ROSA J. SALES, EARL RYAN CHENG and EMIL RALPH CHENG, petitioners, vs.WILLIAM BARRO, respondent.

This case originated from the ejectment complaint filed by the petitioners against the respondent, his wife, and all persons claiming rights. petitioners alleged among others that (1) they are owners of the lot described and embraced in Transfer Certificate of Title (2) the respondent constructed a shanty thereon without their consent; (3) the respondent and his co-defendants have not been paying any rent to the petitioners for their occupation thereof; (4) the respondent and his co-defendants refused the formal demand made by the petitioners for them to vacate the subject lot;

In his answer, the respondent denied the allegations of the complaint, and essentially claimed that (1) his construction of the temporary makeshift house on the lot was tolerated by the petitioners, considering that he acted as the caretaker thereof; and (2) he does not remember receiving any demand letter and summons from the barangay and so he was surprised to know that an ejectment complaint was filed against him.

In its Decision7 dated September 27, 2004, the MeTC found in favor of the petitioners. It held that the respondent, his wife, and all persons claiming rights under them, being possessors by tolerance, can be validly ejected from the lot at any time and after due notice. It then directed them to vacate the lot, pay P5,000 a month from January 2004 up to such time that the lot is actually turned over to the petitioners, and pay P10,000 as attorney’s fees.

After finding the complaint to be substantially lacking in the requisite allegations that would make out a case either for forcible entry or unlawful detainer,8 the Court of Appeals reversed the RTC decision and accordingly dismissed the petitioners’ complaint.

Simply put, we are asked to resolve: (1) whether the Court of Appeals correctly dismissed the complaint;

Anent the first issue, the petitioners argue that the complaint was for unlawful detainer, and hence, there was no need for them to allege prior physical possession of the lot. They further contend that their position that the complaint was for unlawful detainer is supported by the claim of the respondent in his answer that "he made a temporary makeshift structure on the lot to serve as his living place and that the same was tolerated by the petitioners considering that he acted as caretaker of the property."11 For his part, the respondent insists that the Court of Appeals was correct in dismissing the complaint.12

After carefully examining the averments of the petitioners’ complaint and the character of the reliefs sought therein,13 we hold that the Court of Appeals did not err in finding that the complaint was for forcible entry, and that the Court of Appeals correctly dismissed it.

There are two reasons why we could not subscribe to the petitioners’ submission that their complaint was for unlawful detainer. Firstly, the petitioners’ own averment in the complaint "that the defendant constructed a shanty in the lot of the plaintiffs without their consent,"14 and the relief asked for by the petitioners that the respondent and his wife "pay the amount of P10,000 a month beginning January 2004 as for reasonable rent of the subject premises,"15 clearly contradict their claim. It must be highlighted that as admitted by the petitioners in their motion for reconsideration16 before the appellate court, and as evidenced by the TCT No. 262237 annexed to the complaint, the petitioners became owners of the property only on January 6, 2004. By averring that the respondent constructed his shanty on the lot without their consent and then praying that the MeTC direct the respondent to pay them rent from January 2004, or from the inception of the respondent’s occupation of the lot, no other conclusion can be made except that the petitioners had always considered respondent’s occupation of the same to be unlawful from the very beginning. Hence, the complaint can never support a case for

unlawful detainer. "It is a settled rule that in order to justify an action for unlawful detainer, the owner’s permission or tolerance must be present at the beginning of the possession."17

Secondly, the nature of the complaint is neither changed nor dependent upon the allegations and/or defenses made in the answer. As we had previously stated in Cañiza v. Court of Appeals,18 "it is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it, are the allegations of the complaint and the character of the relief sought."

As correctly found by the Court of Appeals, what the petitioners actually filed was a fatally defective complaint for forcible entry, considering that there was no allegation therein regarding the petitioners’ prior physical possession of the lot.19 In Tirona v. Alejo, we held that "in actions for forcible entry, two allegations are mandatory for the municipal trial court to acquire jurisdiction: first, the plaintiff must allege his prior physical possession of the property; and second, he must also allege that he was deprived of his possession by any of the means provided for in Section 1,20 Rule 70 of the Rules of Court, namely, force, intimidation, threats, strategy, and stealth." 21

The petitioners’ allegation that they are the registered owners of the lot miserably falls short of satisfying the required averment of prior physical possession. As we had clarified and stressed in Tirona, "the word possessionas used in forcible entry and unlawful detainer, means nothing more than physical possession, not legal possession in the sense contemplated in civil law."22

WHEREFORE, the instant petition is DENIED for lack of merit. Costs against the petitioners.

MEDINA, petitioners, vs. GREENFIELD DEVELOPMENT CORPORATION,respondent.

Petitioners are the grandchildren of Pedro Medina from two marriages. In his first marriage to Isadora San Jose, Pedro sired three children: Rafael, Rita and Remegia; in his second marriage, this time to Natalia Mullet, Pedro had five: Cornelio, Brigida, Balbino, Crisanta and Rosila. Except for Balbino and Crisanta, all of Pedro’s children likewise bore children, the petitioners in this case.*1+

On June 5, 1962, Pedro, his brother Alberto Medina and his niece Nazaria Cruz (Alberto’s daughter) executed a notarized Contract to Sell in favor of respondent Greenfield Development Corporation over a parcel of land located in Muntinlupa City, then in the Province of Rizal, covered by Transfer Certificate of Title (TCT) No. 100177 (Lot 90-A) and measuring 17,121 square meters.[2] A notarized Deed of Sale covering said property was subsequently entered into on June 27, 1962, in favor of respondent, and this time signed by Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz, as vendors.[3]

Thereafter, a notarized Deed of Absolute Sale with Mortgage was executed on September 4, 1964 in favor of respondent over Lot 90-B covered by TCT No. 100178, measuring 16,291 square meters. Signing as vendors were Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz.[4]

By virtue of these sales, respondent was able to register in its name the title to the two parcels of land with TCT No. 100578 covering Lot 90-A and TCT No. 133444 covering Lot 90-B. These properties were consolidated with other lots and were eventually registered on July 19, 1995, in the name of respondent under TCT Nos. 202295, 202296 and 202297.[5]

On November 6, 1998, petitioners instituted Civil Case No. 98-233, an action for annulment of titles and deeds, reconveyance, damages with preliminary injunction and restraining order, against respondent

and the Register of Deeds of Makati.[6] Included in the complaint are the heirs of Nazaria Cruz, as unwilling co-plaintiffs.[7] Petitioners allege in their complaint that they are co-owners of these two parcels of land. While the titles were registered in the names of Pedro, Alberto, Cornelio, Brigida and Gregoria, all surnamed Medina, they alleged that they were recognized as co-owners thereof. In support of their case, petitioners maintain that the deeds of sale on these properties were simulated and fictitious, and the signatures of the vendors therein were fake. Despite the transfer of the title to respondent’s name, they remained in possession thereof and in fact, their caretaker, a certain Santos Arevalo and his family still reside on a portion of the property. On July 13, 1998, petitioners caused an adverse claim to be annotated on the titles. After discovering the annotation, respondent constructed a fence on the property and posted security personnel, barring their ingress and egress. Thus, petitioners sought, among others, the issuance of a temporary restraining order and a writ of preliminary injunction enjoining respondent and its agents and representatives from preventing petitioners to exercise their rights over the properties.[8]

Respondent denied the allegations, stating that petitioners have no valid claim on the properties as it is already titled in its name by virtue of the public documents executed by their predecessors. As counterclaim, respondent alleged that Santos Arevalo is not petitioners’ caretaker and it was them who employed him as caretaker.[9]

On January 18, 1999, the trial court issued its resolution granting petitioners’ prayer for injunctive relief. Let therefore an injunction issue, enjoining and directing defendant GREENFIELD DEVELOPMENT CORPORATION, its security guards, agents, representatives, and all those claiming rights under it, from preventing plaintiffs and their caretaker Santos Arevalo, from entering and going out of the subject premises, and from preventing them to exercise their property rights, upon payment of a bond in the amount of P100,000.00.

THE COURT OF APPEALS COMMITTED A MISTAKE IN HOLDING THAT RESPONDENT WAS IN CONSTRUCTIVE POSSESSION OF THE SUBJECT PREMISES NOTWITHSTANDING THAT PETITIONERS ARE IN ACTUAL POSSESSION THEREOF

The Court however holds suspect the acquisition by Greenfield Development Corporation of the two parcels. Lot 90-A covered by Transfer Certificate of Title No. 100177, was promised to be sold to defendant under a contract to sell but the other co-owners did not sign this Contract to Sell, who all denied knowledge of the same. No contract of Sale followed this Contract to Sell which cannot be the bases of the issuance of a new title. A Contract to Sell is only a promise to sell, and is not a deed of sale, specially as this Contact to Sell is not signed by all of the registered owners.

This Court cannot also understand how the document, denominated as DEED OF ABSOLUTE SALE WITH MORTGAGE can be the bases (sic) of a new title. The absoluteness of the sale, is contradicted by the mortgage it also provides. There is absoluteness of sale only when the buyer upon execution of the contract, pay (sic) in full the consideration and ownership passes to the Vendee. The registered owners of Lot 90-B covered by Transfer Certificate of Title No. 100178 even deny having executed this document of Deed of Absolute Sale with Mortgage.

Until these matters are threshed out at the trial on the merits, and after this is fully explained and determined, whether the properties were actually sold to Defendant Greenfield Development Corporation, irreparable injury will visit the landowner if the claim of ownership by Greenfield Development Corporation is allowed and not enjoined.[14]

The Court of Appeals, however, disagreed with the trial court. It noted that the trial court relied mainly on petitioners’ allegations in the complaint, which were not supported by substantial evidence, and ignored the presumption of validity ascribed to the duly notarized deeds of conveyances and the titles issued to respondent. The Court of Appeals also found that respondent is in constructive possession of the properties in dispute considering that it is already the registered owner thereof since 1962. Lastly, the Court of Appeals held that petitioners’ right to impugn respondent’s title to the property has already prescribed.[15]

Section 3, Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a preliminary injunction, to wit:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

The purpose of a preliminary injunction is to prevent threatened or continuous irremediable injury to some of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim is to preserve the status quo until the merits of the case can be heard fully.[16] Thus, to be entitled to an injunctive writ, the petitioner has the burden to establish the following requisites:[17]

1) a right in esse or a clear and unmistakable right to be protected;

(2) a violation of that right;

(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.

Hence, petitioners’ entitlement to the injunctive writ hinges on their prima facie legal right to the properties subject of the present dispute. The Court notes that the present dispute is based solely on the parties’ allegations in their respective pleadings and the documents attached thereto. We have on one hand, petitioners’ bare assertion or claim that they are co-owners of the properties sold by their predecessors to respondent, and on the other, respondent’s claim of ownership supported by deeds of conveyances and torrens titles in their favor. From these alone, it is clear that petitioners failed to discharge the burden of clearly showing a clear and unmistakable right to be protected. Where the complainant’s right or title is doubtful or disputed, injunction is not proper. The possibility of irreparable damage without proof of actual existing right is not a ground for an injunction.[18]

Petitioners, however, argue that the presumption of validity of the notarized documents and titles cannot be applied in respondent’s case as it is not an innocent purchaser.*22+According to petitioners, respondent is fully aware that at the time that the Contract to Sell was entered into in 1962, Leon Medina who is a co-owner of the property then covered by TCT No. 21314, was already dead. Suffice it

to say that these arguments already involve the merits of the main case pending before the trial court, which should not even be preliminarily dealt with, as it would be premature.

Petitioners also claim that they are in actual possession of the property. As alleged in their complaint, they instituted Santos Arevalo, a co-petitioner, as caretaker.[26] They also alleged in their petition filed before this Court that Balbino and Yolanda Medina and their respective families are still residing on a portion of the property.[27] Respondent belies their claim, declaring that it employed Arevalo as caretaker. Respondent presented a notarized Receipt and Quitclaim dated April 26, 1994, signed by Arevalo, who attested that he was employed by respondent as caretaker and that his stay on the property was a mere privilege granted by respondent.

