G.R. No. L-44428 September 30, 1977

AVELINO BALURAN, petitioner, vs.HON. RICARDO Y. NAVARRO, Presiding Judge, Court of First Instance of Ilocos Norte, Branch I and ANTONIO OBEDENCIO, respondents.

Alipio V. Flores for petitioner.

Rafael B. Ruiz for private respondent.

MUÑOZ PALMA, J.:

Spouses Domingo Paraiso and Fidela Q. Paraiso were the owners of a residential lot of around 480 square meters located in Sarrat, Ilocos Norte. On or about February 2, 1964, the Paraisos executed an agreement entitled "BARTER" whereby as party of the first part they agreed to "barter and exchange" with spouses Avelino and Benilda Baluran their residential lot with the latter's unirrigated riceland situated in Sarrat, Ilocos Norte, of approximately 223 square meters without any permanent improvements, under the following conditions:

1. That both the Party of the First Part and the Party of the Second Part shall enjoy the material possession of their respective properties; the Party of the First Part shall reap the fruits of the unirrigated riceland and the Party of the Second Part shall have a right to build his own house in the residential lot.

2. Nevertheless, in the event any of the children of Natividad P. Obencio, daughter of the First Part, shall choose to reside in this municipality and build his own house in the residential lot, the Party of the Second Part shall be obliged to return the lot such children with damages to be incurred.

3. That neither the Party of the First Part nor the Party of the Second Part shall encumber, alienate or dispose of in any manner their respective properties as bartered without the consent of the other.

4. That inasmuch as the bartered properties are not yet accordance with Act No. 496 or under the Spanish Mortgage Law, they finally agreed and covenant that this deed be registered in the Office of the Register of Deeds of Ilocos Norte pursuant to the provisions of Act No. 3344 as amended. (p. 28, rollo)

On May 6, 1975 Antonio Obendencio filed with the Court of First Instance of Ilocos Norte the present complaint to recover the above-mentioned residential lot from Avelino Baluran claiming that he is the rightful owner of said residential lot having acquired the same from his mother, Natividad Paraiso Obedencio, and that he needed the property for Purposes Of constructing his house thereon inasmuch as he had taken residence in his native town, Sarrat. Obedencio accordingly prayed that he be declared owner of the residential lot and that defendant Baluran be ordered to vacate the same forfeiting his (Obedencio) favor the improvements defendant Baluran had built in bad faith.1

Answering the complaint, Avelino Baluran alleged inter alia (1) that the "barter agreement" transferred to him the ownership of the residential lot in exchange for the unirrigated riceland conveyed to plaintiff's Predecessor-in-interest, Natividad Obedencio, who in fact is still in On thereof, and (2) that the plaintiff's cause of action if any had prescribed. 2

At the pre-trial, the parties agreed to submit the case for decision on the basis of their stipulation of facts. It was likewise admitted that the aforementioned residential lot was donated on October 4, 1974 by Natividad Obedencio to her son Antonio Obedencio, and that since the execution of the agreement of February 2, 1964 Avelino Baluran was in possession of the residential lot, paid the taxes of the property, and constructed a house thereon with an value of P250.00. 3 On November 8, 1975, the trial Judge Ricardo Y. Navarro rendered a decision the dispositive portion of which reads as follows:

Consequently, the plaintiff is hereby declared owner of the question, the defendant is hereby ordered to vacate the same with costs against defendant.

Avelino Baluran to whom We shall refer as petitioner, now seeks a review of that decision under the following assignment of errors:

I — The lower Court erred in holding that the barter agreement did not transfer ownership of the lot in suit to the petitioner.

II — The lower Court erred in not holding that the right to re-barter or re- exchange of respondent Antonio Obedencio had been barred by the statute of limitation. (p. 14, Ibid.)

The resolution of this appeal revolves on the nature of the undertaking contract of February 2, 1964 which is entitled "Barter Agreement."

It is a settled rule that to determine the nature of a contract courts are not bound by the name or title given to it by the contracting parties. 4 This Court has held that contracts are not what the parties may see fit to call them but what they really are as determined by the principles of law. 5 Thus, in the instant case, the use of the, term "barter" in describing the agreement of February 2, 1964, is not controlling. The stipulations in said document are clear enough to indicate that there was no intention at all on the part of the signatories thereto to convey the ownership of their respective properties; all that was intended, and it was so provided in the agreement, was to transfer the material possession thereof. (condition No. 1, see page I of this Decision) In fact, under condition No. 3 of the agreement, the parties retained the right to alienate their respective properties which right is an element of ownership.

With the material ion being the only one transferred, all that the parties acquired was the right of usufruct which in essence is the right to enjoy the Property of another. 6 Under the document in question, spouses Paraiso would harvest the crop of the unirrigated riceland while the other party, Avelino Baluran, could build a house on the residential lot, subject, however, to the condition, that when any of the children of Natividad Paraiso Obedencio, daughter of spouses Paraiso, shall choose to reside in the municipality and build his house on the residential lot, Avelino Baluran shall be obliged to return the lot to said children "With damages to be incurred." (Condition No. 2 of the Agreement) Thus, the mutual agreement — each party enjoying "material possession" of the other's property — was subject to a resolutory condition the happening of which would terminate the right of possession and use.

A resolutory condition is one which extinguishes rights and obligations already existing. 7 The right of "material possession" granted in the agreement of February 2, 1964, ends if and when any of the children of Natividad Paraiso, Obedencio (daughter of spouses Paraiso, Party of the First Part) would reside in the municipality and build his house on the property. Inasmuch as the condition opposed is not dependent solely on the will of one of the parties to the contract — the spouses Paraiso — but is Part dependent on the will of third persons — Natividad Obedencio and any of her children — the same is valid. 8

When there is nothing contrary to law, morals, and good customs Or Public Policy in the stipulations of a contract, the agreement constitutes the law between the parties and the latter are bound by the terms thereof. 9

Art. 1306 of the Civil Code states:

Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, Morals, good customs, public order, or public policy.

Contracts which are the private laws of the contracting parties, should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter what their form may be, whenever the essential requisites for their validity are present. (Philippine American General Insurance Co., Inc. vs. Mutuc, 61 SCRA 22)

The trial court therefore correctly adjudged that Antonio Obedencio is entitled to recover the possession of the residential lot Pursuant to the agreement of February 2, 1964.

Petitioner submits under the second assigned error that the causa, of action if any of respondent Obedencio had Prescribed after the lapse of four years from the date of execution of the document of February 2, 1964. It is argued that the remedy of plaintiff, now respondent, Was to ask for re-barter or re-exchange of the properties subject of the agreement which could be exercised only within four years from the date of the contract under Art. 1606 of the Civil Code.

The submission of petitioner is untenable. Art. 1606 of the Civil Code refers to conventional redemption which petitioner would want to apply to the present situation. However, as We stated above, the agreement of the parties of February 2, 1964, is not one of barter, exchange or even sale with right to repurchase, but is one of or akin the other is the use or material ion or enjoyment of each other's real property.

Usufruct may be constituted by the parties for any period of time and under such conditions as they may deem convenient and beneficial subject to the provisions of the Civil Code, Book II, Title VI on Usufruct. The manner of terminating or extinguishing the right of usufruct is primarily determined by the stipulations of the parties which in this case now before Us is the happening of the event agreed upon. Necessarily, the plaintiff or respondent Obedencio could not demand for the recovery of possession of the residential lot in question, not until he acquired that right from his mother, Natividad Obedencio, and which he did acquire when his mother donated to him the residential lot on October 4, 1974. Even if We were to go along with petitioner in his argument that the fulfillment of the condition cannot be left to an indefinite, uncertain period, nonetheless, in the case at bar, the respondent, in whose favor the resolutory condition was constituted, took immediate steps to terminate the right of petitioner herein to the use of the lot. Obedencio's present complaint was filed in May of 1975, barely several months after the property was donated to him.

One last point raised by petitioner is his alleged right to recover damages under the agreement of February 2, 1964. In the absence of evidence, considering that the parties agreed to submit the case for decision on a stipulation of facts, We have no basis for awarding damages to petitioner.

However, We apply Art. 579 of the Civil Code and hold that petitioner will not forfeit the improvement he built on the lot but may remove the same without causing damage to the property.

Art. 579. The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper, provided he does not alter its form or substance; but he shall have no right to be indemnified therefor. He may, however. He may, however, removed such improvements, should it be possible to do so without damage to the property. (Emphasis supplied)

Finally, We cannot close this case without touching on the unirrigated riceland which admittedly is in the possession of Natividad Obedencio.

In view of our ruling that the "barter agreement" of February 2, 1964, did not transfer the ownership of the respective properties mentioned therein, it follows that petitioner Baluran remains the owner of the unirrigated riceland and is now entitled to its Possession. With the happening of the resolutory condition provided for in the agreement, the right of usufruct of the parties is extinguished and each is entitled to a return of his property. it is true that Natividad Obedencio who is now in possession of the property and who has been made a party to this case cannot be ordered in this proceeding to surrender the riceland. But inasmuch as reciprocal rights and obligations have arisen between the parties to the so-called "barter agreement", We hold that the parties and for their successors-in-interest are duty bound to effect a simultaneous transfer of the respective properties if substance at justice is to be effected.

WHEREFORE, Judgment is hereby rendered: 1) declaring the petitioner Avelino Baluran and respondent Antonio Obedencio the respective owners the unirrigated riceland and residential lot mentioned in the "Barter Agreement" of February 2, 1964; 2) ordering Avelino Baluran to vacate the residential lot and removed improvements built by thereon,

provided, however that he shall not be compelled to do so unless the unirrigated riceland shall five been restored to his possession either on volition of the party concerned or through judicial proceedings which he may institute for the purpose.

Without pronouncement as to costs. So Ordered.

NATIONAL HOUSING AUTHORITY, petitioner, vs. COURT OF APPEALS, BULACAN GARDEN CORPORATION and MANILA SEEDLING BANK FOUNDATION, INC., respondents.D E C I S I O NCARPIO, J.:

The Case

This is a petition for review[1] seeking to set aside the Decision[2] dated 30 March 2001 of the Court of Appeals (appellate court) in CA-G.R. CV No. 48382, as well as its Resolution dated 25 June 2001 denying the motion for reconsideration. The appellate court reversed the Decision[3] of Branch 87 of the Regional Trial Court of Quezon City (trial court) dated 8 March 1994 in Civil Case No. Q-53464. The trial court dismissed the complaint for injunction filed by Bulacan Garden Corporation (BGC) against the National Housing Authority (NHA). BGC wanted to enjoin the NHA from demolishing BGCs facilities on a lot leased from Manila Seedling Bank Foundation, Inc. (MSBF). MSBF allegedly has usufructuary rights over the lot leased to BGC.

