1. [1931V99E] THE BACHRACH MOTOR CO., INC., plaintiff-appellee, vs. TALISAY- SILAY MILLING CO. ET AL., defendants-appellees. THE PHILIPPINE NATIONAL BANK, intervenor-appellant.1931 Sep 17En BancG.R. No. 35223D E C I S I O N

ROMUALDEZ, J:

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

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

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

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

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

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

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

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

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

"3. In holding that the assignment (Exhibit 9, P. N. B.) of said bonus made on March 7, 1930, by Mariano Lacson Ledesma to the Philippine National Bank to be applied to the payment of his debt to said Philippine National Bank is fraudulent.

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

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

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

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

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

The appellant bank bases its preferential right upon the contention that the bonus in question is civil fruits of the land which the owners had mortgaged for the benefit of the central giving the bonus, and that, a civil fruits of said land, said bonus was assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of the document Exhibit 9 of said intervening institution, which admitted in its brief that "if the bonus

in question is not civil fruits or rent which became subject to the mortgage in favor of the Philippine National Bank when Mariano Lacson Ledesma's personal obligation fell due, the assignment of March 7, 1930 (Exhibit 9, P. N. B.), is null and void, not because it is fraudulent, for there was no intent of fraud in executing the deed, that the cause or consideration of the assignment was erroneous, for it was based upon the proposition that the bonus was civil fruits of the land mortgaged to the Philippine National Bank." (P. 31.)

The fundamental question, then, submitted to our consideration is whether or not the bonus in question is civil fruits.

This is how that bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co., Inc., was indebted to the Philippine National Bank. To secure the payment of its debt, it succeeded in inducing its planters, among whom was Mariano Lacson Ledesma, to mortgage their land to the creditor bank. And in order to compensate those planters for the risk they were running with their property under that mortgage, the aforesaid central, by a resolution passed on that same date, i.e., December 22, 1923, and amended on March 23, 1928, undertook to credit the owners of the plantation thus mortgaged every year with a sum equal to two per centum of the debt secured according to the yearly balance, the payment of the bonus being made at once, or in part from time to time, as soon as the central became free of its obligations to the aforesaid bank, and of those contracted by virtue of the contract of supervision, and had funds which might be so used, or as soon as it obtained from said bank authority to make such payment. (Exhibits 5, 6; P. N. B.)

Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second, the proceeds from leases of lands; and, third, the income from perpetual or life annuities, or other similar sources of revenue. It may be noted that according to the context of the law, the phrase "u otras analogas" refers only to rents or income, for the adjectives "otras" and "analogas" agree with the noun "rentas," as do also the other adjectives "perpetuas" and "vitalicias." That is why we say that by "civil fruits" the Civil Code understands one of three and only three things, to wit: the rent of a building, the rent of land, and certain kinds of income. As the bonus in question is not the rent of a building or of land, the only meaning of "civil fruits" left to be examined is that of "income."

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

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

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

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

2. JOSEFINA S. DE LAUREANO, petitioner, vs. HON. MIDPANTAO L. ADIL, in his capacity as Presiding Judge, Court of First Instance of Iloilo, Branch II, and ONG CU, respondents.1976 July 292nd DivisionG.R. No. L-43345D E C I S I O N

AQUINO, J:

Josefina S. de Laureano in this special civil action of certiorari assails the interlocutory orders of the Court of First Instance of Iloilo, denying her motions for execution and for a preliminary mandatory injunction in an ejectment suit which was decided in her favor by the city court of Iloilo City and which was appealed by the lessee, Ong Cu (Civil Cage No. 10370).

Mrs. Laureano is the registered owner of Lots 996 and 1004-B with a total area of 3,107 square meters located at the corner of Iznart and Solis Streets, Iloilo City. The lots were leased to Ong Cu for fifteen-year period which allegedly expired on August 31, 1974.

In view of Ong Cu's failure to vacate the lots and remove his improvements thereon. Mrs. Laureano filed against him an ejectment suit in October, 1974 in the city court of Iloilo City.

After trial, the city court on September 23, 1975 rendered a judgment ordering Ong Cu to vacate the lots, to restore their possession to Mrs. Laureano, to remove his buildings and other improvements thereon and to pay P12,428 monthly as compensation for the use and occupation of the lots from September 1, 1974 up to the time he vacates them, with interest at twelve percent per annum from the date of accrual, plus P10,000 as moral and exemplary damages and attorney's fees.

Ong Cu appealed to the Court of First Instance of Iloilo. Instead of filing a supersedeas bond based on the findings of the city court in its decision, Ong Cu asked the city court ex parte to approve his supersedeas bond in the sum of P22,000 and to fix the rental value of the two lots at P1,200 a month. The city court granted that ex parte motion in its order of October 8, 1975. Thereafter, the record was elevated to the Court of First Instance. The case was assigned to the sala of respondent Judge.

On November 4 Mrs. Laureano received a notice from the clerk of court that Ong Cu's appeal had been docketed. On November 13 she filed a motion in the lower court praying for a preliminary mandatory injunction to restore her to the possession of the said lots. Invoking article 1674 of the Civil Code and section 9, Rule 70 of the Rules of Court, she alleged that Ong Cu's appeal was frivolous and dilatory.

She also asked for immediate execution of the city court's judgment on the ground that Ong Cu's supersedeas bond was inadequate and that he had failed to deposit

the sum of P12,428 monthly as reasonable value of the use and occupation of the lots adjudged by the city court.

Ong Cu opposed the two motions. The lower court in its order of December 9, 1975 upheld the city court's order fixing the supersedeas bond and the amount to be deposited by Ong Cu.

After the lower court's attention was called to its failure to resolve Mrs. Laureano's other motion for a mandatory injunction, it ruled in its order of February 12, 1976 that the writ could not be granted because it had already sanctioned Ong Cu's supersedeas bond, the purpose of which was to stay execution pending appeal. The lower court reasoned out that it would be absurd to stay execution and at the same time restore possession to the plaintiff by granting the mandatory injunction. It regarded Ong Cu as a possessor in good faith entitled to reimbursement of his necessary and useful expenses.

The instant certiorari action was filed on March 25, 1976. The issue is whether the lower court acted with grave abuse of discretion in denying Mrs. Laureano's motions for execution and a mandatory injunction.

The motion for execution. Rule 70 of the Rules of Court provides:

"SEC. 8. Immediate execution of judgment. How to stay same. If judgment is rendered against the defendant, execution shall issue immediately, unless an appeal has been perfected and the defendant to stay execution files a sufficient bond, approved by the municipal or city court and executed to the plaintiff to enter the action in the Court of First Instance and to pay the rents, damages, and costs accruing down to the time of the judgment appealed from, and unless, during the pendency of the appeal, he deposits with the appellate court the amount of rent due from time to time under the contract, if any, as found by the judgment of the municipal or city court to exist. In the absence of a contract, he shall deposit with the court the reasonable value of the use and occupation of the premises for the preceding month or period at the rate determined by the judgment, on or before the tenth day of each succeeding month or period. The supersedeas bond shall be transmitted by the municipal or city court, with the other papers, to the clerk of the Court of First Instance to which the action is appealed.

"All moneys so paid to the appellate court shall be deposited in the provincial or city treasury, and shall be held there until the final disposition of the appeal, unless the court, by agreement of the interested parties, or in the absence of reasonable grounds of opposition to a motion to withdraw, or for justifiable reasons, shall decree otherwise. Should the defendant fail to make the payments above prescribed from time to time during the pendency of the appeal, the appellate court, upon motion of the plaintiff, of which the defendant shall have notice, and upon proof of such failure, shall order the execution of the judgment appealed from

with respect to the restoration of possession, but such execution shall not be a bar to the appeal taking its course until the final disposition thereof on its merits.

xxx xxx xxx."

As explicitly provided in section 8, the judgment of the inferior court in plaintiff's favor in an ejectment case is immediately executory. Thus, where the city court on the day it rendered the judgment ordered the execution thereof and the defendant did not perfect his appeal and did not post a supersedeas bond, it was held that certiorari would not lie to set aside the execution. Section 8 of Rule 70 is an exception to the general rule as to the execution of the judgment of an inferior court which is found in section 18, Rule 5 of the Rules of Court (Pascua vs. Nable, 71 Phil. 186).

The inferior court's judgment is immediately executory in order to prevent further damages to the plaintiff should the defendant continue to deprive him of the possession of the premises in litigation (Yu Tiong Tay vs. Barrios, 79 Phil. 597, 601).

The defendant may stay execution by (a) perfecting an appeal and filing a supersedeas bond and (b) paying from time to time either to the plaintiff or to the Court of First Instance during the pendency of the appeal the rentals or the reasonable value of the use and occupation of the property as fixed by the inferior court in its judgment (Sison vs. Hon. Bayona, 109 Phil. 557, 561; Vda. de Palanca vs. Chua Keng Kian, L-26430, March 11, 1969, 27 SCRA 356).

The reasonable value of the use and occupation of the premises is that fixed by the inferior court in its judgment because the rental stipulated in the lease contract that had expired might no longer be the reasonable value for the use and occupation of the premises by the reason of the change or rise in value (Aylon vs. Jugo, 78 Phil. 816).

The purpose of the supersedeas bond is to secure payment of the rents and damages adjudged in the appealed judgment. Hence, the bond is not necessary if the defendant deposits in court the amount of back rentals fixed in the judgment. In other words, the supersedeas bond answers only for rentals as fixed in the judgment and not for those that may accrue during the pendency of the appeal which are guaranteed by the periodical deposits to be made by the defendant. (Sison vs. Hon. Bayona, supra). The appeal bond answers for the costs (Sanchez vs. Zosa, L-27043, November 28, 1975, 68 SCRA 171, 174; Contreras vs. Dinglasan, 79 Phil. 42).

The damages contemplated in section 8 of Rule 70 refer to the reasonable compensation for the use and occupation of the property which is generally measured by its fair rental value. It cannot refer to other damages which are foreign to the enjoyment or material possession of the property. Consequently, attorney's fees cannot be considered as damages (Castueras vs. Bayona, 106 Phil. 340).

In the instant case, the city court found that Ong Cu's lease expired on August 31, 1974 and that the reasonable value of the use and occupation of the two lots is four pesos a square meter or P12,428 monthly. To stay execution, Ong Cu should have filed, and the city court should have required, a supersedeas bond in the total amount of the reasonable value of the use and occupation of the two lots for the period from September 1, 1974 to September, 1975, or for thirteen months, at the rate fixed in the city court's judgment which is P12,428.

The supersedeas bond should be in the total sum of P161,564.00. And the amount to be deposited monthly beginning October, 1975 is that same amount of P12,428. The deposit should be made on or before the tenth day of the succeeding month.

The city court erred in issuing ex parte an order granting Ong Cu's motion fixing the supersedeas bond at P22,000 and the monthly deposit at P1,200 which was the rental stipulated in the lease contract that had already expired. The city court should not have allowed Ong Cu to dictate the amount of the supersedeas bond and the amount of the monthly payments to be deposited in court.

The reasonable value of the use and occupation of the two lots was already fixed in its judgment. That value is the value to be deposited in court. Ong Cu's motion that it be fixed at P1,200 was uncalled for and was in contravention of the mandatory provisions of section 8 of Rule 70.

Also contrary to the peremptory provisions of section 8 was Ong Cu's act of fixing his supersedeas bond at P22,000 instead of at the amount equivalent to the total compensation or rentals that had accumulated up to the rendition of the city court's judgment. That is the amount of the supersedeas bond unalterably fixed in section 8.

The lower court theorized that the city court's order of October 8, 1975 approving Ong Cu's supersedeas bond in the sum of P22,000 and provisionally fixing the monthly rental deposited at P1,200 was a valid amendment of the city court's decision of September 23. That theory is untenable. It distorts the meaning of an amendment. Ong Cu did not move that the decision be amended. The order according to its letter and tenor can in no sense be interpreted as amendment of the city court's decision. It makes no reference to the decision.

At the time the order was issued, Ong Cu had already filed his notice of appeal. He did not file a new notice of appeal by indicating therein that he was appealing from the city court's decision as supposedly amended by its order of October 8. He could not have done so because the October 8 order in its face does not purport to amend the decision.

It results that Ong Cu's supersedeas bond was inadequate and that he did not deposit the compensation for the use and occupation of the two lots which was

fixed in the city court's judgment. His supersedeas bond and his deposits were not sufficient to stay execution.

If this were a case where the defendant did not file any supersedeas bond or did not make any monthly deposit, then Mrs. Laureano would be entitled as a matter of right to the immediate execution of the city court's judgment both as to the restoration of possession and the payment of the accrued rentals or compensation for the use and occupation of the premises (De Pages and Vda. de Rodriguez vs. Hon. Canonoy, 116 Phil. 898, 901; Paulino, Sr. vs. Hon. Surtida, 109 Phil. 621, 626).

In such a case the execution is mandatory. The only exceptions are the existence of fraud, accident, mistake or execusable negligence which prevented the defendant from posting the supersedeas bond or making the monthly deposit, or the occurrence of supervening events which brought about a material change in the situation of the parties and which would make the execution inequitable (Cunanan vs. Rodas, 78 Phil. 800; Laurel vs. Abalos, L-26098, October 31, 1969, 30 SCRA 281).

This is a case where there was a supersedeas bond and where monthly deposits were made but the bond and the deposit were inadequate or were not in conformity with the city court's judgment. Ong Cu committed a mistake because he followed the erroneous order of the city court which fixed the supersedeas bond and the monthly deposit in contravention of its own decision and, consequently, in violation of section 8 of Rule 70. Because of that mistake, immediate execution under Rule 70 would not be warranted (See Yu Phi Khim vs. Amparo, 86 Phil. 441, 445; Bantug vs. Montinola, 73 Phil. 13, 20; Kraut vs. Encarnacion, 96 Phil. 986; Tagulimot vs. Makalintal, 85 Phil. 40; De la Cruz vs. Burgos, L-28095, July 30, 1969, 28 SCRA 977). The Court of First Instance has discretion to order the execution of a new supersedeas bond to replace a defective one (Zamora vs. Dinglasan and Hilario, 77 Phil. 46, 53).

Ong Cu should be given a thirty-day period from notice within which to file a new supersedeas bond in the sum of P161,564 and to deposit the value of the use and occupation of the two lots at the rate of P12,428 beginning October, 1975 less the amounts already deposited by him. Execution should issue if he fails to file a new supersedeas bond and to make up for the deficiency in his monthly deposits.

Motion for mandatory injunction. The Civil Code provides:

"ART. 1674. In ejectment cases where an appeal is taken the remedy granted in article 539, second paragraph, shall also apply, if the higher court is satisfied that the lessee's appeal is frivolous or dilatory, or that the lessor's appeal is prima facie meritorious. The period of ten days referred to in said article shall be counted from the time the appeal is perfected. (n)"

Article 1674 is reproduced in section 9 of Rule 70. Article 539 of the Civil Code in its second paragraph grants to the possessor, who was deprived of the possession of

his real property through forcible entry, the right to secure from an inferior court in the action for forcible entry a writ of preliminary mandatory injunction to restore him in his possession.

Article 1674 gives to the plaintiff in an unlawful detainer case originating in the inferior court and appealed to the Court of First Instance the remedy which article 539 gives to the plaintiff in a forcible entry case. It is designed to eliminate the injustice of the old rule which allowed the lessee to continue in possession during an appeal even if the owner or plaintiff has an immediate right to the premises in litigation (pp. 98, 143, Report of Code Commission).

Article 1674 is in consonance with the summary character of an ejectment suit which is an expeditious means for recovering possession of real property (Deveza vs. Montecillo, L-23942, March 28, 1969, 27 SCRA 822; Mara, Inc. vs. Estrella, L-40511, July 25, 1975, 65 SCRA 471) but the effectiveness of which was often frustrated by defendant's dilatory tactics which were tolerated by inferior courts (Vda. de Palanca vs. Chua Keng Kian, L-26430, March 11, 1969, 27 SCRA 356, 365-6).

The decisive issue is whether the pleadings, the city court's decision and Ong Cu's contentions show that his appeal is manifestly frivolous and dilatory.

There is no question that Mrs. Laureano is the registered owner of the two lots and that they were leased to Ong Cu for a fifteen-year period counted from September 1, 1959 and expiring on August 31, 1974. Ong Cu in his answer to the ejectment complaint unmistakably admitted that the lease expired on that date. He alleged that there were negotiations for his purchase of the two lots.

His defenses were that the ejectment action was premature because he was still considering Mrs. Laureano's proposal to sell the lots; that the removal of his buildings and improvements allegedly worth P1,800,000 would prejudice him and entail considerable expenses; that there is difficulty in looking for another site during the short period granted to him by Mrs. Laureano; that he is willing to buy the lots at a reasonable price, and that the price fixed by Mrs. Laureano is excessive.

Those defenses cannot defeat the ejectment suit. The expiration of the lease and Mrs. Laureano's refusal to renew it made Ong Cu a deforciant or an unlawful withholder of the possession of the lots. He has become a possessor in bad faith. The Civil Code provides:

"ART. 1669. If the lease was made for a determinate time, it ceases upon the day fixed, without the need of a demand. (1565)

"ART. 1671. If the lessee continues enjoying the thing after the expiration of the contract over the lessor's objection, the former shall be subject to the responsibilities of a possessor in bad faith. (n)

"ART. 1673. The lessor may judicially eject the lessee for any of the following causes:

"(1) When the period agreed upon, . . . has expired.

xxx xxx xxx (1569a)"

The rule is that if after the termination of the lease contract the lessee prolongs his occupation of the premises, there is unlawful detainer and article 1674 applies. For the purpose of that article, it is enough that the plaintiff is the owner of the land and that the defendant is in temporary occupation thereof whether under a lease contract or on mere tolerance or under a temporary permit. (De la Cruz vs. Bocar, 99 Phil. 491).

The lower court assumed that Ong Cu in constructing his building on the leased lots is a possessor in good faith entitled to reimbursement of the necessary and useful expenses incurred by him and with a right of retention, as contemplated in articles 546 and 547 of the Civil Code.

That assumption is erroneous. As a lessee, who constructed a building on the leased land, Ong Cu cannot be characterized as a builder in good faith. Under article 448 of the Civil Code the owner of the land on which anything has been built in good faith may appropriate the building after payment of the indemnity provided in articles 546 and 548 of the Civil Code.

Article 448 applies to a case where one builds on land of which he honestly claims to be the owner and not to lands wherein one's only interest is that of a lessee under a rental contract. A contrary rule would place it within the power of the lessee "to improve his landlord out of his property" (Alburo vs. Villanueva, 7 Phil. 277, 280; Cortes vs. Ramos, 46 Phil. 184; Fojas vs. Velasco, 51 Phil. 520; Bantug vs. Montinola, 73 Phil. 13).

In other words, article 448 refers to a possessor who occupied the land in the belief that he was the owner thereof. It does not apply to the lessee because the lessee knows at the outset that he is not the owner of the land (Lopez, Inc. vs. Philippine & Eastern Trading Co., Inc., 99 Phil. 348). The tenant has no pretension to being the owner of the land (Rivera vs. Trinidad, 48 Phil. 396, 401).

As noted by the city court, Ong Cu's rights with respect to the improvements made by him on the leased land are governed by the following provisions of the Civil Code:

"ART. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements,

even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary.

"With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. (n)"

Under article 1678 it is the lessor who has the option to pay for one-half of the value of the improvements which the lessee has made in good faith, which are suitable for the use for which the lease is intended and which have not altered the form and substance of the land (Philippine National Bank vs. Pineda, L-29748, August 29, 1969, 29 SCRA 262; Lapeña and Pineda vs. Morfe, 101 Phil. 997; Sto. Domingo vs. Chua Man, 105 Phil. 220; Bacaling vs. Laguda, 70 O.G. 2694, 54 SCRA 243).

Contrary to the lower court's impression, the lessee has no right of retention because article 546 of the Civil Code does not apply to the improvements made by him. Only the possessor in good faith has a right of retention under article 546. As already noted, article 1671 regards an overstaying lessee as a possessor in bad faith.

The lower court discerned an absurdity or incongruency in allowing a defendant in an ejectment case to stay execution of the inferior court's decision, by filing a supersedeas bond and making monthly deposits, and at the same time granting a mandatory injunction to restore possession on the theory that the defendant's appeal is frivolous and mandatory.

The absurdity is more apparent than real. The execution in an ejectment case has two aspects: (a) possession and (b) the rentals or reasonable value of the use of the premises. The mandatory injunction refers to the possession of the premises in litigation.

On the other hand, the supersedeas bond and the monthly deposits are primarily designed to insure that the plaintiff would be paid the back rentals or the compensation for the use and occupation of the premises should the inferior court's decision in his favor be affirmed on appeal. Hence, if no bond was filed or no monthly deposit was made, the plaintiff is entitled to the possession of the premises. To allow the defendant to continue his possession without any security for the rentals would be prejudicial to the plaintiff. He might not be able to recover the back rentals when the judgment in his favor becomes final and executory. In that event, his claim for rentals would be illusory or ineffectual.

If the mandatory injunction is granted, defendant's possession would cease but the supersedeas bond and the deposits already made would subsist as security for the accrued pecuniary liability of the defendant to the plaintiff. The execution as to the rentals or compensation for the use of the premises would be stayed.

It results that the lower court gravely abused its discretion in not granting the writ of mandatory injunction. Its questioned orders were predicated on erroneous assumptions.

, certiorari does not lie to question the propriety of an interlocutory order of the trial court. Interlocutory orders ordinarily should be reviewed when an appeal is taken from the trial court's judgment. Not every procedural error or erroneous legal or factual conclusion amounts to a grave abuse of discretion. An error of judgment is not necessarily a jurisdictional error.

But when a grave abuse of discretion was patently committed, such as when the lower court acted capriciously and whimsically, or petitioner's contention appears to be clearly tenable, or the broader interests of justice or public policy require the setting aside of the interlocutory order, then it devolves upon this Court in a certiorari proceeding to exercise its supervisory authority and to correct the error committed which in such a case is equivalent to lack of jurisdiction (Sanchez vs. Zosa, L-27043, November 28, 1975, 68 SCRA 171, 175; Pachoco vs. Tumangday and Fernando, 108 Phil. 238; Manila Electric Co. and Sheriff of Quezon City vs. Hon. Enriquez, etc. and Espinosa, 110 Phil. 499).

The immediate possession to be granted to Mrs. Laureano under the writ of mandatory injunction would embrace the portions of the two lots not occupied by Ong Cu's improvements.

As to the portions of the lots occupied by Ong Cu's improvements, their demolition would be necessary in order to deliver the possession thereof to Mrs. Laureano. In such a case, the provisions of section 14, Rule 39 of the Rules of Court should be observed. A special order of demolition should be issued only after notice and hearing and after giving Ong Cu a reasonable time to effect the removal.

The disposition of the appeal in the lower court should proceed in accordance with section 45 of the Judiciary Law as amended. The grant of the mandatory injunction constitutes a prejudgment of the appeal with respect to the possession of the two lots. The main point to be resolved in the lower court's disposition of the appeal is the correctness of the city court's finding on the reasonable value of the use and occupation of the two lots after the lease expired on August 31, 1974.

In filing the ejectment suit Mrs. Laureano opted not to reimburse Ong Cu for his improvements. Consequently, there is no issue as to the reimbursement to be made under article 1678. What period should be given to Ong Cu for the removal of his improvements is a matter that should be judiciously resolved by the lower court in the light of the evidence introduced in the city court and the evidence that will be presented during the hearing on the petition for a special order of demolition. Ong Cu's rights under the law should be respected. Nothing oppressive or arbitrary should be perpetrated in connection with the removal of his improvements.

WHEREFORE, the lower court's orders of December 9, 1975 and February 12, 1976 are set aside.

(1) The lower court is directed to require Ong Cu (a) to file within thirty (30) days from notice a new supersedeas bond in the amount of P161,564 representing the reasonable compensation for the use and occupation of the two lots, at the rate found by the city court, from September 1, 1974 to September, 1975, when the city court rendered its judgment, and (b) to deposit in court within the same period the compensation for the use and occupation of the lots for the period from October 1, 1975 to June, 1976 at the rate of P12,428 a month, the amount fixed in the inferior court's judgment, less the amounts already deposited by Ong Cu at the rate of P1,200 a month.

(2) If after June, 1976 he has not restored to Mrs. Laureano the portions of the two lots not occupied by his buildings, then he should deposit in court on or before the tenth day of each month, as prescribed in section 8, Rule 70 of the Rules of Court, the same sum of P12,428 until he has complied with the mandatory injunction decreed herein.

(3) The lower court is further directed to issue a writ of preliminary mandatory injunction requiring Ong Cu to vacate the two lots in question, to deliver the possession thereof to Mrs. Laureano, and to remove his buildings and improvements after the court has passed upon the corresponding petition for demolition.

(4) After Ong Cu has complied with the mandatory injunction with respect to the portions of the lots not occupied by his buildings and improvements, he should deposit in court the value of the use and occupation of the portions of the two lots occupied by his buildings at the rate of four pesos a square meter. Costs against respondent Ong Cu.

SO ORDERED.

Fernando (Chairman), Antonio and Martin, JJ., concur.

3. [1980V68] MARIANO FLOREZA, petitioner, vs. MARIA D. de EVANGELISTA and SERGIO EVANGELISTA, respondents.1980 February 211st DivisionG.R. No. L-25462D E C I S I O N

MELENCIO-HERRERA, J.:

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals (CA-G.R. No. 23516-R) promulgated on November 4, 1965, entitled "Maria de Evangelista and Sergio Evangelista, (now the respondents) vs. Mariano Floreza (petitioner herein)," reversing the judgment of the Court of First Instance of Rizal rendered on July 17, 1957, and instead ordering petitioner to vacate respondents' residential lot, to remove his house at his own expenses and to pay rental from May 5, 1956.

Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00.

In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about November 1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot and built thereon a house of light materials (barong-barong) without any agreement as to payment for the use of said residential lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in favor of FLOREZA. 1

On the following dates, the EVANGELISTAS again borrowed the indicated amounts: September 16, 1946 - P100.00; 2 August 17, 1947 - P200.00; 3 January 30, 1949 - P200.00; 4 April 1, 1949 - P140.00, 5 or a total of P740.00 including the first loan. The last three items are evidenced by private documents stating that the residential lot stands as security therefor and that the amounts covered thereunder are payable within six years from date, without mention of interest. The document executed on September 16, 1946 stated specifically that the loan was without interest "walang anumang patubo."

On January 10, 1949, FLOREZA demolished this house of light materials and in its place constructed one of strong materials assessed in his name at P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no rental as before. 6

On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with a right to repurchase within a period of 6 years from date, or up to August 1, 1955, as evidenced by a notarial document, Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No. 2147. 7

On January 2, 1955, or seven months before the expiry of the repurchase period, the EVANGELISTAS paid in full the repurchase price of P1,000.00.