Possession and ownership are two different legal concepts. Just as possession is not a definite proof of ownership, neither is non-possession inconsistent with ownership. Even assuming that petitioners’ allegations are true, it bears no legal consequence in the case at hand because the execution of the deeds of conveyances is already deemed equivalent to delivery of the property to respondent, and prior physical delivery or possession is not legally required.*28+ Under Article 1498 of the Civil Code, “when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot be inferred.” Possession is also transferred, along with ownership thereof, to respondent by virtue of the notarized deeds of conveyances.[29]

The Court, however, finds that it was precipitate for the Court of Appeals to rule that petitioners’ action is barred by prescription. As previously stressed, the parties are yet to prove their respective allegations and the trial court is yet to receive the evidence. There is nothing on record that can conclusively support the conclusion that the action is barred by prescription. Hence, the Court of Appeals should not have made such ruling.

WHEREFORE, the petition is hereby DENIED for lack of merit. G.R. No. 162787 June 13, 2008

REPUBLIC OF THE PHILIPPINES, petitioners, vs.LOURDES F. ALONTE, respondent.

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Decision1of the Court of Appeals (CA) dated February 26, 2004 which affirmed the Decision of the Regional Trial Court of Quezon City, Branch 82 (RTC) granting respondent's petition for reconstitution, be reversed and set aside.

The CA accurately summarized the facts as culled from the records, thus:

On August 10, 2001, the petitioner-appellee [herein respondent] Lourdes F. Alonte filed a Petition for the Reconstitution of the Original of Transfer Certificate of Title No. 335986 and Issuance of the Corresponding Owner's Duplicate thereof supposedly over lot 18-B of the subd. Plan (LRC) Psd-328326 containing an area of Eighty Square Meters and Ninety Five Square Decimeters (80.95) situated in the Municipality of Caloocan (now Quezon City).

The petitioner-appellee alleged in its [sic] petition that she is the owner in fee simple of a parcel of land with its improvement situated in Quezon City, bounded and described as follows:

x x x x

It is further alleged that the original copy of the aforesaid title which used to be kept in the Office of the Register of Deeds of Quezon City was among those declared either destroyed or burned during the fire

which razed the said office on June 11, 1988 (Annex "E", Certification From the Register of Deeds, Records, p. 9).

Likewise, the petitioner-appellee alleged that the owner's Duplicate copy thereof was lost and an affidavit to that effect was executed and accordingly filed in the Office of the Registry of Deeds for Quezon City (Annex "F").

At the ex-parte hearing conducted on January 4, 2002, the petitioner-appellee was represented by her attorney-in-fact, Editha Alonte as evidenced by a Special Power of Attorney (Exh. "H"). The petitioner-appellee is presently in the United States and the witness and her family together with her sisters-in-law are the ones presently occupying the house erected thereon.

The following documents were presented to prove the jurisdictional facts:

● Exhibit "A" - copy of the Petition dated July 27, 2001.

● Exhibit "B" - Order dated August 29, 2001.

● Exhibit "C", "C-1" to "C-5" - the proof of service of the said Order to the City Prosecutor's Office, the Registry of Deeds of Quezon City, the Quezon City Legal Department, the Land Registration Authority, the Office of the Solicitor General, and the Land Management Bureau of the DENR;

● Exhibit "D" - Certificate of Publication dated October 26, 2001 issued by the National Printing Office;

● Exhibit "E" - Volume 97 No. 43, October 22, 2001 issue of the Official Gazette;

● Exhibit "E-1" - Volume 97 No. 44, October 29, 2001 issue of the Official Gazette;

● Exhibit "F" - Certificate of Posting and Service dated November 19, 2001 by the Deputy Sheriff of this Court.

In addition to the abovementioned documents, the petitioner-appellee presented the following:

● Annex "A" - Photocopy of TCT No. 335986;

● Annex "B" - Tax Declaration No. D-074-00504 for 1996;

● Annex "C" - Tax Declaration No. D-074-00921 for 1997;

● Annex "D" - Certification from the Office of the City Treasurer dated July 25, 2001;

? Annex "E" - Certification from the Register of Deeds of Quezon City dated February 4, 2000;

● Annex "F" - Affidavit of Loss dated July 9, 2001;

● Annex "G" - Technical Description;

● Annex "H" - Certification from the Office of the City Assessor dated August 1, 2001 (Records, pp. 5-12).2

The CA further adopted the following factual findings of the RTC, to wit:

The adjoining owners of the subject property were also furnished with copies of the Order dated August 29, 2001 by registered mail, as evidenced by the registry return cards (Exhibits "G", "G-1" and "G-2") attached to the records. There being no opposition thereto, the petitioner was allowed to present her evidence ex-parte before a Hearing Officer designated by the Court.

x x x x

In its Report dated August 2, 2002, the Land Registration Authority submitted its findings as follows:

(1) The present petition seeks the reconstitution of Transfer Certificate of Title No. 335986, allegedly lost or destroyed and supposedly covering Lot 18-B of the subdivision plan (LRC) Psd-328326, situated in the Municipality of Caloocan (now Quezon City).

(2) The plan and technical description of Lot 18-B of the subdivision plan (LRC) Psd – 328326, were verified correct by this Authority to represent the aforesaid lot and the same have been approved under (LRA) PR-19193 pursuant to the provision of Section 12 of Republic Act No. 26.3(Emphasis supplied)

On August 13, 2002, the RTC promulgated its Decision, the dispositive portion of which reads as follows:

WHEREFORE, the Petition dated July 27, 2001 is hereby GRANTED and the Register of Deeds of Quezon City is hereby directed to reconstitute in the files of his Office the original copy of TCT No. 335986 based on the corresponding technical description and survey plan of the property in question in the name of petitioner Lourdes F. Alonte.

The owner's duplicate copy of TCT No. 335986 which was lost is hereby declared null and void and the Register of Deeds of Quezon City is hereby directed to issue a new owner's duplicate copy of the reconstituted title to the petitioner, after payment of the prescribed fees and after their Order shall have become final.

SO ORDERED.4

Thereafter, the RTC Branch Clerk of Court issued a Certificate of Finality dated September 3, 2002.5

However, on September 10, 2002, the RTC issued an Order reading as follows:

It appearing from the records that the Notice of Appeal filed by the Office of the Solicitor General thru registered mail on August 29, 2002 and received by this Court on September 4, 2002, was within the reglementary period, the Certificate of Finality earlier issued on September 3, 2002 is hereby REVOKEDand/or otherwise RECALLED.

ACCORDINGLY, the Notice of Appeal is hereby given due course. Let, therefore, the records hereof be elevated to the Court of Appeals for appropriate proceedings and disposition.

SO ORDERED.6

On February 26, 2004, the CA then issued the assailed Decision affirming the RTC judgment. The CA held that the RTC did not err in ordering the reconstitution of the original copy of Transfer Certificate of Title (TCT) No. 335986 based on a photocopy because the court applied Section 3(f) of Republic Act (R.A.) No. 26, entitled "An Act Providing a Special Procedure for the Reconstitution of Torrens Certificate of Title Lost or Destroyed", which took effect on September 26, 1946. Said provision states that "transfer

certificates of title shall be reconstituted from x x x any other document which, in the judgment of the court, is sufficient and proper basis for reconstituting the lost or destroyed certificate of title."

Hence, the present petition for review on certiorari on the following grounds:

I

The Court of Appeals erred in finding that there is sufficient and proper basis for reconstitution of TCT No. 335986.

II

The Court of Appeals erred in affirming the lower court's decision granting the petition for reconstitution despite respondent's failure to comply with the mandatory requirements prescribed under Republic Act No. 26.7

Petitioner alleges that the trial court did not acquire jurisdiction to hear the petition for respondent's failure to allege the following mandatory and jurisdictional facts in her petition:

1. the names and addresses of the occupants or persons in possession of the property, of the owners of the adjoining properties and of all persons who may have any interest in the property;

2. a detailed description of the encumbrance appearing on the title; and

3. the restrictions and liabilities allegedly appearing on the subject title as referred to in paragraph 8 of the Petition.8

Petitioner also pointed out other supposed defects in the petition, i.e., it was not accompanied by a plan and technical description of the property duly approved by the Chief of the General Land Registration Office (now Land Registration Authority [LRA]) or by a certified copy of the description taken from a prior certificate of title covering the same property as prescribed under the last condition under Section 12 of R.A. No. 26; there was no tracing cloth plan attached to the petition as prescribed by Section 5 (a) of LRC Circular No. 35; and there is no showing that the Affidavit of Loss executed on July 9, 2001 by the petitioner stating the alleged fact of loss of the owner's duplicate copy of TCT No. T-335986 had been sent or registered with the Office of the Registry of Deeds of Quezon City.9

The petition is unmeritorious.

The Court emphasizes its ruling in Republic of the Philippines v. Casimiro,10 to wit:

The findings of fact of the RTC, affirmed by the Court of Appeals, cannot be disturbed by this Court, since –

As a rule, only questions of law may be appealed to the Court by certiorari. The Court is not a trier of facts, its jurisdiction being limited to errors of law. Moreover, where as in this case the Court of Appeals affirms the factual findings of the trial court, such findings generally become conclusive and binding upon the Court. The Court will not disturb the factual findings of the trial and appellate courts unless there are compelling or exceptional reasons, and there is none in the instant petition.

Petitioner failed to present before this Court any compelling or exceptional argument or evidence that would justify a departure from the foregoing general rule. This Court defers to the findings of both the RTC and the Court of Appeals as to the weight accorded to respondent’s evidence and the sufficiency

thereof to substantiate his right to a reconstitution of the original copy of TCT No. 305917.11 (Emphasis supplied)

In the present case, the RTC declared the petition to be sufficient in form and substance in its Order12 dated August 29, 2001. Both the RTC and the CA found the evidence presented by petitioner as adequate to order the reconstitution of TCT No. 335986. Akin to Casimiro,13 herein petitioner also failed to convince the Court that there are compelling reasons for it to deviate from the general rule that the findings of fact of the RTC, affirmed by the CA, are binding on this Court.

A thorough examination of the record reveals that there is no factual basis for petitioner's claim that respondent failed to comply with the requirements for a petition for reconstitution as enumerated in Sections 12 and 13 of R.A. No. 26, to wit:

Section 12. Petitions for reconstitution from sources enumerated in Section x x x 3(f) of this Act, shall be filed with the proper Court of First Instance, by the registered owner, his assigns, or any person having an interest in the property. The petition shall state or contain, among other things, the following: (a) that the owner's duplicate of the certificate of title had been lost or destroyed; (b) that no co-owner's, mortgagee's or lessee's duplicate had been issued, or, if any had been issued, the same had been lost or destroyed; (c ) the location, area and boundaries of the property; (d) the nature and description of the buildings or improvements, if any, which do not belong to the owner of the land, and the names and addresses of the owners of such buildings or improvements; (e) the names and addresses of the occupants or persons in possession of the property, of the owners of the adjoining properties and of all persons who may have any interest in the property; (f) a detailed description of the encumbrances, if any, affecting the property; and (g) a statement that no deeds or other instruments affecting the property have been presented for registration, or, if there be any, the registration thereof has not been accomplished, as yet. All documents, or authenticated copies thereof, to be introduced in evidence in support of the petition for reconstitution shall be attached thereto and filed with the same: Provided, That in case the reconstitution is to be made exclusively from sources enumerated in Sections 2(f) or 3(f) of this Act, the petition shall be further accompanied with a plan and technical description of the property duly approved by the Chief of the General Land Registration Office, or with a certified copy of the description taken from a prior certificate of title covering the same property.