Antecedent Facts

On 24 October 1968, Proclamation No. 481 issued by then President Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA[4] as reserved property for the site of the National Government Center (NGC). On 19 September 1977, President Marcos issued Proclamation No. 1670, which removed a seven-hectare portion from the coverage of the NGC. Proclamation No. 1670 gave MSBF usufructuary rights over this segregated portion, as follows:

Pursuant to the powers vested in me by the Constitution and the laws of the Philippines, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, do hereby exclude from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site, certain parcels of land embraced therein and reserving the same for the Manila Seedling Bank Foundation, Inc., for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation.

This parcel of land, which shall embrace 7 hectares, shall be determined by the future survey based on the technical descriptions found in Proclamation No. 481, and most particularly on the original survey of the area, dated July 1910 to June 1911, and on the subdivision survey dated April 19-25, 1968. (Emphasis added)

MSBF occupied the area granted by Proclamation No. 1670. Over the years, MSBFs occupancy exceeded the seven-hectare area subject to its usufructuary rights. By 1987, MSBF occupied approximately 16 hectares. By then the land occupied by MSBF was bounded by Epifanio de los Santos Avenue (EDSA) to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north.

On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders. BGC leased the portion facing EDSA, which occupies 4,590 square meters of the 16-hectare area.

On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127 (MO 127) which revoked the reserved status of the 50 hectares, more or less, remaining out of the 120 hectares of the NHA property reserved as site of the National Government Center. MO 127 also authorized the NHA to commercialize the area and to sell it to the public.

On 15 August 1988, acting on the power granted under MO 127, the NHA gave BGC ten days to vacate its occupied area. Any structure left behind after the expiration of the ten-day period will be demolished by NHA.

BGC then filed a complaint for injunction on 21 April 1988 before the trial court. On 26 May 1988, BGC amended its complaint to include MSBF as its co-plaintiff.

The Trial Courts Ruling

The trial court agreed with BGC and MSBF that Proclamation No. 1670 gave MSBF the right to conduct the survey, which would establish the seven-hectare area covered by MSBFs usufructuary rights. However, the trial court held that MSBF failed to act seasonably on this right to conduct the survey. The trial court ruled that the previous surveys conducted by MSBF covered 16 hectares, and were thus inappropriate to determine the seven-hectare area. The trial court concluded that to allow MSBF to determine the seven-hectare area now would be grossly unfair to the grantor of the usufruct.

On 8 March 1994, the trial court dismissed BGCs complaint for injunction. Thus:

Premises considered, the complaint praying to enjoin the National Housing Authority from carrying out the demolition of the plaintiffs structure, improvements and facilities in the premises in question is hereby DISMISSED, but the suggestion for the Court to rule that Memorandum Order 127 has repealed Proclamation No. 1670 is DENIED. No costs.

SO ORDERED.[5]

The NHA demolished BGCs facilities soon thereafter.

The Appellate Courts Ruling

Not content with the trial courts ruling, BGC appealed the trial courts Decision to the appellate court. Initially, the appellate court agreed with the trial court that Proclamation No. 1670 granted MSBF the right to determine the location of the seven-hectare area covered by its usufructuary rights. However, the appellate court ruled that MSBF did in fact assert this right by conducting two surveys and erecting its main structures in the area of its choice.

On 30 March 2001, the appellate court reversed the trial courts ruling. Thus:

WHEREFORE, premises considered, the Decision dated March 8, 1994 of the Regional Trial Court of Quezon City, Branch 87, is hereby REVERSED and SET ASIDE. The National Housing Authority is enjoined from demolishing the structures, facilities and improvements of the plaintiff-appellant Bulacan Garden Corporation at its leased premises located in Quezon City which premises were covered by Proclamation No. 1670, during the existence of the contract of lease it (Bulacan Garden) had entered with the plaintiff-appellant Manila Seedling Bank Foundation, Inc.

No costs.

SO ORDERED.[6]

The NHA filed a motion for reconsideration, which was denied by the appellate court on 25 June 2001.

Hence, this petition.

The Issues

The following issues are considered by this Court for resolution:

WHETHER THE PETITION IS NOW MOOT BECAUSE OF THE DEMOLITION OF THE STRUCTURES OF BGC; and

WHETHER THE PREMISES LEASED BY BGC FROM MSBF IS WITHIN THE SEVEN-HECTARE AREA THAT PROCLAMATION NO. 1670 GRANTED TO MSBF BY WAY OF USUFRUCT.

The Ruling of the Court

We remand this petition to the trial court for a joint survey to determine finally the metes and bounds of the seven-hectare area subject to MSBFs usufructuary rights.

Whether the Petition is Moot because of theDemolition of BGCs Facilities

BGC claims that the issue is now moot due to NHAs demolition of BGCs facilities after the trial court dismissed BGCs complaint for injunction. BGC argues that there is nothing more to enjoin and that there are no longer any rights left for adjudication.

We disagree.

BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not. The issue for resolution has a direct effect on MSBFs usufructuary rights. There is yet the central question of the exact location of the seven-hectare area granted by Proclamation No. 1670 to MSBF. This issue is squarely raised in this petition. There is a need to settle this issue to forestall future disputes and to put this 20-year litigation to rest.

On the Location of the Seven-Hectare Area Granted byProclamation No. 1670 to MSBF as Usufructuary

Rule 45 of the 1997 Rules of Civil Procedure limits the jurisdiction of this Court to the review of errors of law.[7] Absent any of the established grounds for exception,[8] this Court will not disturb findings of fact of lower courts. Though the matter raised in this petition is factual, it deserves resolution because the findings of the trial court and the appellate court conflict on several points.

The entire area bounded by Agham Road to the east, EDSA to the west, Quezon Avenue to the south and by a creek to the north measures approximately 16 hectares. Proclamation No. 1670 gave MSBF a usufruct over only a seven-hectare area. The BGCs leased portion is located along EDSA.

A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct.[9] A usufructuary may lease the object held in usufruct.[10] Thus, the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists.[11] However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-hectare area covered by MSBFs usufructuary rights.

MSBFs survey shows that BGCs stall is within the seven-hectare area. On the other hand, NHAs survey shows otherwise. The entire controversy revolves on the question of whose land survey should prevail.

MSBFs survey plots the location of the seven-hectare portion by starting its measurement from Quezon Avenue going northward along EDSA up until the creek, which serves as the northern boundary of the land in question. Mr. Ben Malto (Malto), surveyor for MSBF, based his survey method on the fact that MSBFs main facilities are located within this area.

On the other hand, NHAs survey determines the seven-hectare portion by starting its measurement from Quezon Avenue going towards Agham Road. Mr. Rogelio Inobaya (Inobaya), surveyor for NHA, based his survey method on the fact that he saw MSBFs gate fronting Agham Road.

BGC presented the testimony of Mr. Lucito M. Bertol (Bertol), General Manager of MSBF. Bertol presented a map,[12] which detailed the area presently occupied by MSBF. The map had a yellow-shaded portion, which was supposed to indicate the seven-hectare area. It was clear from both the map and Bertols testimony that MSBF knew that it had occupied an area in excess of the seven-hectare area granted by Proclamation No. 1670.[13] Upon cross-examination, Bertol admitted that he personally did not know the exact boundaries of the seven-hectare area.[14] Bertol also admitted that MSBF prepared the map without consulting NHA, the owner of the property.[15]

BGC also presented the testimony of Malto, a registered forester and the Assistant Vice-President of Planning, Research and Marketing of MSBF. Malto testified that he conducted the land survey, which was used to construct the map presented by Bertol.[16] Bertol clarified that he authorized two surveys, one in 1984 when he first joined MSBF, and the other in 1986.[17] In both instances, Mr. Malto testified that he was asked to survey a total of 16 hectares, not just seven hectares. Malto testified that he conducted the second survey in 1986 on the instruction of MSBFs general manager. According to Malto, it was only in the second survey that he was told to determine the seven-hectare portion. Malto further clarified that he based the technical descriptions of both surveys on a previously existing survey of the property.[18]

The NHA presented the testimony of Inobaya, a geodetic engineer employed by the NHA. Inobaya testified that as part of the NHAs Survey Division, his duties included conducting surveys of properties administered by the NHA.[19] Inobaya conducted his survey in May 1988 to determine whether BGC was occupying an area outside the seven-hectare area MSBF held in usufruct.[20] Inobaya surveyed the area occupied by MSBF following the same technical descriptions used by Malto. Inobaya also came to the same conclusion that the area occupied by MSBF, as indicated by the boundaries in the technical descriptions, covered a total of 16 hectares. He further testified that the seven-hectare portion in the map presented by BGC,[21] which was constructed by Malto, does not tally with the boundaries BGC and MSBF indicated in their complaint.

Article 565 of the Civil Code states:

ART. 565. The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct; in default of such title, or in case it is deficient, the provisions contained in the two following Chapters shall be observed.

In the present case, Proclamation No. 1670 is the title constituting the usufruct. Proclamation No. 1670 categorically states that the seven-hectare area shall be determined by future survey under the administration of the Foundation subject to private rights if there be any. The appellate court and the trial court agree that MSBF has the latitude to determine the location of its seven-hectare usufruct portion within the 16-hectare area. The appellate court and the trial court disagree, however, whether MSBF seasonably exercised this right.

It is clear that MSBF conducted at least two surveys. Although both surveys covered a total of 16 hectares, the second survey specifically indicated a seven-hectare area shaded in yellow. MSBF made the first survey in 1984 and the second in 1986, way before the present controversy started. MSBF conducted the two surveys before the lease to BGC. The trial court ruled that MSBF did not act seasonably in exercising its right to conduct the survey. Confronted with evidence that MSBF did in fact conduct two surveys, the trial court dismissed the two surveys as self-serving. This is clearly an error on the part of the trial court. Proclamation No. 1670 authorized MSBF to determine the location of the seven-hectare area. This authority, coupled with the fact that Proclamation No. 1670 did not state the location of the seven-hectare area, leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct.

More evidence supports MSBFs stand on the location of the seven-hectare area. The main structures of MSBF are found in the area indicated by MSBFs survey. These structures are the main office, the three green houses, the warehouse and the composting area. On the other hand, the NHAs delineation of the seven-hectare area would cover only the four hardening bays and the display area. It is easy to distinguish between these two groups of structures. The first group covers buildings and facilities that MSBF needs for its operations. MSBF built these structures before the present controversy started. The second group covers facilities less essential to MSBFs existence. This distinction is decisive as to

which survey should prevail. It is clear that the MSBF intended to use the yellow-shaded area primarily because it erected its main structures there.

Inobaya testified that his main consideration in using Agham Road as the starting point for his survey was the presence of a gate there. The location of the gate is not a sufficient basis to determine the starting point. MSBFs right as a usufructuary as granted by Proclamation No. 1670 should rest on something more substantial than where MSBF chose to place a gate.

To prefer the NHAs survey to MSBFs survey will strip MSBF of most of its main facilities. Only the main building of MSBF will remain with MSBF since the main building is near the corner of EDSA and Quezon Avenue. The rest of MSBFs main facilities will be outside the seven-hectare area.