On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a letter 8 asking him to vacate the premises as they wanted to make use of their residential lot besides the fact that FLOREZA had already been given by them more than one year within which to move his house to another site. On May 4, 1956, the EVANGELISTAS made a formal written demand to vacate, within five days from notice, explaining that they had already fully paid the consideration for the repurchase of the lot. 9 FLOREZA refused to vacate unless he was first reimbursed the value of his house. Hence, the filing of this Complaint on May 18, 1956 by the EVANGELISTAS.

The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong materials built by FLOREZA on their residential lot, without payment of indemnity; or, in the alternative to order FLOREZA to remove said house; 2) that FLOREZA pay them the sum of P10.00 per month as the reasonable value for the use and occupation of the same from January 2, 1955 (the date the repurchase price was paid) until FLOREZA removes the house and delivers the lot to them; and 3) to declare the transaction between them and FLOREZA as one of mortgage and not of pacto de retro.

In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would execute a deed of repurchase and leave the premises upon payment to him of the reasonable value of the house worth P7,000.00.

In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the question of whether the transaction between the parties is one of mortgage or pacto de retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid. And, applying Article 448 of the Civil Code, 10 it rendered a decision dispositively decreeing:

"FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment granting the plaintiffs the right to elect, as owners of the land, to purchase the house built on the said lot in question by the defendant for P2,500 or to sell their said land to the defendant for P1,500. In the event that the plaintiffs shall decide not to purchase the house in question, the defendant should be allowed to remain in plaintiffs' premises by paying a monthly rental of P10.00 which is the reasonable value for the use of the same per month as alleged by plaintiffs in their complaint. The Court also orders the defendant to pay a monthly rental of P10.00 for the use of the land in question from May 18, 1956, the date of the commencement of this action. The counterclaim of the defendant is hereby ordered dismissed. Without pronouncement as to costs.

"SO ORDERED." 11

Both parties appealed to the Court of Appeals.

On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement for his house but that he could remove the same at his expense; and accordingly rendered judgment thus:

"WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-appellant Mariano Floreza to vacate plaintiffs' residential lot described in the complaint and to pay rental of P10.00 a month from May 5, 1956, until he (defendant) shall have vacated the premises; (2) ordering defendant to remove his house from the land in question within 30 days from the time this decision becomes final and executory; (3) ordering the Register of Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol. 36, in the Registration Book under Act 3344 upon payment of his lawful fees; and (4) taxing the costs in both instances against defendant-appellant Mariano Floreza." 12

Hence, this Petition for Review on Certiorari by FLOREZA, seeking a reversal of the aforestated judgment and ascribing the following errors:

1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in bad faith without likewise holding that respondents as owners of the land in dispute, were likewise in bad faith and therefore both parties should in accordance with Art. 453 of the New Civil Code be considered as having acted in good faith.

2) That the Court of Appeals erred in completely ignoring the issue raised on appeal as to whether or not respondents as owners of the questioned lot, were in bad faith in the sense that they had knowledge of and acquiesced to the construction of the house of petitioner on their lot.

3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in the adjudication of the rights of petitioner and respondent.

4) That the Court of Appeals erred in declaring that petitioner is not entitled to reimbursement for the value of his house and that he should instead remove the same at his expense.

5) That the Court of Appeals erred in adjudging petitioner to vacate respondents' lot in question and to pay rentals commencing from May 5, 1956, until he shall have vacated the premises, notwithstanding that petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to retention without payment of rental while the corresponding indemnity of his house had not been paid.

6) That the Court of Appeals erred in taxing costs against petitioner.

7) That the Court of Appeals erred in not awarding petitioner's counterclaim.

During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered substituted by her son, petitioner Sergio, as her legal representative, in a Resolution dated May 14, 1976.

On October 20, 1978, the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA had since died and that his heirs had voluntarily vacated the residential lot in question. The date FLOREZA passed away and the date his heirs had voluntarily vacated the property has not been stated. Required to comment, "petitioner (represented by his heirs)", through counsel, confirmed his death and the removal of the house and manifested that thereby the question of reimbursement had become moot and academic. He objected to the dismissal of the case, however, on the ground that the issue of rentals still pends. on January 21, 1980, complying with a Resolution of this Court, the EVANGELISTAS clarified that the dismissal they were praying for was not of the entire case but only of this Petition for Review on Certiorari.

We are not in agreement that the question of reimbursement of the value of the improvement erected on the subject property has become moot. Petitioner's right of retention of subject property until he is reimbursed for the value of his house, as he had demanded, is inextricably linked with the question of rentals. For if petitioner has the right to indemnity, he has the right of retention and no rentals need be paid. Conversely, if no right of retention exists, damages in the form of rentals for the continued use and occupation of the property should be allowed.

We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable to the factual milieu herein. Said codal provision applies only when the builder, planter, or sower believes he had the right so to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title. [13] In this case, petitioner makes no pretensions of ownership whatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that the EVANGELISTAS should also be held in bad faith, so that both of them being in bad faith, Article 453 of the Civil Code[14] should apply. By the same token, however, that Article 448 of the same Code is not applicable, neither is Article 453 under the ambiance of this case.

Would petitioner, as vendee a retro, then be entitled to the rights granted in Article 1616 of the Civil Code (Art. 1518 of the old Code)? To quote:

"Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition:

(1) The expenses of the contract, and any other legitimate payments made by reason of the sale;

(2) The necessary and useful expenses made on the thing sold."

The question again calls for a negative answer. It should be noted that petitioner did not construct his house as a vendee a retro. The house had already been constructed as far back as 1949 (1945 for the house of light materials) even before the pacto de retro sale in 1949. Petitioner incurred no useful expense, therefore, after that sale. The house was already there at the tolerance of the EVANGELISTAS in consideration of the several loans extended to them. Since petitioner cannot be classified as a builder in good faith within the purview of Article 448 of the Civil Code, nor as a vendee a retro, who made useful improvements during the lifetime of the pacto de retro, petitioner has no right to reimbursement of the value of the house which he had erected on the residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed. The rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil Code (Art. 487 of the old- Code), may make on the property useful improvements but with no right to be indemnified therefor. He may, however, remove such improvements should it be possible to do so without damage to the property: For if the improvements made by the usufructuary were subject to indemnity, we would have a dangerous and unjust situation in which the usufructuary could dispose of the owner's funds by compelling him to pay for improvements which perhaps he would not have made. [15]

We come now to the issue of rentals. It is clear that from the date that the redemption price had been paid by the EVANGELISTAS on January 2, 1955, petitioner's right to the use of the residential lot without charge had ceased. Having retained the property although a redemption had been made, he should be held liable for damages in the form of rentals for the continued use of the subject residential lot 16 at the rate of P10.00 monthly from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court of Appeals, until the house was removed and the property vacated by petitioner or his heirs.

WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that payment of rentals by the heirs of Mariano Floreza, who are hereby ordered substituted for him, shall commence on January 3, 1955 until the date that the residential lot in question was vacated.

Costs against petitioner.

SO ORDERED.

Teehankee (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

4. INTER-REGIONAL DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS and RICARDO CABALLERO, respondents.1975 July 221st DivisionG.R. No. L-39677D E C I S I O N

CASTRO, J:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-GR. 02794-SP. Upon consideration of the allegations contained, the issues raised and the arguments adduced in the petition, as well as the respondent's comment thereon, the Court resolved to treat this case as a special civil action. 1 The challenged decision declares null and void an order dated January 16, 1974 of Judge Sancho Y. Inserto of the Court of First Instance of Iloilo (Branch I) which enjoined the defendant in its civil case 9562, entitled "Inter-Regional Development Corporation vs. Ricardo Caballero," from cutting and milling the sugar cane crop which the therein plaintiff company (herein petitioner) asserts to have planted in good faith.

On December 13, 1974 we issued a temporary restraining order which reads as follows:

"You (respondent Court of Appeals) are hereby RESTRAINED from enforcing and/or implementing your decision in CA-GR No. 02794-SP entitled 'Ricardo Caballero versus Hon. Sancho Inserto, etc., et al.' and you (respondent Caballero), your agents, representatives, assigns, successors-in-interest and/or any person or persons acting upon your orders or in your place or stead, are likewise RESTRAINED from collecting and/or negotiating the quedans representing the milled sugar canes homestead from Lots No. 1 and 6, Psn-118496 in Batad, Iloilo for the crop year 1973-74."

In civil case 8195 of the Court of First Instance of Iloilo, entitled "Inter-Regional Development Corporation vs. Isidro Estrada, et al." for annulment of sales and damages and involving land ownership, the court, thru Judge Castrence Veloso of Branch III, rendered judgment dismissing the complaint and, among others, ordering the spouses Jose Bañez and Isabel Bañez (president and treasurer, respectively, of the Inter-Regional Development Corporation) or their privies —

"to immediately vacate and surrender the possession of Lots 1 and 6, Plan Psu-118496 to the third-party plaintiff (Isidro A. Estrada) and not to molest, disturb or in any manner interfere with his possession thereof . . ."

The corporation appealed; nonetheless, Judge Veloso issued, on May 7, 1973, a partial writ of execution pending appeal, and possession of the two lots was delivered to Estrada, following which the latter, on May 25, 1973, leased the lots to now respondent Ricardo Caballero for a term of ten years, starting with the crop year 1973-74.

On July 6, 1973 the corporation filed a special civil action for certiorari with the Court of Appeals, praying that Judge Veloso be enjoined from enforcing the partial writ of execution. Holding that the said Judge did not abuse his discretion in ordering partial execution, the Court of Appeals, on October 16, 1973, dismissed the petition. This decision became final.

However, five days before entry of judgment, or on November 15, 1973, the corporation filed civil case 9562, for injunction and damages, against the lessee Caballero to settle the question of ownership of the sugar crop for 1973-74 which the corporation alleged to have planted in good faith on the lands litigated in civil case 8195. Judge Sancho Inserto, to whom the case was assigned, issued a writ of preliminary injunction enjoining Caballero "from cutting, milling the growing sugar cane . . ."

Caballero moved for reconsideration, but before the court could act on his motion, he filed a petition for certiorari with the Court of Appeals. On September 30, 1974 the appellate court promulgated its decision setting aside Judge Inserto's preliminary injunction.

Hence, the present recourse by the corporation.

On the issue of whether the preliminary injunction issued in case 9562 by Judge Inserto enjoining Caballero from cutting and milling the sugar cane constitutes an interference with the partial writ of execution pending appeal issued in case 8195 by Judge Veloso ordering the Bañez spouses to vacate and surrender possession of the parcels of land and not to molest or disturb Estrada's (Caballero's lessor) possession thereof, we find that neither order interferes with the other; as a matter of fact the order of Judge Inserto complements that of Judge Veloso. The latter refers to the land itself, the ownership of which was the only issue adjudged in the decision pending appeal, while the former refers to the sugar cane crop standing thereon. True it is that under article 440 of the Civil Code the ownership of property includes the right of accession to everything attached thereto either naturally or artificially, and that under article 415, trees, plants and growing fruits, while they are attached to the land, are immovable property; it is equally true that when a person plants in good faith on land belonging to another, the landowner does not ipso facto acquire ownership of what has been planted; he must first indemnify the planter before he can appropriate the same. And so provides article 448:

"The owner of the land in 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 . . ."

The aforequoted article, not those relied upon by the respondent, applies in the present case, because the petitioner has alleged good faith in planting the sugar

cane, thus giving rise to a conflict of rights which poses the issue of the protection of the alleged planter in good faith without causing injustice to the landowner. 2

Absent any incompatibility between the orders issued by Judges Inserto and Veloso, the doctrine that no court has the power to interfere by injunction with the judgment or decrees of another court of concurrent or coordinate jurisdiction, having equal power to grant the relief, 3 does not apply.

In holding that the gathering of the crops existing on the land is part of Estrada's right of ownership and possession, the Court of Appeals in effect prematurely held that the petitioner is a planter in bad faith; this is error since the issues as to who planted and whether the planter planted in good faith are the very issues posed in case 9562, which is yet pending.

The Court of Appeals, however, did not err in entertaining the petition for certiorari even if a motion for reconsideration had not yet been resolved by the Court of First Instance, in view of the urgency of securing a definitive ruling on the sugar cane crop, which is perishable. 4

ACCORDINGLY, the judgment of the Court of Appeals in CA-G.R. O2794-SP is set aside, and the restraining order heretofore issued is made permanent, without prejudice, however, to the final outcome in case 9562 of the Court of First Instance of Iloilo. No costs.

Makasiar, Esguerra, Muñoz, Palma and Martin, JJ., concur.

Teehankee, J., is on leave.

5. BARTOLOME ORTIZ, petitioner, vs. HON. UNION C. KAYANAN, in his capacity as Judge of the Court of First Instance of Quezon, Branch IV; ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO, AND GREGORIO PAMISARAN, respondents.1979 July 302nd DivisionG.R. No. L-32974D E C I S I O N

ANTONIO, J:

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

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

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

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

successor in interest of the original homestead applicant and that because plaintiff failed to participate in the public auction, he is forever barred to claim the property; that plaintiff filed a motion for reconsideration of this decision which was denied by the Director of Lands in his order dated June 10, 1959; that finally, on appeal to the Secretary of Agriculture and Natural Resources, the decision rendered by the Regional Land Officer was affirmed in toto." 1

On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case, the dispositive portion of which reads as follows:

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

Plaintiff appealed the decision to the Court of Appeals.

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

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

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

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

"Ordering further the plaintiff to render an accounting of the tolls he collected from March of 1967 to December 31, 1968 and from September 1969 to March 31, 1970, and deliver said tolls collected to the receiver and if judgment is already executed, then to Quirino Comintan and Eleuterio Zamora; and,

"Finally, to condemn plaintiff to pay moral damages for withholding the tools which belong to your movant in an amount this Court may deem just in the premises." 4

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

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

xxxxxxxxx

"In virtue of the findings of this Court as contained in the dispositive portion of its decision, the defendants are jointly obligated to pay the plaintiff in the amount of P13,632.00 as reasonable value of the improvements he introduced on the whole property in question, and that he has the right of retention until fully paid. It can be

gleaned from the motion of the defendants that if plaintiff submits an accounting of the tolls he collected during the periods above alluded to, their damages of about P25,000.00 can more than offset their obligation of P13,362.00 in favor of the plaintiff, thereafter the possession of the land he delivered to the defendants since the decision of the Supreme Court has already become final and executory, but in the interregnum pending such accounting and recovery by the Receiver of the tolls collected by the plaintiff, the defendants pray that they allowed to put up a bond in lieu of the said P13,632.00 to answer for damages of the former, if any.

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

xxxxxxxxx

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

"WHEREFORE, finding the Motion for Execution filed by the defendants to be meritorious, the same is granted; provided, however, that they put up a bond equal the adjudicated amount of P13,632.00 accruing in favor of the plaintiff, from a reputable or recognized bonding or surety company, conditioned that after an

accounting of the tolls collected by the plaintiff should there be found out any balance due and payable to him after reckoning said obligation of P13,632.00 the bond shall be held answerable therefor." 5

Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan had filed the required bond. The writ directed the Sheriff to enforce the decision of the Court, and stated, in part, the following:

"But should there be found any amount collectible after accounting and deducting the amount of P13,632.00, you are hereby ordered that of the goods and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag, Quezon, be caused to be made any excess in the abovementioned amount together with your lawful fees and that you render same to defendant Quirino Comintan. If sufficient personal property cannot be found thereof to satisfy this execution and lawful fees thereon, then you are commanded that of the lands and buildings of the said BARTOLOME ORTIZ you make the said excess amount in the manner required by the Rules of Court, and make return of your proceedings within this Court within sixty (60) days from date of service.

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

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

"(a) That the respondent judge has no authority to place respondents in possession of the property;

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

"© That to assess petitioner a P25,000.00 liability for damages is purely punitive imposition without factual or legal justification."

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

"It goes without saying that defendant Comintan is entitled to be placed in possession of Lot No. 5785-A of PLS-45 (Calauag Public Land Subdivision) and enjoyment of the tolls from March, 1967 to March, 1968 and from September, 1969 to March 31, 1970 which were received by plaintiff Bartolome Ortiz, collected from the property by reason of the diversion road where vehicular traffic was detoured. To defendant Comintan belongs the tolls thus collected from a portion of the land awarded to him used as a diversionary road by the doctrine of accretion and his

right over the same is ipso jure, there being no need of any action to possess said addition. It is so because as consistently maintained by the Supreme Court, an applicant who has complied with all the terms and conditions which entitle him to a patent for a particular tract of public land, acquires a vested right therein and is to be regarded as equitable owner thereof so that even without a patent, a perfected homestead or sales application is a property right in the fullest sense, unaffected by the fact that the paramount title is still in the Government and no subsequent law can deprive him of that vested right. The question of the actual damages suffered by defendant Comintan by reason of the unaccounted tolls received by plaintiff had already been fully discussed in the order of September 23, 1970 and the Court is honestly convinced and believes it to be proper and regular under the circumstances.

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

"In view thereof, finding the motion filed by plaintiff to be without merit, the Court hereby denies the same and the order of September 23, 1970 shall remain in full force subject to the amendment that the execution of the decision with respect to the one-half portion 'B' shall not be conditioned to the public sale by the Bureau of Lands.

"SO ORDERED." 7

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

It is the position of petitioner that all the fruits of the property, including the tolls collected by him from the passing vehicles, which according to the trial court

amounts to P25,000.00, belongs to petitioner and not to defendant/private respondent Quirino Comintan, in accordance with the decision itself, which decreed that the fruits of the property shall be in lieu of interest on the amount to be paid to petitioner as reimbursement for improvements. Any contrary opinion, in his view, would be tantamount to an amendment of a decision which has long become final and executory and, therefore, cannot be lawfully done.

Petitioner, therefore, prayed that (1) a Writ of Preliminary Injunction be issued enjoining the enforcement of the Orders of September 23, 1970 and November 18, 1970, and the Writ of Execution issued thereto, or restoring to petitioner the possession of the property if the private respondents had been placed in possession thereof; (2) annulling said Orders as well as the Writ of Execution, dissolving the receivership established over the property; and (3) ordering private respondents to account to petitioner all the fruits they may have gathered or collected from the property in question from the time of petitioner's illegal dispossession thereof.

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

It appears that as a consequence of the deposit made by private respondents, the Deputy Sheriff of Calauag, Quezon ousted petitioner's representative from the land in question and put private respondents in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for Reconsideration' dated January 29, 1971' and 'Supplemental Motion for Reconsideration and Manifestation,"' contending that the tender of deposit mentioned in the Supplemental Motion was not really and officially made, "'inasmuch as the same is not supported by any official receipt from the lower court, or from its clerk or cashier, as required by law;" that said deposit does not constitute sufficient compliance with the judgment sought to be enforced, neither

was it legally and validly made because the requisites for consignation had not been complied with; that the tender of legal interest for six months cannot substitute petitioner's enjoyment of the fruits of the property as long as the judgment in Civil Case No. C-90 has not been implemented in the manner decreed therein; that contrary to the allegations of private respondents, the value of the improvements on the whole property had been determined by the lower court, and the segregation of the improvements for each lot should have been raised by them at the opportune moment by asking for the modification of the decision before it became final and executory; and that the tolls on the property constituted "civil fruits" to which the petitioner is entitled under the terms of the decision.

IV The issue decisive of the controvercy is after the rendition by the trial court of its judgment in Civil Case No. C-90 on March 22, 1966 confirming the award of one-half of the property to Quirino Comintan whether or not petitioner is still entitled to retain for his own exclusive benefit all the fruits of the property, such as the tolls collected by him from March 1967 to December 1968, and September 1969 to March 31, 1970, amounting to about P25,000.00. In other words, petitioner contends that so long as the aforesaid amount of P13,632.00 decreed in the judgment representing the expenses for clearing the land and the value of the coconuts and fruit trees planted by him remains unpaid, he can appropriate for his exclusive benefit all the fruits which he may derive from the property, without any obligation to apply any portion thereof to the payment of the interest and the principal of the debt.

We find this contention untenable.

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

However, even after his good faith ceases, the possessor in fact can still retain the property, pursuant to Article 546 of the New Civil Code, until he has been fully reimbursed for all the necessary and useful expenses made by him on the property. This right of retention has been considered as one of the conglomerate of measures devised by the law for the protection of the possessor in good faith. Its object is to guarantee the reimbursement of the expenses, such as those for the preservation of the property, 14 or for the enhancement of its utility or productivity. 15 It permits the actual possessor to remain in possession while he has not been reimbursed by the person who defeated him in the possession for those necessary expenses and useful improvements made by him on the thing possessed. The

principal characteristic of the right of retention is its accessory character. It is accessory to a principal obligation. Considering that the right of the possessor to receive the fruits terminates when his good faith ceases, it is necessary, in order that this right to retain may be useful, to concede to the creditor the right to secure reimbursement from the fruits of the property by utilizing its proceeds for the payment of the interest as well as the principal of the debt while he remains in possession. This right of retention of the property by the creditor, according to Scaevola, in the light of the provisions of Article 502 of the Spanish Civil Code, 16 is considered not a coercive measure to oblige the debtor to pay, depriving him temporarily of the enjoyment of the fruits of his property, but as a means of obtaining compensation for the debt. The right of retention in this case is analogous to a contract of antichresis and it can be considered as a means of extinguishing the obligation, inasmuch as the right to retain the thing lasts only for the period necessary to enable the creditor to be reimbursed from the fruits for the necessary and useful expenses. 17

According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if the property retained is a movable, and to that of antichresis, if the property held is immovable. 18 This construction appears to be in harmony with similar provisions of the civil law which employs the right of retention as a means or device by which a creditor is able to obtain the payment of a debt. Thus, under Article 1731 of the New Civil Code, any person who has performed work upon a movable has a right to retain it by way of pledge until he is paid. Similarly, under Article 1914 of the same Code, the agent may retain in pledge the things which are the object of the agency until the principal effects reimbursement of the funds advanced by the former for the execution of the agency, or he is indemnified for all damages which he may have suffered as a consequence of the execution of the agency, provided he is free from fault. To the same effect, the depository, under Article 1994 of the same Code, may retain the thing in pledge until the full payment of what may be due him by reason of the deposit. The usufructuary, pursuant to Article 612 of the same Code, may retain the property until he is reimbursed for the amount paid for taxes levied on the capital (Article 597) and for extraordinary repairs (Article 594).

In all of these cases, the right of retention is used as a means of extinguishing the obligation. As amply observed by Manresa: "El derecho de retencion, lo hemos dicho, es el derecho de prenda o el de anticresis constituido por la ley con independencia de la voluntad de las partes." 19 In a pledge if the thing pledged earns or produces fruits, income, dividends or interests, the creditor shall compensate what he receives with those which are owing him. 20 In the same manner, in a contract of antichresis, the creditor acquires the right to receive the fruits of an immovable of his debtor with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit. 21

The debtor can not reacquire enjoyment of the immovable until he has actually paid what he owes the creditor. 22

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

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

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

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

Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the Bureau of Lands and, therefore, petitioner is entitled to remain in possession thereof. This is not disputed by respondent Eleuterio Zamora. 25 After public sale is had and in the event that Ortiz is not declared the successful bidder, then he should be reimbursed by respondent Zamora in the corresponding amount for the improvements on Lot 5785-B. WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is hereby modified to conform to the foregoing

judgment. The Writ of Preliminary Injunction, dated January 29, 1971, is hereby dissolved. Without special pronouncement as to costs.

6. [1983V237] ROSENDO BALUCANAG, petitioner, vs. HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, respondents.1983 May 302nd DivisionG.R. No. L-33422D E C I S I O N

ESCOLIN, J.:

This petition for review of the decision of the Court of First Instance of Manila in Civil Case No. 67503 calls for a determination of the respective rights of the lessor and the lessee over the improvements introduced by the latter in the leased premises.

Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot located in Zamora Street, Pandacan, Manila, covered by Transfer Certificate of Title No. 25664. On August 31, 1952, Mrs. Charvet leased said lot to respondent Richard Stohner for a period of five [5] years at the monthly rental of P40.00, payable in advance within the first ten [10] days of each month. The lease contract 1 provided, among others, that:

"IV. The lessee may erect such buildings upon and make such improvements to the leased land as he shall see fit. All such buildings and improvements shall remain the property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove the said buildings and improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee."

During the existence of the lease, Stohner made fillings on the land and constructed a house thereon, said improvements being allegedly valued at P35,000.00.

On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo Balucanag. 2

For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote Stohner a letter demanding that he vacate the premises. 3 In reply thereto, Stohner, also thru counsel, claimed that he was a builder in good faith of the residential house erected in the land. He offered the following proposals for a possible compromise, to wit:

"[a] Mr. Stohner will purchase the said lot from your client with the interest of 12% per annum on the value, or

"[b] Your client Mr. Rosendo Balucanag will reimburse our client in the total amount of P35,000.00 for the improvements and construction he has made on the lot in question."

As no agreement was reached, Balucanag instituted in the City Court of Manila an ejectment suit against Stohner and after due trial, the court rendered a decision, the decretal portion of which reads as follows:

"IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered, ordering the defendant to pay the plaintiff the sum of P360.00 as back rentals from December, 1965 to August 1966 at the rate of P40.00 a month and to vacate the premises. The defendant is further ordered to pay the sum of P100.00 as Attorney's fees which is considered reasonable within the remises."

On appeal, the Court of First Instance of Manila, Branch IX, presided by respondent Judge Alberto J. Francisco, after conducting a trial de novo, rendered a decision, setting aside the judgment of the city court and dismissing the petitioner's complaint. Respondent judge held that Stohner was a builder in good faith because he had constructed the residential house with the consent of the original lessor, Mrs. Charvet, and also because the latter, after the expiration of the lease contract on August 31, 1957, had neither sought Stohner's ejectment from the premises, nor the removal of his house therefrom. Invoking Articles 448 and 546 of the Civil Code 4 , respondent judge concluded that Stohner, being a builder in good faith cannot be ejected until he is reimbursed of the value of the improvements.

Frustrated in his effort to have the decision reconsidered, Balucanag filed the instant petition for review.

We find the petition impressed with merit. Paragraph IV of the lease contract entered into by Stohner with Mrs. Charvet specifically provides that ". . . such buildings and improvements shall remain the property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove the said buildings and improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee." Respondent Stohner does not assail the validity of this stipulation. Neither has he advanced any reason why he should not be bound by it.

But even in the absence of said stipulation, respondent Stohner cannot be considered a builder in good faith Article 448 of the Civil Code, relied upon by respondent judge, applies only to a case where one builds on land in the belief that he is the owner thereof and it does not apply where one's only interest in the land is that of a lessee under a rental contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of lessor and lessee, the former being the successor in interest of the original owner of the lot. As we ruled in Lopez, Inc. vs. Phil. and Eastern Trading Co., Inc., 5 ". . . the principle of possessor in good faith refers only to a party who occupies or possess property in the belief that he is the owner thereof and said good faith ends only when he discovers a flaw in his title so as to reasonably advise or inform him that after all he may not be the legal owner of said property. It cannot apply to a lessee because as such lessee he knows that he is not the owner of he leased premises. Neither can he deny the ownership or title of his lessor. . . . A lessee who introduces improvements in the leased

premises, does so at his own risk in the sense that he cannot recover their value from the lessor, much less retain the premises until such reimbursement. . . ."

