Property Cases 3

EDITHA ALVIOLA and PORFERIO ALVIOLA, petitioners, vs.HONORABLE COURT OF APPEALS, FORENCIA BULING Vda de TINAGAN, DEMOSTHENES TINAGAN, JESUS TINAGAN, ZENAIDA T., JOSEP and JOSEPHINE TINAGAN, respondents. MARTINEZ, J.:In this petition for review on certiorari, petitioners assail the decision 1 of the Court of Appeals dated April 8, 1994 which affirmed the decision of the lower court ordering petitioners to peacefully vacate and surrender the possession of the disputed properties to the private respondents.Culled from the record are the following antecedent facts of this case to wit:On April 1, 1950, Victoria Sonjaconda Tinagan purchased from Mauro Tinagan two (2) parcels of land situated at Barangay Bongbong, Valencia, Negros Oriental. 2 One parcel of land contains an area of 5,704 square meters, more or less; 3 while the other contains 10,860 square meters. 4 Thereafter, Victoria and her son Agustin Tinagan, took possession of said parcels of land.Sometime in 1960, petitioners occupied portions thereof whereat they built a copra dryer and put up a store wherein they engaged in the business of buying and selling copra.On June 23, 1975, Victoria died. On October 26, 1975, Agustin died, survived by herein private respondents, namely his wife, Florencia Buling Vda. de Tinagan and their children Demosthenes, Jesus, Zenaida and Josephine, all surnamed Tinagan.On December 24, 1976, petitioner Editha assisted by her husband filed a complaint for partition and damages before the then Court of First Instance of Negros Oriental, Branch 1, Dumaguete City, docketed as Civil Case No. 6634, claiming to be an acknowledged natural child of deceased Agustin Tinagan and demanding the delivery of her shares in the properties left by the deceased. 5

On October 4, 1979, the aforesaid case was dismissed by the trial court on the ground that recognition of natural children may be brought only during the lifetime of the presumed parent and petitioner Editha did not fall in any of the exceptions enumerated in Article 285 of the Civil Code. 6

Petitioners assailed the order of dismissal by filing a petition for certiorari and mandamus before this Court. 7 On August 9, 1982, this Court dismissed the petition for lack of merit. 8 Petitioners filed a motion for reconsideration but the same was denied on October 19, 1982. 9

On March 29, 1988, private respondents filed a complaint for recovery of possession against Editha and her husband Porferio Alviola before the Regional Trial Court of Negros Oriental, Branch 35, Dumaguete City, docketed as Civil Case No. 9148, praying, among others, that they be declared absolute owners of the said parcels of land, and that petitioners be ordered to vacate the same, to remove their copra dryer and store, to pay actual damages (in the form of rentals), moral and punitive damages, litigation expenses and attorney's fees. 10

In their answer, petitioners contend that they own the improvements in the disputed properties which are still public land; that they are qualified to be beneficiaries of the comprehensive agrarian reform program and that they are rightful possessors by occupation of the said properties for more than twenty years. 11

After trial, the lower court rendered judgment in favor of the private respondents, the dispositive portion of which reads:

WHEREFORE, premises considered, in Civil Case No. 9148, for Recovery of Property, the court hereby renders judgment:a) Declaring plaintiffs as the absolute owners of the land in question including the portion claimed and occupied by defendants;b) Ordering defendants Editha Alviola and her husband Porfirio Alviola to peacefully vacate and to surrender the possession of the premises in question to plaintiffs; Defendants may remove their store and dryer on the premises without injury and prejudice to the plaintiffs;c) Ordering defendants to pay the following amounts to the plaintiffs:1. P150.00 monthly rentals from April 1988 up to the time the improvements in the questioned portions are removed;2. P5,000.00 for attorney's fees;3. P3,000.00 for litigation expenses and to pay the costs.SO ORDERED. 12

Petitioners appealed to the Court of Appeals. On April 8, 1994, the respondent court rendered its decision, 13affirming the judgment of the lower court. Petitioners filed a motion for reconsideration 14 but the same was denied by the respondent court in an order dated October 6, 1994. 15

Hence, this petition.