On the other hand, this Court cannot countenance MSBFs act of exceeding the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owners interests. One such duty is found in Article 601 of the Civil Code which states:

ART. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have knowledge, that may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for damages, as if they had been caused through his own fault.

A usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.[22] This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBFs encroachment of its benefactors property gave birth to the confusion that attended this case. To put this matter entirely to rest, it is not enough to remind the NHA to respect MSBFs choice of the location of its seven-hectare area. MSBF, for its part, must vacate the area that is not part of its usufruct. MSBFs rights begin and end within the seven-hectare portion of its usufruct. This Court agrees with the trial court that MSBF has abused the privilege given it under Proclamation No. 1670. The direct corollary of enforcing MSBFs rights within the seven-hectare area is the negation of any of MSBFs acts beyond it.

The seven-hectare portion of MSBF is no longer easily determinable considering the varied structures erected within and surrounding the area. Both parties advance different reasons why their own surveys should be preferred. At this point, the determination of the seven-hectare portion cannot be made to rely on a choice between the NHAs and MSBFs survey. There is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all doubts on the exact location of the seven-hectare area and thus avoid future controversies. This new survey should consider existing structures of MSBF. It should as much as possible include all of the facilities of MSBF within the seven-hectare portion without sacrificing contiguity.

A final point. Article 605 of the Civil Code states:

ART. 605. Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. If it has been constituted, and before the expiration of such period the town is abandoned, or the corporation or association is dissolved, the usufruct shall be extinguished by reason thereof. (Emphasis added)

The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or associations lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land. Proclamation No. 1670 was issued 19 September 1977, or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left.

MO 127 released approximately 50 hectares of the NHA property as reserved site for the National Government Center. However, MO 127 does not affect MSBFs seven-hectare area since under Proclamation No. 1670, MSBFs seven-hectare area was already exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site.

WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City, which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670. The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval within sixty days from the date ordering the joint survey.

SO ORDERED.

HEIRS OF THE LATE JOAQUIN LIMENSE, namely: CONCESA LIMENSE, Surviving Spouse; and DANILO and JOSELITO, both surnamed Limense, children, Petitioners, vs.RITA VDA. DE RAMOS, RESTITUTO RAMOS, VIRGILIO DIAZ, IRENEO RAMOS, BENJAMIN RAMOS, WALDYTRUDES RAMOS-BASILIO, TRINIDAD RAMOS-BRAVO, PAZ RAMOS-PASCUA, FELICISIMA RAMOS-REYES, and JACINTA RAMOS, Respondents.

D E C I S I O NPERALTA, J.,

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision1 of the Court of Appeals dated December 20, 2001 in CA-G.R. CV No. 33589 affirming in toto the Decision2 of the Regional Trial Court of Manila, Branch 15, dated September 21, 1990 in Civil Case No. 83-16128.

The antecedent facts are as follows:

Dalmacio Lozada was the registered owner of a parcel of land identified as Lot No. 12, Block No. 1074 of the cadastral survey of the City of Manila covered by Original Certificate of Title (OCT) No. 7036 issued at the City of Manila on June 14, 1927,3 containing an area of 873.80 square meters, more or less, located in Beata Street, Pandacan, Manila.

Dalmacio Lozada subdivided his property into five (5) lots, namely: Lot Nos. 12-A, 12-B, 12-C, 12-D and 12-E. Through a Deed of Donation dated March 9, 1932,4 he donated the subdivided lots to his daughters, namely: Isabel, Salud, Catalina, and Felicidad, all surnamed Lozada. The Deed of Donation was registered with the office of the Register of Deeds of Manila on March 15, 1932.

Under the said Deed of Donation, the lots were adjudicated to Dalmacio's daughters in the following manner:

a. Lot No. 12-A in favor of Isabel Lozada, married to Isaac Limense;

b. Lot No. 12-B in favor of Catalina Lozada, married to Sotero Natividad;

c. Lot No. 12-C in favor of Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos, in equal parts;

d. Lot No. 12-D in favor of Salud Lozada, married to Francisco Ramos; and

e. Lot No. 12-E in favor of Isabel Lozada, married to Isaac Limense, and Felicidad Lozada, married to Galicano Centeno.

By virtue of the Deed of Donation executed by Dalmacio Lozada, OCT No. 7036, which was registered in his name, was cancelled and, in lieu thereof, Transfer Certificates of Title (TCTs) bearing Nos. 40041, 40042, 40043, 40044, and 40045 were issued in favor of the donees, except TCT No. 40044, which remained in his name. These new TCTs were annotated at the back of OCT No. 7036.5

TCT No. 40043, which covered Lot No. 12-C, was issued in the name of its co-owners Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos. It covered an area of 68.60 square meters, more or less, was bounded on the northeast by Lot No. 12-A, on the southwest by Calle Beata, and on the northwest by Lot No. 12-D of the subdivision plan. In 1932, respondents' predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C.

On May 16, 1969, TCT No. 968866 was issued in the name of Joaquin Limense covering the very same area of Lot No. 12-C.

On October 1, 1981, Joaquin Limense secured a building permit for the construction of a hollow block fence on the boundary line between his aforesaid property and the adjacent parcel of land located at 2759 Beata Street, Pandacan, Manila, designated as Lot No. 12-D, which was being occupied by respondents. The fence, however, could not be constructed because a substantial portion of respondents' residential building in Lot No. 12-D encroached upon portions of Joaquin Limense's property in Lot No. 12-C.

Joaquin Limense demanded the removal of the encroached area; however, respondent ignored both oral and written demands. The parties failed to amicably settle the differences between them despite referral to the barangay. Thus, on March 9, 1983, Joaquin Limense, duly represented by his Attorney-in-Fact, Teofista L. Reyes, instituted a Complaint7 against respondents before the Regional Trial Court (RTC) of Manila, Branch 15, for removal of obstruction and damages.

Joaquin Limense prayed that the RTC issue an order directing respondents, jointly and severally, to remove the portion which illegally encroached upon his property on Lot No. 12-C and, likewise, prayed for the payment of damages, attorney’s fees and costs of suit.

Respondents, on the other hand, averred in their Answer8 that they were the surviving heirs of Francisco Ramos,9 who, during his lifetime, was married to Salud Lozada, one of the daughters of Dalmacio Lozada, the original owner of Lot No. 12. After subdividing the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his daughters Catalina, married to Sotero Natividad; Isabel, married to Isaac Limense; and Salud, married to Francisco Ramos. Being the surviving heirs of Francisco Ramos, respondents later became co-owners of Lot No. 12-C. Lot No. 12-C has served as right of way or common alley of all the heirs of Dalmacio Lozada since 1932 up to the present. As a common alley, it could not be closed or fenced by Joaquin Limense without causing damage and prejudice to respondents.

After trial on the merits, the RTC rendered a Decision10 dated September 21, 1990 dismissing the complaint of Joaquin Limense. It ruled that an apparent easement of right of way existed in favor of respondents. Pertinent portions of the decision read as follows:

The Court finds that an apparent easement of right of way exists in favor of the defendants under Article 624 of the Civil Code. It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property, the alley established by him continued to be used actively and passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired it in 1969, the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. The existence of the easement of right of way was therefore known to plaintiff who must respect the same in spite of the fact that his transfer certificate of title does not mention the lot of defendants as among those listed therein as entitled to such right of way. It is an established principle that actual notice or knowledge is as binding as registration.11

Aggrieved by said decision, Joaquin Limense filed a notice of appeal. The records of the case were transmitted to the Court of Appeals (CA). During the pendency of the appeal with the CA, Joaquin Limense died in 1999.12

The CA, Seventh Division, in CA-G.R. CV No. 33589, in its Decision13 dated December 20, 2001 dismissed the appeal and affirmed in toto the decision of the RTC.

Frustrated by this turn of events, petitioners, as surviving heirs of Joaquin Limense, elevated the case to this Court via a Petition for Review on Certiorari14 raising the following issues:

1. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN HOLDING, LIKE THE TRIAL COURT DID, THAT RESPONDENTS' LOT 12-D HAS AN EASEMENT OF RIGHT OF WAY OVER JOAQUIN LIMENSE'S LOT 12-C?

2. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN FAILING TO HOLD, LIKE THE TRIAL COURT DID, THAT THE PROTRUDING PORTIONS OF RESPONDENTS' HOUSE ON LOT 12-D EXTENDING INTO JOAQUIN LIMENSE'S LOT 12-C CONSTITUTE A NUISANCE AND, AS SUCH, SHOULD BE REMOVED?

Petitioners aver that the CA erred in ruling that since Lot No. 12-C was covered by two TCT's, i.e., TCT Nos. 40043 and 96886, and there was no evidence on record to show how Joaquin Limense was able to secure another title over an already titled property, then one of these titles must be of dubious origin. According to the CA, TCT No. 96886, issued in the name of Joaquin Limense, was spurious because the Lozada sisters never disposed of the said property covered by TCT No. 40043. The CA further ruled that a co-ownership existed over Lot No. 12-C between petitioners and respondents. Petitioners countered that TCT No. 96886, being the only and best legitimate proof of ownership over Lot No. 12-C, must prevail over TCT No. 40043.

Respondents allege that it was possible that TCT No. 96886, in the name of Joaquin Limense, was obtained thru fraud, misrepresentation or falsification of documents because the donees of said property could not possibly execute any valid transfer of title to Joaquin Limense, as they were already dead prior to the issuance of TCT No. 96886 in 1969. Respondents further allege that petitioners failed to produce proof substantiating the issuance of TCT No. 96886 in the name of Joaquin Limense.

Apparently, respondents are questioning the legality of TCT No. 96886, an issue that this Court cannot pass upon in the present case. It is a rule that the validity of a torrens title cannot be assailed collaterally.15 Section 48 of Presidential Decree (PD) No. 1529 provides that:

[a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

In the case at bar, the action filed before the RTC against respondents was an action for removal of obstruction and damages. Respondents raised the defense that Joaquin Limense's title could have been obtained through fraud and misrepresentation in the trial proceedings before the RTC. Such defense is in the nature of a collateral attack, which is not allowed by law.

Further, it has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, the reliance on registered titles would be lost. The title became indefeasible and incontrovertible after the lapse of one year from the time of its registration and issuance. Section 32 of PD 1529 provides that "upon the expiration of said period of one year, the decree of registration and the certificate of title shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or other persons responsible for the fraud."16 It has, therefore, become an ancient rule that the issue on the validity of title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly instituted for that purpose.17 In the present case, TCT No. 96886 was registered in 1969 and respondents never instituted any direct proceeding or action to assail Joaquin Limense's title.