Section 13. The Court shall cause a notice of the petition, filed under the preceding section, to be published, at the expense of the petitioner, twice in successive issues of the Official Gazette, and to be posted on the main entrance of the provincial building and of the municipal building of the municipality or city in which the land is situated, at least thirty days prior to the date of hearing. The court shall likewise cause a copy of the notice to be sent, by registered mail or otherwise, at the expense of the petitioner, to every person named therein whose address is known, at least thirty days prior to the date of hearing. Said notice shall state, among other things, the number of the lost or destroyed certificate of title, if known, the name of the registered owner, the names of the occupants or persons in possession of the property, the owners of the adjoining properties and all other interested parties, the location, area and boundaries of the property, and the date on which all persons having any interest therein, must appear and file their claim or objections to the petition. The petitioner shall, at the hearing, submit proof of the publication, posting and service of the notice as directed by the court.

The petition for reconstitution alleged that respondent is in possession of the subject lot and it listed the names and addresses of adjoining owners enumerated in the Certification from the Office of the City Assessor dated August 1, 2001; it stated that the title is free from any and all liens and encumbrances; and it stated that a copy of TCT No. 335986 is attached to the petition and made an integral part of the

petition, hence, the restrictions and liabilities appearing at the back of the copy of the TCT are deemed part of the petition for reconstitution. Said petition was also accompanied by a technical description of the property approved by the Commissioner of the National Land Titles and Deeds Registration Administration, the predecessor of the LRA, as prescribed under the last condition of Section 12 of R.A. No. 26. Thus, the petition clearly complied with the requirements of Section 12, R.A. No. 26.

The fact that Editha Alonte, respondent's attorney-in-fact, testified that it is she and her family who are residing on the subject lot does not negate the statement in the petition for reconstitution that it is respondent who is in possession of the lot. After all, Article 524 of the New Civil Code provides that possession may be exercised in one's own name or in that of another. Obviously, Editha Alonte was exercising possession over the land in the name of respondent Lourdes Alonte. This is supported by the Certification14 from the Office of the City Treasurer of Quezon City which states that the real property taxes on said property, declared in the name of Lourdes Alonte, had been paid.

Furthermore, as stated above, the LRA submitted to the trial court a Report15 dated August 2, 2002 stating that "[t]he plan and technical description of Lot 18-B of the subdivision plan (LRC) Psd-328326, were verified correct by this Authority to represent the aforesaid lot and the same have been approved under (LRA) PR-19193 pursuant to the provisions of Section 12 of R.A. No. 26." Attached to said Report were the print copy of plan (LRA) PR-1919316 and the corresponding technical description.17 Since the LRA issued a Report that is highly favorable to respondent, and considering further the presumption that official duty has been regularly performed,18 the only conclusion would be that respondent has fully complied with the requirements of LRC Circular No. 35.

It also appears that the Affidavit of Loss dated July 9, 2001 executed by respondent has indeed been submitted to the Register of Deeds as the photocopy of TCT No. 335986 bears an inscription at the back regarding the submission of such document to the Register of Deeds.

In fine, petitioner miserably failed to present any matter that would warrant the reversal or modification of the factual findings of the RTC, as affirmed by the CA.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.

[G.R. No. 79688. February 1, 1996]

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

D E C I S I O N

PANGANIBAN, J.:

Is a lot buyer who constructs improvements on the wrong property erroneously delivered by the owner’s agent, a builder in good faith? This is the main issue resolved in this petition for review on certiorari to reverse the Decision[1] of the Court of Appeals[2] in CA-G.R. SP No. 11040, promulgated on August 20, 1987.

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

The Facts

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

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

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

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

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

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

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

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

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

The MTCC thus disposed:

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

1. Defendant Wilson Kee is ordered to vacate tithe premises of Lot 9, covered by TCT No. 106367 and to remove all structures and improvements he introduced thereon;

2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P 15.00 a day computed from the time this suit was filed on March 12, 1981 until he actually vacates the premises. This amount shall bear interests (sic) at the rate of 12 per cent (sic) per annum.

3. Third-Party Defendant CT. Torres Enterprises, Inc. and Pleasantville Subdivision are ordered to pay the plaintiff jointly and severally the sum of P3,000.00 as attorney’s fees and P700.00 as cost and litigation expenses.”*4+

On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner and CTTEI were not at fault or were not negligent, there being no preponderant evidence to show that they directly participated in the delivery of Lot 9 to Kee.[5] It found Kee a builder in bad faith. It further ruled that even assuming arguendo that Kee was acting in good faith, he was, nonetheless, guilty of unlawfully usurping the possessory right of Jardinico over Lot 9 from the time he was served with notice to vacate said lot, and thus was liable for rental.

The RTC thus disposed:

“WHEREFORE, the decision appealed from is affirmed with respect to the order against the defendant to vacate the premises of Lot No. 9 covered by Transfer Certificate of Title No. T-106367 of the land records of Bacolod City; the removal of all structures and improvements introduced thereon at his expense and the payment to plaintiff (sic) the sum of Fifteen (P 15.00) Pesos a day as reasonable rental to be computed from January 30, 1981, the date of the demand, and not from the date of the filing of the complaint, until he had vacated (sic) the premises, with interest thereon at 12% per annum. This Court further renders judgment against the defendant to pay the plaintiff the sum of Three Thousand (P3,000.00) Pesos as attorney’s fees, plus costs of litigation.

“The third-party complaint against Third-Party Defendants Pleasantville Development Corporation and C.T. Torres Enterprises, Inc. is dismissed. The order against Third-Party Defendants to pay attorney’s fees to plaintiff and costs of litigation is reversed.”*6+

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

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

Thus, the Court of Appeals disposed:

“WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and judgment is rendered as follows:

1. Wilson Kee is declared a builder in good faith with respect to the improvements he introduced on Lot 9, and is entitled to the rights granted him under Articles 448, 546 and 548 of the New Civil Code.

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are solidarily liable under the following circumstances:

a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove these structures, the third-party defendants shall answer for all demolition expenses and the value of the improvements thus destroyed or rendered useless;

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

3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are ordered to pay in solidum the amount of P3,000.00 to Jardinico as attorney’s fees, as well as litigation expenses.

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

“Furthermore, the case is REMANDED to the court of origin for the determination of the actual value of the improvements and the property (Lot 9), as well as for further proceedings in conformity with Article 448 of the New Civil Code.”*7]

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

The Issues

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

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

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

“3. In the light of the subsequent events or circumstances which changed the rights of the parties, it becomes imperative to set aside or at least modify the judgment of the Court of Appeals to harmonize with justice and the facts;

“4. Private respondent-Kee in accordance with the findings of facts of the lower court is clearly a builder in bad faith, having violated several provisions of the contract to sell on installments;

“5. The decision of the Court of Appeals, holding the principal, Pleasantville Development Corporation (liable) for the acts made by the agent in excess of its authority is clearly in violation of the provision of the law;

“6. The award of attorney’s fees is clearly without basis and is equivalent to putting a premium in (sic) court litigation.”

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

(1) Was Kee a builder in good faith?

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

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

The First Issue: Good Faith

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

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

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

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

xxx xxx xxx

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

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

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

To demonstrate Kee’s bad faith, petitioner points to Kee’s violation of paragraphs 22 and 26 of the Contract of Sale on Installment.

We disagree. Such violations have no bearing whatsoever on whether Kee was a builder in good faith, that is, on his state of mind at the time he built the improvements on Lot 9. These alleged violations may

give rise to petitioner’s cause of action against Kee under the said contract (contractual breach), but may not be bases to negate the presumption that Kee was a builder in good faith.

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

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

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

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

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

The Second Issue: Petitioner’s Liability

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

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

Petitioner’s contention is without merit.

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

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

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

The deed of sale contained the following provision:

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

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

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

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

“2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development Corporation are solidarily liable under the following circumstances:

“a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove these structures, the third-party defendants shall answer for all demolition expenses and the value of the improvements thus destroyed or rendered useless;

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

Petitioner contends that if the above holding would be carried out, Kee would be unjustly enriched at its expense. In other words, Kee would be -able to own the lot, as buyer, without having to pay anything on it, because the aforequoted portion of respondent Court’s Decision would require petitioner and CTTEI jointly and solidarily to “answer” or reimburse Kee there for.

We agree with petitioner.

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

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

dispositive portion of the Court of Appeals’ Decision *as reproduced above+ holding petitioner and CTTEI solidarily liable.

The Third Issue: Attorney’s Fees

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

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

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

WHEREFORE, the petition is partially GRANTED. The Decision of the Court of Appeals is hereby MODIFIED as follows:

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

(2) Petitioner Pleasantville Development Corporation and respondent C.T. Tones Enterprises, Inc. are declared solidarily liable for damages due to negligence; however, since the amount and/or extent of such damages was not proven during the trial, the same cannot now be quantified and awarded;

(3) Petitioner Pleasantville Develpment Corporation and respondent C.T. Torres Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to Jardinico as attorney’s fees, as well as litigation expenses; and

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

G.R. No. 3088 February 6, 1907

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,

vs.

JAMES PETERSON, sheriff of the city of Manila, ET AL., defendants-appellees.

Del-Pan, Ortigas & Fisher for appellant.

Hartigan, Marple, Rohde, & Gutierrez for appellees.

TORRES, J.:

On the 24th of October, 1905, the Spanish-Filipino Bank, a corporation, through its attorneys, Del-Pan, Ortigas and Fisher, filed a complaint against the sheriff of the city of Manila and the other defendant, Juan Garcia, praying that judgment be rendered against the said sheriff, declaring that the execution levied upon the property referred to in the complaint, to wit, wines, liquors, canned goods, and other similar merchandise, was illegal, and directing the defendants to return the said goods to the plaintiff corporation, and in case that he had disposed of the same, to pay the value thereof, amounting to P30,000, Philippine currency, and further that it be declared that the said plaintiff corporation, under the contract of pledge referred to in the complaint had the right to apply the proceeds of the sale of the said goods to the payment of the debt of P40,000, Philippine currency, for the security of which the said merchandise was pledged, with preference over the claim of the other defendant, Juan Garcia and that both defendants be held jointly liable to the plaintiff for the sum of P500, Philippine currency, as damages, and the said defendants to pay the costs of the proceedings, and for such other and further relief as the plaintiff might be entitled to under the law. Plaintiff alleges in its complaint that under the contract entered into on the 4th of March, 1905, by and between the Spanish-Filipino Bank and Francisco Reyes, the former, loaned to the latter the sum of P141,702, Philippine currency; that on the same date Francisco Reyes was already indebted to the bank in the sum of P84,415.38, Philippine currency, which, added to the amount of the loan, made a total of P226,117.38, Philippine currency, received by the said Reyes as a loan from the plaintiff bank, the entire sum at an annual interest of 8 per cent; that to secure the payment of these two sums and the interest thereon, the debtor, Francisco Reyes, by a public instrument executed before a notary on the aforesaid date mortgaged in favor of the plaintiff bank several pieces of property belonging to him, and pledged to the said bank part of his personal property, specifying the proportion on which the said real and personal property thus mortgaged and pledged in favor of the plaintiff corporation would be respectively liable for the payment of the debt; that the property pledged by the debtor to the bank included a stock or merchandise, consisting of wines, liquors, canned goods, and other similar articles valued at P90,591.75, Philippine currency, then stored in the warehouses of the debtor, Reyes, No. 12 Plaza Moraga, in the city of Manila, which said goods and merchandise were liable for the payment of the said sum of P90,591.75, Philippine currency; that in the aforesaid deed of pledge it was agreed by and between the bank and the debtor, Reyes, that the goods should be delivered to Ramon Garcia y Planas for safe-keeping, the debtor having actually turned over to the said Garcia y Planas the goods in question by delivering to him the keys of the warehouse in which they were kept; that in a subsequent contract entered into by and between the debtor, Reyes, and the plaintiff bank on the 29th of September, 1905, the said contract executed on the 4th of March was modified so as to provide that the goods then (September 29) in possession the depositary should only be liable for the sum of P40,000, Philippine currency, the said contract of the 4th of March remaining in all other respects in full force and effect, Luis M.a Sierra having been subsequently appointed by agreement between the bank and the debtor as depositary of the goods thus pledged in substitution for the said Ramon Garcia y Planas.