The law applicable to the case at bar is Article 1678 of the Civil Code, which We quote:

"Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one half of the value of the improvements at the time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby, He shall not, however, cause any more impairment upon the property leased than is necessary. . . ."

This article gives the lessor the option to appropriate the useful improvements by paying one-half of their value, 6 and the lessee cannot compel the lessor to appropriate the improvements and make reimbursement, for the lessee's right under the law is to remove the improvements even if the leased premises may suffer damage thereby. But he shall not cause any more damage upon the property than is necessary.

One last point. It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs. Charvet and later, of Balucanag. An implied new lease or tacita recondition was thus created between the parties, the period of which is established by Article 1687 of the Civil Code thus:

"Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. . . ."

Under the above article, the duration of the new lease must be deemed from month to month, the agreed rental in the instant case being payable on a monthly basis. The lessor may thus terminate the lease after each month with due notice upon the lessee. After such notice, the lessee's right to continue in possession ceases and his possession becomes one of detainer. Furthermore, Stohner's failure to pay the stipulated rentals entitles petitioner to recover possession of the premises.

WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with costs against respondent Stohner. The latter is ordered to vacate the premises in question and to pay Rogelio Balucanag the rentals due from March 1969 up to the time he surrenders the premises, at the rate of P40.00 a month.

SO ORDERED.

Makasiar (Chairman), Aquino, Concepcion, Jr. and Guerrero, JJ., concur.

De Castro, J., took no part.

7. [1984V193] LEONILA SARMIENTO, petitioner, vs. HON. ENRIQUE A. AGANA, District Judge, Court of First Instance of Rizal, Seventh Judicial District, Branch XXVIII, Pasay City, and SPOUSES ERNESTO VALENTlNO and REBECCA LORENZO-VALENTINO, respondents.1984 Apr 302nd DivisionG.R. No. L-57288

G.R. No. L-57288D E C I S I O N

MELENCIO-HERRERA, J.:

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

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

It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs. Jose C. Santos, Jr. who, on September 7, 1974, sold the same to petitioner SARMIENTO. The following January 6, 1975, SARMIENTO asked ERNESTO and wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the evidentiary hearings before the Municipal Court, SARMIENTO submitted the deed of sale of the LAND in her favor, which showed the price to be P15,000.00. On the other hand, ERNESTO testified that the then cost of the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00. The figures were not questioned by SARMIENTO.

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

The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the submission of memoranda, said Court rendered a modifying Decision under Article 448 of the Civil Code. SARMIENTO was required, within 60 days, to exercise the option to reimburse ERNESTO and wife the sum of P40,000.00 as the value of the RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for P25,000.00. SARMIENTO did not exercise any of the two options within the

indicated period, and ERNESTO was then allowed to deposit the sum of P25,000.00 with the Court as the purchase price for the LAND. This is the hub of the controversy. SARMIENTO then instituted the instant Certiorari proceedings.

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

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

"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.".

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

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

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

"The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building,

under article 453 (now Article 546). The owner of the land, upon the other hand, has the option, under article 361 (now Article 448), either to pay for the building or to sell his land to the owner of the building. But he cannot as respondents here did, refuse both to pay for the building and to sell the land and compel the owner of the building to remove it from the land where it is erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.

"We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code." (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).

WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without pronouncement as to costs.

SO ORDERED.

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

8. [1985V193] FRANCISCO DEPRA, plaintiff-appellee, vs. AGUSTIN DUMLAO, defendant-appellant.1985 May 161st DivisionG.R. No. L-57348D E C I S I O N

MELENCIO-HERRERA, J.:

This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of Appeals, which the latter certified to this instance as involving pure questions of law.

Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate of Title No. T-3087, known as Lot No. 685, situated in the municipality of Dumangas, Iloilo, with an area of approximately 8,870 square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an approximate area of 231 sq. ms.

Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on an area of thirty four (34) square meters of DEPRA's property. After the encroachment was discovered in a relocation survey of DEPRA's lot made on November 2, 1972, his mother, Beatriz Derla, after writing a demand letter asking DUMLAO to move back from his encroachment, filed an action for Unlawful Detainer on February 6, 1973 against DUMLAO in the Municipal Court of Dumangas, docketed as Civil Case No. I. Said complaint was later amended to include DEPRA as a party plaintiff.

After trial the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448 of the Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:

"Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rent to be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five (5) days of the month the rent is due; and the lease shall commence on that day that this decision shall have become final."

From the foregoing judgment, neither party appealed so that, if it were a valid judgment, it would have ordinarily lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO deposited such rentals with the Municipal Court.On July 15, 1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was the bone of contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but alleged, in the main, that the present suit is barred by res judicata by virtue of the Decision of the Municipal Court, which had become final and executory.

After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the Stipulation of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the assailed Order, decreeing:

"WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this litigation is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is owner as evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is entitled to possess the same.

"Without pronouncement as to costs.

"SO ORDERED."

Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of the Municipal Court was null and void ab initio because its jurisdiction is limited to the sole issue of possession, whereas decisions affecting lease, which is an encumbrance on real property, may only be rendered by Courts of First Instance.

Addressing ourselves to the issue of validity of the Decision of the Municipal Court, we hold the same to be null and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of Court). 1 The Municipal Court overstepped its bounds when it imposed upon the parties a situation of "forced lease", which like "forced co-ownership" is not favored in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operate as res judicata to the subject complaint for Queting of Title. Besides, even if the Decision were valid, the rule on res judicata would not apply due to difference in cause of action. In the Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment in a detainer case "shall not bar an action between the same parties respecting title to the land." 4

Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith. Thus,

"8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal Court of Dumangas, Iloilo involves the same subject matter in the present case, the Thirty-four (34) square meters portion of land and built thereon in good faith is a portion of defendant's kitchen and has been in the possession of the defendant since 1952 continuously up to the present; . . ."

Consistent with the principles that our Court system, like any other, must be a dispute resolving mechanism, we accord legal effect to the agreement of the

parties, within the context of their mutual concession and stipulation. They have, thereby, chosen a legal formula to resolve their dispute - to apply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448. Hence, we shall refrain from further examining whether the factual situations of DUMLAO and DEPRA conform to the juridical positions respectively defined law, for a "builder in good faith" under Article 448, a "possessor in good faith" under Article 526 and a "landowner in good faith" under Article 448.

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

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

shall have the right.to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

However, the builder or planter cannot be obliged to buy the 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."

Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to pay for the encroaching part of the building, and to sell the encroached part of his land, 5 as he had manifested before the Municipal Court. But that manifestation is not binding because it was made in a void proceeding.

However, the good faith of DUMLAO. is part of the Stipulation of Facts in the Court of First Instance. It was thus error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of the disputed portion implying thereby that he is entitled to have the kitchen removed. He is entitled to such removal only when, after having chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.

"The owner of the building erected in good faith on a land owned by another, is entitled to retain the possession of the land until he is paid the value of his building, under article 453 (now Article 546). The owner of the land, upon the other hand, has the option, under article 361 (now Article 448), either to pay for the building or to sell his land to the owner of the building. But he cannot, as respondents here did refuse both to pay for the building and to sell the land and compel the owner of the

building to remove it from the land where it erected. He is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.

"We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946])."

A word anent the philosophy behind Article 448 of the Civil Code.

The original provision was found in Article 361 of the Spanish Civil Code, which provided:

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

As will be seen, the Article favors the owner of the land, by giving him one of the two options mentioned in the Article. Some commentators have questioned the preference in favor of the owner of the land, but Manresa's opinion is that the Article is just and fair.

". . . es justa la facultad que el codigo da al dueño del suelo en el articulo 361, en el caso de edificacion o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario privilegio en favor de la propiedad territorial. Entienden que impone el Codigo una pena al poseedor de buena fe; y como advierte uno de los comentaristas aludidos, 'no se ve claro el por que de tal pena . . . al obligar al que obro de buena fe a quedarse con el edificio o plantacion, previo el pago del terreno que ocupa, porque si bien es verdad que cuando edifico o planto demostro con este hecho, que queria para si el edificio o plantio, tambien lo es que el que edifico o planto de buena fe lo hizo en la erronea inteligencia de creerse dueño del terreno. Posible es que, de saber lo contrario, y de tener noticia de que habia que comprar y pagar el terreno, no se hubiera decidido a plantar ni a eddficar. La ley, obligandole a hacerlo, fuerza su voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'. Asi podra suceder; pero la realidad es que con ese hecho voluntario, aunque sea inocente, se ha eniquecido torticeramente con perjuicio de otro a quien es justo indemnizarle.

"En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y equitativa, y respetando en lo posible el principio que para la accesion se establece en el art. 358." 7

Our own Code Commission must have taken account of the objections to Article 361 of the Spanish Civil Code. Hence, the Commission provided a modification thereof, and Article 448 of our Code has been made to provide:

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

Additional benefits were extended to the builder but the landowner retained his options.

The fairness of the rules in Article 448 has also been explained as follows:

"Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower to pay for the proper rent. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied: see Cabral, et al vs. Ibañez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050)." 8

WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to the Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code, as follows:1. The trial Court shall determine - a) the present fair price of DEPRA's 34 square meter-area of land; b) the amount of the expenses spent by DUMLAO for the building of the kitchen; c) the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, and d) whether the value of said area of land is considerably more than that of the kitchen built thereon.

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

a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his option under the law (Article 448, Civil Code), whether to appropriate the kitchen a his own by paying to DUMLAO either the amount of the expenses spent by DUMLAO for the building of the kitchen, or the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively paid by DUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the other party and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the Court in favor of the party entitled to receive it;

b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to pay the price of the land but the latter rejects such purchase because, as found by the trial Court, the value of the land is considerably more than that of the kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial Court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, provided that the monthly rental to be fixed by the Court shall not be less than Ten Pesos (P10.00) per month, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since 1952 that DUMLAO has occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2) consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and to have the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall be tendered by DUMLAO to the Court for payment to DEPRA, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court.

c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per month as reasonable compensation for the occupancy of DEPRA's land for the period counted from 1952, the year DUMLAO occupied the subject area, up to the commencement date of the forced lease referred to in the preceding paragraph;

d) The periods to be fixed by the trial Court in its Decision shall be inextendible, and upon failure of the party obliged to tender to the trial Court the amount due to

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

No costs.

9. ALEJANDRO QUEMUEL and RUPERTA SOLIS, plaintiffs-appellants, vs. ANGEL S. OLAES and JULIANA PRUDENTE, defendants-appellees.April 29, 1961En BancG.R. No. L-11084D E C I S I O NAngel S. Olaes and his wife, Juliana Prudente, defendants- appellees herein, were plaintiffs in another case (No. 5442 of the CFI of Cavite), wherein Alejandro Quemuel and his wife Ruperta Solis, plaintiffs-appellants herein, were defendants. In that case No. 5442, the Olaes spouses, registered owners of lot 1095 of the San Francisco de Malabon Estate, located in Rosario, Cavite, sought the recovery of the possession of the said lot and rentals therefor, from the Quemuel spouses, who in their verified answer admitted plaintiffs ownership, but contended that their occupation was gratuitous. On March 16, 1954, the trial court ordered Quemuel and his wife to return the possession of lot 1095 to the Olaes spouses and to pay the latter P20.00 a month from January, 1954, until they shall have vacated the premises. Quemuel and his wife did not appeal from said decision which became final on April 22, 1954. Thereafter, the Olaes spouses sought the execution of the decision and to forestall ejectment, the Quemuel spouses, filed on July 1, 1954, the present complaint, docketed as Civil Case No. 5518, CFI of Cavite.In the present complaint, the Quemuel spouses seek to reduce the monthly rental of P20.00 fixed in Civil Case No. 5442, and to compel the Olaes spouses to sell to them (Quemuels) the portion of the lot 1095 where their house is erected. Respondents, the Olaes spouses, filed a motion to dismiss dated July 9, 1954, alleging lack of cause of action, res adjudicata; prescription, and the cause of action, if any, is barred by plaintiffs' failure to set it up as a counter-claim in civil case No. 5442.On September 17, 1954, the trial court dismissed the complaint, without pronouncement as to costs.An appeal was taken by plaintiffs to the Court of Appeals (Case No. CA-G.R. No. 14837-R) which, by the agreement of the parties, certified the case to this Court. The ex parte petition filed by the plaintiffs-appellants in this Court on August 9, 1956, asking that a writ of preliminary injunction be issued to the Provincial Sheriff of Cavite and the defendants-appellees, enjoining them from demolishing the house of plaintiffs-appellants until there is a final decision in said case No. 14837, by the Supreme Court, was denied on August 14, 1956 by the latter court.The lone assignment alleges that the trial court erred in dismissing the complaint without trial on the merits and in not granting the reliefs prayed for by the plaintiffs-appellants. Appellants stated in their brief that if there will be trial on the merits, they would be entitled to a decision in their favor, because they will establish by competent evidence the allegations in their complaint. And on the claim that they were builders in good faith, they based the right to buy the lot on which their house is built, upon the decision of Belen Uy Tayag vs. Rosario Yuseco, et al., G.R. No. L-8139, Oct. 24, 1955.

It should be recalled at the outstart, that the trial court ordered the dismissal of the complaint, which must have been granted in all or any of the grounds therein alleged, to wit:I. The Complaint states no cause of action. — The first cause of action of the present complaint alleges that in Civil Case No. 5442, the trial court rendered the decision of March 16, 1954, ordering the latter to vacate lot No. 1095 belonging to Olaes and his wife and to pay them a monthly rental of P20.00 from January, 1954, until they shall have vacated the premises; that plaintiffs believe that the portion they are occupying belonged to them; that they occupy only about one-half of the lot; that considering the purchase price of the land, its assessed value and the interest the price would have earned, the rental should not be more than 7 1/2% or P5.60 monthly. Plaintiffs prayed that the rental be reduced to P5.60 a month.Assuming the truth of the above allegations, the same do not constitute a cause of action. A cause of action presupposes a right of the plaintiff and a violation of such right by the defendant. According to the complaint itself, the rental of P20.00 monthly and the order to vacate, were provided in a prior judgment (Civil Case No. 5442) which is final and its validity is not assailed. There being no law that fixes the rental of the same land at 7 1/2% of its alleged market value, the plaintiffs have no right thereto, or a right which could be violated. The defendants are not compelling the plaintiffs to rent the property but wanted them to vacate the premises (Civil Case No. 5442). If the rental determined by the trial court were excessive, the plaintiffs are free to vacate the property. For plaintiffs to insist on possessing the property and fixing the rentals themselves, would have no legal sanction at all.In the second cause of action of the present complaint, the plaintiffs alleged: That they actually occupy about 384 square meters or one-half of lot 1095; of the said area they thought they own 256 square meters by inheritance from Romualdo Solis, father of plaintiff, Ruperta Solis, who became the owner thereof pursuant to a verbal extrajudicial partition made in 1924; Agapita Solis who, sold the entire lot 1095 to defendants, is a sister of Romualdo Solis, and there was an error in the inclusion of the 256 square meters in the Torrens Title and the sale; they acquired from Valentin Solis, brother of both Romualdo and Agapita, a part of the portion occupied by plaintiff's house and warehouse; their house has been there for almost 34 years and is worth P4,000; the defendants are rich, have a house and a lot of their own, and will not suffer any material or sentimental damage if they sell to the plaintiffs one-half of lot No. 1095; plaintiffs offered to pay P960 for the portion they are occupying or P1,920.00 for the whole lot.On the assumption that the allegations of the second cause of action are true, what would be the rights of the parties? The plaintiffs claim that their second cause of action is based on Article 448 in connection with Art. 546, of the new Civil Code. A cursory reading of the provisions, however, will show that they are not applicable to plaintiffs' case. Under Article 448, the right to appropriate the works or improvements or "to oblige the one who built or planted to pay the price of the

land" belongs to the owner of the land. The only right given to the builder in good faith is the right to reimbursement for the improvements; the builder, cannot compel the owner of the land to sell such land to the former. This is assuming that the plaintiffs are builders in good faith. But the plaintiffs are not builders in good faith. From the pleadings and the documentary evidence submitted, it is indisputable that the land in question originally belonged to the government as part of the Friar Lands Estate and the title thereto was in the name of the government until it was purchased by Agapita Solis who applied, thru the Bureau of Lands, to purchase the land by installments. The corresponding Sale Certificate No. 531, effective July 1, 1909 (Exhibit 2) was executed. In defendants' complaint (as plaintiff in civil case no. 5442), they alleged that they are the owners of lot 1095 and that defendants (plaintiffs herein), "have been occupying southeastern half portion thereof, without any right thereto, except the tolerance of plaintiffs" (defendants herein), which were admitted, expressly and under oath, in the answer of plaintiffs herein. It would, therefore, appear that plaintiffs herein were not unaware of the flaw in their title, if any, and that their true relation with the herein defendants was that of tenant and landlord, and, that their rights are governed by Article 1573 in relation to article 487 of the old Civil Code, which reads as follows: —"Art. 1573. A lessee shall have with respect to useful and voluntary improvements, the same right which are granted the usufructuaries.""Art. 487. The usufructuary may make on the property held in usufruct any improvements, useful or recreative, which he may deem proper, provided he does not change its form or substance, but he shall have no right to be indemnified therefor. He may, however, remove such improvements, should it be possible to do so without injury to the property".From the above provisions, it can clearly be inferred that plaintiff cannot even compel the defendants to pay for the improvements the former made in the property or to sell the latter's land. Plaintiffs' only right, is to remove the improvements, if it is possible to do so without damage to the land.It should be noted that article 448 of the new Civil Code, (equivalent to Art. 361 of the old Civil Code), relied upon by plaintiffs, is intended to apply only to a case where one builds, or sows, or plants on land in which he believes himself to have a claim of title and not to lands wherein one's only interest is that of tenant, under a rental contract, which is the present case (Alburo vs. Villanueva, 7 Phil., 277). The tenant cannot be said to be a builder in good faith as he has no pretension to be owner (Rivera vs. Thailand, 48 Phil., 396; see also 3 Manresa 4th Ed. pp. 215-216).The trial court, therefore, did not commit any error in dismissing the two causes of action.II. The first cause of action, if any, is barred by a prior judgment. - As plaintiffs in Civil Case No. 5442, the defendants alleged in their complaint that the reasonable rental value of the premises in question was P20.00 a month (par 5). In said case No. 5442, the matter of the rental was in issue, and the same was

considered and decided by the trial court, which ordered the defendants therein "to pay a reasonable compensation of P20.00 a month beginning with January, 1954, until they shall have left the premises". In the instant case, the parties are the identical parties in Civil Case No. 5442, the same lot 1095 is the subject matter of both cases; the same issue, namely, the amount of the rental is involved. Even assuming that appellants have a cause of action, the doctrine of res judicata already operates against them.III. The second cause of action, if any, is barred by the statute of limitations. - As shown by the documentary evidence submitted with the defendants' motion to dismiss, lot No. 1095 was purchased by Agapita Solis from the Government on July 1, 1909. After full payment of the purchase price, T.C.T. No. 10771 covering said lot was issued to said Agapita Solis on June 8, 1933, (Exhibits 1 and 2). Assuming that plaintiffs or their alleged predecessor-in-interest, had a cause of action for claiming the ownership of portions of said lot, such cause of action accrued at the latest, on June 8, 1933. The plaintiffs or their predecessor had ten (10) years from said date, within which to file the corresponding action. They, however, filed the instant complaint only on July 1, 1954, or more than 21 years, after the accrual of the cause of action.IV. The cause of action, if any, is barred by plaintiffs' failure to set it up as a counterclaim in Civil Case No. 5442. - Whether the cause of action is for recovery of ownership or for an alleged right to purchase the property, or for reimbursement for some improvements, the herein plaintiffs as defendants in Civil Case No. 5442, should have set it up as a counterclaim in said case, because same was necessarily connected with, or arose out of the transactions involved in said case No. 5442 (Sec. 6, Rule 10, Rules of Court).It is alleged that plaintiffs appellants'-complaint should not have been dismissed without trial on the merits, because in the case of De Jesus, et al. vs. Belarmino, et al. G.R. No. L-6665, June 30, 1954; Off. Gaz. July 1954, p. 3064, it was held that "where the complaint was dismissed not because of any evidence presented by the parties, or as a result of a trial on the merits, but merely on a motion to dismiss filed by the defendants, the sufficiency of the motion should be tested on the strength of the allegation of facts contained in the complaint and no other", which has been interpreted to apply to cases where the motion to dismiss is based solely on the ground of lack of cause of action. Considering the fact that (1) In the case at bar, documentary evidence and the records of the Civil Case No. 5442 were presented and considered by the trial court; and (2) in the De Jesus case, the only ground for dismissal was the lack of cause of action, while in the present case, aside from said ground, plaintiffs alleged other grounds, the said ruling finds no application.IN VIEW HEREOF, we hereby affirm the order appealed from, with costs against the plaintiffs-appellants.Bengzon, C.J. Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Dizon, JJ., concur.

10. [1988V988] MAXIMO GABRITO, ROGER LIBUT, CARMELITA UY, LIZA DE VERA, thru her Attorney-in-Fact, JESUS DE LOS SANTOS, petitioners, vs. THE HON. NINTH DIVISION, COURT OF APPEALS, THE HON. NICIAS O. MENDOZA, Presiding Judge Branch 74, Regional Trial Court, Olongapo City, et al., respondents.1988 November 243rd DivisionG.R. No. 77976D E C I S I O N

BIDIN, J.:

This is a petition for review on certiorari with preliminary injunction and restraining order of the decision of the Court of Appeals ** dated March 4, 1987 in CA-G.R. No. SP No. 08710, "Maximo Gabrito et al. vs. Hon. Nicias O. Mendoza and Roberto Tan et al.," affirming the April 2, 1986 decision of the Regional Trial Court of Olongapo City *** which also affirmed the decision of MTCC, Branch V, Olongapo City, and the Resolution of respondent court dated March 30, 1987 denying herein petitioners' motion for reconsideration.

The appeal originated as an unlawful detainer complaint filed by herein private respondents with the Municipal Trial Court, Branch V, Olongapo City.

The antecedent facts as summarized by the Court of Appeals are as follows:

"The spouses Roberto Tan and Benita Ching-Tan filed a complaint in the Municipal Trial Court against defendants Maximo Gabrito, et al., alleging that they are the possessors and legal owners of the property situated at No. 107 Gordon Ave., New Kalalake, Olongapo City as evidenced by Tax Declaration No. 4-2046. The defendants are leasing portions of this parcel of land, each paying the corresponding monthly rentals due thereon.

"On the leased portion, the defendants constructed buildings and have allowed other persons to sublease the same for commercial purposes.

"As the spouses Tan have no other property where they could construct their residential house, the spouses Tan notified the defendants (in January 1984) that they intend to personally use the land to build their house thereon and gave defendants three (3) months to vacate the premises and remove the structures and improvements which defendants had constructed thereon.

"In April 1984, defendants requested for an extension of time within which to vacate, which was granted by the spouses Tan. However, from that time on, defendants also stopped paying monthly rentals due on the land they leased.

"In view of this, in July 1984, defendants were told to leave the premises and to pay rentals in arrears. As defendants refused to comply with both demands, the matter was brought to the Barangay Council for settlement. As no agreement was reached, a certification to file action was issued to the spouses Tan. Hence, the Tans filed an action for unlawful detainer with damages against Gabrito, et al.

"In answer to the complaint, defendants Gabrito, et al. denied the material allegations of the complaint and alleged that: they are builders in good faith over the land as provided in Article 448 of the Civil Code; the land where the houses of defendants were built is a public land, not yet awarded nor titled to anybody; plaintiffs's alleged predecessor-in-interest not being the owner thereof could not have passed nor transferred ownership thereof to them (plaintiffs) considering that Gloria Carillo's Miscellaneous Sales Application No. (X-44320) has not yet been acted upon by the Bureau of Lands; plaintiffs and their predecessors-in-interest are absentee applicants over the land, hence, are disqualified to own the same; plaintiffs have never been in possession of the land while the defendants are in actual physical possession thereof; the sale of plaintiffs' alleged predecessor-in-interest in favor of plaintiffs is null and void for being in violation of P.D. No. 1517 as defendants being lessees of the land have the right of first refusal thereof.

"Defendants brought a counterclaim for damages against the plaintiffs." (Rollo, Annex 'C', pp. 39-40).

Respondent Municipal Trial Judge applied the rule on summary procedure in this case, rendered its decision dated November 22, 1985, the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered for all the defendants to vacate the parcel of land described in par. 3 of the complaint, removing therefrom the buildings and any other improvements respectively owned by them; and to pay plaintiffs the following as reasonable compensation for the use of the premises:

Maximo Gabrito ---- at P250.00 per month from April 1984 until he vacates the premises;

Roger Libut ---- at P150.00 per month from May 1984 until he vacates the premises;

Liza de Vera ---- at P150.00 per month from April 1984, until she vacates the premises;

Carmelita Uy --- at P170.00 per month from April 1984, until she vacates the premises.

for all defendants to pay, in equal shares, damages by way of attorney's fees in the amount of ONE THOUSAND PESOS (P1,000.00) as well as costs.

SO ORDERED." (Rollo, p. 35).

On appeal to the Regional Trial Court (Civil Case No. 450-085), the decision of the Municipal Trial Court was affirmed in its decision dated April 2, 1986, the dispositive portion of which reads:

"WHEREFORE, premised on all the foregoing consideration and finding no prejudicial and reversible error was ever committed by the lower Court, the Court affirms in toto the decision being appealed, with costs against the defendants-appellants.

SO ORDERED." (Rollo, Annex 'B' p. 38)

On review, herein respondent Court of Appeals sustained the decision rendered by the Regional Trial Court Branch LXXIV, and ruled;

"WHEREFORE, the Petition for Review herein is DISMISSED for lack of merit." (Rollo, Annex 'C', p. 44)

On March 16, 1987, the petitioner filed their "Motion for Reconsideration and Opposition to the Motion for Immediate Execution Pending Further Proceedings" which was denied by the Ninth Division of respondent Court of Appeals in its Resolution dated March 30, 1987 and granted the Motion for Immediate Issuance of a Writ of Execution filed by private respondents (Annex "F", Rollo, pp. 57-58)

Hence, this petition for review on certiorari filed on April 13, 1987.

On April 21, 1987, Acting Chief Justice Andres Narvasa, authorized the grant of Temporary Restraining Order in this case which was confirmed by the Second Division of this Court in its Resolution dated April 27, 1987 (Rollo, pp. 86, 87, 88).

In a Resolution dated June 8, 1987, petitioners were required to comment on the motion dated April 26, 1987 (Rollo, p. 94) of counsel for respondents, praying to set aside the temporary restraining order issued on April 21, 1987 and to issue a writ of execution pending appeal or to allow the Court of Appeals to proceed with the execution of the decision pending appeal (Rollo, p. 115), which was complied with by petitioners on July 22, 1987 (Rollo, p. 143).