Additionally, an examination of TCT No. 40043 would readily show that there is an annotation that it has been "CANCELLED."18 A reading of TCT No. 96886 would also reveal that said title is a transfer from TCT No. 4886619 and not TCT 40043. Thus, it is possible that there was a series of transfers effected from TCT No. 40043 prior to the issuance of TCT No. 96886. Hence, respondents' position that the issuance of TCT No. 96886 in the name of Joaquin Limense is impossible, because the registered owners of TCT No. 40043 were already dead prior to 1969 and could not have transferred the property to Joaquin Limense, cannot be taken as proof that TCT No. 96886 was obtained through fraud, misrepresentation or falsification of documents.

Findings of fact of the CA, although generally deemed conclusive, may admit review by this Court if the CA failed to notice certain relevant facts that, if properly considered, would justify a different conclusion, and if the judgment of the CA is premised on a misapprehension of facts.20 As with the present case, the CA's observation that TCT No. 96886 is of dubious origin, as TCT No. 40043 does not appear to have been disposed of by Catalina, Isabel and Salud Lozada, is improper and constitutes an indirect attack on TCT No. 96886. As we see it, TCT No. 96886, at present, is the best proof of Joaquin Limense’s ownership over Lot No. 12-C. Thus, the CA erred in ruling that respondents and petitioners co-owned Lot No. 12-C, as said lot is now registered exclusively in the name of Joaquin Limense.

Due to the foregoing, Joaquin Limense, as the registered owner of Lot 12-C, and his successors-in-interest, may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon.21

However, although the owner of the property has the right to enclose or fence his property, he must respect servitudes constituted thereon. The question now is whether respondents are entitled to an easement of right of way.

Petitioners contend that respondents are not entitled to an easement of right of way over Lot No. 12-C, because their Lot No. 12-D is not duly annotated at the back of TCT No. 96886 which would entitle them to enjoy the easement, unlike Lot Nos. 12-A-1, 12-A-2, 12-A-3, 12-A-4, 12-A-5, and 12-A-6. Respondents, on the other hand, allege that they are entitled to an easement of right of way over Lot No. 12-C, which has been continuously used as an alley by the heirs of Dalmacio Lozada, the residents in the area and the public in general from 1932 up to the present. Since petitioners are fully aware of the long existence of the said alley or easement of right of way, they are bound to respect the same.

As defined, an easement is a real right on another's property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing somebody else to do or something to be done on his property, for the benefit of another person or tenement.22

Easements may be continuous or discontinuous, apparent or non-apparent.

Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. Discontinuous easements are those which are used at intervals and depend upon the acts of man. Apparent easements are those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. Non-apparent easements are those which show no external indication of their existence.23

In the present case, the easement of right of way is discontinuous and apparent. It is discontinuous, as the use depends upon the acts of respondents and other persons passing through the property. Being an alley that shows a permanent path going to and from Beata Street, the same is apparent.

Being a discontinuous and apparent easement, the same can be acquired only by virtue of a title.24

In the case at bar, TCT No. 96886, issued in the name of Joaquin Limense, does not contain any annotation that Lot No. 12-D was given an easement of right of way over Lot No. 12-C. However, Joaquin Limense and his successors-in-interests are fully aware that Lot No. 12-C has been continuously used and utilized as an alley by respondents and residents in the area for a long period of time.

Joaquin Limense's Attorney-in-Fact, Teofista L. Reyes, testified that respondents and several other residents in the area have been using the alley to reach Beata Street since 1932. Thus:

Atty. Manuel B. Tomacruz:

Q: Mrs. Witness, by virtue of that Deed of Donation you claim that titles were issued to the children of Dalmacio Lozada namely Salud Lozada, Catalina Lozada and Isabel Lozada, is that right?

A: Yes, sir.

Q: And after the said property was adjudicated to his said children the latter constructed their houses on their lots.

A: Yes, sir.

Q: As a matter of fact, the herein defendants have constructed their houses on the premises alloted to them since the year 1932?

A: Yes, sir, they were able to construct their house fronting Beata Street.

Q: And that house they have constructed on their lot in 1932 is still existing today?

A: Yes, sir and they still used the alley in question and they are supposed to use Beata Street but they are not using Beata Street.

Q: They are using the alley?

A: Yes, sir, they are using the alley and they do not pass through Beata Street.

Q: And they have been using the alley since 1932 up to the present?

A: Yes, sir they have been using the alley since that time. That was their mistake and they should be using Beata Street because they are fronting Beata Strret.

Q: As a matter of fact, it is not only herein defendants who have been using that alley since 1932 up to the present?

A: Yes, sir they are using the alley up to now.

Q: As a matter of fact, in this picture marked as Exh. "C-1" the alley is very apparent. This is the alley?

A: Yes, sir.

Q: And there are houses on either side of this alley?

A: Yes, sir.

Q: As a matter of fact, all the residents on either side of the alley are passing through this alley?

A: Yes, sir, because the others have permit to use this alley and they are now allowed to use the alley but the Ramos's family are now [not] allowed to use this alley.25

In Mendoza v. Rosel,26 this Court held that:

Petitioners claim that inasmuch as their transfer certificates of title do not mention any lien or encumbrance on their lots, they are purchasers in good faith and for value, and as such have a right to demand from respondents some payment for the use of the alley. However, the Court of Appeals found, as a fact, that when respondents acquired the two lots which form the alley, they knew that said lots could serve no other purpose than as an alley. The existence of the easement of right of way was therefore known to petitioners who must respect the same, in spite of the fact that their transfer certificates of title do not mention any burden or easement. It is an established principle that actual notice or knowledge is as binding as registration.

Every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that "where the party has knowledge of a prior existing interest that was unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him."27

In the case at bar, Lot No. 12-C has been used as an alley ever since it was donated by Dalmacio Lozada to his heirs. It is undisputed that prior to and after the registration of TCT No. 96886, Lot No. 12-C has served as a right of way in favor of respondents and the public in general. We quote from the RTC's decision:

It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property the alley established by him continued to be used actively and passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired it in 1969 the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. x x x28

Thus, petitioners are bound by the easement of right of way over Lot No. 12-C, even though no registration of the servitude has been made on TCT No. 96886.

However, respondents’ right to have access to the property of petitioners does not include the right to continually encroach upon the latter’s property. It is not disputed that portions of respondents' house on Lot No. 12-D encroach upon Lot No. 12-C. Geodetic Engineer Jose Agres, Jr. testified on the encroachment of respondents' house on Lot No. 12-C, which he surveyed.29 In order to settle the rights of the parties relative to the encroachment, We should determine whether respondents 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 a design to defraud or to seek an unconscionable advantage. An individual’s personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. 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. 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.30

Good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof.31 It is a matter of record that respondents' predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C, in 1932.32 Respondents' predecessor-in-interest owned the 1/3 portion of Lot No. 12-C at the time the property was donated to them by Dalmacio Lozada in 1932. The Deed of Donation executed by the late Dalmacio Lozada, dated March 9, 1932, specifically provides that:

I hereby grant, cede and donate in favor of Catalina Lozada married to Sotero Natividad, Isabel Lozada married to Isaac Simense and Salud Lozada married to Francisco Ramos, all Filipinos, of legal age, the parcel of land known as Lot No. 12-C, in equal parts.33

The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and 17 meters in length; the stairs; and the concrete structures are all within the 1/3 share alloted to them by their donor Dalmacio Lozada and, hence, there was absence of a showing that respondents acted in bad faith when they built portions of their house on Lot No. 12-C.

Using the above parameters, we are convinced that respondents' predecessors-in-interest acted in good faith when they built portions of their house on Lot 12-C. Respondents being builders in good faith, we shall now discuss the respective rights of the parties relative to the portions encroaching upon respondents' house.

Articles 448 and 546 of the New Civil Code provide:

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

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

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

In Spouses Del Campo v. Abesia,34 this provision was applied to one whose house, despite having been built at the time he was still co-owner, overlapped with the land of another. In that case, this Court ruled:

The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build, plant or sow upon the land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership.

However, when, as in this case, the ownership is terminated by the partition and it appears that the house of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. x x x35

In other words, when the co-ownership is terminated by a partition, and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another co-owner, but the encroachment was in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties. In this case, the co-ownership was terminated due to the transfer of the title of the whole property in favor of Joaquin Limense.

Under the foregoing provision, petitioners have the right to appropriate said portion of the house of respondents upon payment of indemnity to respondents, as provided for in Article 546 of the Civil Code. Otherwise, petitioners may oblige respondents to pay the price of the land occupied by their house. However, if the price asked for is considerably much more than the value of the portion of the house of respondents built thereon, then the latter cannot be obliged to buy the land. Respondents shall then pay the reasonable rent to petitioners upon such terms and conditions that they may

agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, respondents may demolish or remove the said portion of their house, at their own expense, if they so decide.36

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.37 Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land.38

The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can compel the landowner to make a choice between two options: (1) to appropriate the building by paying the indemnity required by law, or (2) to sell the land to the builder.39

The raison d’etre for this provision has been enunciated, thus:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.40]

In accordance with Depra v. Dumlao,41 this case must be remanded to the trial court to determine matters necessary for the proper application of Article 448 in relation to Article 546. Such matters include the option that petitioners would take and the amount of indemnity that they would pay, should they decide to appropriate the improvements on the lots.

Anent the second issue, although it may seem that the portions encroaching upon respondents' house can be considered a nuisance, because it hinders petitioners' use of their property, it cannot simply be removed at respondents' expense, as prayed for by petitioner. This is because respondents built the subject encroachment in good faith, and the law affords them certain rights as discussed above.

WHEREFORE, the petition is DENIED, the Decision of the Court of Appeals dated December 20, 2001 in CA-G.R. CV No. 33589 is AFFIRMED with the following MODIFICATIONS:

1. No co-ownership exists over Lot No. 12-C, covered by TCT No. 96886, between petitioners and respondents.

2. The case is REMANDED to the Regional Trial Court, Branch 15, Manila, for further proceedings without further delay to determine the facts essential to the proper application of Articles 448 and 546 of the Civil Code. SO ORDERED.G.R. No. 91889 August 27, 1993

MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, petitioners, vs.THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR., MARIA THERESA V. VELOSO AND CASTRENSE C. VELOSO, respondents.

Virgilio E. Dulay for petitioners.