On the 19th of October, 1905, in an action brought in the Court of First Instance of the city of Manila by Juan Garcia y Planas against Francisco Reyes and Ramon Agtarat, judgment was rendered against the last-mentioned two for the sum of P15,000, Philippine currency, to be paid by them severally or jointly, upon which judgment execution was issued against the property of the defendants, Reyes and Agtarap. On the aforesaid 19th day of October, for the purpose of levying upon the property of the defendants, the sheriff at the request of Garcia, the plaintiff in that case, entered the warehouse where the goods pledged to the plaintiff bank were stored under the custody of the depositary, Sierra, and levied upon them as per list attached to the complaint marked "Exhibit A." The sheriff seized the goods which had

been pledged to the bank, depriving the latter of the possession of the same, to which said contract executed on the 4th of March, 1905. Without the authority of the bank, Reyes could not dispose of the said goods. The value of the goods seized by the sheriff was P30,000, Philippine currency, the said sheriff, having refused, and still refusing, to return to the same to the bank, notwithstanding repeated demands made upon him to this effect, and it being alleged in the complaint that unless prohibited by the court the sheriff would proceed to sell the said goods at public auction and apply the proceeds to the satisfaction of the judgment rendered in favor of the Juan Garcia y Planas, while the other debtor Reyes had not paid to the bank the P40,000, Philippine currency, to secure the payment of which the goods mentioned in Exhibit A had been pledged to the bank, that is, to secure the payment of a sum in excess of the actual value of the goods in the hands of the sheriff.

The defendant sheriff, James J. Peterson, and Juan Garcia, his codefendant, through their attorneys, Hartigan, Marple, Rohde and Gutierrez, answering the complaint, stated that they admitted the allegations contained in paragraphs 1, 2, 3, 4, 5, 12, and 17 of the complaint, but denied the allegations contained in paragraphs 6, 7, 8, 9, 10, 11, 14, 16, and 18. They further denied the allegations contained in paragraph 12, with the exception that the defendant sheriff levied upon the goods mentioned in Exhibit A attached to the complaint for the purpose of satisfying the judgment referred to therein; and also the allegations contained in paragraph 13 of the complaint, with the exception that the sheriff seized the property mentioned in Exhibit A under the execution referred to therein; and finally defendants denied the allegation contained in paragraph 15 of the complaint, with the exception of the allegation that the value of the property seized is P30,000. They accordingly asked that the action be dismissed and that it be adjudged that the plaintiff had no interest whatever in the property described in the complaint, and that the plaintiff be taxed with the costs of these proceedings.

The testimony introduced by the parties having been received, and the exhibits having been attached to the record, the court below entered judgment on the 4th of January, 1906, dismissing plaintiff's action and directing that the defendant recover from the Spanish-Filipino Bank the costs of this action, for which execution was duly issued. To this judgment counsel for plaintiff excepted and announced his intention of prosecuting a bill of exceptions, and further made a motion for a new trial on the ground that the judgment of the court below was contrary to law and that the findings of fact were plainly and manifestly contrary to the weight of the evidence.

The decision of this case depends mainly upon the question as to whether the contract of pledge entered into by and between the Spanish-Filipino Bank and Francisco Reyes to secure a loan made by the former to the latter was valid, all the requisites prescribed by the Civil Code having been complied with.

If so, the bank's claim had preference over the claim of a third person not secured, as was the bank's, by a pledge, with reference to the property pledged to the extent of its value, and therefore such property could not have been legally levied upon by the sheriff at the request of the defendant, Juan Garcia. (Arts. 1921, 1922, Civil Code.)

The contract in question complies with all the requisites provided in article 1857 of the Civil Code, such as that the property was pledged to secure a debt, the date of the execution, the terms of the pledge, and the property pledged, all of which appears in a public document, and the property pledged was placed in the hands of a third person by common consent of the debtor and creditor, under the supervision of an agent of the bank. (Arts. 1863, 1865, 1866, 1869, 1871, Civil Code.) The defect alleged to exist in the said contract is that the debtor, Reyes, continued in possession of the property pledged; that he never parted with the said property, and that neither the creditor nor the depositary appointed

by common consent of the parties were ever in possession of the property pledged, and for this reason, and upon the further ground that the contract was fraudulent, the court below dismissed the complaint with the costs against the plaintiff.

In the motion for a new trial it was alleged by the plaintiff that the judgment of the court below was contrary to law, and that the findings of fact contained therein were plainly and manifestly against the weight of the evidence. If plaintiffs contention is correct, then the judgment of the court below should be reversed.

From the evidence introduced at the trial, both oral and documentary, it appears that a third person, appointed by the common consent of the debtor and creditor, was in possession of the goods pledged in favor of the bank under the direct supervision of an agent of the bank expressly appointed for this purpose, and it has not been shown that the said Reyes continued in the possession of the goods after they had been pledged to the plaintiff bank.

Exhibit C and the testimony of Francisco Reyes, Luis M.a Sierra, and Mariano Rodriguez corroborate the existence and authenticity of the contract of pledge recorded in a public instrument and conclusively and satisfactorily show that the debtor, after the pledge of the property, parted with the possession of the same, and that it was delivered to a third person designated by common consent of the parties. For the purpose of giving this possession greater effect, the pledgee appointed a person to examine daily the property in the warehouse where the same was kept.

The witness Matias Garcia also testified as to the status of these goods, and informed Juan Garcia of such status before the same were levied upon.

The sheriff's testimony supports the allegation that the depositary, Sierra, was present at the place where the goods were kept, as well as the representative of the bank, Rodriguez, when he, the sheriff, went there for the purpose of levying upon the said property. He further testified that Rodriguez, the representative of the bank, then protested and notified him that the property in question was pledged to the Spanish-Filipino Bank.

The contract in question was, therefore, a perfect contract of pledge under articles 1857 and 1863 of the Civil Code, it having been conclusively shown that the pledgee took charge and possession of the goods pledged through a depository and a special agent appointed by it, each of whom had a duplicate key to the warehouse wherein the said goods were stored, and that the pledgee, itself, received and collected the proceeds of the goods as they were sold.

The fact that the said goods continued in the warehouse which was formerly rented by the pledgor, Reyes, does not affect the validity and legality of the pledge, it having been demonstrated that after the pledge had been agreed upon, and after the depository appointed with the common consent of the parties had taken possession of the said property, the owner, the pledgor, could no longer dispose of the same, the pledgee being the only one authorized to do so through the depositary and special agent who represented it, the symbolical transfer of the goods by means of the delivery of the keys to the warehouse where the goods were stored being sufficient to show that the depositary appointed by the common consent of the parties was legally placed in possession of the goods. (Articles 438, 1463, Civil Code.)

The fact that the debtor, Reyes, procured purchasers and made arrangements for the sale of the goods pledged and that the bills for the goods thus sold were signed by him does not affect the validity of the

contract, for the pledgor, Reyes, continued to be the owner of the goods, (art. 1869, Civil Code), he being the one principally interested in the sale of the property on the best possible terms.

As to the reservation stipulated in paragraph 13 of the contract executed on the 4th of March, 1905, it could not affect the contract in question for the reason that reservation referred to the rent from the property mortgaged, to the bank and the dividends from the shares of stock also pledged to the bank, and not the merchandise so pledged, and such reservation could not have rendered the contract of pledge null.

If the case is to be decided in accordance with the facts alleged and established, the defendant not having introduced any evidence to show that the said contract of pledge was fraudulent as to other creditors, there was no legal ground upon which the court below could have held that the contract evidenced by the instrument in question was entered into to defraud other creditors of the pledgor.

For the reason hereinbefore set out, and the judgment of the court below being contrary to the evidence, the said judgment is hereby reversed, and it is hereby adjudged that the plaintiff corporation, under and by virtue of the contract of pledge in question, had a preferential right over that of the defendant, Juan Garcia, to the goods pledged or the value thereof, the value to be applied to the payment of the debt of P40,000, Philippine currency, for the security of which the said property was pledged, and the defendants are accordingly hereby ordered to return to the plaintiff corporation the property improperly levied upon, or to pay its value, amounting to P30,000, Philippine currency, without special provision as to costs. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter the case be remanded to the court below for execution. So ordered.

G.R. No. L-9989 March 13, 1918

EDUARDO CUAYCONG, ET AL., plaintiffs-appellees,

vs.

RAMONA BENEDICTO, ET AL., defendants-appellants.

Ruperto Montinola and Aurelio Montinola for appellants.

No appearance for appellees.

FISHER, J.:

The issues in this case relate to the right of plaintiffs to make use of two roads existing on the Hacienda Toreno, a tract of land in the municipality of Victorias, Negros Occidental, the property of the defendants, Blasa Benedicto and Ramona Benedicto. One of these roads is referred to in the proceedings as the Nanca-Victorias road and the other as the Dacuman — Toreno road. The Court of First Instance held that those of the plaintiffs who claimed to be entitled to make use of the Dacuman — Toreno road had failed to establish the asserted right, and dismissed the action as to them. From this decision they appealed to this court but, their brief not having been filed within the time prescribed by the rules, their appeal was dismissed, on motion of defendants, by resolution dated February 14, 1916. Consequently, the issues presented on this appeal are limited to those which relate to the rights of the parties with respect to the Nanca-Victorias road, and the determination of the correctness of the decision of the court concerning that part of the controversy submitted to its decision.

The allegations in the complaint with respect to the Nanca-Victorias road are that the appellees, Eduardo Cuaycong, Lino Cuaycong, and Eulalio Dolor, are the owners of a group of haciendas situated between the southern boundary of the Hacienda Toreno and the barrio of Nanca, of the municipality of Seravia, and that the appellees Silverio Ginoo, Gervasio Ascalon, and Juan Ledesma, are the lessees of part of said haciendas; that more than twenty years the appellees and their predecessors in interest have made use of the Nanca-Victorias road, which crosses the Hacienda Toreno, openly, publicly, and continiously, with the knowledge of the owners of the said hacienda, for the purpose of conveying the products of their haciendas to the town of Victorias and to the landing place there situated, and for the purpose of transporting supplies from those points to their haciendas, making use of the said road by means of carts, carabaos, and other usual means of transportation; that there is no outlet to a public road from the hacienda occupied by these plaintiffs, the only road and way by which the products of the plaintiffs' property can be taken to the town of Victorias and to the landing place there being across the Hacienda Toreno by the road marked on the plan attached to the complaint; that on the fifteenth day of November, 1912, the defendants closed the road in question at the point at which it crosses the Hacienda Toreno, and refused to permit plaintiffs to continue using it; that plaintiffs were about to commence to grind their crop of sugar cane, and that, if prevented from transporting their sugar across the Hacienda Toreno to their point of embarkation, would suffer damages difficult to estimate. Upon these averments of fact the plaintiffs prayed for a judgment that they are entitled to use the road in question as they have been using it in the past, and that a perpetual injunction be issued against plaintiffs restraining them from impending such use. Upon the filing of the complaint, plaintiffs moved the court to issue a preliminary injunction restraining defendants from interfering with the use of the road during the pendency of the suit, which motion was granted by the court.

Defendants in their answer put in issue all the special averments of the complaint, as above set forth, and by way of counterclaim and special defense, averred that the road crossing the Hacienda Toreno, over which plaintiffs claim the right of passage, is the private property of defendants; and, further, that they have not refused plaintiffs permission to pass over this road but have required them to pay toll for the privilege of doing so. Defendants also claimed damages for the use of the road by plaintiffs during the pendency of the suit, alleging that the preliminary injunction had been improvidently issued upon false statements contained in the verified complaint filed by plaintiffs.

