTCC judge and respondents’ lawyers should be respectively
held personally accountable for the Decision and for filing the case. 79 The
insinuation of petitioners that the lawyers manipulated the issuance of a false
barangay certification is unavailing.80 Their contention that respondents did not
attend the barangay conciliation proceedings was based solely on hearsay, which
has little or no probative value.81

WHEREFORE, the assailed Decision and Resolution of the Court of Appeals

are AFFIRMED with the followingMODIFICATIONS:

1. The portion requiring Spouses Vicente and Rosario Macasaet to reimburse

one half of the value of the useful improvements, amounting to P475,000, and
the right of Spouses Ismael and Rosita Macasaet to remove those
improvements (if the former refuses to reimburse) is DELETED.

2. The case is REMANDED to the court of origin for further proceedings to

determine the facts essential to the proper application of Articles 448 and 546
of the Civil Code, specifically to the following matters:

a. Spouses Vicente and Rosario Macasaet’s option to appropriate -- as

their own -- the improvements on the lots, after paying the indemnity, as
provided under Article 546 in relation to Article 448 of the Civil Code; or
in requiring Spouses Ismael and Rosita Macasaet to pay for the value of
the lots, unless it is considerably more than that of the improvements, in
which case petitioners shall pay reasonable rent based upon the terms
provided under the Civil Code

b. The value of the useful expenses incurred by Spouses Ismael and

Rosita Macasaet in the construction of the improvements on the lots

146
 c. The increase in value acquired by the lots by reason of the useful
improvements

d. Spouses Vicente and Rosario Macasaet’s choice of type of indemnity

to be paid (whether b or c)

e. Whether the value of the lots is considerably more than that of the
improvements built thereon

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 108894 February 10, 1997

TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner,

vs.
COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and
EDUARDO UY, respondents.

PANGANIBAN, J.:

The parties in this case are owners of adjoining lots in Parañaque, Metro Manila. It
was discovered in a survey, that a portion of a building of petitioner, which was

147
presumably constructed by its predecessor-in-interest, encroached on a portion of
the lot owned by private respondent. What are the rights and obligations of the
parties? Is petitioner considered a builder in bad faith because, as held by
respondent Court, he is "presumed to know the metes and bounds of his property as
described in his certificate of title"? Does petitioner succeed into the good faith or
bad faith of his predecessor-in-interest which presumably constructed the building?

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

WHEREFORE, premises considered, the Decision of the Regional Trial

Court is hereby reversed and set aside and another one entered —

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

2. Ordering Tecnogas to pay the sum of P2,000.00 per month as

reasonable rental from October 4, 1979 until appellee vacates the land;

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

area;

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

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

fees;

6. Costs against appellee.

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

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

hereby modified deleting paragraph 4 of the dispositive portion of our
decision which reads:

4. Ordering appellee to pay the value of the land occupied by

the two-storey building.

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

merit.

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

The Facts

148
The facts are not disputed. Respondent Court merely reproduced the factual
findings of the trial court, as follows:5

That plaintiff (herein petitioner) which is a corporation duly organized

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

149
After trial on the merits, the Regional Trial Court 6 of Pasay City, Branch 117, in Civil
Case No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of
petitioner who was the plaintiff therein. The dispositive portion
7
reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff and

against defendant and ordering the latter to sell to plaintiff that portion of
land owned by him and occupied by portions of plaintiff's buildings and
wall at the price of P2,000.00 per square meter and to pay the former:

1. The sum of P44,000.00 to compensate for the losses in

materials and properties incurred by plaintiff through thievery
as a result of the destruction of its wall;

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

and

3. The costs of this suit.

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

The Issues

The petition raises the following issues: 8

(A)

Whether or not the respondent Court of Appeals erred in holding the

petitioner a builder in bad faith because it is "presumed to know the
metes and bounds of his property."

(B)

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

(C)

Whether or not the respondent Court of Appeals erred in ordering the

removal of the "structures and surrounding walls on the encroached
150
 area" and in withdrawing its earlier ruling in its August 28, 1992 decision
for the petitioner "to pay for the value of the land occupied" by the
building, only because the private respondent has "manifested its choice
to demolish" it despite the absence of compulsory sale where the builder
fails to pay for the land, and which "choice" private respondent
deliberately deleted from its September 1, 1980 answer to the
supplemental complaint in the Regional Trial Court.

In its Memorandum, petitioner poses the following issues:

A.

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

B.

In a specific "boundary overlap situation" which involves a builder in

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

C.

The respondent court's citation of the twin cases of Tuason &

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

D.

Quite contrary to respondent Uy's reasoning, petitioner Tecnogas

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

D.(E.)