Torres, Tobias, Azura & Jocson for private respondents.NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision 1 of the Court of Appeals affirming the decision 2 of the Regional Trial Court of Pasay, Branch 114 Civil Cases Nos. 8198-P, and 2880-P, the dispositive portion of which reads, as follows:

Wherefore, in view of all the foregoing considerations, in this Court hereby renders judgment, as follows:

In Civil Case No. 2880-P, the petition filed by Manuel R. Dulay Enterprises, Inc. and Virgilio E. Dulay for annulment or declaration of nullity of the decision of the Metropolitan Trial Court, Branch 46, Pasay City, in its Civil Case No. 38-81 entitled "Edgardo D. Pabalan, et al., vs. Spouses Florentino Manalastas, et al.," is dismissed for lack of merits;

In Civil Case No. 8278-P, the complaint filed by Manuel R. Dulay Enterprises, Inc. for cancellation of title of Manuel A. Torres, Jr. (TCT No. 24799 of the Register of Deeds of Pasay City) and reconveyance, is dismissed for lack or merit, and,

In Civil Case No. 8198-P, defendants Manuel R. Dulay Enterprises, Inc. and Virgilio E. Dulay are ordered to surrender and deliver possession of the parcel of land, together with all the improvements thereon, described in Transfer Certificate of Title No. 24799 of the Register of Deeds of Pasay City, in favor of therein plaintiffs Manuel A. Torres, Jr. as owner and Edgardo D. Pabalan as real estate administrator of said Manuel A. Torres, Jr.; to account for and return to said plaintiffs the rentals from dwelling unit No. 8-A of the apartment building (Dulay Apartment) from June 1980 up to the present, to indemnify plaintiffs, jointly and severally, expenses of litigation in the amount of P4,000.00 and attorney's fees in the sum of P6,000.00, for all the three (3) cases. Co-defendant Nepomuceno Redovan is ordered to pay the current and subsequent rentals on the premises leased by him to plaintiffs.

The counterclaim of defendants Virgilio E. Dulay and Manuel R. Dulay Enterprises, Inc. and N. Redovan, dismissed for lack of merit. With costs against the three (3) aforenamed defendants. 3

The facts as found by the trial court are as follows:

Petitioner Manuel R. Dulay Enterprises, Inc, a domestic corporation with the following as members of its Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and general manager, Atty. Virgilio E. Dulay with 10 shares and designated as vice-president; Linda E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary, owned a property covered by TCT No. 17880 4 and known as Dulay Apartment consisting of sixteen (16) apartment units on a six hundred eighty-nine (689) square meters lot, more or less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City.

Petitioner corporation through its president, Manuel Dulay, obtained various loans for the construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel). It even had to borrow money from petitioner Virgilio Dulay to be able to continue the hotel project. As a result of said loan, petitioner Virgilio Dulay occupied one of the unit apartments of the subject property since property since 1973 while at the same time managing the Dulay Apartment at his shareholdings in the corporation was subsequently increased by his father. 5

On December 23, 1976, Manuel Dulay by virtue of Board Resolution No 18 6 of petitioner corporation sold the subject property to private respondents spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of Absolute Sale. 7 Thereafter, TCT No. 17880 was cancelled and TCT No. 23225 was issued to private respondent Maria Theresa Veloso. 8 Subsequently, Manuel Dulay and private respondents spouses Veloso executed a Memorandum to the Deed of Absolute Sale of December 23, 1976 9 dated December 9, 1977 giving Manuel Dulay within (2) years or until December 9, 1979 to repurchase the subject property for P200,000.00 which was, however, not annotated either in TCT No. 17880 or TCT No. 23225.

On December 24, 1976, private respondent Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to private respondent Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry No. 68139 in TCT No. 23225. 10

Upon the failure of private respondent Maria Veloso to pay private respondent Torres, the subject property was sold on April 5, 1978 to private respondent Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of Sheriff's Sale 11 issued on April 20, 1978.

On July 20, 1978, private respondent Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem 12 in favor of Manuel Dulay assigning her right to repurchase the subject property from private respondent Torres as a result of the extra sale held on April 25, 1978.

As neither private respondent Maria Veloso nor her assignee Manuel Dulay was able to redeem the subject property within the one year statutory period for redemption, private respondent Torres filed an Affidavit of Consolidation of Ownership 13 with the Registry of Deeds of Pasay City and TCT No. 24799 14 was subsequently issued to private respondent Manuel Torres on April 23, 1979.

On October 1, 1979, private respondent Torres filed a petition for the issuance of a writ of possession against private respondents spouses Veloso and Manuel Dulay in LRC Case No. 1742-P. However, when petitioner Virgilio Dulay was never authorized by the petitioner corporation to sell or mortgage the subject property, the trial court ordered private respondent Torres to implead petitioner corporation as an indispensable party but the latter moved for the dismissal of his petition which was granted in an Order dated April 8, 1980.

On June 20, 1980, private respondent Torres and Edgardo Pabalan, real estate administrator of Torres, filed an action against petitioner corporation, Virgilio Dulay and Nepomuceno Redovan, a tenant of Dulay Apartment Unit No. 8-A for the recovery of possession, sum of money and damages with preliminary injunction in Civil Case, No. 8198-P with the then Court of First Instance of Rizal.

On July 21, 1980, petitioner corporation filed an action against private respondents spouses Veloso and Torres for the cancellation of the Certificate of Sheriff's Sale and TCT No. 24799 in Civil Case No. 8278-P with the then Court of First Instance of Rizal.

On January 29, 1981, private respondents Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas, a tenant of Dulay Apartment Unit No. 7-B, with petitioner corporation as intervenor for ejectment in Civil Case No. 38-81 with the Metropolitan Trial Court of Pasay City which rendered a decision on April 25, 1985, dispositive portion of which reads, as follows:

Wherefore, judgment is hereby rendered in favor of the plaintiff (herein private respondents) and against the defendants:

1. Ordering the defendants and all persons claiming possession under them to vacate the premises.

2. Ordering the defendants to pay the rents in the sum of P500.000 a month from May, 1979 until they shall have vacated the premises with interest at the legal rate;

3. Ordering the defendants to pay attorney's fees in the sum of P2,000.00 and P1,000.00 as other expenses of litigation and for them to pay the costs of the suit. 15

Thereafter or on May 17, 1985, petitioner corporation and Virgilio Dulay filed an action against the presiding judge of the Metropolitan Trial Court of Pasay City, private respondents Pabalan and Torres for the annulment of said decision with the Regional Trial Court of Pasay in Civil Case No. 2880-P.

Thereafter, the three (3) cases were jointly tried and the trial court rendered a decision in favor of private respondents.

Not satisfied with said decision, petitioners appealed to the Court of Appeals which rendered a decision on October 23, 1989, the dispositive portion of which reads, as follows:

PREMISES CONSIDERED, the decision being appealed should be as it is hereby AFFIRMED in full. 16

On November 8, 1989, petitioners filed a Motion for Reconsideration which was denied on January 26, 1990.

Hence, this petition.

During the pendency of this petition, private respondent Torres died on April 3, 1991 as shown in his death certificate 17 and named Torres-Pabalan Realty & Development Corporation as his heir in his holographic will 18 dated October 31, 1986.

Petitioners contend that the respondent court had acted with grave abuse of discretion when it applied the doctrine of piercing the veil of corporate entity in the instant case considering that the sale of the subject property between private respondents spouses Veloso and Manuel Dulay has no binding effect on petitioner corporation as Board Resolution No. 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary.

We do not agree.Section 101 of the Corporation Code of the Philippines provides:

Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if:

1. Before or after such action is taken, written consent thereto is signed by all the directors, or

2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or

3. The directors are accustomed to take informal action with the express or implied acquiese of all the stockholders, or

4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing.

If a directors' meeting is held without call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof.

In the instant case, petitioner corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. At any rate, corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which, in his case, petitioner Virgilio Dulay failed to do.

It is relevant to note that although a corporation is an entity which has a personality distinct and separate from its individual stockholders or members, 19 the veil of corporate fiction may be pierced when it is used to defeat public convenience justify wrong, protect fraud or defend crime. 20 The privilege of being treated as an entity distinct and separate from its stockholder or members is therefore confined to its legitimate uses and is subject to certain limitations to prevent the commission of fraud or other illegal or unfair act. When the corporation is used merely as an alter ego or business conduit of a person, the law will regard the corporation as the act of that person. 21 The Supreme Court had repeatedly disregarded the separate personality of the corporation where the corporate entity was used to annul a valid contract executed by one of its members.

Petitioners' claim that the sale of the subject property by its president, Manuel Dulay, to private respondents spouses Veloso is null and void as the alleged Board Resolution No. 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained. As correctly pointed out by the respondent Court of Appeals:

Appellant Virgilio E. Dulay's protestations of complete innocence to the effect that he never participated nor was even aware of any meeting or resolution authorizing the mortgage or sale of the subject premises (see par. 8, affidavit of Virgilio E. Dulay, dated May 31, 1984, p. 14, Exh. "21") is difficult to believe. On the contrary, he is very much privy to the transactions involved. To begin with, he is a incorporator and one of the board of directors designated at the time of the organization of Manuel R. Dulay Enterprise, Inc. In ordinary parlance, the said entity is loosely referred to as a "family corporation". The nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of which Manuel R. Dulay Enterprises, Inc. is typical: four-fifths of its incorporators being close relatives namely, three (3) children and their father whose name identifies their corporation (Articles of Incorporation of Manuel R. Dulay Enterprises, Inc. Exh. "31-A"). 22

Besides, the fact that petitioner Virgilio Dulay on June 24, 1975 executed an affidavit 23 that he was a signatory witness to the execution of the post-dated Deed of Absolute Sale of the subject property in favor of private respondent Torres indicates that he was aware of the transaction executed between his father and private respondents and had, therefore, adequate knowledge about the sale of the subject property to private respondents.

Consequently, petitioner corporation is liable for the act of Manuel Dulay and the sale of the subject property to private respondents by Manuel Dulay is valid and binding. As stated by the trial court:

. . . the sale between Manuel R. Dulay Enterprises, Inc. and the spouses Maria Theresa V. Veloso and Castrense C. Veloso, was a corporate act of the former and not a personal transaction of Manuel R. Dulay. This is so because Manuel R. Dulay was not only president and treasurer but also the general manager of the corporation. The corporation was a closed family corporation and the only non-relative in the board of directors was Atty. Plaridel C. Jose who appeared on paper as the secretary. There is no denying the fact, however, that Maria Socorro R. Dulay at times acted as secretary. . . ., the Court can not lose sight of the fact that the Manuel R. Dulay Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single family. It cannot be concealed that Manuel R. Dulay as president, treasurer and general manager almost had absolute control over the business and affairs of the corporation. 24

Moreover, the appellate courts will not disturb the findings of the trial judge unless he has plainly overlooked certain facts of substance and value that, if considered, might affect the result of the case, 25 which is not present in the instant case.

Petitioners' contention that private respondent Torres never acquired ownership over the subject property since the latter was never in actual possession of the subject property nor was the property ever delivered to him is also without merit.

Paragraph 1, Article 1498 of the New Civil Code provides:

When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary do not appear or cannot clearly be inferred.

Under the aforementioned article, the mere execution of the deed of sale in a public document is equivalent to the delivery of the property. Likewise, this Court had held that:

It is settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale. As such, he is entitled to the possession of the said property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title. The buyer can in fact demand possession of the land even during the

redemption period except that he has to post a bond in accordance with Section 7 of Act No. 3133 as amended. No such bond is required after the redemption period if the property is not redeemed. Possession of the land then becomes an absolute right of the purchaser as confirmed owner. 26

Therefore, prior physical delivery or possession is not legally required since the execution of the Deed of Sale in deemed equivalent to delivery.