The case was tried in July, 1913. The court on December 8, 1913, rendered judgment, dismissing the complaint with respect to the plaintiffs Felix Suarez, Probo Jereza, Enrique Azcona, and Melecio Pido, these being the plaintiffs who claimed the right to use the Dacuman — Toreno road. With respect to the Nanca-Victorias road, the court held that it was a public highway over which the public had acquired a right of use by immemorial prescription, and ordered the issuance of a perpetual injunction against plaintiffs, restraining them from interfering in any manner with the use of the said road.

The conclusion of the court with respect to the facts affecting the Nanca-Victorias road are as follows:

Turning to a consideration of the evidence relative to the Nanca-Victorias road we find incontestable proof that it has been in existence for at least forty years. That the hacenderos located in the southwestern section of Victorias and the public generally passed over it freely and that it was used for all purposes of transportation of farm produce, animals, etc. and by pedestrians as well as carromatas and other conveyances without break or interruption until two or three years ago when the defendants announced that the road was private and that those who wished to pass over it with sugar carts would be obliged to pay a toll of ten centavos — all other vehicles, it appears, were permitted to pass free charge. This arrangement seems to have existed during the years of 1911 and 1912 and part of 1913, the money being collected apparently from some hacenderos and not from others. There is some

reason to believe from the evidence presented by defendants themselves that the practice of making these payments to hacienda 'Toreno' originated in an attempt to raise a fund for the repair of the road. There is no evidence that any other hacenderos between Nanca and Victorias or any other person made any attempt to close the road or to collect toll. On the contrary the road appears to have been repaired by the hacenderos when it needed repairing and everyone used it on equal terms until the defendants in 1910 or 1911 interposed the objection that the road in dispute was private. This we think is a fair deduction from the evidence and although it is asserted that toll was collected at an earlier date by the late Leon Montinola, brother of the defendant Ruperto Montinola, there is no tangible evidence that this was so and that toll has been paid only during the years of 1911, 1912, and part of 1913.

The question presented by the assignment of error are in effect:

(a) Is the Nanca-Victorias road at the point at which it traverses the Hacienda Toreno a public highway or not?

(b) If it be held that the road in question is not a public highway, have plaintiffs proven their acquisition of an easement of way over the Hacienda Toreno at the point traversed by the road in question?

The trial judge, in holding that the road in question is public, bases in conclusion upon the fact, which he deems to have been proven, that the road has been in existence "from time immemorial," and had been "continiously used as a public road . . . and open to public as such for thirty or forty years . . . until . . . the defendants undertook to claim it as private and to collect toll for the passage of carts." (Bill of Exceptions, p. 56.) There is no doubt that for the past thirty or forty years a road has existed between the former site of the town of Victorias and the barrio of Nanca, of the municipality of Seravia, and that this road crosses defendants' hacienda. It is also true that during this period the plaintiffs and their predecessors in the ownership of the hacienda now held by them have made use of this road for the purpose of going and coming from their haciendas to the town of Victorias; but the question is whether this use was limited to the plaintiffs, and their tenants and employees, or whether it was, as held by the lower court, a use enjoyed by the public in general. Plaintiffs produced only two witnesses, Segundo de Leon (stet. notes, pp. 21-22) and Eduardo Cuaycong, (stet. notes, pp. 27-33) to testify as regards the use of the Nanca-Victorias road. Several other witnesses testified on behalf of plaintiffs, but their testimony relates to the Dacuman — Toreno road, which is not involved in this appeal. We have carefully read the testimony of the witnesses Leon and Cuaycong, given upon their direct and cross examination, but we have been unable to find that either of them has testified that the road in question was ever used by the public in general. These witnesses testified with regard to the use of the road by the present and former owners and occupants of the estates of Bacayan, Esperanza, Alcaigan, Pusot, and Dolores for the transportation of the products of these estates to the town of Victorias, and of supplies and agricultural implements from Victorias to the haciendas, but neither of them testified expressly that any other use had been made of said road. Nevertheless, it may be reasonably inferred from the testimony of these witnesses that all persons having occasion to travel between Victorias and the haciendas of Bacayan, Esperanza, Alacaigan, Pusot, and Dolores, whether or not they were owners, tenants, or employees of said estates, made use of the road now in dispute, crossing the Hacienda Toreno, and to this limited extent it may be said that the public made use of the road, but there is nothing in the evidence to indicate that the so — called public use extended beyond this.

Apart from the fact that there is no direct evidence to support the finding of the court concerning the general public use of the road in dispute, the record contains data strongly tending to show that when the complaint was filed plaintiffs did not contend that the road was a public highway, but merely contended that they had acquired by prescription an easement of way across the Hacienda Toreno. For

example, the action is entitled an "action concerning a right of away." (Bill of Exceptions, pp. 64 and 65.) It is not averred in the complaint that the road in question was used by the public. On the contrary, it is averred that it was used by the plaintiffs and their predecessors. The averment in paragraph 8 of the complaint that the plaintiffs have no other "outlet to a public road" than that which they have been accustomed to used by going across the defendants' hacienda for the purpose of going to the town of Victorias also shows that when they commenced this action they had in mind the provisions of articles 564, et seq. of the Civil Code, which relate to the method of establishing the compulsory easement of way. The owners of an existing easement, as well as those whose properties are adjacent with a public road, have no occasion to invoke these provisions of the Code, which relate to the creation of new rights, and not the enforcement of rights already in existence.

It is true in the opening statement made to the court, counsel for plaintiffs, who was not the same attorney by whom the complaint was signed, stated that plaintiffs contend that the road in question is public, but as no evidence was introduced tending to establish this contention concerning the Nanca — Victorias road, counsel for defendants had no occasion to object upon the ground that such testimony was not relevant to the averments of the complaint. No evidence was taken to indicate that at any time since the road in question has been in existence any part of the expense of its upkeep has been defrayed by the general government, the province, or the municipality. The trial judge said upon this subject:

It is true that whatever repairs were made on the road were made irregularly. The municipality of Victorias had no funds to devote to the construction and repair of roads, and the upkeep of the road depending entirely therefore on the initiative of the persons who used it, was attended to only at such times as repairs were absolutely necessary. (Bill of Exceptions, p. 49.)

The court also held that it appears from the government grant issued in 1885 to the original owner of the hacienda adjacent to the Hacienda Toreno on its western boundary, that the Nanca-Victorias road at that time separated that estate from the Jalbuena Hacienda, and that these facts constitute "circumstantial evidence that the road was in existence in 1885." We have examined the document to which the court refers, and we agree that the road in question existed in 1885; but we do not believe that the document in question proves that the road was public highway.

Another circumstance established by the evidence, and which is some importance in the determination of this issue, is that although the defendants closed the Nanca-Victorias road in the month of February, 1911, and since that time have collected toll from persons passing over it with carts loaded with sugar, including those belonging to several of the plaintiffs, nothing was done by them to prevent the continuation of this restriction until December, 1912, when this action was commenced. It is natural to assume that if plaintiffs had considered that the road in question was public, they would have protested immediately against the action of the defendants, and would have either commenced a civil action, as they subsequently did, or would have brought about a prosecution under section 16 of Act No. 1511.

Upon the evidence taken and admissions contained in the pleadings and those made during the course of the trial we consider that the following findings are warranted:

1. The town of Victorias has always been the shipping point of the products of the Hacienda Toreno, and of the haciendas of appellees, as well as the place from which supplies were brought to those properties.

2. For thirty or forty years before the commencement of the suit a wagon road, herein called the Nanca-Victorias road, has been in existence, connecting the haciendas of appellees with the town of Victorias, and this road traverses the property of defendants. Since the removal of the town of Victorias to a new

site the Nanca-Victorias road has been used by appellees in travelling between their properties and the provincial road which crosses the Hacienda Toreno from east to west.

3. No public funds have at any time been expended on the construction or upkeep of the Nanca-Victorias road, but from time to time work has been done on it by the laborers employed by the present and former owners of the Hacienda Toreno and the haciendas owned by the appellees and their predecessors in title.

4. The Nanca-Victorias wagon road, including that part of it which crosses the Hacienda Toreno, has for thirty-five or forty years been used by the appellees and their predecessors in title for the transportation, by the usual means, of the products of their estates to their shipping points in or near the town of Victorias, and the transportation to their estates of all supplies required by them, and has been used by all persons having occasion to travel to and from all or any of the estates now owned by the appellees.

5. The use of the Nanca-Victorias road in the manner and by the person above mentioned was permitted without objection by the owners of the Hacienda Toreno until the year 1911, when they closed it, and began charging a toll of 5 centavos for each cart which passed over the road, including carts belonging to the appellants, until restrained from continuing to do so by the preliminary injunction granted in this case.

6. The Nanca-Victorias road constitutes the only outlet from the estates of appellants to the nearest public road which is the provincial road which crosses the Hacienda Toreno from east to west.

Upon these facts the questions of law to be decided are:

(a) Is the Nanca-Victorias road a public highway?

(b) If the Nanca-Victoria road, or that part of it which crosses the Hacienda Toreno, is not a public highway, is it subject to a private easement of way in favor of the appellees?

The defendants are the owners of the Hacienda Toreno under a Torrens title issued in accordance with the Land Registration Act, conferring to them its absolute ownership, subject only to the limitations of paragraph four of section 39 of said Act. It is admitted that there is no annotation on the certificate of title regarding the road here in question, either as a "public road" or as a "private way established by law," and, therefore, the questions presented by this appeal are to be determined precisely as they would be had the Hacienda Toreno not been brought under the operation of the Land Registration Act. The plaintiffs being the owners of the property in question, the presumption of law is that it is free from any lien or encumbrance whatever, and the burden therefore rests upon plaintiffs to establish the contrary. As this court said in case of Fabie vs. Lichauco and the children of Francisco L. Roxas (11 Phil. Rep., 14):

It is settled of law that a property is assumed to be free from all encumbrance unless the contrary is proved.

There is admittedly no evidence to show that the land occupied by the road here in question was any time conveyed to the general government or any of its political subdivisions by the present or any of the former owners of the Hacienda Toreno. There is no evidence, even remotely, tending to show that the road existed prior to the time when the property now known as the Hacienda Toreno passed from the State into private ownership. The record fails to disclose any evidence whatever tending to show that

the Government has at any time asserted any right or title in or to the land occupied by the road, or that it has incurred any expense whatever in its upkeep or construction. The Civil Code defines as public roads those which are constructed by the State (art. 339), and as provincial and town roads those "the expense of which is borne by such towns or provinces." (Civil Code, art. 344.) While it is not contended that this definition is exclusive, it does show that during the Spanish regime, under normal conditions, roads which were public were maintained at the public expense, and that the fact that at no time was any expense incurred by the Government with respect to the road here in question tends strongly to support the contention of the defendants that it is private way.

During the Spanish regime the law required each able to bodied citizen not within one of the exempted classes to work a certain number of days in each year, his labor to be devoted to "services of general utility" to the municipality of his residence. (Royal Decree of July 11, 1883, art. 5.) Under this Decree and the Regulations for its enforcement (Berriz, vol. 11, 258) the greater part of the work on the public road of the Islands was accomplished. Had the road here in question been a public way, it is reasonable to assume that the polistas of the town of Victorias would have been employed in maintaining it. It is most significant that no mention is made in the testimony of the plaintiffs' witnesses of any work of this character having been done on the road at any time, particularly in view of the fact that their attention was drawn to this point. (Stet. note, pp. 8, 10, 11, 12, 13 and 14.)

The evidence shows that the repairs were made by the owners of the estates benefited by the road, and by their laborers, as a pure voluntary act for their own convenience and interest. There being no evidence of a direct grant to the government of the land occupied by the road in question or that any Government funds or labor were expended upon it, the question presents itself whether the use to which the road has been put was such as to justify the conclusion of the lower court that it has become public property. There being no evidence that the original use of the road by plaintiffs' predecessors was based upon any grant of the fee to the road or of an easement of way, or that it began under the assertion of a right on their part, the presumption must be that the origin of the use was the mere tolerance or license of the owners of the estates affected.