In the resolution of October 5, 1987 (Rollo, p. 187) the petition was given due course and the parties were required to submit their respective memoranda within twenty (20) days from notice. Petitioners' memorandum was submitted on December 3, 1987 (Rollo, p. 196). Respondents submitted their memorandum on April 12, 1988 (Rollo, p. 235).

Petitioners raised the following issues:

"1. That a Municipal Trial Court has no jurisdiction to take cognizance of, a case for Unlawful Detainer under Sec. 1, of Rule 70 of the Rules of Court, where the plaintiffs are merely the legal possessors and recent transferees of a public land, and the defendants are the absolute owners of the building existing on the same land, for a number of years already.

2. That the respondent Regional Trial Court, Branch LXXIV, Olongapo City, ought to have dismissed the action for Unlawful Detainer and as the same was also heard on appeal by the said Court on this jurisdictional challenge.

3. The market value of the residential houses or buildings of the defendants on the said land is approximately P170,000.00, and it was with plaintiffs' predecessor-in-interest, one Gloria Carillo-Potente that defendants caused said structures to be erected in said land plaintiffs having only acquired from said predecessor, by means of a Deed of Sale of such rights sometime on January 5, 1984.

4. Upon this frame of facts which are admitted in the Decision of both Courts, only a Court of General jurisdiction, a Regional Trial Court, can have the competence to try and decide the same: the Court of Special Limited Jurisdiction, cannot take cognizance of such facts as an action for Unlawful Detainer.

5. Arguendo, that the Court of Origin has jurisdiction to take cognizance of the cause of action for Unlawful Detainer, it should have not heard the case in accordance with the Rules of Summary Proceedings, and based its Decision on an Affidavit hearing, as the question of ownership was being contested between plaintiffs and defendants, with respect to whom was the preferred grantee to the same land, and which falls under the complete administration and control of the Bureau of Lands.

6. In fact, the Court of Origin, Branch V, Municipal Trial Court in Cities, Olongapo, should have suspended the proceedings, as there was an Administrative Protest being heard by the District Land Office of Olongapo City.

7. On the question of suspension of proceedings denied by the Court of Origin, Municipal Trial Court in Cities, Branch V, Olongapo City, an action for Certiorari was filed before Branch LXXIII, of Regional Trial Court, Olongapo City, Civil Case No. 399-0-85, and although a Restraining Order against Municipal Trial Court in Cities, Branch V, City of Olongapo, was issued, the same was already academic as by that time said Municipal Trial Court, Branch V, Olongapo City, has already rendered its Decision in favor of private respondent hereat, plaintiff therein.

8. Branch LXXIV, Regional Trial Court, Olongapo, in its Decision rendered on appeal, did not pass upon such matters, specified supra, so as to reverse the Decision of the Court of Origin: the subject Decisions, have not considered the due process rights of petitioners toward their residences and structures, the same are facing the risk of condemnation and destruction without fair hearing, and such improvements have an aggregate value of P170,000.00, more or less.

9. Respondent Honorable Judge Mendoza of Branch LXXIV, Regional Trial Court, Olongapo, may have been misled by the citation of authority, case of vda. de Bocaling vs. Laguna, et al., 54 SCRA, 243, relied upon by appellees, said case being totally inapplicable to the facts of this case.

10. Respondent Deputy Sheriff, Rogelio Lumanlan, without regard to the fifteen (15) days period finality of the Order and/or Writ of Demolition, harrassed herein petitioners, notwithstanding the pendency of matters involved to their extreme discomfort and anxiety.

11. The Decision of the Honorable Court of Appeals, Annex `C', sustained the Decision of the Regional Trial Court and ignored the vital issues posed for resolution: A Motion For Reconsideration, copy is hereto attached as Annex 'D', was presented, precisely to stress the same but, a pointed or precise ruling upon such issues was avoided in the Resolution dated 30th of March, 1987, true copy attached herein as Annex 'E'.

12. On the other (sic) upon Motion of private respondents, the Tans, despite Opposition thereto, Writ of Execution pending appeal was issued and respondent Deputy Sheriff Lumanlan enforced the same, copy of which is hereto attached as Annex `F': true copy of Notice to Vacate selved by said respondent Deputy Sheriff to petitioners is attached as Annex `G' herein.

13. Per Annex `D' Motion For Reconsideration a constitutional point, was reared-forth, on first impression, per proviso of Sec. 10, Art. XIII ---- new, 1986 Constitution, relevant to demolition and resettlement, and, Resolution, dated 30th March, 1987, Annex `E', of the Honorable Appellate Authority, avoided said constitutional question, without passing-upon the same.

"14. Of Jurisdictional matters: Decision dated March 4, 1987, of the Honorable Court of Appeals was, received on March 6, 1987, Motion For Reconsideration was filed on March 16, 1987, and Resolution dated 30th of March, 1987, denying Motion for Reconsideration was received on April 1, 1987: thus, this Petition is filed within the 15 day period." (Rollo, pp. 4-8).

All of which boil down to the main issue of whether or not an action for unlawful detainer is the proper action to oust petitioners from their occupation of the land in dispute.

There is no question as to the ownership of the land in litigation as both petitioners and private respondents admit that the same is a public land and owned by the government. The bone of contention is, who has a better right to possess the land which definitely falls under the jurisdiction of the Municipal Trial Court and the rule of summary procedure may properly be applied.

In a preliminary conference held pursuant to Section 6 of the Rule on Summary Procedure, defendants admitted that they entered the premises as lessees and had been paying rentals for the use of the land to Gloria Carillo, private respondents' predecessor-in-interest (Order dated May 15, 1985 in Civil Case No. 2511, MTC, Olongapo City, Branch V; Rollo, pp. 7273). When requested to vacate the premises, petitioners asked for an extension of time which request was granted. However,

petitioners failed to vacate the premises and also stopped paying rentals. In view of said admissions, petitioners had unquestionably recognized private respondents' prior right of possession over the questioned property.

Petitioners' allegation in their answer that they are builders in good faith over the land as provided for in Article 448 of the Civil Code is untenable. As ruled by this Court, Article 448 of the Civil Code, applies only where one builds on land in the belief that he is the owner of the land, but does not apply where one's interest in the land is that of a lessee under a rental contract (Balucanag v. Francisco, 122 SCRA 498 [1983]). More than that, it has been settled that the mere fact that, in his answer, defendant claims to be the exclusive owner of the property from which plaintiff seeks to eject him is not sufficient to divest the Municipal Trial Court of jurisdiction (Vivar v. Vivar, 8 SCRA 847, 849 [1963]; De Santa vs. Court of Appeals, 140 SCRA 52 [1985]).

In addition, this Court held in Bocaling v. Laguna, et al (54 SCRA 243, 250 [1973]) that:

"The rule is well-settled that lessees, like petitioner, are not possessors in good faith, because he knew that their occupancy of the premises continues only during the life of the lease, and they cannot as a matter of right, recover the value of their improvements from the lessor, much less retain the premises until they are reimbursed. Their rights are governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects."

Petitioners contend that the above cited case is "completely inapplicable to the case at bar, because the genesis case of Ejectment therein was subjected to a compromise Agreement" (Rollo, p. 18). Such contention is, however, untenable. One of the issues raised in the above-cited case was whether or not lessees are builders and/or possessors in good faith entitled to reimbursement for the value of their improvements. The Court categorically resolved the issue in the negative without qualification nor even a reference to the compromise agreement alluded to by the petitioner.

In a later development, petitioners filed a supplemental memorandum submitting the decision of the Bureau of Lands dated June 7, 1987, the dispositive portion of which reads:

"IN VIEW OF ALL THE FOREGOING, the Miscellaneous Sales Application No. 4320 of Benita Ching Tan should be, as hereby as it is rejected forfeiting to the government whatever amount had been paid on account thereof. The miscellaneous sales application of Maximo Gabrito, Carmelita Uy, Roger Libut and Liza de Vera shall continue to be given due course after a subdivision survey of the portion occupied by them shall have been made at their pro-rata expense.

SO ORDERED."

In view thereof, petitioners maintain that they are the lawful owners of the buildings and the legal possessors of subject land and that the records of the court proceedings show the pendency of the administrative protest before the Bureau of Lands between the same litigating parties (Rollo, pp. 166-167).

Respondents countered that the decision of the Bureau of Lands granting preferential right to the petitioners to apply for the subject parcel of land is still on appeal before the Department of Natural Resources. 1 Hence, said decision which is not yet final, cannot affect the outcome of this case because the authority given to the land department over the disposition of public land does not exclude the courts from their jurisdiction over possessory actions, the character of the land notwithstanding (Rollo, pp. 246-247).

The contention of private respondents is well taken.

This issue has long been laid to rest by this Court. As early as the case of Pitarque v. Sorilla (92 Phil. 55 [1952]), this Court ruled that:

"The vesting of the Lands Department with authority to administer, dispose of, and alienate public lands must not be understood as depriving the other branches of the Government of the exercise of their respective functions of powers thereon, such as the authority to stop disorders and quell breaches of peace by the police and the authority on the part of the courts to take jurisdiction over possessory actions arising therefrom not involving, directly or indirectly, alienation and disposition."

Said ruling was reiterated in Bahayang v. Maceren, 96 Phil 390 [1955]; in Molina v. De Bacud, 19 SCRA 956 [1967] and in Rallon v. Ruiz, Jr., 28 SCRA 331 [1969]. In the latter case, the Court specifically ruled on the jurisdictional question, as follows:

"Courts have jurisdiction over possessory actions involving public lands to determine the issue of physical possession (in forcible entry cases before the inferior court) on the better right of possession (in accion publiciana cases before court of first instance). And this is because the issue of physical possession raised before the courts is independent of the question of disposition and alienation of public lauds which should be threshed out in the Bureau of Lands."

The above ruling was further reiterated in Francisco v. Secretary of Agriculture and Natural Resources (121 SCRA 380 [1983]) and in a recent case of National Development Co., et al. v. Hervilla, G.R. No. 65718, June 30, 1987 (151 SCRA 520), where it was held that:

"It is now well settled that the administration and disposition of public lands are committed by law to the Director of Lands primarily, and ultimately to the Secretary of Agriculture and Natural Resources. The jurisdiction of the Bureau of Lands is confined to the determination of the respective rights of rival claimants of public

lands or to cases which involve disposition and alienation of public lands. The jurisdiction of courts is limited to the determination of who has the actual, physical possession or occupation of the land in question (in forcible entry cases, before municipal courts) or, the better right of possession (in accion publiciana, in cases before the Court of First Instance, now Regional Trial Court)."

And even more recently in the case of Guerrero v. Amores, et al., G.R. No. L-34492 promulgated on March 28, 1988, the Court clearly stated that "pending final adjudication of ownership by the Bureau of Lands, the Court has jurisdiction to determine in the meantime the right of possession over the land." Corollary thereto, the power to order the sheriff to remove improvements and turn over the possession of the land to the party adjudged entitled thereto, belongs only to the courts of justice and not to the Bureau of Lands.

In the same case, the application of the principle of exhaustion of administrative remedies with reference to public lands, was further clarified by this Court as follows:

"On the other hand, the application of the principle of exhaustion of administrative remedies as a condition precedent to the filing of a juridical action is confined to controversies arising out of the disposition of public lands (Geukoko vs. Araneta, 102 Phil. 706 (1957); Marukot vs. Jacinto, 98 Phil. 128 (1957), alienation of public lands (Rallos vs. Ruiz, Jr., supra) or to the determination of the respective rights of rival claimants to public lands (Pitarque vs. Sorilla, supra) and not to possessory actions involving public lands which are limited to the determination of who has the actual, physical possession or occupation of the land in question (Rallos vs. Ruiz, Jr., supra)."

In fact, the Bureau of Lands in its decision of June 7, 1987, admitted the jurisdiction of the courts to decide the case on the question of physical possession, although not on the question of ownership (Rollo, p. 179).

Under the circumstances, a careful study of the records failed to show any cogent reason to disturb the findings of the Municipal Trial Court in Cities; of the Regional Trial Court, both of Olongapo City and finally of the Court of Appeals.

WHEREFORE, the decision of respondent Court of Appeals is Affirmed and the temporary restraining order is lifted. Costs against petitioners.

SO ORDERED.

Fernan, (C.J.), Gutierrez, Jr., Feliciano and Cortes, JJ., concur.

11. [1983V210] PERSHING TAN QUETO, petitioner, vs. COURT OF APPEALS, JUAN POMBUENA and RESTITUTA TACALINAR GUANGCO DE POMBUENA, respondents.1983 May 16En BancG.R. No. L-35648

G.R. No. L-35648D E C I S I O N

ABAD SANTOS, J.:

Before Us is a petition to review the decision of the defunct Court of Appeals (now Intermediate Appellate Court) in CA-G.R. No. 39492-R entitled, Restituta T. Guangco, Plaintiff-Appellant, versus Juan Pombuena, Defendant-Appellee, and Pershing Tan Queto, Defendant-Appellant. The decision was penned by Justice Ramon C. Fernandez who was joined by Justices Cecilia Muñoz Palma and Hermogenes Concepcion, Jr. It should be noted that all of the aforementioned justices later joined this Court. Justice Concepcion is still with the Court and is obviously not taking part in this decision.

The appealed decision is not long and having been written by a jurist with impressive credentials it readily provides both the factual background and the issues involved. For this reason the full text of the decision is reproduced as follows:

"This action for reconveyance of title, annulment of barter and recovery of property and damages was instituted by Restituta T. Guangco against Juan Pombuena and Pershing Tan Queto on October 9, 1964 in the Court of First Instance of Misamis Occidental.

The petition states that the plaintiff is one of the legitimate children of the late Benito Guangco and Basilides Takalinar, both having died intestate; that Benito Guangco and Basilides Takalinar were the owner in fee simple of that parcel of urban land situated at Centro, Ozamiz City, Philippines, known as Lot No. 304, containing an area of 702 square meters, more or less; that in their lifetime until their respective deaths, Benito Guangco and Basilides Takalinar lived with their daughter, the plaintiff, then married to the defendant, Juan Pombuena, in the house built on the southern part of said lot; that it was the plaintiff who took good care of her parents, Benito Guangco and Basilides Takalinar, until their respective deaths; that Benito Guangco died ahead of his wife, Basilides Takalinar; that sometime before her death, Basilides Takalinar, wished and instructed that after her death, one half (1/2) portion of the aforementioned lot be given to Buenaventura Guangco, and the other one-half (1/2) be given to the daughter, the plaintiff; that the other sisters and brothers agreed and respected this wish, instruction and adjudication, so that since February 11, 1927, when the instruction was given, the plaintiff possessed and owned said property as a realty orally bequeathed to her by her mother and it thus became her only paraphernal property; that in order to strengthen her ownership together with her husband, the defendant, Juan Pombuena, a deed of sale was executed with the consideration

P50.00 that was never paid for it was only a simulated price, in favor of the plaintiff and said defendant; that after the subdivision of the said lot, the southern portion belonging to the plaintiff was designated Lot No. 304-B; that Lot No. 304-B was designated as Cad. Lot No. 5944, Misamis Cadastre; that through fraud, error and/or mistake, defendant, Juan Pombuena, obtained for said Cad. Lot No. 5944 O.C.T. No. 0-1160 in his name on April 23, 1962 from the Registry of Property of Ozamis City, to the damage and prejudice of the true owner, the plaintiff who knew of the title only very recently; that the title being now indefeasible, this action for reconveyance was filed; that the plaintiff, as owner leased portion of Lot 304-B to the defendant, Pershing Tan Queto on September 22, 1949; that during the existence of the lease contract the defendant-lessee, Pershing Tan Queto, had shown unusual interest in the property by sending different persons persuading the plaintiff to sell or barter the property to him but the plaintiff flatly told to said defendant and his emissaries that she was not selling or bartering the property because it is her only paraphernal property which she inherited from her deceased parents and she wants to preserve the integrity of the property in order to cherish and keep the memories of her late parents; that persuasion having failed, the defendant Tan Queto employed the more clever and subtle strategy by allowing the defendant Juan Pombuena and some of plaintiff's children to obtain credit in his store; that defendant Tan Queto also loaned money to Pombuena and plaintiff's children, entrapping defendant, Juan Pombuena in many debts which grew to an amount which was quite difficult for the plaintiff and her husband, Juan Pombuena, to pay, so that at the time the lease contract expired, the defendant Pershing Tan Queto refused to surrender and return the property to the plaintiff; that in order to recover possession of said property, the plaintiff filed an unlawful detainer case in the Municipal Court of Ozamiz City, which was decided against defendant Pershing Tan Queto; that meanwhile defendant Pershing Tan Queto continued to cajole the plaintiff into selling or bartering the said property to him and the plaintiff stood firmly on her conviction never to sell or barter Lot 304-B; that in spite of the firm refusal of the plaintiff not to sell the property, without her knowledge and consent, through deceit and misrepresentation, the defendant Pershing Tan Queto, finally succeeded in unduly influencing the defendant, Juan Pombuena, into signing a barter contract on October 10, 1962; that after she knew of the barter contract, the plaintiff immediately protested against this deceitful act and one of her children, Napoleon Pombuena, wrote an angry letter to defendant Pershing Tan Queto vehemently protesting against the barter contract and said Napoleon Pombuena and his brother, Dr. Solomon Pombuena, wrote the Register of Deeds of Ozamiz City not to register said barter contract; that in spite of the vehement protest of plaintiff and her children against the said barter contract, the defendant Pershing Tan Queto started and persisted in the construction of the present concrete building, portion of which is now illegally standing on the whole of Lot 304-B; that since she had knowledge of the barter contract, the plaintiff suffered actual and

moral damages; that since October 10, 1962, when defendant Pershing Tan Queto took possession of Lot 304-B, the plaintiff failed to collect the monthly rental at the rate of P250.00 per month or a total of P6,000.00 for the period of 24 months up to and including October 10, 1964; that from the time of the filing of this case until its final termination, the plaintiff is entitled to a monthly rental of P250.00 or when defendant Pershing Tan Queto shall have made business with the portion of the building on Lot 304-B, the rental shall be at P900.00 per month; and that because of the refusal of defendant Pershing Tan Queto to annul the barter contract and return the possession of the property to plaintiff, the latter had to engage counsel whom she agreed to pay P2,000.00 attorney's fees.

In their answer filed on October 24, 1964 the defendants admit paragraphs I and VIII of the petition and deny the rest of the material allegations therein. As affirmative defenses, they aver that on February 11, 1927 defendant Juan Pombuena and the plaintiff acquired by purchase the land now designated as Lot 304-B, from plaintiff's mother Basilides Takalinar for the purchase price of P50.00; that the plaintiff and her defendant-husband had entered upon the actual occupation and enjoyment of the land as their conjugal property since then up to October 2, 1952 when the husband conveyed it by barter to defendant Pershing Tan Queto; that the primitive owner of the land, together with the other half portion now known as Lot 304-A, was Benito Guangco; that in the hearing before the Cadastral Court plaintiff never asserted or claimed the land in question as her paraphernal property, so said court adjudicated on November 22, 1938 this portion of Lot 304 as conjugal property of the plaintiff and defendant, Juan Pombuena resulting in the issuance of O.C.T. No. 0-1160; that plaintiff somehow managed this property because defendant Juan Pombuena, her husband, had been enmeshed in earning livelihood for himself, his wife and growing family, working almost overtime even at night as a sawmill employee; that consequently, the wife sort of administered the land in question, their only conjugal property; that on September 22, 1949, the plaintiff negotiated with defendant Pershing Tan Queto the lease over this land, but in the consummation of the lease defendant, Juan Pombuena, as husband of plaintiff, affixed his signature to the contract of lease thereby giving his consent to the transaction; that in fact, in Civil Case No. 448 of the City Court of Ozamiz City for illegal detainer and damages against defendant Pershing Tan Queto filed by plaintiff and her husband, paragraph III of their complaint averred that the spouses 'executed the contract of lease in favor of the defendant'; that neither in the complaint nor in the contract of lease was it therein expressly adverted that plaintiff Restituta Takalinar was exclusive owner of the land as her paraphernal property, that defendant Pershing Tan Queto and his co-defendant Juan Pombuena, after the illegal detainer case was decided by the City Court of Ozamiz, both appealed to the Court of First Instance of Misamis Occidental; that meanwhile an agreement of barter was reached by both defendants hereto whereby the land in question would be exchanged for a land with an already standing house thereon

which the plaintiff and her husband and children are, and have long been, occupying and in addition thereto the plaintiff and her defendant-husband were given P4,000.00 and the indebtedness adjudged against them by the City Court of Ozamiz was condoned; that the plaintiff and her defendant-husband, as well as their children, knew and impliedly assented to this transaction of barter because they are still making use of the house and land bartered to them as absolute owners and possessors; that the two sons; Dominador and Napoleon, both surnamed Pombuena, through their mother, the plaintiff, have each made use of the P4,000.00; that defendant Pershing Tan Queto before entering into the barter transaction diligently inquired and found that the land was adjudicated to plaintiff and defendant Juan Pombuena as their conjugal property having alleged and proved in the cadastral hearing that they acquired it on February 11, 1927 from Basilides Takalinar resulting in the issuance of the torrens title in question, that both being advised that the husband could dispose without the consent of the wife property acquired as conjugal property before the effectivity of the new civil code, the defendants went ahead with the barter; that had defendant Pershing Tan Queto agreed to spend for the remodelling of the house bartered to the Pombuena family at an enormous cost, this case would not have arisen; that plaintiff, her husband, children and grandchildren have not been paying rental any more on the house and lot to them bartered by defendant Pershing Tan Queto since April 1962, which was at the rate of P50.00 monthly; that the petition states no cause of action, that the instant action primarily involves the husband and wife but there is no allegation in the petition that earnest efforts toward a compromise have been made; that the property being conjugal, no reconveyance is feasible; and that annulment of barter will not lie in this case because no ground for either rescission or viodance of the contract appears indubitable.

The defendant Pershing Tan Queto asks for moral damages and attorney's fees.

The plaintiff seasonably filed an answer to the counterclaim.

The trial court rendered a decision dated January 12, 1967 the dispositive part of which reads:

'WHEREFORE, judgment is hereby rendered:

a. Annulling the barter agreement dated October 10, 1962, Exhibit "J";

b. Ordering the mutual restitution of properties stated in the barter by reason of said annulment;

c. Ordering the Register of Deeds of Ozamiz City to cancel Original Certificate of Title No. 0-1160 and to issue in lieu thereof a transfer certificate of title in the name of Restituta Takalinar Guangco, of legal age, Filipino, married to Juan Pombuena, and residing at Ozamiz City, as her paraphernal property; and

d. Ordering the defendants to pay the costs.

SO ORDERED

City of Ozamiz, January 12, 1967.

(Sgd.) GERONIMO R. MARAVE

Judge'

(Record on Appeal, pp. 40-41)

The plaintiff and defendant, Pershing Tan Queto, appealed to this Court.

The plaintiff assigns the following errors:

I

THE TRIAL COURT ERRED IN NOT DECLARING THAT PORTION OF THE BUILDING ON THE LAND IN QUESTION BUILT IN BAD FAITH.

II

THAT THE TRIAL COURT ERRED IN NOT ORDERING THE DEFENDANT-APPELLANT PAY THE RENTALS IN ARREARS.

III

THAT THE TRIAL COURT ERRED IN NOT ORDERING THE DEFENDANT-APPELLANT PAY DAMAGES.

IV

THAT THE TRIAL COURT ERRED IN NOT ORDERING THE DEFENDANT-APPELLANT PAY THE ATTORNEY'S FEES.'

(Brief of plaintiff-appellant, pp. 1-2)

The defendant, Pershing Tan Queto, contends that the trial court erred in the following manner:

'I

THE TRIAL COURT ERRED IN NOT FINDING THAT THE CONTRACT OF SALE, EXHIBIT "B", IS TRULY A SALE, NOT JUST A MERE CONVEYANCE.

II

THE TRIAL COURT ERRED IN FINDING THAT THE LAND SUBJECT MATTER OF THE PRESENT ACTION IS A PARAPHERNAL PROPERTY OF THE PLAINTIFF-APPELLANT, AND NOT A CONJUGAL PROPERTY OF THE APPELLEE AND SAID APPELLANT.

III

THE TRIAL COURT ERRED IN NOT GIVING FULL FORCE, EFFECT AND VIRTUE TO THE BARTER AGREEMENT, EXHIBIT "G"

IV

THE TRIAL COURT ERRED IN NOT DISMISSING THE COMPLAINT WITH COSTS AGAINST PLAINTIFF-APPELLANT: IN NOT GRANTING TO DEFENDANT-APPELLANT THE REMEDY OR RELIEF HE HAS PRAYED IN HIS COUNTERCLAIM.'

(Brief of defendant-appellant, pp. 1-2)

We shall first take up the appeal of the defendant, Pershing Tan Queto.

By whatever name Exh. "B" is called, under the circumstances surrounding its execution and viewed in the light of Exh. "C-1", the real intention of Basilides Takalinar was to convey the land in question to her daughter, Restituta Takalinar, as the share of the latter in the future hereditary estate of the former.

The trial court, therefore, did not commit the first error assigned by appellant Tan Queto.

That the land in question is a paraphernal property of plaintiff-appellant was admitted by defendant, Juan Pombuena, and appellant, Tan Queto in the illegal detainer action, Civil Case No. 448 of the City Court of Ozamiz.

Thus paragraph II of the complaint in said illegal detainer case reads:

'That plaintiff Restituta Guangco de Pombuena is an owner of a certain portion of residential land and improvements existing thereon, situated in the City of Ozamiz, Philippines, bounded and more particularly described as follows:

Bounded on the North - by remaining portion of Lot 304 now the share of Buenaventura Guangco and measures 66 ft.; East - by Heirs of Pangilinan and Rosa Vayson and measures 55 ft.; South - by Heirs of Ramon Bernad and measures 66 ft.; West - by Rizal street and measures 55 ft.; containing an approximate area of 3,630 sq. ft.; a portion only of the bigger lot designated as Lot No. 304 of the City of Ozamiz Cadastre and covered by Tax Dec. No. 32756 in the name of Benito Guangco, deceased father of the plaintiff Restituta Guangco de Pombuena.'

(Complaint, Exh. "D")

The complaint was verified as true of their own knowledge by Restituta Guangco, plaintiff-appellant, and her husband, defendant, Juan Pombuena.

In his answer to the complaint in the illegal detainer case, defendant-appellant, Pershing Tan Queto alleged:

'1. That he ADMITS the averments in Paragraphs I, II, III and IV of the complaint.'

(Exh. E-1)

We, therefore, concur in the finding of the trial court that the land in question is a paraphernal property of plaintiff-appellant.

In view of the admission by both Juan Pombuena and Pershing Tan Queto that the land in question is the paraphernal property of the plaintiff-appellant, it follows that the barter agreement, Exh. "G", has no effect.

As a consequence, the trial court did not err in not dismissing the complaint and not granting the relief prayed by defendant-appellant in his counterclaim.

We now come to the appeal of the plaintiff-appellant.

The first error assigned is meritorious.