Finally, we hold that the respondent appellate court did not err in denying petitioner's motion for reconsideration despite the fact that private respondents failed to submit their comment to said motion as required by the respondent appellate court from resolving petitioners' motion for reconsideration without the comment of the private respondent which was required merely to aid the court in the disposition of the motion. The courts are as much interested as the parties in the early disposition of cases before them. To require otherwise would unnecessarily clog the courts' dockets.

WHEREFORE, the petition is DENIED and the decision appealed from is hereby AFFIRMED. SO ORDERED.G.R. No. 167195 May 8, 2009

ASSET PRIVATIZATION TRUST, Petitioner, vs.T.J. ENTERPRISES, Respondent.

D E C I S I O NTINGA, J.:

This is a Rule 45 petition1 which seeks the reversal of the Court of Appeals’ decision2 and resolution3 affirming the RTC’s decision4 holding petitioner liable for actual damages for breach of contract.

Petitioner Asset Privatization Trust5 (petitioner) was a government entity created for the purpose to conserve, to provisionally manage and to dispose assets of government institutions.6 Petitioner had acquired from the Development Bank of the Philippines (DBP) assets consisting of machinery and refrigeration equipment which were then stored at Golden City compound, Pasay City. The compound was then leased to and in the physical possession of Creative Lines, Inc., (Creative Lines). These assets were being sold on an as-is-where-is basis.

On 7 November 1990, petitioner and respondent entered into an absolute deed of sale over certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5. Respondent paid the full amount of P84,000.00 as evidenced by petitioner’s Receipt No. 12844. After two (2) days, respondent demanded the delivery of the machinery it had purchased. Sometime in March 1991, petitioner issued Gate Pass No. 4955. Respondent was able to pull out from the compound the properties designated as Lots Nos. 3 and 5. However, during the hauling of Lot No. 2 consisting of sixteen (16) items, only nine (9) items were pulled out by respondent. The seven (7) items that were left behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one (1) Reefer Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all accessories; (5) one (1) unit chest freezer; (6) one (1) unit room air-conditioner; and (7) one (1) unit air compressor. Creative Lines’ employees prevented respondent from hauling the remaining machinery and equipment.

Respondent filed a complaint for specific performance and damages against petitioner and Creative Lines.7 During the pendency of the case, respondent was able to pull out the remaining machinery and equipment. However, upon inspection it was discovered that the machinery and equipment were damaged and had missing parts.

Petitioner argued that upon the execution of the deed of sale it had complied with its obligation to deliver the object of the sale since there was no stipulation to the contrary. It further argued that being a sale on an as-is-where-is basis, it was the duty of respondent to take possession of the property. Petitioner claimed that there was already a constructive delivery of the machinery and equipment.

The RTC ruled that the execution of the deed of absolute sale did not result in constructive delivery of the machinery and equipment. It found that at the time of the sale, petitioner did not have control over the machinery and equipment

and, thus, could not have transferred ownership by constructive delivery. The RTC ruled that petitioner is liable for breach of contract and should pay for the actual damages suffered by respondent.

On petitioner’s appeal, the Court of Appeals affirmed in toto the decision of the RTC.

Hence this petition.

Before this Court, petitioner raises issues by attributing the following errors to the Court of Appeals, to wit:

I.The Court of Appeals erred in not finding that petitioner had complied with its obligation to make delivery of the properties subject of the contract of sale.

II.The Court of Appeals erred in not considering that the sale was on an "as-is-where-is" basis wherein the properties were sold in the condition and in the place where they were located.

III.The Court of Appeals erred in not considering that respondent’s acceptance of petitioner’s disclaimer of warranty forecloses respondent’s legal basis to enforce any right arising from the contract.

IV.The reason for the failure to make actual delivery of the properties was not attributable to the fault and was beyond the control of petitioner. The claim for damages against petitioner is therefore bereft of legal basis.8

The first issue hinges on the determination of whether there was a constructive delivery of the machinery and equipment upon the execution of the deed of absolute sale between petitioner and respondent.

The ownership of a thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.9 The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee.10

As a general rule, when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. And with regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept.11 In order for the execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing sold.12

However, the execution of a public instrument only gives rise to a prima facie presumption of delivery. Such presumption is destroyed when the delivery is not effected because of a legal impediment.13 It is necessary that the vendor shall have control over the thing sold that, at the moment of sale, its material delivery could have been made.14 Thus, a person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument.15

In this case, there was no constructive delivery of the machinery and equipment upon the execution of the deed of absolute sale or upon the issuance of the gate pass since it was not petitioner but Creative Lines which had actual possession of the property. The presumption of constructive delivery is not applicable as it has to yield to the reality that the purchaser was not placed in possession and control of the property.

On the second issue, petitioner posits that the sale being in an as-is-where-is basis, respondent agreed to take possession of the things sold in the condition where they are found and from the place

where they are located. The phrase as-is where-is basis pertains solely to the physical condition of the thing sold, not to its legal situation.16 It is merely descriptive of the state of the thing sold. Thus, the as-is where-is basis merely describes

the actual state and location of the machinery and equipment sold by petitioner to respondent. The depiction does not alter petitioner’s responsibility to deliver the property to respondent.1awphi1.zw+

Anent the third issue, petitioner maintains that the presence of the disclaimer of warranty in the deed of absolute sale absolves it from all warranties, implied or otherwise. The position is untenable.

The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.17 Ownership of the thing sold is acquired by the vendee from the moment it its delivered to him in any of the ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee.18 A perusal of the deed of absolute sale shows that both the vendor and the vendee represented and warranted to each other that each had all the requisite power and authority to enter into the deed of absolute sale and that they shall perform each of their respective obligations under the deed of absolute in accordance with the terms thereof.19 As previously shown, there was no actual or constructive delivery of the things sold. Thus, petitioner has not performed its obligation to transfer ownership and possession of the things sold to respondent.

As to the last issue, petitioner claims that its failure to make actual delivery was beyond its control. It posits that the refusal of Creative Lines to allow the hauling of the machinery and equipment was unforeseen and constituted a fortuitous event.

The matter of fortuitous events is governed by Art. 1174 of the Civil Code which provides that except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. The elements of a fortuitous event are: (a) the cause of the unforeseen and unexpected occurrence, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner, and; (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.20

A fortuitous event may either be an act of God, or natural occurrences such as floods or typhoons, or an act of man such as riots, strikes or wars.21 However, when the loss is found to be partly the result of a person’s participation–whether by active intervention, neglect or failure to act—the whole occurrence is humanized and removed from the rules applicable to a fortuitous event.22

We quote with approval the following findings of the Court of Appeals, to wit:

We find that Creative Lines’ refusal to surrender the property to the vendee does not constitute force majeure which exculpates APT from the payment of damages. This event cannot be considered unavoidable or unforeseen. APT knew for a fact that the properties to be sold were housed in the premises leased by Creative Lines. It should have made arrangements with Creative Lines beforehand for the smooth and orderly removal of the equipment. The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and all human agencies are to be excluded from creating or entering into the cause of the mischief. When the effect, the cause of which is to be considered, is found to be in part the result of the participation of man, whether it be from active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and removed from the rules applicable to the acts of God.23

Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been delayed through the fault of either the buyer or seller the goods are at the risk of the party in fault. The risk of loss or deterioration of the goods sold does not pass to the buyer until there is actual or constructive delivery thereof. As previously discussed, there was no actual or constructive delivery of the machinery and equipment. Thus, the risk of loss or deterioration of property is borne by petitioner. Thus, it should be liable for the damages that may arise from the delay.1avvphi1

Assuming arguendo that Creative Lines’ refusal to allow the hauling of the machinery and equipment is a fortuitous event, petitioner will still be liable for damages. This Court agrees with the appellate court’s findings on the matter of damages, thus:

Article 1170 of the Civil Code states: "Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof are liable for damages." In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.24 The trial court correctly awarded actual damages as pleaded and proven during trial.25

WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of Appeals dated 31 August 2004. Cost against petitioner.SO ORDERED.G.R. No. 188661 April 11, 2012

ESTELITA VILLAMAR, Petitioner, vs.BALBINO MANGAOIL, Respondent.

D E C I S I O NREYES, J.:

The CaseBefore us is a petition for review on certiorari1 under Rule 45 of the Rules of Court filed by Estelita Villamar (Villamar) to assail the Decision2 rendered by the Court of Appeals (CA) on February 20, 2009 in CA-G.R. CV No. 86286, the dispositive portion of which reads:

WHEREFORE, the instant appeal is DISMISSED. The assailed decision is AFFIRMED in toto.SO ORDERED.3

The resolution4 issued by the CA on July 8, 2009 denied the petitioner's motion for reconsideration to the foregoing.

The ruling5 of Branch 23, Regional Trial Court (RTC) of Roxas, Isabela, which was affirmed by the CA in the herein assailed decision and resolution, ordered the (1) rescission of the contract of sale of real property entered into by Villamar and Balbino Mangaoil (Mangaoil); and (2) return of the down payment made relative to the said contract.

Antecedents FactsThe CA aptly summarized as follows the facts of the case prior to the filing by Mangaoil of the complaint6 for rescission of contract before the RTC:

Villamar is the registered owner of a 3.6080 hectares parcel of land [hereinafter referred as the subject property] in San Francisco, Manuel, Isabela covered by Transfer Certificate of Title (TCT) No. T-92958-A. On March 30, 1998, she entered into an Agreement with Mangaoil for the purchase and sale of said parcel of land, under the following terms and conditions:

"1. The price of the land is ONE HUNDRED AND EIGHTY THOUSAND (180,000.00) PESOS per hectare but only the 3.5000 hec. shall be paid and the rest shall be given free, so that the total purchase or selling price shall be [P]630,000.00 only;

2. ONE HUNDRED EIGHTY FIVE THOUSAND (185,000.00) PESOS of the total price was already received on March 27, 1998 for payment of the loan secured by the certificate of title covering the land in favor of the Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela [Rural Bank of Cauayan], in order that the certificate of title thereof be

withdrawn and released from the said bank, and the rest shall be for the payment of the mortgag[e]s in favor of Romeo Lacaden and Florante Parangan;

3. After the release of the certificate of title covering the land subject-matter of this agreement, the necessary deed of absolute sale in favor of the PARTY OF THE SECOND PART shall be executed and the transfer be immediately effected so that the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefor, and the proceeds of the loan, whatever be the amount, be given to the PARTY OF THE FIRST PART;

4. Whatever balance left from the agreed purchase price of the land subject matter hereof after deducting the proceed of the loan and the [P]185,000.00 already received as above-mentioned, the PARTY OF THE SECOND PART shall pay unto the PARTY OF THE FIRST PART not later than June 30, 1998 and thereafter the parties shall be released of any obligations for and against each other; xxx"

On April 1, 1998, the parties executed a Deed of Absolute Sale whereby Villamar (then Estelita Bernabe) transferred the subject parcel of land to Mangaoil for and in consideration of [P]150,000.00.