Petitioners aver that respondent court erred in declaring private respondents the owners of the disputed properties. They contend that ownership of a public land cannot be declared by the courts but by the Executive Department of the Government, citing the case of Busante vs. Hon. Court of Appeals, Oct. 20, 1992, 214 SCRA 774; and that the respondent court erred in not considering that private respondents' predecessor-in-interest, Victoria Sonjaco Tinagan, during her lifetime, ceded her right to the disputed properties in favor of petitioners.Moreover, petitioners maintain that the respondent court erred in holding that they were in bad faith in possessing the disputed properties and in ruling that the improvements thereon are transferable. They claim that the copra dryer and the store are permanent structures, the walls thereof being made of hollow-blocks and the floors made of cement.Private respondents counter that the question of whether or not the disputed properties are public land has been resolved by overwhelming evidence showing ownership and possession by the Tinagans and their predecessors-in-interest prior to 1949. They further aver that they merely tolerated petitioners' possession of the disputed properties for a period which was less than that required for extraordinary prescription.The petition must fail.Petitioners claim that the disputed properties are public lands. This is a factual issue. The private respondents adduced overwhelming evidence to prove their ownership and possession of the two (2) parcels of land on portions of which petitioners built the copra dryer and a store. Private respondents' tax declarations and receipts of payment of real estate taxes, as well as other related documents, prove their ownership of the disputed properties. As stated previously in the narration of facts, these two (2) parcels of land were originally owned by Mauro Tinagan, who sold the same to Victoria S. Tinagan on April 1, 1950, as evidenced by a Deed of Sale, 16wherein the two (2) lots, Parcels 1 and 2, are described. 17 Anent Parcel 1, tax declarations indicate that the property has always been declared in the name of the Tinagans. The first, Tax Declaration No. 3335 18 is in the name of Mauro Tinagan. It was thereafter cancelled by Tax Declaration No. 19534 effective 1968, 19 still in the name of Mauro. This declaration was cancelled by Tax Declaration No. 016740 now in the name of Agustin Tinagan, 20 effective 1974, followed by Tax Declaration No. 08-421 in the name of Jesus Tinagan, effective 1980; 21 and finally by Tax Declaration No. 08-816 in the name of Jesus Tinagan, effective 1985. 22

With regard to Parcel 2, private respondents presented Tax Declaration No. 20973 in the name of Mauro Tinagan, effective 1959, 23 Tax Declaration No. 016757, effective 1974; 24 Tax Declaration No. 08-405-C in the name of Agustin Tinagan, effective 1980 25 and Tax Declaration No. 08-794 in the name of Agustin Tinagan, effective 1985. 26 Moreover, the realty taxes on the two lots have always been paid by the private respondents. 27 There can be no doubt, therefore, that the two parcels of land are owned by the private respondents.The record further discloses that Victoria S. Tinagan and her son, Agustin Tinagan, took possession of the said properties in 1950, introduced improvements thereon, and for more than 40 years, have been in open, continuous, exclusive and notorious occupation thereof in the concept of owners.Petitioners' own evidence recognized the ownership of the land in favor of Victoria Tinagan. In their tax declarations, 28 petitioners stated that the house and copra dryer are located on the land of Victoria S. Tinagan/Agustin Tinagan. By acknowledging that the disputed portions belong to Victoria/Agustin Tinagan in their tax declarations, petitioners' claim as owners thereof must fail.The assailed decision of the respondent court states that "Appellants do not dispute that the two parcels of land subject matter of the present complaint for recovery of possession belonged to Victoria S. Tinagan, the grandmother of herein plaintiffs-appellees; that Agustin Tinagan inherited the parcels of land from his mother Victoria; and that plaintiffs-appellees, in turn, inherited the same from Agustin." 29