The amicable settlement between the parties should be interpreted as a

contract and enforced only in accordance with its explicit terms,

151
 and not over and beyond that agreed upon; because the courts
do not have the power to create a contract nor expand its scope. 13

E.(F.)

As a general rule, although the landowner has the option to choose

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

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

1. It did not give the exact citations of cases decided by the Honorable
Supreme Court that allegedly contradicts the ruling of the Hon. Court of
Appeals based on the doctrine laid down in Tuason vs.Lumanlan case
citing also Tuason vs. Macalindong case (Supra).

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

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

The Court's Ru1ing

The petition should be granted.

Good Faith or Bad Faith

Respondent Court, citing the cases of J.M. Tuason & Co., Inc. vs. Vda. de
Lumanlan 17 and J.M. Tuason & Co., Inc.vs. Macalindong, 18 ruled that petitioner
"cannot be considered in good faith" because as a land owner, it is "presumed to
know the metes and bounds of his own property, specially if the same are reflected
in a properly issued certificate of title. One who erroneously builds on the adjoining

152
lot should be considered a builder in (b)ad (f)aith, there being presumptive
knowledge of the Torrens title, the area, and the extent of the boundaries." 19

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

There is no question that when petitioner purchased the land from Pariz Industries,
the buildings and other structures were already in existence. The record is not clear
as to who actually built those structures, but it may well be assumed that petitioner's
predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code
presumes good faith, and since no proof exists to show that the encroachment over
a narrow, needle-shaped portion of private respondent's land was done in bad faith
by the builder of the encroaching structures, the latter should be presumed to have
built them in good faith. 21 It is presumed that possession continues to be enjoyed in
the same character in which it was acquired, until the contrary is proved. 22 Good
faith consists in the belief of the builder that the land he is building on is his, and his
ignorance of any defect or flaw in his title. 23 Hence, such good faith, by law, passed
on to Pariz's successor, petitioner in this case. Further, "(w)here one derives title to
property from another, the act, declaration, or omission of the latter, while holding
the title, in relation to the property, is evidence against the former." 24And
possession acquired in good faith does not lose this character except in case and
from the moment facts exist which show that the possessor is not unaware that he
possesses the thing improperly or wrongfully. 25 The good faith ceases from the
moment defects in the title are made known to the possessor, by extraneous
evidence or by suit for recovery of the property by the true owner. 26

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

The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles
153
 546 and 548, or to oblige the one who built or planted to pay the price of
the land, and the one who sowed, the proper rent. However, the builder
or planter cannot be obliged to buy the land if its value is considerably
more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall fix the
terms thereof.

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

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

We answer such question in the affirmative.

In the first place, there is no sufficient showing that petitioner was aware of the
encroachment at the time it acquired the property from Pariz Industries. We agree
with the trial court that various factors in evidence adequately show petitioner's lack
of awareness thereof. In any case, contrary proof has not overthrown the
presumption of good faith under Article 527 of the Civil Code, as already stated,
taken together with the disputable presumptions of the law on evidence. These
presumptions state, under Section 3 (a) of Rule 131 of the Rules of Court, that the
person is innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that the
law has been obeyed. In fact, private respondent Eduardo Uy himself was unaware
of such intrusion into his property until after 1971 when he hired a surveyor,
following his purchase of another adjoining lot, to survey all his newly acquired lots.
Upon being apprised of the encroachment, petitioner immediately offered to buy the
area occupied by its building — a species of conduct consistent with good faith.

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

Estoppel

Respondent Court ruled that the amicable settlement entered into between
petitioner and private respondent estops the former from questioning the private
154
respondent's "right" over the disputed property. It held that by undertaking to
demolish the fence under said settlement, petitioner recognized private respondent's
right over the property, and "cannot later on compel" private respondent "to sell to it
the land since" private respondent "is under no obligation to sell." 28

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

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

That the fence which serve(s) as a wall housing the electroplating

machineries shall not be demolished in the mean time which portion
shall be subject to negotiation by herein parties.

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

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

A compromise is a bilateral act or transaction that is expressly

acknowledged as a juridical agreement by the Civil Code and is therein
dealt with in some detail. "A compromise," declares Article 2208 of said
Code, "is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already
commenced."

xxx xxx xxx

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

In the context of the established facts, we hold that petitioner did not lose its rights
under Article 448 of the Civil Code on the basis merely of the fact that some years
after acquiring the property in good faith, it learned about — and aptly recognized —
the right of private respondent to a portion of the land occupied by its building. The
supervening awareness of the encroachment by petitioner does not militate against
155
its right to claim the status of a builder in good faith. In fact, a judicious reading of
said Article 448 will readily show that the landowner's exercise of his option can only
take place after the builder shall have come to know of the intrusion — in short,
when both parties shall have become aware of it. Only then will the occasion for
exercising the option arise, for it is only then that both parties will have been aware
that a problem exists in regard to their property rights.