In a letter dated September 18, 1998, Mangaoil informed Villamar that he was backing out from the sale agreed upon giving as one of the reasons therefor:

"3. That the area is not yet fully cleared by incumbrances as there are tenants who are not willing to vacate the land without giving them back the amount that they mortgaged the land."

Mangaoil demanded refund of his [P]185,000.00 down payment. Reiterating said demand in another letter dated April 29, 1999, the same, however, was unheeded.7 x x x (Citations omitted)

On January 28, 2002, the respondent filed before the RTC a complaint8 for rescission of contract against the petitioner. In the said complaint, the respondent sought the return of P185,000.00 which he paid to the petitioner, payment of interests thereon to be computed from March 27, 1998 until the suit's termination, and the award of damages, costs and P20,000.00 attorney's fees. The respondent's factual allegations were as follows:

5. That as could be gleaned the "Agreement" (Annex "A"), the plaintiff [Mangaoil] handed to the defendant [Villamar] the sum of [P]185,000.00 to be applied as follows; [P]80,000 was for the redemption of the land which was mortgaged to the Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela, to enable the plaintiff to get hold of the title and register the sale x x x and [P]105,000.00 was for the redemption of the said land from private mortgages to enable plaintiff to posses[s] and cultivate the same;

6. That although the defendant had already long redeemed the said land from the said bank and withdrawn TCT No. T-92958-A, she has failed and refused, despite repeated demands, to hand over the said title to the plaintiff and still refuses and fails to do so;

7. That, also, the plaintiff could not physically, actually and materially posses[s] and cultivate the said land because the private mortgage[e]s and/or present possessors refuse to vacate the same;

11. That on September 18, 1998, the plaintiff sent a letter to the defendant demanding a return of the amount so advanced by him, but the latter ignored the same, x x x;

12. That, again, on April 29, 1999, the plaintiff sent to the defendant another demand letter but the latter likewise ignored the same,

13. That, finally, the plaintiff notified the defendant by a notarial act of his desire and intention to rescind the said contract of sale, xxx;

(Citations omitted)

In the respondent’s answer to the complaint, she averred that she had complied with her obligations to the respondent. Specifically, she claimed having caused the release of TCT No. T-92958-A by the Rural Bank of Cauayan and its delivery to a certain "Atty. Pedro C. Antonio" (Atty. Antonio). The petitioner alleged that Atty. Antonio was commissioned to facilitate the transfer of the said title in the respondent's name. The petitioner likewise insisted that it was the respondent who unceremoniously withdrew from their agreement for reasons only the latter knew.

The Ruling of the RTCOn September 9, 2005, the RTC ordered the rescission of the agreement and the deed of absolute sale executed between the respondent and the petitioner. The petitioner was, thus directed to return to the respondent the sum of P185,000.00 which the latter tendered as initial payment for the purchase of the subject property. The RTC ratiocinated that:

There is no dispute that the defendant sold the LAND to the plaintiff for [P]630,000.00 with down payment of [P]185,000.00. There is no evidence presented if there were any other partial payments made after the perfection of the contract of sale.

Article 1458 of the Civil Code provides:

"Art. 1458. By the contract of sale[,] one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent."

As such, in a contract of sale, the obligation of the vendee to pay the price is correlative of the obligation of the vendor to deliver the thing sold. It created or established at the same time, out of the same course, and which result in mutual relations of creditor and debtor between the parties.

The claim of the plaintiff that the LAND has not been delivered to him was not refuted by the defendant. Considering that defendant failed to deliver to him the certificate of title and of the possession over the LAND to the plaintiff, the contract must be rescinded pursuant to Article 1191 of the Civil Code which, in part, provides:

"Art. 1191. The power of rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him."10

The petitioner filed before the CA an appeal to challenge the foregoing. She ascribed error on the part of the RTC when the latter ruled that the agreement and deed of sale executed by and between the parties can be rescinded as she failed to deliver to the respondent both the subject property and the certificate of title covering the same.

The Ruling of the CAOn February 20, 2009, the CA rendered the now assailed decision dismissing the petitioner’s appeal based on the following grounds:

Burden of proof is the duty of a party to prove the truth of his claim or defense, or any fact in issue necessary to establish his claim or defense by the amount of evidence required by law. In civil cases, the burden of proof is on the defendant if he alleges, in his answer, an affirmative defense, which is not a denial of an essential ingredient in the plaintiff's cause of action, but is one which, if established, will be a good defense – i.e., an "avoidance" of the claim, which prima facie, the plaintiff already has because of the defendant's own admissions in the pleadings.

Defendant-appellant Villamar's defense in this case was an affirmative defense. She did not deny plaintiff-appellee’s allegation that she had an agreement with plaintiff-appellee for the sale of the subject parcel of land. Neither did she deny that she was obliged under the contract to deliver the certificate of title to plaintiff-appellee immediately after said title/property was redeemed from the bank. What she rather claims is that she already complied with her obligation to deliver the title to plaintiff-appellee when she delivered the same to Atty. Antonio as it was plaintiff-appellee himself who engaged the services of said lawyer to precisely work for the immediate transfer of said title in his name. Since,

however, this affirmative defense as alleged in defendant-appellant's answer was not admitted by plaintiff-appellee, it then follows that it behooved the defendant-appellant to prove her averments by preponderance of evidence.

Yet, a careful perusal of the record shows that the defendant-appellant failed to sufficiently prove said affirmative defense. She failed to prove that in the first place, "Atty. Antonio" existed to receive the title for and in behalf of plaintiff-appellee. Worse, the defendant-appellant failed to prove that Atty. Antonio received said title "as allegedly agreed upon."

We likewise sustain the RTC's finding that defendant-appellant V[i]llamar failed to deliver possession of the subject property to plaintiff-appellee Mangaoil. As correctly observed by the RTC - "[t]he claim of the plaintiff that the land has not been delivered to him was not refuted by the defendant." Not only that. On cross-examination, the defendant-appellant gave Us insight on why no such delivery could be made, viz.:

Q: So, you were not able to deliver this property to Mr. Mangaoil just after you redeem the property because of the presence of these two (2) persons, is it not?

A: Yes, sir.

Q: Forcing you to file the case against them and which according to you, you have won, is it not?

A: Yes, sir.

Q: And now at present[,] you are in actual possession of the land?

A: Yes, sir. x x x"

With the foregoing judicial admission, the RTC could not have erred in finding that defendant-[appellant] failed to deliver the possession of the property sold, to plaintiff-appellee.

Neither can We agree with defendant-appellant in her argument that the execution of the Deed of Absolute Sale by the parties is already equivalent to a valid and constructive delivery of the property to plaintiff-appellee. Not only is it doctrinally settled that in a contract of sale, the vendor is bound to transfer the ownership of, and to deliver the thing that is the object of the sale, the way Article 1547 of the Civil Code is worded, viz.:

"Art. 1547. In a contract of sale, unless a contrary intention appears, there is:

(1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing;

(2) An implied warranty that the thing shall be free from any hidden defaults or defects, or any change or encumbrance not declared or known to the buyer.

shows that actual, and not mere constructive delivery is warrantied by the seller to the buyer. "(P)eaceful possession of the thing" sold can hardly be enjoyed in a mere constructive delivery.

The obligation of defendant-appellant Villamar to transfer ownership and deliver possession of the subject parcel of land was her correlative obligation to plaintiff-appellee in exchange for the latter's purchase price thereof. Thus, if she fails to comply with what is incumbent upon her, a correlative right to rescind such contract from plaintiff-appellee arises, pursuant to Article 1191 of the Civil Code.11 x x x (Citations omitted)

The IssuesAggrieved, the petitioner filed before us the instant petition and submits the following issues for resolution:

I.WHETHER THE FAILURE OF PETITIONER-SELLER TO DELIVER THE CERTIFICATE OF TITLE OVER THE PROPERTY TO RESPONDENT-BUYER IS A BREACH OF OBLIGATION IN A CONTRACT OF SALE OF REAL PROPERTY THAT WOULD WARRANT RESCISSION OF THE CONTRACT;

II.WHETHER PETITIONER IS LIABLE FOR BREACH OF OBLIGATION IN A CONTRACT OF SALE FOR FAILURE OF RESPONDENT[-]BUYER TO IMMEDIATELY TAKE ACTUAL POSSESSION OF THE PROPERTY NOTWITHSTANDING THE ABSENCE OF ANY STIPULATION IN THE CONTRACT PROVIDING FOR THE SAME;

III.WHETHER THE EXECUTION OF A DEED OF SALE OF REAL PROPERTY IN THE PRESENT CASE IS ALREADY EQUIVALENT TO A VALID AND CONSTRUCTIVE DELIVERY OF THE PROPERTY TO THE BUYER;

IV.WHETHER OR NOT THE CONTRACT OF SALE SUBJECT MATTER OF THIS CASE SHOULD BE RESCINDED ON SLIGHT OR CASUAL BREACH;

V. WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE RTC ORDERING THE RESCISSION OF THE CONTRACT OF SALE[.]12

The Petitioner's Arguments

The petitioner avers that the CA, in ordering the rescission of the agreement and deed of sale, which she entered into with the respondent, on the basis of her alleged failure to deliver the certificate of title, effectively imposed upon her an extra duty which was neither stipulated in the contract nor required by law. She argues that under Articles 149513 and 149614 of the New Civil Code (NCC), the obligation to deliver the thing sold is complied with by a seller who executes in favor of a buyer an instrument of sale in a public document. Citing Chua v. Court of Appeals,15 she claims that there is a distinction between transferring a certificate of title in the buyer's name, on one hand, and transferring ownership over the property sold, on the other. The latter can be accomplished by the seller's execution of an instrument of sale in a public document. The recording of the sale with the Registry of Deeds and the transfer of the certificate of title in the buyer's name are necessary only to bind third parties to the transfer of ownership.16

The petitioner contends that in her case, she had already complied with her obligations under the agreement and the law when she had caused the release of TCT No. T-92958-A from the Rural Bank of Cauayan, paid individual mortgagees Romeo Lacaden (Lacaden) and Florante Parangan (Paranga), and executed an absolute deed of sale in the respondent's favor. She adds that before T-92958-A can be cancelled and a new one be issued in the respondent's favor, the latter decided to withdraw from their agreement. She also points out that in the letters seeking for an outright rescission of their agreement sent to her by the respondent, not once did he demand for the delivery of TCT.

The petitioner insists that the respondent's change of heart was due to (1) the latter's realization of the difficulty in determining the subject property's perimeter boundary; (2) his doubt that the property he purchased would yield harvests in the amount he expected; and (3) the presence of mortgagees who were not willing to give up possession without first being paid the amounts due to them. The petitioner contends that the actual reasons for the respondent's intent to rescind their agreement did not at all constitute a substantial breach of her obligations.