This being so, has that merely permissive use been converted into a title vested in the public at large, or in the plaintiffs by reason of their ownership of the land beneficially affected by the use?

Had it been shown that the road had been maintained at the public expense, with the acquiescence of the owners of the estates crossed by it, this would indicate such adverse possession by the government as in course of time would ripen into title or warrant the presumption of a grant or of a dedication. But in this case there is no such evidence, and the claims of plaintiffs, whether regarded as members of the public asserting a right to use the road as such, or as persons claiming a private easement of way over the land of another must be regarded as resting upon the mere fact of user.

If the owner of a tract of land, to accommodate his neighbors or the public in general, permits them to cross his property, it is reasonable to suppose that it is not his intention, in so doing, to divest himself of the ownership of the land so used, or to establish an easement upon it and that the persons to whom such permission, tacit or express, is granted, do not regard their privilege of use as being based upon an essentially revocable license. If the use continues for a long period of time, no change being made in the relations of the parties by any express or implied agreement, does the owner of the property affected lose his right of revocation? Or, putting the same question in another form, does the mere permissive use ripen into title by prescription?

It is a fundamental principle of the law in this jurisdiction concerning the possession of real property that such possession is not affected by acts of a possessory character which are "merely tolerated" by the possessor, or which are due to his license (Civil Code, arts. 444 and 1942). This principle is applicable not only with respect to the prescription of the dominium as a whole, but to the prescription of right in rem. In the case of Cortes vs. Palanca Yu Tibo (2 Phil. Rep., 24, 38), the Court said:

The provision of article 1942 of the Civil Code to the effect that acts which are merely tolerated produce no effect with respect to possession is applicable as much to the prescription of real rights as to the prescription of the fee, it being a glaring and self-evident error to affirm the contrary, as does the appellant in his motion papers. Possession is the fundamental basis of the prescription. Without it no kind of prescription is possible, not even the extraordinary. Consequently, if acts of mere tolerance produce no effect with respect to possession, as that article provides, in conformity with article 444 of the same Code, it is evident that they can produce no effect with respect to prescription, whether ordinary or extraordinary. This is true whether the prescriptive acquisition be of a fee or of real rights, for the same reason holds in one and the other case; that is, that there has been no true possession in the legal sense of the word. (See also Ayala de Roxas vs. Maglonso, 8 Phil Rep., 745; Municipality of Nueva Caceres vs. Director of Lands and Roman Catholic Bishop of Nueva Caceres, 24 Phil. Rep., 485.)

Possession, under the Civil Code, to constitute the foundation of a prescriptive right, must be possession under claim of title (en concepto de dueno), or use the common law equivalent of the term, it must be adverse. Acts of a possessory character performed by one who holds by mere tolerance of the owner are clearly not en concepto de dueño, and such possessory acts, no matter how long so continued, do not start the running of the period of prescription.

A similar question was presented in the case of the Roman Catholic Archbishop of Manila vs. Roxas (22 Phil. Rep., 450), in which case it appeared that Roxas, the owner of the Hacienda de San Pedro Macati, claimed a right of way across the property of the church to Calle Tejeron, a public street of the town of San Pedro Macati. The proof showed that the road in question had been used by the tenants of the Hacienda de San Pedro Macati for the passage of carts in coming and leaving the hacienda "from time immemorial," and further that the road had been used for time out of mind, not only by the tenants of the hacienda but by many other people in going and coming from a church half-way between the boundary line of the hacienda and Calle Tejeron. The court held that the facts did not give rise to a prescriptive right of easement in favor of the owner of the hacienda, upon the ground that such use "is to be regarded as permissive and under an implied license, and not adverse. Such a use is not inconsistent with the only use which the proprietor thought fit to make of the land, and until the appellee thinks proper to inclose it, such use is not adverse and will not preclude it from enclosing the land when other views of its interest render it proper to do so. And though an adjacent proprietor may make such use of the open land more frequently than another, yet the same rule will apply unless there be some decisive act indicating a separate and exclusive use under a claim of right. A different doctrine would have a tendency to destroy all neighborhood accommodations in the way of travel; for if it were once understood that a man, by allowing his neighbor to pass through his farm without objection over the pass-way which he used himself, would thereby, after the lapse of time, confer a right on such neighbor to require the pass-way to be kept open for his benefit and enjoyment, a prohibition against all such travel would immediately ensue."

The decisions of the supreme court of Louisiana, a State whose jurisdiction is based, as is our own, upon the Roman Law, and whose Civil Code is taken, as is our own,. very largely from the Code of Napoleon, are particularly persuasive in matters of this character. In the case of Torres vs. Fargoust (37 La. Ann.,

497), cited by appellants in their brief, in which the issues were very similar to those of the present case, the court held that—

The mere fact that for thirty or forty years the public was permitted to pass over this ground would not of itself constitute the place a locus publicus . . . dedication must be shown by evidence so conclusive as to exclude all idea of private ownership; . . . such dedication cannot be inferred from ere user alone; . . . no one is presumed to give away his property. The burden is on him who avers a divestiture of ownership to prove it clearly.

We are, therefore, of the opinion, and so hold, that upon the facts established by the evidence it does not appear that the road in question is a public road or way. We are also of the opinion that plaintiffs have failed to show that they have acquired by prescription a private right of passage over the lands of defendants. The supreme court of Spain has decided that under the law in force before the enactment of the Civil Code, the easement of way was discontinous, and that while such an easement might be acquired by prescription, it must be used in good faith, in the belief of the existence of the right, and such user must have been continuous from time immemorial. (Judgment of December 15, 1882.) In the appealed decision the court below says that the plaintiffs and their predecessors made use of the road in question "from time immemorial," but there is no evidence whatever in the record to sup[port this finding, although it is true that the evidence shows the existence of the road and its use by the plaintiffs and their predecessors for thirty-five or forty years. Speaking of the evidence required under the present Code of Civil Procedure to show immemorial use of an easement, this court said in the case of Ayal de Roxas vs. Case (8 Phil. Rep., 197, 198):

Third Partida in title 31, law 15 . . . says that discontinues servitudes . . . must be proved by usage or a term so long that men can not remember its commencement. . . . In many judgments the supreme court of Spain has refused to accept proof of any definite number of years as a satisfaction of this requirement of the law. . . . We are of the opinion that in order to establish a right of prescription [title of prescription based upon use from time immemorial] something more required than memory of living witnesses. Whether this something should be the declaration of persons long dead, repeated by those who testify, as exacted by the Spanish law, or should be the common reputation of ownership recognized by the Code of Procedure, it is unnecessary for us to decide. On either theory the appellant has failed in his proof . . . .

The same thing may be said in this case. Witnesses have testified that they have known the road for a certain period of years, beginning at a time prior to the enactment of the Civil Code, but no evidence has been made to prove immemorial use by either of the means of proof mentioned in this decision cited, nor is immemorial user averred in the complaint as the basis of the right. It is evident, therefore, that no vested right by user from time immemorial had been acquired by plaintiffs at the time the Civil Code took effect. Under that Code (art 539) no discontinuous easement could be acquired by prescription in any event. Assuming, without deciding, that this rule has been changed by the provisions of the present Code of Civil Procedure relating to prescription, and that since its enactment discontinuous easement may be required by prescription, it is clear that this would not avail plaintiffs. The Code of Civil Procedure went into effect on October 1, 1901. The term of prescription for the acquisition of rights in real estate is fixed by the Code (sec. 41) at ten years. The evidence shows that in February, 1911, before the expiration of the term of ten years since the time the Code of Civil Procedure took effect, the defendants interrupted the use of the road by the plaintiffs by constructing and maintaining a toll gate on it and collecting toll from persons making use of it with carts and continued to do so until they were enjoined by the granting of the preliminary injunction by the trial court in December, 1912. Our conclusion is, therefore, that the plaintiffs have not acquired by prescription a right to an easement of

way over the defendant's property; that their use of the Nanca-Victorias road across the Hacienda Toreno was due merely to the tacit license and tolerance of the defendants and their predecessors in title; that license was essentially revokable; and that, therefore, the defendants were within their rights when they closed the road in 1911.

While in the allegations from the plaintiffs' complaint it might be inferred that it was their purpose to seek to impose upon the defendants the easement to which arts. 564 et seq. of the Civil Code relate, that purpose was evidently abandoned, and the case was tried upon a wholly different theory. Proof was offered to show that the right of passage across defendants' land is necessary to enable plaintiffs to get their products to market, but there was no offer on their part to pay defendants the indemnity required by section 564.

For the reasons stated the judgment of the court below is reversed, the injunction issued against defendants is allowed on this appeal. So ordered.

G.R. No. L-57259 October 13, 1983

ANGEL P. PERAN, petitioner,

vs.

THE HONORABLE PRESIDING JUDGE, BRANCH II, COURT OF FIRST INSTANCE OF SORSOGON, 10th JUDICIAL DISTRICT, RAMON ESPERA and ENCARNACION EVASCO, as private-respondents, respondents.

Irene P. Escandor for petitioner.

Esteban Escalante, Jr. for private respondents.

MELENCIO-HERRERA, J.:

The decision of the then Court of First Instance of Sorsogon, Branch II, Gubat, Sorsogon, rendered in the exercise of its appellate jurisdiction, dismissing Civil Case No. 1277, entitled "Angel P. Peran vs. Encarnacion Evasco, et al.", for Forcible Entry and Illegal Detainer, is being assailed in this Petition for Review on certiorari on a question of law. Said Decision reversed the judgment of the 2nd Municipal Circuit Court of Bulusan-Barcelona, Sorsogon, for Forcible Entry & Illegal Detainer.

The antecedent facts follow:

The property in question, an unregistered residential land, with an area of 1,225 square meters more or less, situated at Tagdon Barcelona, Sorsogon, was originally owned by Jose Evasco. On December 29, 1950, Jose Evasco executed a "Reparticion Ex-trajudicial" whereby he partitioned his properties among his five heirs. 1 Subject property was one of those alloted to his son, Alejandro Evasco, who had it surveyed in 1956 (Exhibits "I" and "I-1") who had it declared in his name under Tax Declaration No. 1900. The other heirs received their own shares, one of them, the deceased Anacleto Evasco, one of whose children was listed as Encarnacion, possibly, the principal private respondent herein.

Alejandro Evasco sold his property to Jose E. Torella on December 31, 1972, 2 who declared it for taxation purposes under Tax Declaration No. 5157. 3 On July 10, 1977, Jose E. Torella, in turn, sold the land to Jose Enriquez Sabater, 4 and the latter also declared the property in his name under Tax

Declaration No. 7127. 5 Petitioner Angel P. Peran acquired the land by purchase from Jose Enriquez Sabater on December 27, 1978, 6 and subsequently declared it, too, in his name under Tax Declaration No. 7310. 7 The sale was duly recorded in the Register of Deeds' Office of the province of Sorsogon on January 3, 1979 in accordance with the provisions of Sec. 194 of the Revised Administrative Code as amended by Act No. 3344.

Sometime in January 1979, petitioner personally asked private respondents, Encarnacion Evasco and her common-law husband Ramon Espera, whose house is erected on a 440 square meter portion (44 sq, ms. according to petitioner) of the lot in question, to remove the same and vacate the premises. Respondents refused, and consequently, a confrontation between the parties was had before the, Municipal Mayor of Barcelona and later before the Municipal Judge of Bulusan-Barcelona to settle the dispute, but to no avail.

On February 8, 1979, petitioner filed a complaint for Forcible Entry and Illegal Detainer against private respondents before the 2nd Municipal Circuit Court of Bulusan-Barcelona, seeking the ejectment of the latter from the portion in question contending that respondents are mere squatters thereon; that they had prevented plaintiff from entering the property and deprived him of possession; and that they were tolerating persons in getting soil and bringing about a gradual erosion of the land to his extreme prejudice.