Taking exception to the aforequoted finding, petitioners contend that while the 2 parcels of land are owned by private respondents, the portions wherein the copra dryers and store stand were ceded to them by Victoria S. Tinagan in exchange for an alleged indebtedness of Agustin Tinagan in the sum of P7,602.04. 30

This claim of the petitioners was brushed aside by the respondent court as merely an afterthought, thus —

Appellants' claim that they have acquired ownership over the floor areas of the store and dryer "in consideration of the account of Agustin Tinagan in the sum of P7,602.04" is not plausible. It is more of an "after-thought" defense which was not alleged in their answer. Although the evidence presented by them in support of this particular claim was not duly objected to by counsel for appellees at the proper time and therefore

deemed admissible in evidence, an examination of the oral and documentary evidence submitted in support thereof, reveals the weakness of their claim.Appellant testified that the areas on which their store and dryer were located were exchanged for the amount of P7,602.04 owed to them by Agustin in 1967 (TSN, Hearing of April 14, 1989, p. 9); that he did not bother to execute a document reflecting such agreement "because they were our parents and we had used the land for quite sometime already they had also sold their copra to us for a long time." (id.) Yet, as earlier discussed, the tax declarations in appellants' answer show that even after 1967, they expressly declared that the parcels of land on which their store and dryer were constructed, belonged to Victoria and Agustin (Exhs. 2-A, 2-B, 2-C, 3-A, 3-B). If appellants really believed that they were in possession of the said particular areas in the concept of owners, they could have easily declared it in said tax declarations. 31

Concededly, petitioners have been on the disputed portions since 1961. However, their stay thereon was merely by tolerance on the part of the private respondents and their predecessor-in-interest. The evidence shows that the petitioners were permitted by Victoria Sanjoco Tinagan to build a copra dryer on the land when they got married. Subsequently, petitioner Editha Alviola, claiming to be the illegitimate daughter of Agustin Tinagan, filed a petition for partition demanding her share in the estate of the deceased Agustin Tinagan on December 6, 1976. However, the petition was dismissed since it was brought only after the death of Agustin Tinagan. This Court dismissed the petition for certiorari and mandamus filed by petitioner Editha Alviola on August 9, 1982. It was on March 29, 1988, when private respondents filed this complaint for recovery of possession against petitioners. Considering that the petitioners' occupation of the properties in dispute was merely tolerated by private respondents, their posture that they have acquired the property by "occupation" for 20 years does not have any factual or legal foundation.As correctly ruled by the respondent court, there was bad faith on the part of the petitioners when they constructed the copra dryer and store on the disputed portions since they were fully aware that the parcels of land belonged to Victoria Tinagan. And, there was likewise bad faith on the part of the private respondents, having knowledge of the arrangement between petitioners and

Victoria Tinagan relative to the construction of the copra dryer and store. Thus, for purposes of indemnity, Article 448 of the New Civil Code should be applied. 32 However, the copra dryer and the store, as determined by the trial court and respondent court, are transferable in nature. Thus, it would not fall within the coverage of Article 448. As the noted civil law authority, Senator Arturo Tolentino, aptly explains: "To fall within the provision of this Article, the construction must be of permanent character, attached to the soil with an idea of perpetuity; but if it is of a transitory character or is transferable, there is no accession, and the builder must remove the construction. The proper remedy of the landowner is an action to eject the builder from the land." 33

The private respondents' action for recovery of possession was the suitable solution to eject petitioners from the premises.WHEREFORE, this petition should be, as it is hereby, DISMISSED.The assailed decision is hereby AFFIRMED.SO ORDERED.