Options of Private Respondent

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

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

Where the builder, planter or sower has acted in good faith, a conflict of
rights arises between the owners, and it becomes necessary to protect
the owner of the improvements without causing injustice to the owner of
the land. In view of the impracticality of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of
the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent. It is the owner of the land who is
authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of
the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off.
Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949;
Article applied; see Cabral, et al. vs. Ibanez [S.C.] 52 Off. Gaz. 217;
Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).

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

the proper remedy, which respondent Court sustained in its assailed Decisions, is
thus legally flawed. This is not one of the remedies bestowed upon him by law. It
would be available only if and when he chooses to compel the petitioner to buy the
land at a reasonable price but the latter fails to pay such price. 33 This has not taken
place. Hence, his options are limited to: (1) appropriating the encroaching portion of
petitioner's building after payment of proper indemnity, or (2) obliging the latter to
buy the lot occupied by the structure. He cannot exercise a remedy of his own liking.

Neither is petitioner's prayer that private respondent be ordered to sell the

land 34 the proper remedy. While that was dubbed as the "more workable solution"
in Grana and Torralba vs. The Court of Appeals, et al., 35 it was not the relief granted
in that case as the landowners were directed to exercise "within 30 days from this
decision their option to either buy the portion of the petitioners' house on their land
or sell to said petitioners the portion of their land on which it stands." 36Moreover,
156
in Grana and Torralba, the area involved was only 87 square meters while this case
involves 520 square meters37. In line with the case of Depra vs. Dumlao, 38 this case
will have to be remanded to the trial court for further proceedings to fully implement
the mandate of Art. 448. It is a rule of procedure for the Supreme Court to strive to
settle the entire controversy in a single proceeding leaving no root or branch to bear
the seeds of future
39
litigation.

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

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

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

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

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

The trial court shall determine:

a) the present fair price of private respondent's 520 square-meter area of

land;

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

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

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

2. After said amounts shall have been determined by competent evidence, the
regional trial court shall render judgment as follows:

a) The private respondent shall be granted a period of fifteen (15) days

within which to exercise his option under the law (Article 448, Civil
Code), whether to appropriate the portion of the building as his own by
paying to petitioner its fair market value, or to oblige petitioner to pay the

157
price of said area. The amounts to be respectively paid by petitioner and
private respondent, in accordance with the option thus exercised by
written notice of the other party and to the court, shall be paid by the
obligor within fifteen (15) days from such notice of the option by
tendering the amount to the trial court in favor of the party entitled to
receive it;

b) If private respondent exercises the option to oblige petitioner to pay

the price of the land but the latter rejects such purchase because, as
found by the trial court, the value of the land is considerably more than
that of the portion of the building, petitioner shall give written notice of
such rejection to private respondent and to the trial court within fifteen
(15) days from notice of private respondent's option to sell the land. In
that event, the parties shall be given a period of fifteen (15) days from
such notice of rejection within which to agree upon the terms of the
lease, and give the trial court formal written notice of the agreement and
its provisos. If no agreement is reached by the parties, the trial court,
within fifteen (15) days from and after the termination of the said period
fixed for negotiation, shall then fix the terms of the lease provided that
the monthly rental to be fixed by the Court shall not be less than two
thousand pesos (P2,000.00) per month, payable within the first five (5)
days of each calendar month. The period for the forced lease shall not
be more than two (2) years, counted from the finality of the judgment,
considering the long period of time since 1970 that petitioner has
occupied the subject area. The rental thus fixed shall be increased by
ten percent (10%) for the second year of the forced lease. Petitioner
shall not make any further constructions or improvements on the
building. Upon expiration of the two-year period, or upon default by
petitioner in the payment of rentals for two (2) consecutive months,
private respondent shall be entitled to terminate the forced lease, to
recover his land, and to have the portion of the building removed by
petitioner or at latter's expense. The rentals herein provided shall be
tendered by petitioner to the trial court for payment to private
respondent, and such tender shall constitute evidence of whether or not
compliance was made within the period fixed by the said court.

c) In any event, petitioner shall pay private respondent an amount

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

158
 d) The periods to be fixed by the trial court in its decision shall be non-
extendible, and upon failure of the party obliged to tender to the trial
court the amount due to the obligee, the party entitled to such payment
shall be entitled to an order of execution for the enforcement of payment
of the amount due and for compliance with such other acts as may be
required by the prestation due the obligee.

No costs.

SO ORDERED.

159