Private respondents answered denying the material allegations of the Complaint, and alleging that they are the lawful possessors for more than twenty (20) years of the said portion, which formerly belonged to Jose Evasco, grandfather of Encarnacion Evasco and that petitioner has no right to eject them therefrom.

On September 1, 1979, the 2nd Municipal Circuit Court of Bulusan-Barcelona rendered its Decision ordering private respondents to vacate the lot in question, return its possession to petitioner, reimburse him attorney's fees of P300.00 and litigation expenses, and to pay the costs. Reconsideration of the said decision filed by private respondents was denied by said Court on November 12, 1979. Private respondents appealed to respondent Court of First Instance of Sorsogon, Branch II.

Respondent Court reversed the Municipal Circuit Court and dismissed the case on March 28, 1980, ruling that said Court had no jurisdiction over the case as the same was filed only on February 4, (8), 1979, which was well beyond the one-year-period of limitation, the cause of action having accrued from the sale of the property by Alejandro Evasco to Jose E. Torella on December 31, 1972; and that since the only issue in an illegal detainer case is physical possession, "whoever has prior possession, no matter in what character, is protected by law."

Reconsideration of the said Decision sought by petitioner was denied by respondent Court.

Petitioner appealed said judgment directly to this Tribunal on a question of law, raising as the lone issue:

... whether the respondent court was in error when for purposes of determining the jurisdiction of the 2nd Municipal Circuit Court of Bulusan-Barcelona, to try Civil Case No. 1227, for Illegal Detainer:

(a) it reckoned the counting of one-year period within which to file the action from the sale of the property in question by Alejandro Evasco to Jose Torella on December 31, 1972 and not from the date of demand made by the petitioner upon the respondents; and

(b) by assuming that "prior possession in whatever character is protected by law.

We rule for petitioner.

Private respondents admit that the land in question was originally owned by Jose Evasco. The tax declarations covering their house clearly state "house built on land owned by Jose Evasco under Tax No. 1599". 8 Since the land had been partitioned to Alejandro Evasco by his father, Jose Evasco, respondent Encarnacion can lay no claim to the property even as a grand-daughter of Jose Evasco. Respondents may have been in possession of the portion they occupy prior to petitioner but they have not proved their title thereto, nor their right to possess the same. As the 2nd Municipal Circuit Court of Bulusan-Barcelona found, no concrete evidence was introduced by respondents on this point. Moreover, it is noteworthy that the validity of the "Reparticion Extrajudicial" whereby said lot was adjudicated to Alejandro Evasco by his father Jose Evasco, predecessors-in-interest of petitioner, had never been challenged.

If at all, private respondents' possession of their portion of the property was by mere tolerance of petitioner's predecessors-in-interest, which, however, does not vest in them a right which they can assert against petitioner. Possession by tolerance is lawful but this becomes illegal when, upon demand to vacate by the owner, the possessor refuses to comply with such demand. 9 A possessor by tolerance is necessarily bound by an implied promise to vacate upon demand, failing which a summary action for ejectment is the proper remedy against him. 10 It is not necessary that there be a formal agreement or contract of lease before an unlawful detainer suit may be filed against a possessor by tolerance. 11 Neither is prior physical possession of the property by petitioner an indispensable requisite. 12The ruling of respondent Court, therefore, that "since the only issue in forcible entry and illegal detainer action is the physical possession of real property—possession de facto and n t possession de jure—whoever has prior possession, no matter in what character, is protected by law," is erroneous under the factual milieu herein,

A Forcible Entry and Unlawful Detainer action must be brought within one year from the unlawful deprivation or withholding of possession. 13 The one-year-period of limitation commences from the time of demand to vacate, and when several demands are made, the same is counted from the last letter of demand. 14 Demand may either be personal or in writing. 15 The demand to vacate having been made by petitioner in January 1979, and the ejectment suit having been instituted on February 8, 1979, the 2nd Municipal Circuit Court of Bulusan-Barcelona acted well within its jurisdiction in taking cognizance of the case.

WHEREFORE, the assailed Decision of respondent Court of First Instance of Sorsogon, Branch II, in Civil Case No.1227, is SET ASIDE, and the Decision of the 2nd Municipal Circuit Court of Bulusan-Barcelona is hereby reinstated,

Costs against private respondents.

[G.R. No. 111737. October 13, 1999]

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

D E C I S I O N

GONZAGA-REYES, J.:

Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals[1] in CA-G.R. CV No. 28549 entitled “SPOUSES TIMOTEO PIÑEDA, ET. AL. vs. DEVELOPMENT BANK OF THE PHILIPPINES” which affirmed the decision of the Regional Trial Court (RTC), Branch 16[2], Roxas City in Civil Case No. V-4590, for cancellation of certificate of title and/or specific performance, accounting and damages with a prayer for the issuance of a writ of preliminary injunction.

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

On July 5, 1978, the Ministry of Justice issued Opinion No. 92, Series of 1978[3] which declared that lands covered by P.D. No. 27[4], like the herein subject property, may not be the object of foreclosure proceedings after the promulgation of said decree on Oct. 21, 1972.

On August 24, 1981, the PIÑEDAS offered to redeem the foreclosed property by offering P10,000.00 as partial redemption payment. This amount was accepted by DBP who issued O.R. No. 1665719 and through a letter, conditionally approved the offer of redemption considering the P10,000.00 as down payment.[5] However, on November 11, 1981, DBP sent the PIÑEDAS another letter informing them that pursuant to P.D. 27, their offer to redeem and/or repurchase the subject property could not be favorably considered for the reason that said property was tenanted.[6] On November 16, 1981, in deference to the above-mentioned opinion, DBP through Ramon Buenaflor sent a letter to the Acting Register of Deeds of Capiz requesting the latter to cancel TCT No. T-15559 and to restore Original Certificate of Title No. P-1930 in the name of the PIÑEDAS. The Acting Register of Deeds, in reply to such request, suggested that DBP file a petition in court pursuant to Section 108 of Presidential Decree 1529[7]. In compliance with said suggestion, DBP petitioned for the cancellation of TCT No. T-15559 with then Court of First Instance of Capiz, Branch II, docketed as Special Case No. 2653. The petition was favorably acted upon on February 22, 1982. Thus, the foreclosure proceeding conducted on February 2, 1977 was declared null and void and the Register of Deeds of Capiz was ordered to cancel TCT No. 15559; OCT No. 1930 was ordered revived.

Meanwhile, on December 21, 1981, the PIÑEDAS filed the instant complaint against DBP for cancellation of certificate of title and/or specific performance, accounting and damages with a prayer for the issuance of a writ of preliminary injunction averring that DBP, in evident bad faith, caused the consolidation of its title to the parcel of land in question in spite of the fact that the 5-year redemption

period expressly stated in the Sheriff’s Certificate of Sale had not yet lapsed and that their offer to redeem the foreclosed property was made well within said period of redemption.[8]

After trial, the RTC ruled in favor of the PIÑEDAS stating that DBP violated the stipulation in the Sheriff’s Certificate of Sale which provided that the redemption period is five (5) years from the registration thereof in consonance with Section 119[9] of CA No. 141[10]. DBP should therefore assume liability for the fruits that said property produced from said land considering that it prematurely took possession thereof. The dispositive portion of the decision reads:

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

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

SO ORDERED.”*11+

DBP appealed to the Court of Appeals, which affirmed the decision of the RTC. The Court of Appeals stated that since DBP was in evident bad faith when it unlawfully took possession of the property subject of the dispute and defied what was written on the Sheriff’s Certificate of Sale, the PIÑEDAS were entitled to recover the fruits produced by the property or its equivalent valued at P72,000.00 per annum or a total of P216,000.00 for the three-year period. Respondent court stated that said amount was not rebutted by DBP and was fair considering the size of the land in question. The court added that any discussion with respect to the redemption period was of little significance since the foreclosure proceeding was declared null and void in Special Civil Case No. 2653[12] on February 22, 1982. Thus, the right of the PIÑEDAS to redeem the property has become moot and academic. Finally, the award of attorney’s fees amounting to P10,000.00*13+ was justified considering that the PIÑEDAS were compelled to protect their interests.[14]

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

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

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

3. Ground No. 3 - The Honorable Court Of Appeals Gravely Erred In Affirming The Court A Quo’s Decision Awarding Attorney’s Fees And Litigation Costs In Favor Of The Private Respondents Notwithstanding Absence Of Evidence Proving the Same. Clearly, The Lower Court Committed Misapprehension Of Facts That Can Be Considered A Question Of Law.”*16+

DBP maintains that the valuation of the income derived from the property in dispute allegedly amounting to P216,000.00 was not proven by the PIÑEDAS. DBP argues that they granted the PIÑEDAS

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

DBP also alleges that the mere fact that DBP took possession and administration of the property does not warrant a finding that DBP was in bad faith. First, records show that the PIÑEDAS consented to and approved the takeover of DBP. Second, Sec. 7[17] of Act No. 3135[18] allows the mortgagee-buyer to take possession of the mortgaged property even during the redemption period. Third, DBP’s act of consolidating the title of the property in its name does not constitute bad faith as there is no law which prohibits the purchaser at public auction from consolidating title in its name after the expiration of the one (1) year redemption period reckoned from the time the Certificate of Sale was registered; and neither is there any law or jurisprudence which prohibits the PIÑEDAS from exercising their right of redemption over said property within five (5) years even if title is consolidated in the name of the purchaser. When DBP consolidated title over the property in its name, the new TCT issued in its favor was subject to the lien i.e. the right of redemption of the PIÑEDAS; if there was a failure to register this in the TCT, DBP should not be faulted. Besides, even if the five (5) year period of redemption was not indicated therein, Sec. 44[19] and 46[20] of Presidential Decree No. 1529[21] attaches such lien by operation of law even in the absence of an annotation in the title. Moreover, Sec. 119 of CA No. 141 also makes said right of redemption a statutory lien, which subsists and binds the whole world despite the absence of registration.

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

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

“4. xxx In case of foreclosure, the Mortgagor hereby consents to the appointment of the mortgagee or any of its employees as receiver, without any bond, to take charge of the mortgage property at once, and to hold possession of the case and the rents and profits derived from the mortgaged property before the sale. xxx”*22+

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

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

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

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

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

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

A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition any flaw, which invalidates it.[23] Good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.[24] It was therefore incumbent on the PIÑEDAS to prove that DBP was aware of the flaw in its title i.e. the nullity of the foreclosure. This, they failed to do.

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

“Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of sale; and such redemption shall be governed by the provisions of section four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure[25], in so far as these are not inconsistent with the provisions of this Act.”

If no redemption is made within one year, the purchaser is entitled as a matter of right to consolidate*26+ and to possess*27+ the property.*28+ Accordingly, DBP’s act of consolidating its title and taking possession of the subject property after the expiration of the period of redemption was in accordance with law. Moreover, it was in consonance with Section 4 of the mortgage contract between DBP and the PIÑEDAS where they agreed to the appointment of DBP as receiver to take charge and to hold possession of the mortgage property in case of foreclosure. DBP’s acts cannot therefore be tainted with bad faith.

The right of DBP to consolidate its title and take possession of the subject property is not affected by the PIÑEDAS’ right to repurchase said property within five years from the date of conveyance granted by Section 119 of CA No. 141. In fact, without the act of DBP consolidating title in its name, the PIÑEDAS would not be able to assert their right to repurchase granted under the aforementioned section. Respondent PIÑEDAS are of the erroneous belief that said section prohibits a purchaser of homestead land in a foreclosure sale from consolidating his title over said property after the one-year period to redeem said property has expired. Section 119 does not contain any prohibition to convey homestead land but grants the homesteader, his widow or legal heirs a right to repurchase said land within a period of five years in the event that he conveys said land. This is in consonance with the policy of homestead laws to distribute disposable agricultural lands of the State to land-destitute citizens for their home and cultivation.[29] The right to repurchase under Section 119 aims to preserve and keep in the family of the homesteader that portion of public land which the State had gratuitously given him.[30] Such right is

based on the assumption that the person under obligation to reconvey the property has the full title to the property because it was voluntarily conveyed to him or that he consolidated his title thereto by reason of a redemptioner’s failure to exercise his right of redemption.*31+ It is also settled that “the five-year period of redemption fixed in Section 119 of the Public Land Law of homestead sold at extrajudicial foreclosure begins to run from the day after the expiration of the one-year period of repurchase allowed in an extrajudicial foreclosure”.*32+ Thus DBP’s consolidation of title did not derogate from or impair the right of the PIÑEDAS to redeem the same under C.A. No. 141.