We concur in the finding, being supported by overwhelming evidence, of the trial court that Tan Queto had more than sufficient knowledge that the land in question was the paraphernal property of Restituta before the barter agreement between him and Juan Pombuena. Tan Queto, therefore, was aware that Juan Pombuena, the person he was dealing with, was not the owner of the land in question. The conclusion is inescapable that the defendant-appellant, Pershing Tan Queto, was a builder in bad faith. Hence he has no right to be refunded the value of whatever he constructed on the land in question. (Arts. 449 and 546, Civil Code of the Philippines.)

The equity and circumstances of the case do not warrant that the defendant-appellant be ordered to pay the plaintiff-appellant rentals. Moreover, it appears that the plaintiff-appellant and her family have been living on the house and land of Tan Queto without paying any rent.

By the same token, the defendant-appellant should not be made to pay damages and attorney's fees.

WHEREFORE, the decision appealed from is hereby affirmed with the sole modification that the defendant-appellant is not entitled to be refunded the value of whatever he constructed on the land in question, without pronouncement as to costs.

The core issue in the trial court, the Court of Appeals and this Court is the ownership of Lot No. 304-B (Cadastral Lot No. 5944) which is covered by O.C.T. No. 0-1160 of the Registry of Property of Ozamiz City.

Restituta T. Guangco claims that although the lot was registered in the name of her husband, Juan Pombuena, it was her paraphernal property because she acquired it through a lucrative title from her mother. Upon the other hand, Juan Pombuena and the transferee of the lot, Pershing Tan Queto, claim that it belongs to the conjugal partnership of the Pombuenas and having been acquired on February 11, 1927, long before the Civil Code of the Philippines took effect, Juan Pombuena had

the capacity to alienate (barter) it even without the consent of the wife. (Art. 166, par. 2, Civil Code.).

Both the trial court and the Court of Appeals found as a fact that the lot in question is the paraphernal property of Restituta T. Guangco. How the Court of Appeals reached this conclusion is well explained in its decision. The judgment of the Court of Appeals is conclusive as to the facts; it cannot be reviewed by this Court. (2 Moran, Rules of Court [1976], p. 485, citing a long list of cases.)

Since the lot in question is the paraphernal property of Restituta, the order to register it in her name as her paraphernal property is well-taken. Also well-taken is the order annulling the barter agreement and directing the mutual restitution of the objects bartered because of failure of consideration.

The other question relates to the forfeiture of the building which Tan Queto built on the land in question. The Court of Appeals found as a fact that Tan Queto was a builder in bad faith because he knew that the land was the paraphernal property of Restituta and it was not for Juan Pombuena to barter it.

The factual conclusion that Tan Queto is a builder in bad faith is well-taken. He knew that he acquired no title to the lot in question because of the barter and when he built on it he did so in bad faith. As a builder in bad faith he has no right to be refunded the value of the building for Article 449 of the Civil Code stipulates:

"Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity."

The Court of Appeals committed no error of a legal nature in its decision.

WHEREFORE, the petition is dismissed for lack of merit. Costs against the petitioner.

SO ORDERED

Makasiar, Guerrero, Melencio-Herrerra, Plana, Escolin, Vasquez, Relova and Gutierrez, Jr., JJ., concur.

Teehankee, Aquino, Concepcion, Jr. and De Castro, JJ., took no part.

Fernando, C.J., is on official leave.

12. J. M. TUASON & CO., INC., represented by its Managing Partner, GREGORIO ARANETA; INC., plaintiff-appellee, vs. TEODOSIO MACALINDONG, defendant-appellant.1962 December 29En BancG.R. No. L-15398D E C I S I O N

On September 9, 1958, plaintiff instituted Civil Case No. Q-3303 in the Court of First Instance of Rizal, against Teodosio Macalindong, alleging therein that it is the registered owner of a parcel of land, commonly known as the Sta. Mesa Heights Subdivision, located at Quezon City and covered by Transfer Certificate of Title No. 1267 (37686-Rizal) of the Registry of Deeds of Quezon City; that on or about December 5, 1955, the defendant, thru force, strategy and stealth, unlawfully entered into the possession of some 200 square meters, within said parcel of land, situated at Barrio North Tatalon, Quezon City, and constructed his house thereon; and that because of this act it suffered and will continue to suffer damages at the rate of P60.00 monthly, representing the fair rental value of the portion occupied. Defendant Answering, stated among others, that —

". . . prior to 1955 and since time immemorial, he and his predecessors-in-interest have been in open, adverse, public, continuous and actual possession of the lot in question in the concept of owner and, by reason of such possession, he had made improvement thereon valued at P9,000.00."

As a counterclaim, he asked an award of P25,000.00 for moral and exemplary damages and P600.00 as attorney's fees.

Defendant presented documents tending to show that the portion in question was acquired by him on June 28, 1954, thru purchase from Graciano M. Flores (Exh. 1), who in turn acquired the same from Lucia T. Teotico on April 27, 1954 (Exh. 2). The latter bought the same from Agustin de Torres on April 1, 1950 (Exh. 3), who allegedly derived his title from Telesforo Deudor, a party in the Compromise Agreement, which formed the basis of the joint decisions in Civil Cases Nos. Q- 135, 139, 174, 177 and 186, of the same court.

The court a quo rendered judgment, the pertinent portions of which read —

". . . In the first place, the Court takes judicial notice of the fact that this property has been registered under the Torrens System, in the name of plaintiff since 1914, hence, the claim of possession of defendant cannot defeat the efficacy of the title of the plaintiff in the second place, as testified to by the defendant himself when he was trying to declare the property in question in the Office of the City Assessor he could not do so because he was told that there was a question to that. In fine, the documents presented by the defendant cannot be considered by the Court as to vest in him any rights over the property in question as against the title of the plaintiff which has been issued since 1914. . . .

WHEREFORE, the Court renders judgment in favor of the plaintiff and against the defendant by declaring the defendant to have no valid right of possession and title whatever in plaintiff's premises; ordering him and all persons claiming under him to vacate the premises in question and to remove his house and other construction therefrom; ordering him to pay the plaintiff the sum of P30.00 a month from the date of usurpation in 1955 until the plaintiff is restored to the possession of the same; and for him to pay the costs."

Defendant presented a Motion to Reconsider and/or to Set Aside Decision, alleging that the said decision is contrary to the evidence and law. It was contended that while the plaintiff secured title over the land, the portion in question, however, had been in the adverse, open, public and continuous possession of the defendant's predecessor- in-interest, since 1893. Defendant reproduced portions of the Compromise Agreement used in the Civil Cases earlier enumerated, to show the possession of his predecessors-in-interest, to wit: —

"SECOND. — That within the perimeter of said land is an area measuring fifty (50) quiñones, over which the DEUDORS have claimed possessory rights by virtue of what purports to be an abstract of an 'informacion posesoria' covering the latter property, which recites that at the time of issuance thereof in 1893, the Records of the Registry of Deeds of Manila (South District) showed that said property was registered in the name of the old Telesforo Deudor, predecessor-in-interest of the present Deudors who are parties hereto. . . .

"THIRD. — That said DEUDORS have been in possession of the land in question and claim to be the owners thereof and during the period of possession have sold their possessory rights to various third persons;

"FOURTH. — That in the middle of 1950, DEUDORS, under a mistaken impression of the nature of their rights in said property, began the following suits against the OWNERS in the Court of First Instance of Quezon City . . . "

The motion for reconsideration having been denied on February 21, 1959, defendant appealed directly to this Court, claiming that the court a quo erred —(1) In not holding that plaintiff-appellee's Torrens Certificate of Title is Null and Void insofar as the property in controversy is concerned;(2) In not holding that plaintiff-appellee's action has already prescribed or is already barred by laches;(3) In not holding that defendant-appellant is a possessor in good faith and is entitled to retention until reimbursed of the value of his improvements;(4) In ordering defendant-appellant to pay rentals to the sum of P30 per month from 1955 until plaintiff-appellee is restored to the possession of the land in controversy; and(5) In not dismissing the complaint.

The appellee's cause of action is based on its ownership of the subject land, evidenced by TCT No. 1267 of the Register of Deeds of Quezon City (Exhibit A), which was issued in appellee's name on May 29, 1939 (Decree No. 17431 G.L.R.O. No. 7681), and was traceable to O.C.T. No. 735 (Rizal, issued on July 8, 1914.) Appellant's defense is that he is the owner of the subject premises. His only counter-claim is for attorney's fees and moral and exemplary damages, for appellee's supposedly malicious and frivolous presentation of the complaint. Nullity of appellee's title and reconveyance were never set up, either as defenses or as counter-claims. Neither prescription of appellee's claim or bar of the action for recovery due to laches was averred in appellant's defenses. Appellant cannot raise them now for the first time on appeal. Verily, the failure to raise the issue of prescription and laches, amounts to a waiver of such defenses (Sec. 10, Rule 9; Maxilom vs. Tabotabo, 9 Phil., 390; Domingo vs. Osorio, 7 Phil., 405). Moreover, the right of the appellee to file an action to recover possession based on its Torrens Title is imprescriptible and not barred under the doctrine of laches (Art. 348, Civil Code; Francisco, et al., vs. Cruz, et al., [CA] 43 O.G. 5105). On the contrary, the laws on prescription of actions and on estoppel and laches presently operate against appellant. After many years of inaction — forty-four (44) years, from July 8, 1914 (issuance of O. C. T. No. 735, Rizal), or nineteen (19) years from May 29, 1939 (issuance of T. C. T. No. 1267), appellant should be completely barred from assailing the decree of registration of the subject property (Tiburcio vs. PHHC, G.R. No. L-13429, Oct. 31, 1959; See also J. M. Tuason & Co., Inc., vs. Bolaños, L-4935, May 28, 1954, and J. M. Tuason & Co., Inc. vs. Santiago, G.R. No. L-5079, July 31, 1956, involving the same Decree).

We are in accord with appellant's contention that Act No. 496 is not intended to shield fraud and that registration thereunder merely confirms title but does not vest any, when there is none, because registration under the Torrens system is not a mode of acquiring ownership. We are not, however, justified to apply these principles to the facts of the case and partially annul appellee's Torrens Title, which, as stated above, is traceable to an original certificate of title issued way back in 1914, or over 44 years ago, and which is now incontrovertible and conclusive against the whole world (sec. 38, Act 496). To sustain an action for annulment of a Torrens Title, for being void ab initio, it must be shown that the land Court which had issued the pertinent decree of registration, did not acquire jurisdiction over the case; and to succeed in an action for reconveyance after the lapse of one year from the decree of registration, actual fraud in securing the title must be proved (Bernardo vs. Siojo, 58 Phil. 89, 102). The pleadings filed by appellant before the trial court, alleged no such lack of jurisdiction and no evidence whatsoever was adduced or attempted to be adduced on the question of jurisdiction of the said land court; and the record also fails to show fraudulent acts or any knowledge of others' adverse rights by the original Tuason registrants in G. L. R. O. Rec. No. 7681, or that the latter knew of Telesforo Deudor's or Agustin de Torres' supposed right of

ownership. Appellant mentions an informacion posesoria, subject of Compromise Agreement dated March 16, 1953, between Deudor and Tuason & Co., Inc., allegedly issued in 1893 to Telesforo Deudor, who sold a portion of his land to Agustin de Torres, who possessed it until it passed to Lucia T. Teotico, to show that he had a previous title to the land, before the appellee had obtained a Torrens Title in 1914. In the first place, the compromise agreement had already been rescinded (Deudor, et al. vs. J. M. Tuason & Co., Inc. L-13768, May 30, 1961). In the second place, the records do not indicate that either Telesforo Deudor or Agustin de Torres was in possession of the subject lot, at the time appellee's predecessor-in-interest had obtained a Torrens Title thereto in 1914, or at any time before World War II. And there is no finding of the trial court to this effect. On the contrary, it is a fact that in December 1955, appellant entered a portion of 200 square meters of appellee's land, without the consent and knowledge of appellee, and on September 9, 1958, appellee commenced the present action for recovery of possession. To this finding of fact, the parties are bound, because the appeal, according to appellant, would only raise questions of law. Moreover, if We were to give due weight to the compromise agreement which, by the way, was not presented in evidence in the case at bar, the appellant will have to concede that "The Deudors had a wrong impression of the nature of their rights" in the subject property, and perforce admit that Telesforo Deudor and Agustin de Torres had no dominical title to the property in question. Appellant claims that he should have been declared a builder in good faith, that he should not have been ordered to pay rentals, and that the complaint should have been dismissed. Again this question is being raised for the first time on appeal. It was not alleged as a defense or counter-claim and the trial court did not make any finding on this factual issue. From the documents submitted, however, it appears that appellant was not a builder in good faith. From the initial certificate of title of appellee's predecessors-in-interest issued on July 8, 1914, there is a presumptive knowledge by appellant of appellee's Torrens Title (which is a notice to the whole world) over the subject premises and consequently appellant can not, in good conscience, say now that he believed his vendor (Flores), his vendor's vendor (Teotico) and the latter's seller (De Torres) had rights of ownership over said lot (Francisco, et al., vs. Cruz, supra). Appellant, had likewise, a sufficient warning from the fact that the lot, subject of his purchase, is described in his Exhibits 1, 2 and 3, to be a portion of an unnumbered and, therefore, unapproved subdivision plan. Had he investigated before buying and before building his house on the questioned lot, he would have been informed that the land is registered under the Torrens system in the name of J. M. Tuason & Co., Inc. If he failed to make the necessary inquiry, appellant is now bound conclusively to appellee's Torrens Title (Sec. 51, Act 496 Emas vs. Zuzuarregui, 35 Phil., 144). Moreover, when appellant was trying to declare the property, the Office of the City Assessor told him he could not do so, because there was "a question to that". Lastly, appellant's remedy in this regard,

should have been directed against his predecessors-in-interest. The decision appealed from, is therefore, affirmed, with costs against the defendant appellant.

13. [1955V207] BELEN UY TAYAG and JESUS B. TAYAG, petitioners, vs. ROSARIO YUSECO, JOAQUIN C. YUSECO and THE COURT OF APPEALS, respondents.1955 Oct 241st DivisionG.R. No. L-8139D E C I S I O N

This is an appeal by certiorari by petitioners Belen Uy Tayag and her husband Jesus B. Tayag from the decision of the Court of Appeals of April 23, 1954, affirming the decision of the Court of First Instance of Manila. The facts in this case as may be gathered from the records and as found by the Court of Appeals may be briefly stated as follows. In and prior to the year 1930 Atty. Joaquin C. Yuseco had been rendering professional services to Maria Lim, owner of lots 11-A and 11-B, block 2251 of the Government Subdivision known as Hacienda de San Lazaro covered by transfer certificates of title Nos. 36400 and 36401 of the Register of Deeds of Manila. To show her appreciation of the service rendered to her Maria offered the two lots to Atty. Yuseco and his wife Rosario Yuseco for them to build on, and accepting the offer, the Yusecos built a house and an annex for servants quarters on the two lots which improvements at present may be reasonably valued at P50,000. Although Atty. Yuseco claims that the two lots were donated to him, he could exhibit no evidence of said donation and the certificates of title already mentioned remained in the name of Maria. There is reason to believe that at least during her lifetime and while she remained owner of the two lots, it was her desire to have the Yusecos occupy the land free. But to go through the formalities and to legalize the possession of the two lots, after the house and the annex were built, there was executed a lease contract to the effect that the lease was to run for a period of five years, with a rental of P120 a year; that the owner of the lots was to pay all land taxes, and that failure to pay the rent when due would be sufficient cause for the recission of the contract. This agreement was noted on the certificates of title.

On November 29, 1945, a few days before her death, Maria sold the two lots to her daughter Belen Uy married to Jesus B. Tayag for and in consideration of the sum of P4,000. The new owners in 1946 asked the Yusecos to remove their houses from the land because Belen and her husband planned to build their own house on the two lots, or else pay a monthly rent of P120. Because of the failure of the Yusecos to comply with the demand, Belen assisted by her husband filed an action of ejectment in the Municipal Court of Manila which later rendered judgment for the plaintiffs and against the defendants "for the restitution of the premises described in the complaint and for the recovery of a monthly rental of P100 from November 30, 1945, up to the date of restitution, and for cost." On appeal by the defendants to the Court of First Instance of Manila, the latter rendered judgment, the dispositive part of which reads as follows:

"Wherefore, judgment is hereby rendered declaring the plaintiff, Belen Uy Tayag, to be entitled to the possession of the two parcels of land described in the complaint upon payment by her to the defendants of the sum of P50,000, which is the value of

the two houses they had built thereon; but in the event said plaintiff shall not be in a position to pay said amount within 90 days from the date this decision shall become final, the defendants are hereby declared to be entitled to purchase the two parcels of land in question for the sum of P10,000, within 90 days from the date the defendants shall have the right to remain in the possession of the plaintiff shall have failed to buy the house. In the meantime, the two parcels of land without any obligation thereof. No pronouncement is hereby made as to costs."

On appeal by the plaintiffs to the Court of Appeals said court found that the Yusecos were builders in good faith under article 448 of the new Civil Code; and that as such builders in good faith, they cannot be required to remove their house and the annex unless they were paid the value thereof. The Court of Appeals further approved P50,000 and P10,000 as the reasonable values of the house and the two lots, respectively, as found by the Court of First Instance and that the Yusecos as builders in good faith will begin to pay rent only when the plaintiffs as owners of the land are unable or unwilling to buy the houses or the builders are unable or choose not to exercise their right to purchase the land, but in the present case, neither party has expressed his willingness or inability to exercise the right corresponding to him under article 448 of the new Civil Code, hence the payment of rent is not in order. The Court of Appeals affirmed the decision of the Court of First Instance.

Appellants Belen and her husband Jesus Tayag filed the present petition for review of the decision of the Court of Appeals, and in their brief assign the following errors:

I The Court of Appeals committed a grave error of law when it decided an issue foreign to that raised in an ejectment case, for in so doing it acted without jurisdiction over the subject matter.

II Granting, arguendo, that there was jurisdiction to determine an issue other than that raised in an ejectment case, the Court of Appeals committed a grave error of law in holding that the rights of Belen Uy Tayag and Jesus B. Tayag, owners of the land, and those of Rosario Yuseco and Joaquin C. Yuseco, owner of the building, should be resolved in accordance with the provisions of Article 448 (formerly Article 361) of the Civil Code of the Philippines.

III Granting, further, for the sake of argument only, that Article 448 of the Civil Code of the Philippines should govern the rights of the parties herein, the Court of Appeals gravely abused its discretion and committed a serious error of law when it affirmed the judgment of the trial court which, in effect, compels the owner of the land to sell it to the owner of the building.

IV The Court of Appeals gravely erred in holding that the petitioners Belen Uy Tayag and Jesus B. Tayag shall be entitled to the possession of the land described in the complaint upon payment of the sum of P50,000 but in the event that they are not in a position to pay said amount within 90 days from the date the decision shall

have become final, the respondents Rosario Yuseco and Joaquin C. Yuseco shall be entitled to purchase the land in question for the sum of P10,000.

Petitioners claim that the Court of First Instance and the Court of Appeals lacked jurisdiction to decide the case as they did for the reason that the only issue involved in an ejectment case is actual possession and that under Rule 72, section 6, the only judgment that may be rendered in such a case is for the defendant to recover costs in the event that the court find that the complaint is not true, or if it finds the complaint to be true to render judgment for the plaintiff for the restitution of the premises, for the sum justly due as arrears of rent or as reasonable compensation for the use and occupation of the premises, and for costs. But according to petitioners, in spite of this legal provision both courts went further and applied the provision of article 448 of the new Civil Code.

In theory, and speaking of ordinary ejectment cases, petitioners may be right; that is to say, if the lessee or occupant has not built anything on the premises, payment of rent would be a valid and satisfactory solution of the problem; but where the occupant has built on the land, especially where said building is substantial and valuable, the courts even in ejectment cases are bound to take cognizance of said fact and when they find that the construction or planting had been effected in good faith, instead of dismissing the complaint and suggesting to the parties to observe and follow the provisions of article 361 or article 448 of the old and the new Civil Code of the Philippines, respectively, and if they cannot agree, to file a new action, not only to enforce or defend the respective rights of the parties but to assess the value of the land and of the improvement as well, the courts in order to avoid multiplicity of actions and to administer practical and speedy justice may, as was done in this case, apply the provisions of the Civil Code relative to builders specially since there is no question as to the ownership of the land as shown by the certificates of title, and the ownership of the buildings.

Petitioners insist that the relation between them and the respondents is that of lessor and lessee and in support of their contention they point to the contract of lease between Maria Lim and the Yusecos executed in 1930. As already stated, the Court of Appeals found respondents to be builders in good faith and that finding is conclusive. In connection with said finding, we are of the opinion that the Yusecos in the mistaken belief that the two lots were being given to them free constructed the improvements in question, and that as already stated, the execution and registration of the contract of lease was a mere formality to legalize the occupation of the lots. Despite the belief of the Yusecos about the lots being donated to them, there is every reason to believe that what Maria Lim intended was to keep the title to the land but allow the Yusecos to occupy the same free, at least as long as she kept said title. This arrangement would appear to have been known to Belen, Maria's daughter, when the two lots were transferred to her a few days before Maria died, because as observed by the Court of Appeals although the Yusecos had

paid no rent since the year 1930 when they constructed the two buildings, Belen in 1946, one year after the land was transferred to her, demanded rents not for the period of 15 or 16 years but only from 1946. This action of hers neither supports nor strengthens her theory that the Yusecos since 1930 were mere lessees and continued to be such after Belen acquired the lots in question.

It will be remembered that the construction in good faith was effected in 1930 and that good faith of the builders may be considered as ended in 1946 when the demand for rent was made. It is, therefore, clear that Art. 361 of the old Civil Code instead of article 448 of the new Civil Code is applicable for the reason that the new Civil Code did not go into effect until 1950. Article 361 of the old Civil Code reads as follows:

"Art. 361. The owner of land on which anything has been built, sown, or planted, in good faith, shall be entitled to appropriate the thing so built, sown or planted, upon paying the compensation mentioned in Article 453 and 454, or to compel the person who has built or planted to pay him the value of the land, and the person who sowed thereon to pay the proper rent therefor."

The above-quoted legal provision is clear and it is now up to the parties, particularly the petitioners to act and make their choice. Since the Court of Appeals has found that neither party has expressed its desire or willingness to do the thing or things which by law they are authorized or compelled to perform, the courts cannot disturb their present status and naturally, payment of rent by respondent for the present, is not in order.

Petitioners question the correctness of the amount of P50,000 fixed by the trial court and approved by the Court of Appeals, as the value of the improvements, claiming that under article 546 of the new Civil Code (taken from article 453 of the old Civil Code) they (petitioners) as owners of the land have the option of either refunding the amount spent for the construction of the two buildings, said to be only P18,000 or "paying him the increase in value which the thing has acquired by reason thereof." The contention of petitioners is well taken.

Affirming the decision of the Court of Appeals in so far as it finds and declares respondents to be possessors in good faith, let this case be remanded to the trial court for further proceedings, particularly to give an opportunity to plaintiffs-petitioners to exercise their choice and option; and for purposes of said choice and option the trial court will admit evidence and make a finding as to the amount of the useful expenditures or "the increase in value which the thing has acquired by reason thereof", under article 453 of the old Civil Code, to be refunded or paid by the petitioners should they choose to appropriate the buildings; "the value of the land" under article 361 of the same Code, to be paid by the defendants-respondents in case plaintiffs-petitioners elect to compel them to buy the land. No costs.

14. [1946V18E] DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS IGNACIO, petitioners, vs. ELIAS HILARIO and his wife DIONISIA DRES, and FELIPE NATIVIDAD, Judge of First Instance of Pangasinan, respondents.1946 Apr 30En BancG.R. No. L-175

D E C I S I O N

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

"Wherefore, judgment is hereby rendered declaring:

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

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

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

"No pronouncement is made as to damages and costs.

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

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

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

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

"ART. 361. The owner of land on which anything has been built, sown or planted in good faith, shall

have the right to appropriate as his own the work, sowing or planting, after the payment of the indemnity stated in articles 453 and 454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

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

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

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

We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 and 453 of the Civil Code.

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

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

The costs shall be paid by plaintiffs-respondents.

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

15. FILIPINAS COLLEGES, INC., plaintiff-appellee, vs. MARIA GARCIA TIMBANG, ET AL., defendants.

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MARIA GARCIA TIMBANG, ET AL., plaintiffs. MARIA GARCIA TIMBANG, plaintiff-appellant, vs. MARIA GERVACIO BLAS, defendant-appellee.1959 September 29En BancG.R. No. L-12812/G.R. No. L-12813D E C I S I O N

BARRERA, J.:

This is an appeal taken from an order of the Court of First Instance of Manila dated May 10, 1957 (a) declaring the Sheriff's certificate of sale covering a school building sold at public auction null and void unless within 15 days from notice of said order the successful bidders, defendants-appellants spouses María García Timbang and Marcelino Timbang, shall pay to appellee María Gervacio Blas directly or through the Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the building at the Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc. owner of 24,500/3,285,934 undivided interest in Lot No. 2-a covered by certificate of title No. 45970, on which the building sold in the auction sale is situated; and (c) ordering the sale in public auction of the said undivided interest of the Filipinas Colleges, Inc. in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in favor of appellee Blas and against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum of P5,750.00 mentioned in (a) above.

The order appealed from is the result of three motions filed in the court a quo in the course of the execution of a final judgment of the Court of Appeals rendered in 2 cases appealed to it in which the spouses Timbang, the Filipinas Colleges, Inc. and Maria Gervacio Blas were the parties. In that judgment of the Court of Appeals, the respective rights of the litigants have been adjudicated as follows:

(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses Timbang in and to lot No. 2-a mentioned above and in consideration thereof, Filipinas Colleges, Inc. was ordered to pay the spouses Timbang the amount of P15,807.90 plus such other amounts which said spouses might have paid or had to pay after February, 1953, to Hoskins & Co., Inc., agent of the Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc. was required to deposit the total amount with the court within 90 days after the decision shall have become final.

(2) Maria Gervacio Blas was declared to be a builder in good faith of the school building constructed on the lot in question and entitled to be paid the amount of P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the said building was ordered to deliver to Blas stock certificate (Exh. C) for 108 shares of

Filipinas Colleges, Inc. with a par value of P10,800.00 and to pay Blas the sum of P8,200.00 representing the unpaid balance of the purchase price of the house.

(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which after liquidation was fixed at P32,859.34, within the 90-day period set by the court, Filipinas Colleges would lose all its rights to the land and the spouses Timbang would then become the owners thereof. In that eventuality, the Timbangs would make known to the court their option under Art. 448 of the Civil Code whether they would appropriate the building in question, in which even they would have to pay Filipinas Colleges, Inc. the sum of P19,000.00, or would compel the latter to acquire the land and pay the price thereof.

Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within the time prescribed, the spouses Timbang, in compliance with the judgment of the Court of Appeals, on September 28, 1956, made known to the court their decision that they had chosen not to appropriate the building but to compel Filipinas Colleges, Inc., to acquire the land and pay them to value thereof. Consequently, on December 29, 1956, the Timbang spouses asked for an order of execution against Filipinas Colleges, Inc. for the payment of the sum of P32,859.34. The motion having been granted, a writ of execution was issued on January 8, 1957.