The petitioner stresses that under Article 1498 of the NCC, when a sale is made through a public instrument, its execution is equivalent to the delivery of the thing which is the contract's object, unless in the deed, the contrary appears or can be inferred. Further, in Power Commercial and Industrial Corporation v. CA,17 it was ruled that the failure of a seller to eject lessees from the property he sold and to deliver actual and physical possession, cannot be considered a substantial breach, when such failure was not stipulated as a resolutory or suspensive condition in the contract and when the effects and consequences of the said failure were not specified as well. The execution of a deed

of sale operates as a formal or symbolic delivery of the property sold and it already authorizes the buyer to use the instrument as proof of ownership.18

The petitioner argues that in the case at bar, the agreement and the absolute deed of sale contains no stipulation that she was obliged to actually and physically deliver the subject property to the respondent. The respondent fully knew Lacaden's and Parangan's possession of the subject property. When they agreed on the sale of the property, the respondent consciously assumed the risk of not being able to take immediate physical possession on account of Lacaden's and Parangan's presence therein.

The petitioner likewise laments that the CA allegedly misappreciated the evidence offered before it when it declared that she failed to prove the existence of Atty. Antonio. For the record, she emphasizes that the said lawyer prepared and notarized the agreement and deed of absolute sale which were executed between the parties. He was also the petitioner’s counsel in the proceedings before the RTC. Atty. Antonio was also the one asked by the respondent to cease the transfer of the title over the subject property in the latter's name and to return the money he paid in advance.

The Respondent's Contentions

In the respondent's comment,19 he seeks the dismissal of the instant petition. He invokes Articles 1191 and 1458 to argue that when a seller fails to transfer the ownership and possession of a property sold, the buyer is entitled to rescind the contract of sale. Further, he contends that the execution of a deed of absolute sale does not necessarily amount to a valid and constructive delivery. In Masallo v. Cesar,20 it was ruled that a person who does not have actual possession of real property cannot transfer constructive possession by the execution and delivery of a public document by which the title to the land is transferred. In Addison v. Felix and Tioco,21 the Court was emphatic that symbolic delivery by the execution of a public instrument is equivalent to actual delivery only when the thing sold is subject to the control of the vendor.

Our RulingThe instant petition is bereft of merit.

There is only a single issue for resolution in the instant petition, to wit, whether or not the failure of the petitioner to deliver to the respondent both the physical possession of the subject property and the certificate of title covering the same amount to a substantial breach of the former's obligations to the latter constituting a valid cause to rescind the agreement and deed of sale entered into by the parties.

We rule in the affirmative.

The RTC and the CA both found that the petitioner failed to comply with her obligations to deliver to the respondent both the possession of the subject property and the certificate of title covering the same.

Although Articles 1458, 1495 and 1498 of the NCC and case law do not generally require the seller to deliver to the buyer the physical possession of the property subject of a contract of sale and the certificate of title covering the same, the agreement entered into by the petitioner and the respondent provides otherwise. However, the terms of the agreement cannot be considered as violative of law, morals, good customs, public order, or public policy, hence, valid.

Article 1458 of the NCC obliges the seller to transfer the ownership of and to deliver a determinate thing to the buyer, who shall in turn pay therefor a price certain in money or its equivalent. In addition thereto, Article 1495 of the NCC binds the seller to warrant the thing which is the object of the sale. On the other hand, Article 1498 of the same code provides that when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed, the contrary does not appear or cannot clearly be inferred.

In the case of Chua v. Court of Appeals,22 which was cited by the petitioner, it was ruled that "when the deed of absolute sale is signed by the parties and notarized, then delivery of the real property is deemed made by the seller to

the buyer."23 The transfer of the certificate of title in the name of the buyer is not necessary to confer ownership upon him.

In the case now under our consideration, item nos. 2 and 3 of the agreement entered into by the petitioner and the respondent explicitly provide:

2. ONE HUNDRED EIGHTY FIVE THOUSAND (P185,000.00) PESOS of the total price was already received on March 27, 1998 for payment of the loan secured by the certificate of title covering the land in favor of the Rural Bank of Cauayan, San Manuel Branch, San Manuel, Isabela, in order that the certificate of title thereof be withdrawn and released from the said bank, and the rest shall be for the payment of the mortgages in favor of Romeo Lacaden and Florante Parangan;

3. After the release of the certificate of title covering the land subject-matter of this agreement, the necessary deed of absolute sale in favor of the PARTY OF THE SECOND PART shall be executed and the transfer be immediately effected so that the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefor, and the proceeds of the loan, whatever be the amount, be given to the PARTY OF THE FIRST PART;24 (underlining supplied)

As can be gleaned from the agreement of the contending parties, the respondent initially paid the petitioner P185,000.00 for the latter to pay the loan obtained from the Rural Bank of Cauayan and to cause the release from the said bank of the certificate of title covering the subject property. The rest of the amount shall be used to pay the mortgages over the subject property which was executed in favor of Lacaden and Parangan. After the release of the TCT, a deed of sale shall be executed and transfer shall be immediately effected so that the title covering the subject property can be used as a collateral for a loan the respondent will apply for, the proceeds of which shall be given to the petitioner.

Under Article 1306 of the NCC, the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy.

While Articles 1458 and 1495 of the NCC and the doctrine enunciated in the case of Chua do not impose upon the petitioner the obligation to physically deliver to the respondent the certificate of title covering the subject property or cause the transfer in the latter's name of the said title, a stipulation requiring otherwise is not prohibited by law and cannot be regarded as violative of morals, good customs, public order or public policy. Item no. 3 of the agreement executed by the parties expressly states that "transfer [shall] be immediately effected so that the latter can apply for a loan from any lending institution using the corresponding certificate of title as collateral therefore." Item no. 3 is literal enough to mean that there should be physical delivery of the TCT for how else can the respondent use it as a collateral to obtain a loan if the title remains in the petitioner’s possession. We agree with the RTC and the CA that the petitioner failed to prove that she delivered the TCT covering the subject property to the respondent. What the petitioner attempted to establish was that she gave the TCT to Atty. Antonio whom she alleged was commissioned to effect the transfer of the title in the respondent's name. Although Atty. Antonio's existence is certain as he was the petitioner’s counsel in the proceedings before the RTC, there was no proof that the former indeed received the TCT or that he was commissioned to process the transfer of the title in the respondent's name.

It is likewise the petitioner’s contention that pursuant to Article 1498 of the NCC, she had already complied with her obligation to deliver the subject property upon her execution of an absolute deed of sale in the respondent’s favor. The petitioner avers that she did not undertake to eject the mortgagors Parangan and Lacaden, whose presence in the premises of the subject property was known to the respondent.

We are not persuaded.

In the case of Power Commercial and Industrial Corporation25 cited by the petitioner, the Court ruled that the failure of the seller to eject the squatters from the property sold cannot be made a ground for rescission if the said ejectment was not stipulated as a condition in the contract of sale, and when in the negotiation stage, the buyer's counsel himself undertook to eject the illegal settlers.

The circumstances surrounding the case now under our consideration are different. In item no. 2 of the agreement, it is stated that part of the P185,000.00 initially paid to the petitioner shall be used to pay the mortgagors, Parangan and Lacaden. While the provision does not expressly impose upon the petitioner the obligation to eject the said mortgagors, the undertaking is necessarily implied. Cessation of occupancy of the subject property is logically expected from the mortgagors upon payment by the petitioner of the amounts due to them.

We note that in the demand letter26 dated September 18, 1998, which was sent by the respondent to the petitioner, the former lamented that "the area is not yet fully cleared of incumbrances as there are tenants who are not willing to vacate the land without giving them back the amount that they mortgaged the land." Further, in the proceedings before the RTC conducted after the complaint for rescission was filed, the petitioner herself testified that she won the ejectment suit against the mortgagors "only last year".27 The complaint was filed on September 8, 2002 or more than four years from the execution of the parties' agreement. This means that after the lapse of a considerable period of time from the agreement's execution, the mortgagors remained in possession of the subject property.

Notwithstanding the absence of stipulations in the agreement and absolute deed of sale entered into by Villamar and Mangaoil expressly indicating the consequences of the former's failure to deliver the physical possession of the subject property and the certificate of title covering the same, the latter is entitled to demand for the rescission of their contract pursuant to Article 1191 of the NCC.

We note that the agreement entered into by the petitioner and the respondent only contains three items specifying the parties' undertakings. In item no. 5, the parties consented "to abide with all the terms and conditions set forth in this agreement and never violate the same."28

Article 1191 of the NCC is clear that "the power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him." The respondent cannot be deprived of his right to demand for rescission in view of the petitioner’s failure to abide with item nos. 2 and 3 of the agreement. This remains true notwithstanding the absence of express stipulations in the agreement indicating the consequences of breaches which the parties may commit. To hold otherwise would render Article 1191 of the NCC as useless.

Article 1498 of the NCC generally considers the execution of a public instrument as constructive delivery by the seller to the buyer of the property subject of a contract of sale. The case at bar, however, falls among the exceptions to the foregoing rule since a mere presumptive and not conclusive delivery is created as the respondent failed to take material possession of the subject property.

Further, even if we were to assume for argument's sake that the agreement entered into by the contending parties does not require the delivery of the physical possession of the subject property from the mortgagors to the respondent, still, the petitioner's claim that her execution of an absolute deed of sale was already sufficient as it already amounted to a constructive delivery of the thing sold which Article 1498 of the NCC allows, cannot stand.

In Philippine Suburban Development Corporation v. The Auditor General,29 we held:

When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred.1âwphi1

In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, x x x where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made.30 (Underlining supplied and citations omitted)

Stated differently, as a general rule, the execution of a public instrument amounts to a constructive delivery of the thing subject of a contract of sale. However, exceptions exist, among which is when mere presumptive and not conclusive

delivery is created in cases where the buyer fails to take material possession of the subject of sale. A person who does not have actual possession of the thing sold cannot transfer constructive possession by the execution and delivery of a public instrument.

In the case at bar, the RTC and the CA found that the petitioner failed to deliver to the respondent the possession of the subject property due to the continued presence and occupation of Parangan and Lacaden. We find no ample reason to reverse the said findings. Considered in the light of either the agreement entered into by the parties or the pertinent provisions of law, the petitioner failed in her undertaking to deliver the subject property to the respondent.

IN VIEW OF THE FOREGOING, the instant petition is DENIED. The February 20, 2009 Decision and July 8, 2009 Resolution of the Court of Appeals, directing the rescission of the agreement and absolute deed of sale entered into by Estelita Villamar and Balbino Mangaoil and the return of the down payment made for the purchase of the subject property, are AFFIRMED. However, pursuant to our ruling in Eastern Shipping Lines, Inc. v. CA,31 an interest of 12% per annum is imposed on the sum of P185,000.00 to be returned to Mangaoil to be computed from the date of finality of this Decision until full satisfaction thereof.SO ORDERED.