It may be argued that P.D. 27 was already in effect when DBP foreclosed the property. However, the legal propriety of the foreclosure of the land was put into question only after Opinion No. 92 series of 1978 of the Ministry of Justice declared that said land was covered by P.D. 27 and could not be subject to foreclosure proceedings. The Opinion of the Ministry of Justice was issued on July 5, 1978 or almost two months after DBP consolidated its title to the property on March 10, 1978. By law and jurisprudence, a mistake upon a doubtful or difficult question of law may properly be the basis of good faith.[33]

In the case of Maneclang vs. Baun,[34] we held that when a contract of sale is void, the possessor is entitled to keep the fruits during the period for which it held the property in good faith. Good faith of the possessor ceases when an action to recover possession of the property is filed against him and he is served summons therefore.[35] In the present case, DBP was served summons on June 30, 1982.[36] By that time, it was no longer in possession of the disputed land as possession thereof was given back to the PIÑEDAS after the foreclosure of DBP was declared null and void on February 22, 1982. Therefore, any income collected by DBP after it consolidated its title and took possession of the property on May 30, 1978 up to February 22, 1982 belongs to DBP as a possessor in good faith since its possession was never legally interrupted.

Finally, we delete the award for attorney’s fees. Although attorney’s fees may be awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought*37+, we hold that DBP’s acts were clearly not unjustified.

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

G.R. No. 159578 February 18, 2009

ROGELIA DACLAG and ADELINO DACLAG (deceased), substituted by RODEL M. DACLAG, and ADRIAN M. DACLAG, Petitioners,

vs.

ELINO MACAHILIG, ADELA MACAHILIG, CONRADO MACAHILIG, LORENZA HABER and BENITA DEL ROSARIO, Respondents.

R E S O L U T I O N

AUSTRIA-MARTINEZ, J.:

Before us is petitioners' Motion for Reconsideration of our Decision dated July 28, 2008 where we affirmed the Decision dated October 17, 2001 and the Resolution dated August 7, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 48498.

Records show that while the land was registered in the name of petitioner Rogelia in 1984, respondents’ complaint for reconveyance was filed in 1991, which was within the 10-year prescriptive period.

We ruled that since petitioners bought the property when it was still an unregistered land, the defense of having purchased the property in good faith is unavailing. We affirmed the Regional Trial Court (RTC) in finding that petitioners should pay respondents their corresponding share in the produce of the subject land from the time they were deprived thereof until the possession is restored to them.

In their Motion for Reconsideration, petitioners contend that the 10-year period for reconveyance is applicable if the action is based on an implied or a constructive trust; that since respondents' action for reconveyance was based on fraud, the action must be filed within four years from the discovery of the fraud, citing Gerona v. De Guzman,1 which was reiterated in Balbin v. Medalla.2

We do not agree.

In Caro v. Court of Appeals,3 we have explicitly held that "the prescriptive period for the reconveyance of fraudulently registered real property is 10 years reckoned from the date of the issuance of the certificate of title x x x."4

However, notwithstanding petitioners' unmeritorious argument, the Court deems it necessary to make certain clarifications. We have earlier ruled that respondents' action for reconveyance had not prescribed, since it was filed within the 10-year prescriptive period.

However, a review of the factual antecedents of the case shows that respondents' action for reconveyance was not even subject to prescription.

The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima was not the owner of the land she sold to petitioners, and the one-half northern portion of such land was owned by respondents. Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code that an action to declare the inexistence of a void contract does not prescribe. Likewise, we have consistently ruled that when there is a showing of such illegality, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former then has the right to sue for the reconveyance of the property.5 An action for reconveyance based on a void contract is imprescriptible.6 As long as the land wrongfully registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to compel him to reconvey the property to the real owner.7 In this case, title to the property is in the name of petitioner Rogelia; thus, the trial court correctly ordered the reconveyance of the subject land to respondents.

Petitioners next contend that they are possessors in good faith, thus, the award of damages should not have been imposed. They further contend that under Article 544, a possessor in good faith is entitled to the fruits received before the possession is legally interrupted; thus, if indeed petitioners are jointly and severally liable to respondents for the produce of the subject land, the liability should be reckoned only for 1991 and not 1984.

We find partial merit in this argument.

Article 528 of the Civil Code provides that possession acquired in good faith does not lose this character, except in a case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the

property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith.8 Such interruption takes place upon service of summons.9lawphil.net

Article 544 of the same Code provides that a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted. Records show that petitioners received a summons together with respondents' complaint on August 5, 1991;10 thus, petitioners' good faith ceased on the day they received the summons. Consequently, petitioners should pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984.

Finally, petitioner would like this Court to look into the finding of the RTC that "since Maxima died in October 1993, whatever charges and claims petitioners may recover from her expired with her"; and that the proper person to be held liable for damages to be awarded to respondents should be Maxima Divison or her estate, since she misrepresented herself to be the true owner of the subject land.

We are not persuaded.

Notably, petitioners never raised this issue in their appellants' brief or in their motion for reconsideration filed before the CA. In fact, they never raised this matter before us when they filed their petition for review. Thus, petitioners cannot raise the same in this motion for reconsideration without offending the basic rules of fair play, justice and due process, specially since Maxima was not substituted at all by her heirs after the promulgation of the RTC Decision.

WHEREFORE, petitioners’ Motion for Reconsideration is PARTLY GRANTED. The Decision of the Court of Appeals dated July 28, 2008 is MODIFIED only with respect to prescription as discussed in the text of herein Resolution, and the dispositive portion of the Decision is MODIFIED to the effect that petitioners are ordered to pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984.

G.R. No. 146259 September 13, 2007

FLORENTINO, TROADIO and PEDRO, all surnamed OCHOA, petitioners,

vs.

MAURO APETA and APOLONIA ALMAZAN, respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Challenged in this Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, are the Decision1 dated September 8, 2000 and Resolution2 dated November 20, 2000 of the Court of Appeals in CA G.R. CV No. 56109.

The facts are:

Since 1910, the above-named petitioners and their predecessors-in-interest have been occupying Lot No. 1580 consisting of 886 square meters situated in Malaban, Biñan, Laguna. The lot is covered by Transfer Certificate of Title (TCT) No. T-40624 of the Registry of Deeds of that province. They built their houses and apartment building thereon.

Sometime in May 10, 1982, Mauro Apeta and Apolonia Almazan, respondents, found that they are the true owners of Lot No. 1580 being occupied by petitioners.

On January 22, 1988, respondents filed with the Regional Trial Court (RTC), Branch 24, Biñan, Laguna a complaint for recovery of possession and damages against petitioners, docketed as Civil Case No. B-2777. Respondents alleged in the main that they are the lawful owners of Lot No. 1580 covered by Certificate of Title No. RT-599 (10731) issued by the Registry of Deeds of Laguna.

In their answer to the complaint, petitioners specifically denied the allegations in the complaint, contending that they are the owners of Lot No. 1580 as shown by TCT No. T-40624 issued by the Registry of Deeds of Laguna.

During the proceedings before the RTC, upon agreement of the parties, the trial judge commissioned Engr. Romulo Unciano of the Bureau of Lands of Region IV to conduct a resurvey of the disputed property. The result of the resurvey (approved by the Bureau of Lands) shows that Lot No. 1580, occupied by petitioners, was registered in the name of Margarita Almada, respondents’ predecessor-in-interest; and that the lot covered by TCT No. T-40624 is not Lot No. 1580, but Lot No. 1581 registered in the name of Servillano Ochoa, petitioners’ predecessor-in-interest. This lot has been occupied by Isidro Jasmin.

On March 24, 1995, the trial court rendered a Decision in favor of respondents, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:

1. Declaring plaintiffs as the true and lawful owners of Lot 1580 of the Biñan Estate Subdivision covered by Transfer Certificate of Title No. RT-599 (10731) and declaring the defendants without right whatsoever to continue in possession thereof.

2. Ordering the defendants and all those acting in their behalf to deliver peacefully the physical possession of Lot 1580 to the plaintiffs and to remove their houses and apartment building thereon.

3. Ordering the defendants to pay, jointly and severally to plaintiffs the amount of P30,000 as and for attorney’s fees and litigation expenses.

SO ORDERED.3

On appeal, the Court of Appeals, in its Decision dated September 8, 2000, affirmed the judgment of the RTC.

Petitioners filed a motion for reconsideration, but it was denied by the appellate court in its Resolution4 dated November 20, 2000.

Hence, the instant petition.

Petitioners contend that Lot No. 1580 belongs to them and that respondents’ action is barred by prescription.

Petitioners’ contention lacks merit.

On petitioners’ claim that they are the owners of Lot No. 1580, it is a well-established principle that in an appeal viaa petition for review on certiorari, only questions of law may be raised. Here, the issue posed by petitioners requires us to weigh anew the evidence submitted by the parties already passed upon by the Court of Appeals. It is basic that this Court is not a trier of facts. Thus, it may not review the findings of the Court of Appeals except, among others: (a) when its factual findings and those of the trial court are contradictory; (b) when its inference is manifestly mistaken or absurd; (c) when its judgment is premised on its misapprehension of the facts; and (d) when it failed to resolve relevant facts which, if properly considered, would justify a modification or reversal of the decision of the appellate court.5 The issue raised by petitioners that they are the actual owners of Lot No. 1580 is factual in nature and requires a review of the pieces of evidence presented by the parties. Thus, we can no longer pass upon and evaluate the lower courts’ finding that based on the evidence presented before them, specifically the result of the resurvey conducted by Engr. Romulo Unciano, respondents are "the true and lawful owners of Lot 1580."

Anent petitioners’ second contention that respondents’ action has been barred by prescription, suffice it to state that no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession.6 Neither can prescription be allowed against the hereditary successors of the registered owner, because they step into the shoes of the decedent and are merely the continuation of the personality of their predecessor-in-interest.7

Verily, the Court of Appeals did not err when it ruled that respondents are the true and lawful owners of Lot No. 1580. Hence, they "should now be placed in possession thereof."

Parenthetically, considering that petitioners and their predecessors-in-interest have built their houses and apartment building on Lot No. 1580, should respondents be allowed to take possession of those improvements? In order to settle this matter, we should determine whether petitioners were builders in good faith.

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. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry.8 The 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.9 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.10

Using the above parameters, we are convinced that petitioners and their predecessors-in-interest were in good faith when they built their houses and apartment building on Lot No. 1580 since they were convinced it was covered by their TCT No. T-40624.

The following provisions of the Civil Code are relevant:

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.

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

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

Article 548. Expense 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 successors in the possession do not prefer to refund the amount expended.

Under the foregoing provisions, the landowner can make a choice - either by 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 that the accessory follows the principal and not the other way around. He must choose only one.

Following the above provisions, respondents, as owners of Lot No. 1580, may choose between appropriating as their own the houses and apartment building constructed thereon by petitioners and their predecessors-in-interest by paying the proper indemnity or value; or obliging petitioners to pay the price of Lot No. 1580 which is not more than that of the improvements.

WHEREFORE, we DENY the petition. The assailed Decision and Resolution of the Court of Appeals in CA G.R. CV No. 56109 are AFFIRMED with MODIFICATION in the sense that respondents have the option to pay for the houses and apartment building constructed by petitioners and their predecessors-in-interest on Lot No. 1580; or to oblige petitioners to pay the price of the lot in an amount not more than the value of the said improvements.