On January 16, 1957, appellee Blas in turn filed a motion for execution of her judgment of P8,200.00 representing the unpaid portion of the price of the house sold to Filipinas Colleges, Inc. Over the objection of the Timbangs, the court granted the motion and the corresponding writ of execution was issued on January 30, 1957. Even before the actual issuance of this writ, or on January 19, 1957, date of the granting of the motion for execution, Blas through counsel, sent a letter to the Sheriff of Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance of the purchase price thereof under Article 2242 of the Civil Code, and to withhold from the proceed of the auction sale the sum of P8,200.00. Levy having been made on the house in virtue of the writs of execution, the Sheriff of Manila on March 5, 1957, sold the building in public auction in favor of the spouses Timbang, as the highest bidders, in the amount of P5,750.00. Personal properties of Filipinas Colleges, Inc. were also auctioned for P245.00 in favor of the spouses Timbang.

As a result of these actuations, three motions were subsequently filed before the lower court:

(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang spouses be ordered to pay and deliver to her the sum of P5,750.00 representing the proceeds of the auction sale of the building of Filipinas Colleges, Inc. over which she has a lien of P8,200.00 for the unpaid balance of the purchase price thereof;

(2) Also by the appellee Blas, praying that there being still two unsatisfied executions, one for the sum of P32,859.34 in favor of the Timbang spouses, and another, for the sum of P8,200.00 in her favor, the land involved, Lot No. 2-a, be sold at public auction; and

(3) By Filipinas Colleges, Inc., praying that because its properties, the house and some personal properties, have been auctioned for P5,750.00 and P245.00 respectively in favor of the Timbang spouses who applied the proceeds to the partial payment of the sum of P32,859.34, value of the land, Lot No. 2-a, it (Filipinas Colleges, Inc.) be declared part owner of said lot to the extent of the total amount realized from the execution sales of its properties.

The Timbang spouses presented their opposition to each and all of these motions. After due hearing the lower court rendered its resolution in the manner indicated at the beginning of this decision, from which the Timbangs alone have appealed.

In assailing the order of the Court a quo directing the appellants to pay appellee Blas the amount of their bid (P5,750.00) made at the public auction, appellants' counsel has presented a novel, albeit ingenious, argument. It is contended that because the builder in good faith has failed to pay the price of the land after the owners thereof exercised their option under Article 448 of the Civil Code, the builder lost his right of retention provided in Article 546 and by operation of Article 445, the appellants as owners of the land automatically became the owners of the building. And since they are the owners ipso facto, the execution sale of the house in their favor was superflous. Consequently, they are not bound to make good their bid of P5,750.00 as that would be to compel them to pay for their own property. By the same token, Blas' claim for preference on account of the unpaid balance of the purchase price of the house does not apply because preference applies only with respect to the property of the debtor, and the Timbangs, owners of the house, are not the debtors of Blas.

This Court cannot accept this oversimplification of appellants' position. Articles 448 and 546 of the Civil Code, defining the rights of the parties in case a person in good faith builds, sows or plants on the land of another, respectively provides:

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planted cannot be obliged to buy the land if its value id 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.

Under the terms of these articles, it is that the owner of the land has the right to choose between appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably more than that of the building. In addition to the right of the builder to be paid the value of his improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by the owner of the land. There is nothing in the language of these two articles, 448 and 546, which would justify the conclusion of appellants that, upon the failure of the builder to pay the value of the land, when such is demanded by the land-owner, the latter becomes automatically the owner of the improvement under Article 445. The case of Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants is no authority for this conclusion. Although it is true it was declared therein that in the event of the failure of the builder to pay the land, after the owner thereof has chosen this alternative, the builder's right of retention provided in Article 546 is lost, nevertheless there was nothing said that as a consequence thereof, the builder loses entirely all rights over his own building. The question is: what is the recourse or remedy left to the parties in such eventuality where the builder fails to pay the value of the land? While the Code is silent on this point, guidance may be derived from the decisions of this Court in the cases of Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs. Hilario, 76 Phil., 605 and the cited case of Bernardo vs. Bataclan, supra.

In the first case, this Court has said:

"A builder in good faith may not be required to pay rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the expenses incurred by him. Possibly he might be made to pay rental only when the owner of the land chooses not to appropriate the improvement and requires the builder in good faith to pay for the land but that the builder is unwilling or unable to pay the land, and then they decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of rental then they can go to the court to fix that amount". mphasis supplied).

Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee, another remedy is suggested in the case of Ignacio vs. Hilario, supra, wherein the court has ruled that the owner of the land is entitled to have the

improvement removed when after having chosen to sell his land to the other party, i.e., the builder in good faith fails to pay for the same.

A further remedy is indicated in the case of Bernardo vs. Bataclan, supra, where this Court approved the sale of the land and the improvement in a public auction applying the proceeds thereof first to the payment of the value of the land and the excess, if any, to be delivered to the owner of the house in payment thereof.

The appellants herein, owners of the land, instead of electing any of the alternatives above indicated chose to seek recovery of the value of their land by asking for a writ of execution; levying on the house of the builder; and selling the same in public auction. And because they are the highest bidder in their own auction sale, they now claim they acquired title to the building without necessity of paying in cash on account of their bid. In other words, they in effect pretend to retain their land and acquire the house without paying a cent therefor.

This contention is without merit. This Court has already held in Matias vs. The Provincial Sheriff of Nueva Ecija (74 Phil., 326) that while it is the invariable practice, dictated by common sense, that where the successful bidder is the execution creditor himself, he need not pay down the amount of the bid if it does not exceed the amount of his judgment, nevertheless, when there is a claim by a third-party, to the proceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder, must pay in cash the amount of his bid as a condition precedent to the issuance to him of the certificate of sale. In the instant case, the Court of Appeals has already adjudged that appellee Blas is entitled to the payment of the unpaid balance of the purchase price of the school building. Blas' claim is therefore not a mere preferred credit, but is actually a lien on the school building as specifically provided in Article 2242 of the new Civil Code. As such, it is superior to the claim of the Timbangs insofar as the proceeds of the sale of said school building are concerned. The order of the lower court directing the Timbang spouses, as successful bidders, to pay in cash the amount of their bid in the sum of P5,750.00 is therefore correct.

With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part owner of the land to the extent of the value of its personal properties sold at public auction in favor of the Timbangs, this Court likewise finds the same as justified, for such amount represents, in effect, a partial payment of the value of the land. If this resulted in the continuation of the so-called involuntary partnership questioned by the appellants, it was due to their own action. As appellee Blas still has an unsatisfied judgment representing the difference between P8,200.00 - the unpaid balance of the purchase price of the building and the sum of P5,750.00 - amount to be paid by the Timbangs, the order of the court directing the sale of such undivided interest of the Filipinas Colleges, Inc. is likewise justified to satisfy the claim of the appellee Blas.

Considering that the appellant spouses Marcelino Timbang and María García Timbang may not voluntarily pay the sum of P5,750.00 as ordered, thereby further delaying the final termination of this case, the first part of the dispositive portion of the order appealed from is modified in the sense that upon failure of the Timbang spouses to pay to the sheriff or to María Gervacio Blas said sum of P5,750.00 within fifteen (15) days from notice of the final judgment, an order of execution shall issue in favor of María Gervacio Blas to be levied upon all properties of the Timbang spouses not exempt from execution for the satisfaction of the said amount.

In all other respects, the appealed order of the court a quo is hereby affirmed, with costs against the appellants.

It is so ordered.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.

16. [1955V223E] SALVACION MIRANDA, plaintiff-appellants, vs. ESTEBAN FADULLON and spouses DIONISIO SEGARRA and CLEMENCIA N. DE SEGARRA, defendants-appellees.1955 Oct 29En BancG.R. No. L-8220D E C I S I O N

MONTEMAYOR, J.:

The present appeal was first taken to the Court of Appeals. Later by resolution of the said court it was certified to us under section 17, paragraph 6 of the Judiciary Act of 1948, as amended, the said Tribunal being of the opinion that the case involved only questions of law. The facts as may be gathered from the pleadings filed by the parties may be briefly stated as follows. In the year 1939 one Lucio Tio was the owner of a parcel of land, lot 1589-J of the Banilad Estate, Cebu, under Transfer Certificate of Title No. 10548. On December 9, 1939, a power of attorney in favor of one Esteban Fadullon executed by Lucio Tio was registered in the land records of Cebu City and annotated at the back of the transfer certificate of title. On the same date the deed of mortgage in favor of the Cebu Mutual Building and Loan Association was also annotated on the same certificate of title. In the year 1946, on the strength of the said power of attorney Fadullon sold the property to the spouses Dionisio Segarra and Clemencia N. de Segarra with right to repurchase within the short period of 30 days. Upon failure of Fadullon to make the repurchase within this period, the Segarras about ten days after the expiration of the period filed a sworn petition for the consolidation of their ownership and registered said petition in the office of the Register of Deeds on May 15, 1946. Apprised of the sale of his property, Lucio Tio on June 4, 1946, filed a complaint in the Court of First Instance of Cebu, Civil Case No. 181 to annul the sale. Service of summons was made upon the Segarras on June 10, 1946. After hearing the trial court rendered judgment annulling the sale. The Segarras appealed to the Court of Appeals under CA-G. R. No. 6550-R and the said Tribunal affirmed the appealed decision and further required the Segarras to pay plaintiff the reasonable rentals on the property from the filing of the action until said property shall have been returned to plaintiff. Upon the decision becoming final the corresponding writ of execution was issued directing the Sheriff to put plaintiff Tio in possession of the lot. It turned out however that during the possession of the property by the Segarras they had introduced improvements thereon consisting of a building of three rooms and a storage room, and one artesian well, with tower and water tank and a cement flooring covering about one-third of the lot which according to the Segarras cost them P5,300. They then filed a motion with the trial court claiming that they were possessors in good faith of the lot in question, and that they had introduced the improvements aforementioned in good faith and asked the court to order the plaintiff to pay for the said improvements valued at P5,300 or to allow them to buy the land should the plaintiff decide not to pay for the improvements. On August 28, 195, the trial court issued the following order:

"The attorney for the plaintiff has been accordingly served with copy of defendant's motion of July 31, 1952, filed through counsel.

"As prayed for, without opposition, the plaintiff is hereby ordered to either pay the defendant spouses, Dionisio Segarra and Clemencia N. Segarra (possessors in good faith) the sum of P5,300, value of the building erected on the land in question, or otherwise allow said defendants to purchase the aforementioned lot."

The plaintiff filed a motion for reconsideration claiming that the Segarras were possessors and builders in bad faith and so were not entitled to reimbursement for the value of the improvements; that the reason he (plaintiff) did not file an opposition to the motion of the defendants asking for reimbursement was that he thought that the trial court was sufficiently informed and impressed with the bad faith with which defendants bought the land and introduced improvements thereon and that it would consequently deny their motion; and in support of his motion for reconsideration plaintiff quoted portions of the decision of the trial court and the Court of Appeals. Upon the denial of his motion for reconsideration, he took the present appeal.

After a careful review of the record we agree with the plaintiff- appellant. The trial court in its decision declaring the sale of the land to the defendants null and void and commenting on the alleged good faith of defendants in buying the property said the following:

"There are two circumstances which seem to stubbornly belie the professed good faith on the part of the Segarras in buying this property; namely the circumstances of the power-of-attorney appearing on the back of the title as of five or six years previous and the other circumstances of the comparatively limited period of one month granted vendor Fadullon to redeem the property. Above all these, is the further circumstance that the said property had already been mortgaged in favor of the Cebu Mutual Building and Loan Association by virtue of that power-of-attorney.

"While the evidence did not disclose a collusion or conspiracy between Fadullon and the Segarras, yet, considering the short period of one month within which to redeem and the surrounding circumstances, the possibility of such collusion lingers.

"Obviously there was in this transaction a prevailing intention of railroading the property into a new ownership as may be proven by the fact that said purchasers filed a sworn petition for consolidating their ownership barely ten days after the expiration of thirty days, that is, on April 13, 1946, and registered with the office of Register of Deeds for Cebu twelve days thereafter, or on May 15, 1946."

The Court of Appeals in its decision affirming that of the trial court said:

"The Segarra spouses maintain that they are purchasers in good faith. We will now examine the record on this point. The alleged power of attorney executed by the

late Lucio Tio in favor of appellant Fadullon was registered in the land record of the Register of Deeds of Cebu City and annotated at the back of Transfer Certificate of Title No. 10548 on December 29, 1939. On the same date, the deed of mortgage in favor of the Cebu Mutual Building and Loan Association was annotated in the said Torrens title (Exhibits 1 and 1-B). This encumbrance alone should have been sufficient to put the Segarra spouses upon an inquiry as to the authority of Fadullon to sell to them the same property six years later. For instance, the Segerras could have asked themselves this question: Did not the mortgage of P400 serve the purpose for which the power of attorney was executed?

"The Segarras did not require Fadullon to produce his power of attorney. While it is true that said power of attorney is annotated at the back of the Torrens title of Tio, it was still incumbent upon the Segarras to ascertain the scope and authority of Fadullon under said power of attorney. Fadullon executed the sale with the right to repurchase within the extraordinary short period of 30 days. This circumstance, again, should have placed the Segarras on their guards, knowing, as they did, that they were dealing with an agent under a power of attorney executed before the war. These unusual circumstances would seem to engender in our minds the possibility of collusion between the appellants, to hasten the registration of the title of the Segarras to the land in dispute . . .

". . . the transfer of dominion on the property in question to the Segarras was null and void and of no effect. The new Certificate of Torrens Title No. 392 on the property now in the name of the Segarras is hereby ordered cancelled and that a new one issued in the name of Lucio Tio and his wife Salvacion Miranda; ordering the Segarras to return the possession of said property to plaintiff;

"The defendants Segarras are furthermore required to pay plaintiff the reasonable rentals on the property from the filing of this action until such time as the said property shall have been returned to plaintiff . . ."

Although neither the trial court nor the Court of Appeals did expressly say and in so many words that the defendants-appellees were possessors in bad faith, from a reading of their decisions particularly those we have just quoted, one can logically infer that was the conclusion of the two courts, or to say it more mildly, that the defendants were not possessors in good faith. Moreover, the very fact that the Court of Appeals sentenced the defendants to pay rentals is an indication, even proof that defendants were considered possessors and builders in bad faith, or at least that they were not possessors and builders in good faith. A builder in good faith may not be required to pay rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the expenses incurred by him. Possibly he might be required to pay rental only when the owner of the land chooses not to appropriate the improvement and requires the builder in good faith to pay for the land, but that the builder is unwilling or unable to buy the land, and

then they decide to leave things as they are and assume the relation of lessor and lessee, and should they disagree as to the amount of the rental then they can go to the court to fix that amount. Furthermore, plaintiff-appellant in her brief (page 7) says without denial or refutation on the part of defendants-appellees that they (defendants) applied for a building permit to construct the improvements in question on December 4, 1946 and the permit was granted on January 11, 1947, all this about seven months after they received the summons on June 10, 1946, meaning to say that the improvements were introduced long after their alleged good faith as possessors had ended.

In view of the foregoing, the appealed order of August 28, 1952 and the order of October 15, 1952, denying plaintiff's motion for reconsideration are set aside. With costs against appellees.

Paras, C.J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Labrador, Concepcion and Reyes, J.B.L., JJ., concur.

17. [1984V462] REPUBLIC OF THE PHILIPPINES (DIRECTOR OF LANDS), petitioner, vs. THE HON. COURT OF APPEALS, BENJAMIN TANCINCO, AZUCENA TANCINCO REYES, MARINA TANCINCO IMPERIAL and MARIO C. TANCINCO, respondents.1984 Oct 121st DivisionG.R. No. L-61647D E C I S I O N

GUTIERREZ, JR., J.:

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

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

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

"Lot 1 - Psu-131892

(Maria C. Tancinco)

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

"Lot 2 - Psu-131892

(Maria C. Tancinco)

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

"Lot 3 - Psu-131892

(Maria C. Tancinco)

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

On April 5, 1974, Assistant Provincial Fiscal Amando C. Vicente, in representation of the Bureau of Lands filed a written opposition to the application for registration.

On March 6, 1975, the private respondents filed a partial withdrawal of the application for registration with respect to Lot 3 of Plan Psu-131892 in line with the recommendation of the Commissioner appointed by the Court.

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

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

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

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

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

"DAHIL DITO, ang hatol na iniakyat ay sinasangayunan at pinagtitibay sa kanyang kabuuan nang walang bayad."

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

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

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

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

xxx xxx xxx

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

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

We agree with the petitioner.

Article 457 of the New Civil Code provides:

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

The above-quoted article requires the concurrence of three requisites before an accretion covered by this particular provision is said to have taken place. They are (1) that the deposit be gradual and imperceptible; (2) that it be made through the effects of the current of the water; and (3) that the land where accretion takes place is adjacent to the banks of rivers.

The requirement that the deposit should be due to the effect of the current of the river is indispensable. This excludes from Art. 457 of the New Civil Code all deposits caused by human intervention. Alluvion must be the exclusive work of nature. In the instant case, there is no evidence whatsoever to prove that the addition to the said property was made gradually through the effects of the current of the Meycauayan and Bocaue rivers. We agree with the observation of the Solicitor General that it is preposterous to believe that almost four (4) hectares of land came into being because of the effects of the Meycauayan and Bocaue rivers. The lone witness of the private respondents who happens to be their overseer and whose husband was first cousin of their father noticed the four hectare accretion to the twelve hectare fishpond only in 1939. The respondents claim that at this point in time, accretion had already taken place. If so, their witness was incompetent to testify to a gradual and imperceptible increase to their land in the years before 1939. However, the witness testified that in that year, she observed an increase in the area of the original fishpond which is now the land in question. If she was telling the truth, the accretion was sudden. However, there is evidence that the alleged alluvial deposits were artificial and man-made and not the exclusive result of the current of the Meycauayan and Bocaue rivers. The alleged alluvial deposits came into being not because of the sole effect of the current of the rivers but as a result of the transfer of the dike towards the river and encroaching upon it. The land sought to be registered is not even dry land cast imperceptibly and gradually by the river's current on the fishpond adjoining it. It is under two meters of water. The private respondents' own evidence shows that the water in the fishpond is two meters deep on the side of the pilapil facing the fishpond and only one meter deep on the side of the pilapil facing the river.

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

accretion. When the private respondents transferred their dikes towards the river bed, the dikes were meant for reclamation purposes and not to protect their property from the destructive force of the waters of the river.

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

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

WHEREFORE, the instant petition is GRANTED. The decision appealed from is hereby REVERSED and SET ASIDE. The private respondents are ordered to move back the dikes of their fishponds to their original location and return the disputed property to the river to which it belongs.

SO ORDERED.

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

18. [1993V598] SPOUSES FELIX BAES AND RAFAELA BAES, petitioners, vs. THE COURT OF APPEALS AND REPUBLIC OF THE PHILIPPINES, respondents.1993 Jul 61st DivisionG.R. No. 108065D E C I S I O N

CRUZ, J.:

This is an appeal by way of certiorari from the decision of the respondent Court of Appeals which affirmed in toto the ruling of the trial court in Civil Case No. 0460-P, the dispositive portion of which read thus:

WHEREFORE, judgment is hereby rendered declaring null and void TCT Nos. 14405, 29592, 29593, 29594, 29595, and TCT No. 29593's derivative titles TCT Nos. 124725, 124726, 124727 and 124729, and ordering the Register of Deeds for Pasay City to cancel them and issue new ones in their stead in the name of the plaintiff after segregating from TCT No. 29593 452 sq. m., the actual area of Lot 2958-C (covered by cancelled TCT No. 11043) belonging to defendant Felix Baes. The counterclaim is hereby dismissed.

Let a copy of this Decision be furnished the Register of Deeds for Pasay City.

SO ORDERED.

The controversy began in 1962, when the government dug a canal on a private parcel of land, identified as Lot 2958 and covering an area of 33,902 sq.m., to streamline the Tripa de Gallina creek.

This lot was later acquired by Felix Baes, who registered it in his name under TCTl No. 10990 and then had it subdivided into three lots, namely: (a) Lot 2958-A, with an area of 28,889 sq.m.; (b) Lot 2958-B, with an area of 3,588 sq.m.; and (c) Lot 2958-C, with an area of 452 sq.m., covered by TCT Nos. 11041, 11042 and 11043, respectively.

In exchange for Lot 2958-B, which was totally occupied by the canal, the government gave Baes a lot with exactly the same area as Lot 2958-B through a Deed of Exchange of Real Property dated June 20, 1970. 1 The property, which was near but not contiguous to Lot 2958-C, was denominated as Lot 3271-A and later registered in the name of Felix Baes under TCT No. 24300. The soil displaced by the canal was used to fill up the old bed of the creek.

Meanwhile, Baes had Lot 2958-C and a portion of Lot 2958-A designated as Lot 1, Blk. 4, resurveyed and subdivided. On January 12, 1968, he submitted a petition for the approval of his resurvey and subdivision plans, claiming that after the said lots were plotted by a competent surveyor, it was found that there were errors in respect of their bearings and distances.

The resurvey-subdivision plan was approved by the Court of First Instance of Pasay City in an order dated January 15, 1968. 2

As a result, the old TCTs covering the said lots were canceled and new ones were issued, to wit: (a) Lot 1-A, Blk. 4, with 672 sq.m., under TCT No. T-14404; (b) Lot 1-B, with 826 sq.m., representing the increase in area after the resurvey, under TCT No. T-14405; (c) Lot 2958-C-1, with 452 sq.m., under TCT No. T-14406; and (d) Lot 2958-C-2, with 2,770 sq.m. representing the increase after resurvey, under TCT No. T-14407.

Lots 2958-C-1 and 2958-C-2 were later consolidated and this time further subdivided into four (4) lots, namely, Lot 1, with an area of 147 sq.m.; Lot 2, with an area of 950 sq.m.; Lot 3, with an area of 257 sq.m.; and Lot 4, with an area of 1,868 sq.m., which were respectively issued TCT Nos. 29592, 29593, 29594, and 29595.

In 1978, the Republic of the Philippines discovered that Lot 1-B (with TCT No. 14405 and an area of 826 sq.m.), on which the petitioners had erected an apartment building, covered Lot 3611 of the Pasay Cadastre, which is a filled-up portion of the Tripa de Gallina creek. Moreover, Lot 2958-C (covered by TCT Nos. 29592 to 29595, with an increased area of 2,770 sq.m. after resurvey and subdivision) had been unlawfully enlarged.

On November 17, 1982, it filed a petition for cancellation of TCT Nos. 14405 and 29592 to 29595. 3

Baes did not object in his answer to the cancellation of TCT Nos. 29592, 29594 and 29595 and was not able to prove during the trial that the government utilized a portion of Lot 2 under TCT No. 29593. The trial court therefore decreed (correctly) that the original Lot 2958-C (with an area of 452 sq.m.) be reverted to its status before the resurvey-subdivision of Lot 2958-C.

The only remaining dispute relates to Lot 1-B (TCT No. 14405), which the petitioners, relying on Article 461 of the Civil Code, are claiming as their own. The government rejects this claim and avers that the petitioners had already been fully compensated for it on June 20, 1970 when they agreed to exchange their Lot 2958-B with Lot 3271-A belonging to the government.

Article 461 of the Civil Code states:

River beds which are abandoned through the natural change in the course of the waters ipso facto belong to the owners whose lands are occupied by the new course in proportion to the area lost. However, the owners of the lands adjoining the old bed shall have the right to acquire the same by paying the value thereof, which value shall not exceed the value of the area occupied by the new bed. mphasis supplied)

A portion of the Tripa de Gallina creek was diverted to a man-made canal which totally occupied Lot 2958-B (with an area of 3,588 sq.m.) belonging to Felix Baes.

Thus, the petitioners claim that they became the owners of the old bed (which was eventually filled up by soil excavated from Lot 2958-B) by virtue of Article 461.

The petitioners rely heavily on Dr. Arturo M. Tolentino's interpretation of this Article, to wit:

This article (461) refers to a natural change in the course of a stream. If the change of the course is due to works constructed by concessioners authorized by the government, the concession may grant the abandoned river bed to the concessioners. If there is no such grant, then, by analogy, the abandoned river bed will belong to the owners of the land covered by the waters, as provided in this article, without prejudice to a superior right of third persons with sufficient title. (Citing 3 Manresa 251-252; 2 Navarro Amandi 100-101; 3 Sanchez Roman 148)

We agree.

If the riparian owner is entitled to compensation for the damage to or loss of his property due to natural causes, there is all the more reason to compensate him when the change in the course of the river is effected through artificial means. The loss to the petitioners of the land covered by the canal was the result of a deliberate act on the part of the government when it sought to improve the flow of the Tripa de Gallina creek. It was therefore obligated to compensate the Baeses for their loss.

We find, however, that the petitioners have already been so compensated. Felix Baes was given Lot 3271-A in exchange for the affected Lot 2958-B through the Deed of Exchange of Real Property dated June 20, 1970. This was a fair exchange because the two lots were of the same area and value and the agreement was freely entered into by the parties. The petitioners cannot now claim additional compensation because, as correctly observed by the Solicitor General,

. . . to allow petitioners to acquire ownership of the dried-up portion of the creek would be a clear case of double compensation and unjust enrichment at the expense of the state.

The exchange of lots between the petitioners and the Republic was the result of voluntary negotiations. If these had failed, the government could still have taken Lot 2958-B under the power of eminent domain, upon payment of just compensation, as the land was needed for a public purpose.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.

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

20. [1929V174E] CORNELIO CRUZ and CIRIACA SERRANO, plaintiffs-appellants, vs. CHUA A. H. LEE, defendant-appellant.1929 Nov 6En BancG.R. No. 31018D E C I S I O N

STREET, J.:

This action was instituted in the Court of First Instance of the City of Manila by Cornelio Cruz and wife, for the purpose of recovering a sum of money from the defendant Chua A. H. Lee, representing the damages alleged to have been sustained by them from the lapsing of certain pawn tickets which they had pledged to the defendant under the circumstances hereinafter stated. Upon hearing the cause the trial court gave judgment in favor of the plaintiffs to recover of the defendant the sum of P1,141, with legal interest from December 16, 1927, and with costs. From this judgment both plaintiffs and defendant appealed.

It appears that prior to June 10, 1926, the plaintiff Cornelio Cruz had pledged valuable jewelry to two different pawnshops in the City of Manila, namely, the Monte de Piedad and Ildefonso Tambunting, receiving therefor twelve pawn tickets showing the terms upon which the articles pledged were held by the pledgees. On the date stated the plaintiff, being desirous of obtaining a further loan upon the same and other jewels, presented himself to the defendant Chua A. H. Lee and pledged to his six pawn tickets of the Monte de Pieded and a bracelet set with seventeen diamonds of different sizes. Upon receiving the bracelet and the six tickets Lee delivered to the plaintiff a sum of money, for which the plaintiff executed a receipt containing words to the effect that the amount of P3,020, therein stated, represented the value of the bracelet and pawn tickets and that it was understood that Lee would become the absolute owner of the articles pledges if Cruz should not return said sum of money within the period of sixty days. One wee thereafter Cruz again presented himself at the place of business of Lee and received the further sum of P3,500, at the same time delivering two pawn tickets of the Monte de Pieded. At the same time Cruz signed a further receipt containing a stipulation that the sale of the articles pledged would become absolute unless the amount stated in the receipt should be returned within sixty days.

The tickets which form the principal feature in these two pledges represented a pair of diamond earrings previously pledged to Ildefonso Tambunting for P7,000 and several other pieces of jewelry previously pledged to the Monte de Pieded for the aggregate amount of P2,020. All of these tickets were renewable, according to the custom of pawnbrokers, upon payment from time to time of the sums of money representing the interest accruing upon the debts for which the jewelry was pawned.

The right of repurchasing the jewelry, which was conceded to Cruz in the two receipts above mentioned, was never exercised by him; and on September 25,

1926, Lee filed a complaint against Cruz in the Court of First Instance of Manila (case No. 30569), in which it was alleged that the receipts above mentioned had been drawn in the form of a sale with stipulation for repurchase in sixty days but that it was understood between the parties that the transaction was a loan and that the jewelry and pawn tickets held by Lee constituted a mere security for the money advanced by him to Cruz. As a consequence Lee asked for judgment against Cruz in the amount of P6,520. On March 31, 1927, judgment in said action was rendered in the Court of First Instance favorably to the plaintiff and, although an attempt was made to get the decision reviewed in the Supreme Court, the judgment was affirmed for failure of the appellants to cause a transcript of the oral testimony to be brought to said court. 1 After affirmance of the judgment in the Supreme Court the cause was returned to the Court of First Instance for execution, but as a result of certain proceedings not necessary to be here recounted, execution in that case was suspended to await the result of the judgment to be given in this case.

It appears that the defendant Lee on August 18, 1926, renewed the ten pawn tickets issued by the Monte de Piedad by paying the interest necessary to effect renewal, but these tickets all expired on October 18, 1926, and were never renewed. The pawn tickets issued by Tambunting's pawnshop on the diamond earrings were dated May 12, 1926, and reminded good for one year, having expired on May 12, 1927. Although the pawn tickets issued by the Monte de Piedad expired on October 18, 1926, it is admitted that they could have been renewed or the jewelry redeemed at any time prior to actual sale at public auction, and these jewels were not sold by the Monte de Piedad until in the year 1927, when they were, at different dates, bought in by the appraiser of the Monte de Piedad for the amount then due upon the respective jewels. But the jewelry represented by one of these pawn tickets was not thus sold until August 10, 1928. From this it will be seen that all of the pawned jewelry was still subject to redemption when civil case No. 30569 was first called for trial on January 3, 1927, and apparently the right of redemption on only one piece of jewelry had been foreclosed by sale when the decision was rendered in the same case at the end of March. The record does not show whether or not the earrings pawned to Ildefonso Tambunting were in fact sold after he tickets lapsed on May 12, 1927, but it is proved that the jewelry was not forthcoming when an inquiry was made therefor by the present plaintiff with a view to redemption after judgment had been rendered in the case instituted by Lee against him.

The first two errors assigned in the brief of the defendant as appellant raise a question of a preliminary nature, which is, whether the present action can be maintained in view of the fact that the cause of action set out in the present complaint might have been — so the defendant supposes — used as a ground of defense or counterclaim in action No. 30569 of the Court of First Instance of Manila instituted by the present defendant against the present plaintiff. Upon this it is

insisted that the trial court should have sustained the plea of res judicata interposed in this case by the defendant. This contention is untenable for the reason that the facts which serve as the basis of the present action were not in existence at the time of commencement of action No. 30569. Under section 97 of the Code of Civil Procedure the defendant is required to set up his counterclaim as a defense only in those cases were the right out of which the counterclaim arises existed at the time of the commencement of the action.

The principal question requiring decision in the case before us is one of law, namely, whether a person who takes a pawn ticket in pledge is bound to renew the ticket from time to time, by the payment of interest, or premium, as required by the pawnbroker, until the rights of the pledgor are finally foreclosed. In this connection reliance is placed by the attorney for the plaintiff upon article 1967 of the Civil Code, which reads as follows:

"The creditor must take care of the thing given in pledge with the diligence of a good father of a family; he shall be entitled to recover any expenses incurred for its preservation and shall be liable for its loss or deterioration, in accordance with the provisions of this Code."

In applying this provision to the situation before us it must be borne in mind that the ordinary pawn ticket is a document by virtue of which the property in the thing pledged passes from hand to hand by mere delivery of the ticket; and the contract of the pledge is, therefore, absolvable to bearer. It results that one who takes a pawn ticket in pledge acquires domination over the pledge; and it is the holder who must renew the pledge, if it is to be kept alive. Article 1867 contemplates that the pledgee may have to undergo expenses in order to prevent the pledge from being lost; and these expenses the pledgee is entitled to recover from the pledgor. From this it follows that where, in a case like this, the pledge is lost by the failure of the pledgee to renew the loan, he is liable for the resulting damage. Nor, in this case, was the duty of the pledgee destroyed by the fact that the pledgee had obtained a judgment for the debt of the pledgor which was secured by the pledge. The duty to use the diligence of a good father of the family in caring for the pledge subsists as long as the pledged article remains in the power of the pledgee.

In this connection we quote as follows from a monographic note appended to Griggs vs. Day (32 Am. St. Rep., 718), in which it is said:

"As the holder of collateral security is entitled to its possession and to the extent of his interest is substantially the owner thereof, he must, to a certain extent at least, assume the duties of ownership, and furthermore must protect the interests of his pledgor as well as his own, because the latter, by giving the collateral security, has parted with the power to protect himself. `The contract carries with it the implication that the security shall be made available to discharge the obligation': Wheeler vs. Newbould, 16 N. Y., 396. We apprehend that it carries with it the

further implication that the property, no matter what its character, shall not be lost through the negligence or inattention of the pledgee."

In commenting upon article 1867 of the Civil Code, the commentator Manresa points out that the predecessor article in the Civil Code of 1951 limited itself to declaring that the creditor should take such care of the pledged thing as the good father of a family, and this led to a lively controversy among the civilians concerning the consequences of the duty of conservation or safekeeping imposed upon the creditor. But this controversy, says the learned author, has largely lost its interest because the authors of the Code put an end to such discussions by defining the responsibility of the creditor in a form so clear and explicit as to leave no room for doubt (Manresa, Codigo Civil, 426, 427). In the treatise of Colin and Capitant on the Civil Law, it is stated that the creditor who receives an article in pledge must bear all the expenses necessary to secure the conservation of the pledge and that the debtor is bound to reimburse him for such expenses. As an illustration of the duty of the pledge and that the debtor is bound to reimburse him for such expenses. As an illustration of the duty of the pledgee to exercise diligence in preserving the pledge, he states that a pledgee who fails to renew at the proper time the inscription of a mortgage guaranteeing a credit will be liable for the damage resulting from its loss (opus citat, p. 77). To the same effect is a passage found in the pages of the French commentator Troplong, Droit Civil Explique, Du Gage, sec. 428.

The question of the extent of the duty of the pledgee in caring for the property pledged has often been discussed in connection with pledges of collateral security. In this case we find the following observation made by the author of the title "Pledge" in 21 Ruling Case Law, to wit:

"The rights and duties of parties to a pledge of securities for the payment of a debt may of course be fixed by agreement as to the manner in which they are to be collected, but as a general rule not only is it the right of the holder of collateral security to collect the money thereon and apply it to the principal debt but his duties in this respect are active and he is bound to ordinary diligence to preserve the legal validity and pecuniary values of the pledge, and if by negligence, wrongful act or omission on his part loss is sustained, it must be borne by him." (Pledge, sec. 30.)

The application of the doctrine above expounded to the case in hand leads to the conclusion that the defendant Chua A. H. Lee in the case before us is liable for the value of the securities lost by his failure to keep the pledges alive in the extent of their actual value over the amounts for which the same were pledged; and the trial court, in out opinion, committed no error in so holding.

There remains to be considered the question of the proper valuation of the jewelry sacrificed in the manner above stated. Upon this point we are of the opinion that

the trial court was to conservative in its estimate; and we find, upon the testimony of Manuel Javier, appraiser of the La Insular Pawnshop, and Francisco Ferrer, a jewelry merchant of Manila, supplemented by that of the plaintiff, Cornelio Cruz, that the two diamond earrings represented by the tickets issued by Tambunting's pawnshop were fairly worth P14,000. It is true that Cornelio Cruz testified that these jewels cost him P11,000, but he at the same time stated that they were at the time of the trial in the court below worth at least P15,000. Again, we are of the opinion that the jewels represented by the ten pawn tickets of Monte de Piedad were worth, at a conservative estimate, the sum of P4,040. In fixing these values it must be remembered that it is not the practice of pawnshops to advance more than from thirty-five to fifty per cent of the true value upon pledges of jewels.

From the values of the jewelry, as estimated above, there is of course to be deducted the amounts which had been advanced upon the pledges with interest thereon at the stipulated rate of 18 per cent per annum until the date when the offer was made by the plaintiff Cornelio Cruz in writing to redeem the jewelry. But it should be noted that the sum of P3,500 which the defendant advanced to Cruz upon the pledge of the pawn tickets covering the earrings must not be deducted, because the defendant, in the prior action, has already recovered judgment for that amount.

Upon liquidation of the account between plaintiffs and defendant in conformity with the suggestion above made, it results that the plaintiffs herein were damaged by the sacrifice of the jewelry in question in the total amount of P6,687.56. Also, in order to clarify the appealed decision, it is declared that the plaintiff is entitled to recover the bracelet composed of seventeen diamonds, forming the additional pledge made by the plaintiff to the defendant, upon satisfaction of the judgment in civil case No. 30569.

The judgment appealed from the is therefore modified to the extent above indicated, namely, that the plaintiffs shall recover of the defendant the sum of P6,687.56, with legal interest from December 16, 1927, until the same shall be paid, as well as the bracelet of seventeen diamonds upon satisfaction of the judgment above mentioned. So ordered, without costs.

Avanceña, C.J., Villamor, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

21. [1989V532] BRIGIDO RAMOS and FELICIDAD JUAN, petitioners, vs. INTERMEDIATE APPELLATE COURT, RODOLFO RAMOS and GERTRUDES MERCADO, respondents.1989 July 052nd DivisionG.R. No. 78282D E C I S I O N

REGALADO, J.:

The usual conflicting claims of ownership culminated in this case involving a parcel of land in Tanawan, Bustos, Bulacan covered by Transfer Certificate of Title No. T-92071 in the name of private respondent Rodolfo Ramos. Said realty was formerly part of the public land constituting the Buenavista Estate which was under the administration of and subject to disposition by the Land Tenure Administration pursuant to Republic Act No. 1400 and, later, by the Land Authority under Republic Act No. 3844.

The evidence of record show that respondent Rodolfo Ramos filed with the Land Authority an application, dated January 5, 1965, for the purchase of the parcel of land in question 1 and was later compelled to file a complaint therein against another claimant in CLA Case No. 40, entitled "Rodolfo Ramos v. Gerardo Ramos." The case resulted in the adjudication to Rodolfo Ramos of an area of 24,793 square meters of the land applied for and an area of 1,810.05 square meters to Gerardo Ramos after the Acting Governor of said office, Remigio T. Eusebio, found both claimants qualified to purchase said portions. Consequently, a contract of sale was executed between private respondent Rodolfo Ramos and the Land Authority of February 5, 1968, 2 which became the basis for the issuance of the aforesaid Transfer Certificate of Title No. T-92071 on February 9, 1968. 3

Annotated as encumbrances on said certificate of title are the conditions that, except by hereditary succession, the land shall not be subdivided, sold or in any manner transferred or encumbered, without the prior written consent of the Governor of the Land Authority and only to qualified persons specified therein.

On January 19, 1978, without the prior consent of the Minister of Land Reform who had succeeded the Governor of the Land Authority, petitioner spouses filed a complaint docketed as Civil Case No. 845-B before the former Court of First Instance of Bulacan, Branch IV, praying for the cancellation of the name of respondent Rodolfo Ramos in the aforesaid certificate of title, to be replaced with petitioners' names. Petitioners alleged that the property in question was titled in the name of respondent Rodolfo Ramos for convenience and in trust, petitioners claiming to be the beneficial owners thereof all along. They attempted to prove in the proceedings below that they acquired the property from a certain Patricio Cruz sometime in 1959, after which they had the same tenanted by one Ramon Samson in 1969. After the latter's death, Pancracio Lopez supposedly took over as tenant from 1969 to 1976. Evidence was likewise adduced to prove that petitioner Felicidad Juan applied for the purchase of said property sometime in 1960 but her

application was withdrawn allegedly because of some family problems. 4 Thereafter, petitioners were supposed to have requested their nephew, respondent Rodolfo Ramos, to have the title of the land issued in his name with petitioner Brigido Ramos pursuing the application with the former Land Tenure Administration. Petitioner further claim that respondent Rodolfo Ramos took over the tenancy rights to the land in 1976.

After considering all the evidence presented, the trial court rendered a decision 5 dismissing the complaint and the counterclaim, for insufficiency of evidence to warrant a declaration that petitioners are entitled to reconveyance of the property. Also, said the court below, there was failure to establish petitioners' ownership over the land and to prove the alleged oral agreement between the parties to have the land titled in the name of private respondent Rodolfo Ramos. Furthermore, the court a quo observed that the approval of the application of said private respondent by the administrative body to which such function belongs may not be interfered with by the courts. 6

Finding no reversible error on the part of the trial court, the then Intermediate Appellate Court affirmed said decision on appeal. 7

The amply supported judgment of respondent court commends itself for approval. It being undisputed that the parcel of land in question originally formed part of the public land, with the present ownership thereof duly acquired by private respondents subject to the encumbrances annotated on the certificate of title thereto, as hereinbefore noted, petitioners have no basis to ask for reconveyance of the land to them. Also, as pointed out earlier, they claim to have acquired the rights to the land from one Patricio Cruz, but they utterly failed to show how the latter acquired said rights in the first place. Aside from their bare assertions, neither did petitioners adduce evidence of the transfer of such rights to them. Furthermore, they should be deemed to have acknowledged that the land belongs to the State when they filed an application for its purchase with the administrative office concerned. It would have been absurd for them to have applied for the purchase of property which they believed was theirs.

Despite such inconsistent postures, petitioners shift to a new tack, this time on a claim of ownership of the land by invoking Article 440 of the Civil Code on accession natural. We do not have to unduly dwell on this issue which was only raised by petitioners for the first time on appeal. An issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process. 8 Besides, We cannot but note petitioners' apocryphal submissions on the matter. They contend that the land in dispute, being supposedly a part of an abandoned river bed, is automatically owned by them as owners of the adjoining lot. Had the petitioners proceeded to read the succeeding provisions of the Civil

Code, they would not have missed Article 461 thereof which provides that "river beds which are abandoned through the natural change in the course of the waters ipso facto belong to the owners of the land occupied by the new course" with the owners of the adjoining lots having the right to acquire them only after paying their value.

With the undisputable absence of any legal right to the land in favor of petitioners, the award to private respondents consequent to their purchase of said land should be given the respect it deserves. As the body empowered by law to approve applications to purchase and dispose of lots under its administration, the determination of the Land Authority in favor of private respondents is binding on this Court, there being a demonstrated absence of any grave abuse of discretion, collusion, fraud or clear error of law and fact. 9

Incidentally, We digress to clarify what appears to have been an oversight on the part of respondent court when it noted that the action herein had prescribed after four years from registration of the deed of sale in favor of private respondent Rodolfo Ramos. This was premised on the assumption that the action was for annulment of a contract on the ground of fraud. A scrutiny of the basic complaint 10 which commenced this case, however, shows that petitioners based their claim for recovery on an alleged implied trust. Consequently, the action for reconveyance prescribes after ten years counted from the date adverse title to the property was asserted, that is, from the registration of the title. 11 At any rate, such misperception would not affect the adjudication made by respondent court since, as already explained, there is no ownership of petitioners over the land on which they can anchor their fancied theory of an implied trust in their favor.

WHEREFORE, the decision of respondent court is AFFIRMED.

SO ORDERED.

Melencio-Herrera (Chairman), Paras, Padilla and Sarmiento, JJ., concur.

22. [1993V822] HEIRS OF JOSE OLVIGA, NAMELY: PLACIDA S. OLVIGA, VIRGILIO OLVIGA, LOLITA OLVIGA, CARMENCITA O. ALPUERTO and JEANETTE OLILA, petitioners, vs. THE HON. COURT OF APPEALS, ANGELITA R. GLOR, SERILINA G. JAMON, EMELITA G. MADELA, EMAN G. MANALO, MYRNA GLOR, FELIPE GLOR, GAUNDENCIO GLOR and CORNELIO GLOR, respondents.1993 Oct 211st DivisionG.R. No. 104813D E C I S I O N

GRIÑO-AQUINO, J.:

This is a petition to review the decision of the Court of Appeals in CA-G.R. CV No. 30542, affirming in toto the decision of the Regional Trial Court of Calauag, Quezon ordering the defendants, heirs of Jose Olviga (petitioners herein), to reconvey the land in dispute to the plaintiffs, heirs of Cornelia Glor (now private respondents), and to pay attorney's fees and the costs of suit.

This case started as an action (Civil Case No. C-883) filed in the Regional Trial Court of Calauag, Quezon by Angelita Glor and her children against the heirs of Jose Olviga for reconveyance of a parcel of land, measuring 54,406 square meters (5.44 has), more or less, known as Lot 13, Pls-84 of the Guinayangan Public Land Subdivision.

The court, after due trial, rendered judgment in favor of the private respondents, the dispositive portion of which reads:

"WHEREFORE, and considering the foregoing judgment is hereby rendered in favor of the PLAINTIFFS and against the defendants as heirs of Jose Olviga to reconvey the land in dispute to the plaintiffs as heirs of Cornelio Glor Sr.; condemning the defendants jointly and severally to pay the plaintiffs attorneys fees of P5,000.00 plus the costs of the suit. The counterclaim interposed by the defendants is dismissed." (p. 12, Rollo.)

The judgment was appealed to the Court of Appeals by the defendants who raised several factual issues regarding possession and fraud, as well as legal issues involving prescription and purchaser in good faith, but the appellate court dismissed the appeal and affirmed in toto the decision of the trial court.

It was established by the evidence on record that the land in question was, in 1950, still forest land when Eutiquio Pureza, then only twelve years old, and his father cleared and cultivated it. In 1954, they introduced improvements such as, coconut trees, jackfruit, mangoes, avocado and bananas. When the area was released for disposition, the Bureau of Lands surveyed the same in 1956 in the name of Eutiquio Pureza. Since then, the land has been known as Lot 13, Pls-84 of the Guinayangan Public Land Subdivision. Godofredo Olviga, a son of Jose Olviga then living with the latter, protested the survey but only with respect to a one-half-hectare portion "sa dakong panulukan ng Amihanan-Silanganan." This protest or "tutol" (Exh. B) of Godofredo Olviga, brother of petitioners Virgilio Olviga and Lolita Olviga Olila, is of

public record in the Bureau of Lands (Exh. B). In said document, Godofredo Olviga expressly admitted that the lot belonged to Eutiquio Pureza, except the 1/2 hectare portion claimed by him (Godofredo) which was included in the survey of Pureza's Lot 13.

In 1960, Eutiquio Pureza filed a homestead application over Lot 13. Without his application having been acted upon, he transferred his rights in said lot to Cornelio Glor in 1961. Neither the homestead application of Eutiquio nor the proposed transfer of his rights to Cornelio Glor was acted upon by the Director of Lands for reasons that the records of the Bureau of Lands do not disclose.

In 1967, Jose Olviga obtained a registered title for said lot in a cadastral proceeding, in fraud of the rights of Pureza and his transferee, Cornelio Glor and his family, who were the real and actual occupants of the land.

What must have happened, as found by the Court of Appeals, is that since Cornelio Glor, Sr. was sickly, and his wife (now widowed) Angelita Glor, was unschooled, they failed to follow up Pureza's homestead application over Lot 13 in the cadastral proceedings in the Municipal Court of Guinayangan Public Land Subdivision, Pls-84, Case 1 (Philcusa-Foa). In fact, they were not aware of the proceedings. Angelita Glor testified that no notice was ever posted on Lot 13 about the proceedings nor did anyone, not even the barangay captain, tell her about them. Neither did she receive any notice from the court sheriff or any court employee. This non-posting of the notice of the cadastral hearing on the land, or in the barangay hall, was confirmed by petitioner Virgilio Olviga himself who testified that he did not notice any papers posted on the property in question (tsn., October 18, 1990, pp. 83-84). On the other hand, petitioners' father, Jose Olviga, claimed both Lots 12 and 13, which are adjoining lots, in the same cadastral proceedings. He falsely omitted in his answer mention of the fact that other persons were in possession of, and claiming adverse interest in, Lot 13 and that the land had been surveyed for Eutiquio Pureza, the former occupant who sold his interests to private respondents' parent, Cornelio Glor, in 1961. Glor was Olvigas' neighbor. As a result, both Lots 12 and 13 were declared as uncontested in the name of Jose Olviga (Exh. 7), and were registered in his name in 1967 in Original Certificate of Title, No. 0-12713 (Exh. 5). In 1971, Olviga requested that OCT No. 0-12713 be split into two (2) TCT's, one each for the two (2) lots. TCT Nos. T-103823 and T-103824 were issued for lots 12 and 13, respectively. Jose Olviga later transferred Lot 13 to his son-in-law, Jaime Olila and daughter, Lolita Olviga resulting in the cancellation of TCT No. T-03824 and the issuance of TCT No. T-241314 in the names of the spouses (Exh. 3).

It was also established that the spouses Jaime Olila and Lolita Olviga Olila, were not innocent purchasers for value of the land from their father, and have never been in possession. The Glors and their predecessors-in-interest (Cornelio Glor Sr., and Eutiquio Pureza) were the ones found to be in possession of the property.

From said findings and conclusions, the appellate court in its decision dated January 13, 1992, resolved the issues presented, thus:

". . . whether or not plaintiffs' action is really one for quieting of title that does not prescribe; or assuming that their demand for the reconveyance of the lot in question prescribes in ten years, being based on an implied trust, whether their cause of action should be counted from the date of the issuance of the late Jose Olviga's title over said lot in 1967 and has, therefore, already prescribed, or whether the prescriptive period should be counted from the date plaintiffs acquired knowledge of said title sometime in 1988.

"The first question should be answered in the affirmative . . .

"xxx xxx xxx

"But even assuming that plaintiffs' action for reconveyance, being based on an implied or constructive trust, prescribes in ten years, the lower court again correctly ruled that their cause of action should be considered to have accrued not from the date of registration of the title of Jose Olviga, defendants' predecessor-in-interest, over the lot in question in 1967, but only from the time plaintiffs learned of such title in 1988 . . .

"xxx xxx xxx

"All in all, therefore, the court a quo did not err in holding that plaintiffs' action against defendants-appellants for the reconveyance of the lot in question filed on April 10, 1989, or in less than a year after they learned of the issuance of a title over said lot to Jose Olviga, predecessor-in-interest of defendants, has not yet prescribed.

"WHEREFORE, the decision appealed from herein is AFFIRMED in toto, with costs against defendants-appellants." (pp. 48-51, Rollo.)

Petitioners now seek a review of the above decision. They allege that: (1) the present action has already prescribed; (2) the Court of Appeals erred when it ruled that the private respondents' cause of action accrued not in 1967 but in 1988; (3) that the Court of Appeals erred when it failed to consider that private respondents as mere homestead transferees cannot maintain an action for reconveyance; (4) that the Faja and Caragay-Layno cases have no bearing and direct application to the case at bar; and (5) that private respondents have not proven by preponderance of evidence their ownership and possession of the disputed land.

With regard to the issue of prescription, this Court has ruled a number of times before that an action for reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property (Vda. de Portugal vs. IAC, 159 SCRA 178). But this rule applies only when

the plaintiff is not in possession of the property, since if a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe.

In Sapto vs. Fabiana, 103 Phil. 683, 686-687, appellants' predecessors sold to appellees in 1931 a parcel of land. The sale was approved by the Provincial Governor of Davao but was never registered. Possession of the land was, however, transferred to Fabiana and the latter has been in possession thereof from 1931 up to the present. The widow and children of Samuel Sapto filed an action to recover the land. This Court in affirming the validity of the sale in favor of appellee (Fabiana) held:

"No enforcement of the contract is in fact needed, since the delivery of possession of the land sold had consummated the sale and transferred title to the purchaser, registration of the contract not being indispensable as between the parties. Actually the action for conveyance was one to quiet title, i.e., to remove the cloud cast upon appellee's ownership by the refusal of the appellants to recognize the sale made by their predecessors. This action accrued only when appellants initiated their suit to recover the land in 1954. Furthermore, it is an established rule of American jurisprudence (made applicable in this jurisdiction by Art. 480 of the New Civil Code) that actions to quiet title to property in the possession of the plaintiff are imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 39 L.R.A. 930; Inland Empire Land Co. vs. Grant County, 138 Wash. 439, 245 Pac. 14)."

In Faja vs. Court of Appeals, 75 SCRA 441, 446, this Court likewise reiterated the ruling that:

". . . There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. No better situation can be conceived at the moment for Us to apply this rule on equity than that of herein petitioners whose mother, Felipa Faja, was in possession of the litigated property for no less than 30 years and was suddenly confronted with a claim that the land she had been occupying and cultivating all these years, was titled in the name of a third person. We hold that in such a situation the right to quiet title to the property, to seek its reconveyance and annul any certificate of title covering it, accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor."

In the case at bar, private respondents and their predecessors-in-interest were in actual possession of the property since 1950. Their undisturbed possession gave them the continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of petitioners, who in 1988 disturbed their possession.

The other issues raised in the petition are factual.

The Court of Appeals and the trial court correctly based their findings of fact on the testimonies of the parties and their witnesses. It can be said therefore that those conclusions are based on substantial evidence. No cogent reason exists to disturb them. As reiterated in a long line of decisions, it is beyond the province of this Court to make its own findings of facts different from those of the trial court as affirmed by the Court of Appeals (Vda. de Cailles vs. Mayuga 170 SCRA 347; New Owners/Management of TML Garments, Inc. vs. Zaragosa, 170 SCRA 563). In petitions for review of decisions of the Court of Appeals, the jurisdiction of this Court is confined to a review of questions of law, except when the findings of fact are not supported by the records or are so glaringly erroneous as to constitute a serious abuse of discretion (Lim vs. Court of Appeals, 158 SCRA 307; Samson vs. Ca, 141 SCRA 194; Republic vs. IAC, 144 SCRA 705). The case at bar does not fall under the exceptions.

WHEREFORE, findings no reversible error in the decision of the Court of Appeals, the petition for review is DENIED, with costs against the petitioners.

SO ORDERED.

Cruz, (Chairman), Davide, Jr., Bellosillo, and Quiason, JJ., concur.

23. [1993V713] SPOUSES VICENTE and LOURDES PINGOL, petitioners, vs. HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, namely: MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, NATIVIDAD D. PELAYO, YOLANDA D. CACERES and MARY DONASCO, respondents.1993 Sep 61st DivisionG.R. No. 102909D E C I S I O N

DAVIDE, JR., J.:

An action denominated as one for specific performance and damages was brought by the private respondents against the petitioners before the Regional Trial Court (RTC) of Caloocan City which, after due trial, rendered a decision in favor of the petitioners. On appeal, the respondent Court reversed the trial court's decision.

It is from this judgment that the petitioners have appealed to this Court by way of a petition for review on certiorari.

The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of Caloocan, with an area of 549 square meters, located at Bagong Barrio, Caloocan City and more particularly described in Transfer Certificate of Title (TCT) No. 7435 of the Registry of Deeds of Caloocan City. On 17 February 1969, he executed a "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" in favor of Francisco N. Donasco which was acknowledged before a notary public. The parcel of land referred to therein is Lot No. 3223 and the pertinent portions of the document read as follows:

"That for and in consideration of the sum of TWENTY THOUSAND AND FIVE HUNDRED THIRTY (P20,530.00) PESOS, Philippine Currency, the VENDOR hereby these presents SELL, CONVEY AND CONVEY by way of Absolute Sale the one-half (1/2) portion, equivalent to Two Hundred Seventy Four and point Fifty (274.50) square meters, to the VENDEE, the above-mentioned property, his heirs, assigns and successors-in-interest;

That the VENDOR hereby confesses and acknowledges the receipt of TWO THOUSAND (P2,000.00) PESOS from VENDEE as advanced (sic) and partial payment to the above-cited consideration of the Sale herein mentioned, leaving therefor a balance of Eighteen Thousand and Five Hundred Thirty (P18,530) Pesos to be paid in several equal installments within a period of six (6) years, beginning January, 1970;

That after computing the above-mentioned equal installments, the VENDEE agrees and undertakes to pay unto the VENDOR a monthly amount equivalent to Two Hundred Fifty Seven (sic) and Thirty Six Centavos (P257.36) within a period of Seventy One (71) months and on the Seven Two [sic] (72) month, the amount of (P257.44) as the last and final installment thereof;

That the VENDEE agrees that in case of default in the payment of the installments due the same shall earn a legal rate of interest, and to which the VENDOR likewise agrees;

That the VENDEE undertakes to pay unto the VENDOR the herein monthly installment within the first five (5) days of each month and the same shall be made available and to be paid at the residence of the VENDOR, payment to be made either directly to the VENDOR, his wife or his authorized representative or factor;

That in case of partition of the above-described property between herein VENDOR and VENDEE, the same shall be divided into two (2) equal parts, the VENDOR gets the corner facing J. De Jesus and Malolos Avenue and the VENDEE shall get the portion with fifteen (15) meters frontage facing J. De Jesus Street only." 1

Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion, designated as Lot No. 3223-A, was then segregated from the mother lot, and the parties prepared a subdivision plan (Exhibit "C") which was approved by the Land Registration Commission. 2

Francisco Donasco immediately took possession of the subject lot and constructed a house thereon. In January 1970, he started paying the monthly installments but was able to pay only up to 1972.

On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid P8,369.00, plus the P2,000.00 advance payment, leaving a balance of P10,161.00 on the contract price. 3 Lot No. 3223-A remained in the possession of Donasco's heirs.

On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific Performance and Damages, with Prayer for Writ of Preliminary Injunction" against the spouses Vicente and Lourdes Pingol (petitioners herein) before the RTC of Caloocan City. The action was docketed as Civil Case No. 13572 and raffled off to Branch 125 of the said court.

In their complaint, 4 the plaintiffs (private respondents herein) averred that after the death of their father, they offered to pay the balance of P10,161.00 plus the stipulated legal rate of interest thereon to Vicente Pingol but the latter rebuffed their offer and has "been demanding for a bigger and unreasonable amount, in complete variance to what is lawfully due and payable." They stated that they had "exerted earnest efforts to forge or reach an amicable and peaceful settlement with the defendants" for the payment of the property in question but to no avail. They further alleged that the defendants were committing "acts of forcible entry and encroachment" upon their land and asked that a writ of preliminary injunction be issued to restrain the defendants from the acts complained of.

Plaintiffs then prayed that the defendants be ordered, inter alia:

"a. . . . to accept the amount of P10,161.00, more or less, plus the stipulated legal rate of interest due thereon, as full and complete payment of the balance for the agreed price/consideration on the one-half (1/2) portion of the parcel of land . . .; [and]

b. . . . to execute the final deed of sale on the one-half (1/2) portion of the lot . . . in accordance with the partition reflected in the survey and subdivision plan, . . ." 5

In their answer with counterclaim, 6 defendants admitted the execution of the aforementioned deed of sale, the segregation of the portion sold and the preparation and approval of the subdivision plan, but set up the following special and affirmative defenses: (1) the plaintiffs' cause of action had already prescribed; (2) the deed of sale embodied a conditional contract of sale "as the consideration is to be paid on installment basis within a period of six years beginning January, 1970"; (3) the subdivision plan was prepared on the assumption that Francisco Donasco would be able to comply with his obligation; (4) when Francisco died, he had not fully paid the total consideration agreed upon; and (5) considering the breach by Francisco of his contractual obligation way back in 1976, the sale was deemed to have been cancelled and the continuous occupancy of Francisco after 1976 and by his heirs thereafter was by mere tolerance of Vicente Pingol. They then asked that the plaintiffs be ordered to vacate the premises and to pay them attorney's fees and a reasonable compensation for the use of the land.

In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is no provision in the deed of sale for its cancellation in case of default in the payment of the monthly installments and invoked Article 1592 of the New Civil Code. They specifically denied the allegations in the counterclaim.

The issues having been joined, the case was then tried on the merits.

On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint and ordering the plaintiffs to pay the defendants P350.00 as reasonable monthly rental for the use of the premises from the filing of the complaint, P10,000.00 by way of attorney's fees, and the costs of the suit. It held that: (1) the deed of absolute sale in question, marked and offered in evidence as Exhibit "A," is a contract to sell, not a contract of sale, since Vicente Pingol had no intention to part with the ownership of the lot unless the full amount of the agreed price had been paid; (2) the contract was deemed to have been cancelled from the moment the late father of the plaintiffs defaulted in the payment of the monthly installments; (3) title and ownership over the lot did not pass to Francisco Donasco and his heirs since the contract to sell was never consummated; and (5) assuming, arguendo, that the plaintiffs have a cause of action for specific performance, such action had already prescribed since the complaint was filed only on 19 October 1988 or more than ten years from the time that they could have lawfully demanded performance. 9

Plaintiffs elevated the case to the Court of Appeals where the appeal was docketed as CA-G.R. CV No. 25967. On 12 November 1991, the said court rendered a decision 10 reversing the appealed decision and decreeing as follows:

"WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and another one is rendered:

(1) Ordering appellee-vendor Vicente Pingol to accept the sum of P10,161.00, plus the legal interest due thereon from the date of institution of this action on October 19, 1988;

(2) Upholding the validity of the 'DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) (of) AN UNDIVIDED PORTION OF A PARCEL OF LAND' (Exh. A), and by virtue and on the strength of which declaring the 'Heirs of the Deceased Francisco N. Domingo' as the owners of the 274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-146255 under the technical description (exh. D) and reflected in the Plan of Subdivision Survey which was approved By Commissioner of Land Registration on August 13, 1971 (exh. C), representing one-half portion [of] lot 3223, situated at the corner of Malolos Avenue and G. de Jesus St., Bagong Barrio, Caloocan City, and covered by TCT No. 7435 of the Registry of Deeds of Caloocan City (exh. B); and

(3) Ordering the defendants-appellees to pay the costs.

SO ORDERED." 11

The Court of Appeals ruled that the deed of sale in question reveals the clear intention of Vicente Pingol to part with the ownership of the one-half portion of the land by way of an absolute sale; that the failure to fully pay the agreed price was not a ground for the cancellation of the sale; and that the plaintiffs' action is imprescriptible since it is akin to an action to quiet title to property in one's possession. 12

Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter referred to as the petitioners, filed this petition for certiorari on 9 January 1992. Plaintiffs, hereinafter referred to as the private respondents, filed their comment thereto on 10 September 1992 to which the petitioners filed a reply on 11 November 1992. We gave due course to the petition and required the parties to submit their respective memoranda, 13 which they subsequently complied with.

Petitioners contend that the Court of Appeals erred:

"I

IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS 'ABSOLUTE DEED OF SALE OF ONE-HALF (1/2) OF AN UNDIVIDED PORTION OF A PARCEL OF LAND' IS AN ABSOLUTE DEED OF SALE SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE AND HIS SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS

AND CONDITIONS, LIKE THE PRICE BEING PAYABLE ON INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME IS A CONDITIONAL DEED OF SALE.

II

IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE FAILED TO COMPLY WITH THE TERMS OF THE CONTRACT (EXHIBIT "A") SPECIFICALLY TO COMPLETE THE PAYMENT OF THE CONSIDERATION ON THE DATE STIPULATED IN THE CONTRACT WHICH WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE PAYMENT THEREOF CAN STILL BE ENFORCED IN AN ACTION INSTITUTED BY THE HEIRS OF THE VENDEE FILED ON OCTOBER 19, 1988 OR A PERIOD OF MORE THAN TWELVE (12) YEARS FROM THE TIME COMPLETE PAYMENT SHOULD HAVE BEEN MADE;

III

IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE WHICH IS AN OFFER TO COMPLETE THE PAYMENT LEFT UNPAID BY PRIVATE RESPONDENTS' FATHER WHICH DOES NOT PRESCRIBE;

IV

IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS NOT PRESCRIBED." 14

The decisive issue in this case is whether Exhibit "A" embodies a contract of sale or a contract to sell. The distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold, whereas in a contract to sell, by agreement, ownership is reversed in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded, whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition, failure of which is not a breach but an event that prevented the obligation of the vendor to convey title from becoming effective. 15

A perusal of Exhibit "A" leads to no other conclusion than that it embodies a contract of sale. The plain and clear tenor of the "DEED OF ABSOLUTE SALE OF ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" is that "the VENDOR hereby . . . SELL, CONVEY AND CONVEY by way of Absolute Sale the one-half (1/2) portion . . . to the VENDEE . . . his heirs, assigns and successors-in-interest." That the vendor, petitioner Vicente Pingol, had that clear intention was further evidenced by his failure to reserve his title thereto until the full payment of the price.

In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature although denominated as a "Deed of Conditional Sale" where there is no stipulation

in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor is there a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Exhibit "A" contains neither stipulation. What is merely stated therein is that "the VENDEE agrees that in case of default in the payment of the installments due the same shall earn a legal rate of interest, and to which the VENDOR likewise agrees."

Furthermore, as found by the Court of Appeals, the acts of the parties, contemporaneous and subsequent to the contract, clearly show that an absolute deed of sale was intended by the parties and not a contract to sell:

"[P]ursuant to the deed, the vendor delivered actual and constructive possession of the property to the vendee, who occupied and took such possession, constructed a building thereon, had the property surveyed and subdivided and a plan of the property was prepared and submitted to the Land Registration Commission which approved it preparatory to segregating the same and obtaining the corresponding TCT in his name. Since the sale, appellee continuously possessed and occupied the property as owner up to his death on July 13, 1984 and his heirs, after his death, continued the occupancy and possession of the property up to the present. Those contemporaneous and subsequent events are demonstrative acts that the vendor since the sale recognized the vendee as the absolute owner of the property sold. All those attributes of ownership are admitted by defendants in their answer, specifically in paragraphs 7 and 9 of their special and affirmative defenses." 17

The contract here being one of absolute sale, the ownership of the subject lot was transferred to the buyer upon the actual and constructive delivery thereof. The constructive delivery of the subject lot was made upon the execution of the deed of sale 18 while the actual delivery was effected when the private respondents took possession of and constructed a house on Lot No. 3223-A.

The delivery of the object of the contract divested the vendor of the ownership over the same and he cannot recover the title unless the contract is resolved or rescinded pursuant to Article 1592 of the New Civil Code which provides that:

"In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term."

Both the trial court and the Court of Appeals did not find that a notarial or judicial rescission of the contract had been made. Although Vicente Pingol asserts that he

had declared to Francisco Donasco that he was cancelling the contract, he did not prove that his demand for rescission was made either judicially or by a notarial act.

Petitioners fault the respondent Court for holding that the action of the petitioners is not barred by the statute of limitations. They argue that the private respondents' action, being based upon a written contract, has prescribed since it was brought only in 1988 or more than ten years from the time when the latter could have lawfully demanded performance. 19

We disagree.

Although the private respondents' complaint before the trial court was denominated as one for specific performance, it is in effect an action to quiet title. In this regard, the following excerpt from Bucton vs. Gabar 20 is apropos:

"The real and ultimate basis of petitioners' action is their ownership of one-half of the lot coupled with their possession thereof, which entitles them to a conveyance of the property. In Sapto, et al. v. Fabiana [103 Phil. 683, 686-87 (1958)], this Court, speaking thru Mr. Justice J.B.L. Reyes, explained that under the circumstances no enforcement of the contract is needed, since the delivery of possession of the land sold had consummated the sale and transferred title to the purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to remove the cloud upon the appellee's ownership by the refusal of the appellants to recognize the sale made by their predecessors."

That a cloud has been cast on the title of the private respondents is indubitable. Despite the fact that the title had been transferred to them by the execution of the deed of sale and the delivery of the object of the contract, the petitioners adamantly refused to accept the tender of payment by the private respondents and steadfastly insisted that their obligation to transfer title had been rendered ineffective.

A vendee in an oral contract to convey land who had made part payment thereof, entered upon the land and had made valuable improvements thereon, is entitled to bring suit to clear his title against the vendor who had refused to transfer the title to him. It is not necessary that the vendee has an absolute title, an equitable title being sufficient to clothe him with personality to bring an action to quiet title. 21

Prescription thus cannot be invoked against the private respondents for it is aphoristic that an action to quiet title to property in one's possession is imprescriptible. 22 The rationale for this rule has been aptly stated thus:

"The owner of real property who is in possession thereof may wait until his possession is invaded or his title is attacked before taking steps to vindicate his right. A person claiming title to real property, but not in possession thereof, must act affirmatively and within the time provided by the statute. Possession is a

continuing right as is the right to defend such possession. So it has been determined that an owner of real property in possession has a continuing right to invoke a court of equity to remove a cloud that is a continuing menace to his title. Such a menace is compared to a continuing nuisance or trespass which is treated as successive nuisances or trespasses, not barred by statute until continued without interruption for a length of time sufficient to affect a change of title as a matter of law." 23

Private respondents shall, however, be liable to pay the legal rate of interest on the unpaid balance of the purchase price from the date of default or on 6 January 1976, when the entire balance should have been paid, pursuant to the provision in the deed of sale.

WHEREFORE, except as above modified, the Decision appealed from is hereby AFFIRMED. As modified, the interest on the unpaid balance of P10,161.00, at the legal rate, shall be computed from 6 January 1976. Upon the payment by the private respondents to the petitioners of the said amount and the interest thereon, the latter are ordered to deliver Transfer Certificate of Title No. 7435 to the Register of Deeds of Caloocan City who shall cancel the same and issue two new transfer certificates of title in lieu thereof, one of which shall be in the name of the herein private respondents covering Lot No. 3223-A and the other in the name of the petitioners covering the remainder of the lot.

SO ORDERED.

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

24. FELIPA FAJA, substituted by: NEMESIO GARDOSE, ANICIA GARDOSE and EUFROSINO GARDOSE, petitioner, vs. HON. COURT OF APPEALS, HON. TOMAS R. LEONIDAS, JUDGE OF THE COURT OF FIRST INSTANCE OF CAPIZ, BRANCH III, and LEVINE FRIAL, respondents.1977 February 281st DivisionG.R. No. L-45045D E C I S I O N

MUÑOZ PALMA, J:

The summary judgment rendered by Judge Tomas R. Leonidas of the Court of First Instance of Capiz, in Civil Case No. M-355, entitled "Levine Frial, plaintiff versus Felipa Faja, defendant", and affirmed by respondent Court of Appeals, is sought to be set aside in this Petition for having been rendered in gross violation of law resulting in a deprivation of petitioners' right to due process.

We find this Petition meritorious under the rule that summary judgment may be rendered only when, except as to the amount of damages, there is no genuine issue as to any material fact, and that the moving party is entitled to a judgment as a matter of law, which is not the situation between the parties in this case. 1

Levine Frial filed with the Court of First Instance of Capiz, Branch III, situated in Mambusao, Capiz, a complaint docketed as Civil Case No. M-355 for "Recovery of Possession and Damages" of a parcel of land situated in Barrio San Agustin, Dumalag, Capiz, with an area of 235,854 square meters more or less, covered by Original Certificate of Title No RO-1496 in the name of Indalecio Frial, father of Levine Frial. The complaint alleged that since 1945 up to the present (the complaint is dated April 15, 1975) the defendant Felipa Faja had been illegally possessing and occupying the above-mentioned property without the knowledge and consent of the registered owner, Indalecio Frial now deceased, nor of his heirs, one of whom is Levine Frial; that when plaintiff Frial came to know that Felipa Faja was occupying the property the former immediately demanded its return but Faja refused, hence, the complaint for recovery of possession of the land in question and the unearned income from the land during the period of not less than 30 years amounting to around P150,000.00. 2

Defendant Felipa Faja in her Answer specifically denied under oath the allegations in the complaint as to the ownership of plaintiff Frial, and by way of special and affirmative defenses claimed: that she is the lawful owner and in actual possession of the property which is identical to Lot No. 4010 of the Cadastral Survey of Dumalag, Capiz, which she inherited from her father, Marcelino Faja, who died in 1925, the latter in turn having inherited the same property from his father, Antonio Faja, who died in 1915; that she and her predecessors-in-interest have been in possession of the property publicly, peacefully, continuously, and adversely, in the concept of owners, for more than 60 years, the property having been declared for taxation purposes in the name of Marcelino Faja under Tax Declaration No. 4807,

revised under Tax Declaration No. 10031 in the year 1921, and presently in the name of Felipa Faja under Tax Declaration No. 5523 and for which the land taxes have been paid since the time Felipa Faja's predecessors have been in possession; that Felipa Faja is actually living on the land in question, and that the same is planted with coconut trees, mangoes, bananas, santol, buri, while around 8 hectares are devoted to rice and corn; that neither plaintiff Levine Frial nor his father Indalecio Frial ever lived on or possessed said property "even for a single moment", and any Certificate of Title secured by Indalecio Frial was obtained through fraud, deceit, and misrepresentation, the latter not being the owner thereof and not having occupied or possessed the property in concept of owner; that as her counterclaim, defendant Faja prays that she be declared the lawful owner of the property, that plaintiff Frial be directed to reconvey the property to her in the sense that the Certificate of Title covering said property be cancelled and, in lieu thereof, a Transfer Certificate of Title be issued in her favor. 3

In his Reply to Felipa Faja's, plaintiff Levine Frial denied that the Certificate of Title of Indalecio Frial was secured through fraud and misrepresentation, and alleged that Faja's right to question the validity of the Title had prescribed. 4

all responsive pleadings were filed, the case was called for a pre-trial conference during which Judge Leonidas directed the parties to submit memoranda on the question of whether or not a summary judgment may be promulgated. 5

In his Memorandum filed with the trial court, plaintiff Levine Frial sustained the view that a summary judgment may properly be issued on the basis of the pleadings inasmuch as the only issues to be resolved were:

"(a)Can a registered owner of a piece of land who has acquired title thereto for almost 35 years still recover possession thereof from actual occupants who claim long and continuous possession of the same property but without title?

"(b)Is reconveyance of a titled property still legally possible, considering that a period of more than 10 years had elapsed since the issuance of the decree of registration?" (p. 36, rollo)

On the other hand, Felipa Faja in her Memorandum averred that the petition for a summary judgment should be denied as there was a genuine controversy between the parties which required a trial on the merits and that the alleged prescription of her counterclaim for reconveyance cannot be the subject of a summary judgment, aside from the fact that her cause of action for the reconveyance to her of the property arose only from the moment she was served copy of the complaint which was in 1975, consequently, her counterclaim was filed well within the statutory period. 6

In an order dated December 3, 1975, the trial Judge sustained Levine Frial's submission stating:

"It appearing from the complaint and the answer, as well as the annexes, thereto, and the written arguments of the parties, that there is no genuine issue as to material fact, except as to the amount of damages, it is ordered that a summary judgment be as it is hereby entered in favor of the plaintiff, and this case is set for trial on the sole issue of damages on December 22, 1975, at 8:00 on the morning.

SO ORDERED." (p. 45, ibid.)

A motion for reconsideration was filed with the trial court 7 but the same was denied for lack of merit in an order dated February 9, 1976. 8

Because Felipa Faja died on November 25, 1975, her children, all surnamed Gardose, in substitution for their deceased mother, filed with the Court of Appeals a Petition for Certiorari (CA-G.R. No. SP-05151-R) and prayed that the aforequoted order for summary judgment be set aside. Respondent Appellate Court through its Eighth Division dismissed the Petition holding that ". . . a summary judgment is proper as there is no genuine issue as to any material fact", reasoning that inasmuch as the disputed property is covered by an Original Certificate of Title, any action to annul that title on the ground of fraud prescribes after the lapse of 10 years from the issuance of the title and therefore the counterclaim for reconveyance pleaded in the answer of Felipa Faja cannot be sustained. 9

We do not agree with respondent Court for the following reasons:

(1)The counterclaim of Felipe Faja for reconveyance to her of the litigated property has not prescribed. It is an established rule that an action to quiet title to property in the possession of plaintiff is imprescriptible. 10 Inasmuch as it is alleged in paragraph 3 of Frial's complaint, that Felipa Faja has been in possession of the property since 1945 up the present or for a period of 30 years, her cause of action for reconveyance, which in effect seeks to quiet her title to the property, falls within that rule. If at all, the period of prescription began to run against Felipa Faja only from the time she was served with copy of the complaint in 1975 giving her notice that the property she was occupying was titled in the name of Indalecio Frial. There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. 11 No better situation can be conceived at the moment for Us to apply this rule on equity than that of herein petitioners whose mother, Felipa Faja, was in possession of the litigated property for no less than 30 years and was suddenly

confronted with a claim that the land she had been occupying and cultivating all these years, was titled in the name of a third person. We hold that in such a situation the right to quiet title to the property, to seek its reconveyance and annul any certificate of title covering it, accrued only from the time the one in possession was made aware of a claim adverse to his own, and it is only then that the statutory period of prescription commences to run against such possessor.

(2)The existence of a Certificate of Title in the name of respondent Frial's father is not conclusive on the question of ownership of the land in controversy, because the validity of such a certificate is put in issue by allegations of fraud and misrepresentation by the defendant below, Felipa Faja. Petitioners herein correctly invoked in their Petition for certiorari filed before respondent tribunal, what this Court stated in Monticines, et al. vs. Court of Appeals, et al., September 4, 1973, 53 SCRA 14, through Justice Enrique M. Fernando, to wit:

"Nor does the mere fact that respondent-appellee Marcelo Coral could show a certificate of Torrens Title in his favor conclude the matter, the question of fraud having been reasonably raised and the remedy of reconveyance sought. Only recently, in the Philippine Commercial and Industrial Bank v. Villalva, (L-28194, November 24, 1972, 48 SCRA 31) this Court had occasion to state: `There is, however, a countervailing doctrine, certainly not of lesser weight, that mitigates the harshness of the iron-clad application of the principle attaching full faith and credit to a Torrens certificate. It is inspired by the highest concept of what is fair and what is equitable. It would be a sad day for the law if it were to be oblivious to the demands of justice. The acceptance accorded the Torrens system of registration would certainly be impaired if it could be utilized to perpetrate fraud and chicanery. If it were thus, then no stigma would attach to a claim based solely on a narrow and literal reading of a statutory prescription, devoid of any shadow of moral right. That is not to be countenanced; duplicity is not to be rewarded. Witness the favor with which jurisprudence has looked on the action for reconveyance as well as the recognition of the constructive trust. There is thus the stress on rectitude'" (Emphasis Ours) 12

It is regrettable to say the least that the above pronouncements of this Court failed to impress respondent tribunal with the merits of petitioners' case.

(3)There are material facts to be inquired into and resolved on the basis of evidence adduced by the parties which will determine the legal precepts to be applied, among which are: (a) the circumstances which led to the issuance in 1950 of Original Certificate of Title RO-1496, a reconstituted title of a supposed Original Certificate of Title No. 23257 allegedly issued on December 12, 1940, pursuant to a decree of registration No. 732588 dated November 5, 1940, which was claimed to have been lost; (b) explanation, if any, for the inaction of the alleged registered owner Indalecio Frial and of his heirs for a period of 30 years to take possession of

the land in question thereby permitting Felipa Faja to cultivate and receive for herself the income from the produce of the land which as estimated by now respondent Frial amounted to around P150,000.00 for the entire period; and (c) the claim of ownership and possession of Felipa Faja and her predecessors-in-interest which allegedly date as far back as 60 years, prior to the filing of Frial's complaint in 1975, and her assertions of fraud and misrepresentation committed by Indalecio Frial in registering the property in his name. All these matters cannot simply be summarily disposed of in favor of respondent Frial and adversely against petitioners without evidence adduced on their conflicting claims. 13

In conclusion, We state that while this Court desires to give full encouragement to trial courts to take advantage of and apply the provisions of the Rules of Court on summary judgment as valuable aids to an expeditious disposition of cases, We cannot but reiterate what was said and held in Constantino vs. Hon. Estenzo, et al., L-40403, July 31, 1975, and reiterated in Auman, et al. vs. Hon. Estenzo, et al., L-40500, February 27, 1976, to wit:

". . . The demands of a fair, impartial, and wise administration of justice call for a faithful adherence to legal precepts on procedure which ensure to litigants the opportunity to present their evidence and secure a ruling on all the issues presented in the respective pleadings. 'Shortcuts' in judicial processes are to be avoided where they impede rather than promote a judicious dispensation of justice."

Again, in Gregorio Loreno and Felisa Lavilla vs. The Hon. Numeriano G. Estenzo, et al., L-43306, October 29, 1976, this Court set aside a summary judgment rendered by respondent Judge Estenzo of the Court of First Instance of Iloilo, reiterating the rule that summary judgment can only be entertained where there are no questions of fact in issue or where the material allegations of the pleadings are not disputed. 14

IN VIEW OF THE FOREGOING, the appealed decision of the Court of Appeals and the disputed Order of the trial court rendering summary judgment in favor of respondent Levine Frial are hereby set aside, and the Presiding Judge of Branch III, Court of First Instance of Capiz, is directed to proceed with the trial on the merits of Civil Case No. M-355. With costs against private respondent Levine Frial.

So Ordered.

Makasiar, Concepcion, Jr. and Martin, JJ., concur.