VERONA PADA-KILARIO and RICARDO KILARIO, petitioners, vs.COURT OF APPEALS and SILVERIO PADA, respondents.DE LEON, JR., J.:The victory1 of petitioner spouses Ricardo and Verona Kilario in the Municipal Circuit Trial Court2 in an ejectment suit3 filed against them by private respondent Silverio Pada, was foiled by its reversal4 by the Regional Trial Court5 on appeal. They elevated their cause6 to respondent Court of Appeals7 which, however, promulgated a Decision8 on May 20, 1998, affirming the Decision of the Regional Trial Court.The following facts are undisputed:One Jacinto Pada had six (6) children, namely, Marciano, Ananias, Amador, Higino, Valentina and Ruperta. He died intestate. His estate included a parcel of land of residential and coconut land located at Poblacion, Matalom, Leyte, denominated as Cadastral Lot No. 5581 with an area of 1,301.92 square meters. It is the northern portion of Cadastral Lot No. 5581 which is the subject of the instant controversy.During the lifetime of Jacinto Pada, his half-brother, Feliciano Pada, obtained permission from him to build a house on the northern portion of Cadastral Lot No. 5581. When Feliciano died, his son, Pastor, continued living in the house together with his eight children. Petitioner Verona Pada-Kilario, one of Pastor's children, has been living in that house since 1960.Sometime in May, 1951, the heirs of Jacinto Pada entered into an extra-judicial partition of his estate. For this purpose, they executed a private document which they, however, never registered in the Office of the Registrar of Deeds of Leyte.At the execution of the extra-judicial partition, Ananias was himself present while his other brothers were represented by their children. Their sisters, Valentina and Ruperta, both died without any issue. Marciano was represented by his daughter, Maria; Amador was represented by his daughter, Concordia; and Higina was represented by his son, Silverio who is the private respondent in this case. It was to both Ananias and Marciano, represented by his daughter, Maria, that Cadastral Lot No. 5581 was allocated during the said partition. When Ananias died, his daughter, Juanita, succeeded to his right as co-owner of said property.On June 14, 1978, Juanita Pada sold to Engr. Ernesto Paderes, the right of his father, Ananias, as co-owner of Cadastral Lot No. 5881.

On November 17, 1993, it was the turn of Maria Pada to sell the co-ownership right of his father, Marciano. Private respondent, who is the first cousin of Maria, was the buyer.Thereafter, private respondent demanded that petitioner spouses vacate the northern portion of Cadastral Lot No. 5581 so his family can utilize the said area. They went through a series of meetings with the barangay officials concerned for the purpose of amicable settlement, but all earnest efforts toward that end, failed.On June 26, 1995, private respondent filed in the Municipal Circuit Trial Court of Matalom, Leyte, a complaint for ejectment with prayer for damages against petitioner spouses.On July 24, 1995, the heirs of Amador Pada, namely, Esperanza Pada-Pavo, Concordia Pada-Bartolome, and Angelito Pada, executed a Deed of Donation9 transferring to petitioner Verona Pada-Kilario, their respective shares as co-owners of Cadastral Lot No. 5581.On February 12, 1996, petitioner spouses filed their Answer averring that the northern portion of Cadastral Lot No. 5581 had already been donated to them by the heirs of Amador Pada. They contended that the extra-judicial partition of the estate of Jacinto Pada executed in 1951 was invalid and ineffectual since no special power of attorney was executed by either Marciano, Amador or Higino in favor of their respective children who represented them in the extra-judicial partition. Moreover, it was effectuated only through a private document that was never registered in the office of the Registrar of Deeds of Leyte.The Municipal Circuit Trial Court rendered judgment in favor of petitioner spouses. It made the following findings:

After a careful study of the evidence submitted by both parties, the court finds that the evidence adduced by plaintiff failed to establish his ownership over . . . Cadastral Lot No. 5581 . . . while defendants has [sic] successfully proved by preponderance of evidence that said property is still under a community of ownership among the heirs of the late Jacinto Pada who died intestate. If there was some truth that Marciano Pada and Ananias Pada has [sic] been adjudicated jointly of [sic] the above-described residential property . . . as their share of the inheritance on the basis of the alleged extra judicial settlement, how come that since 1951, the date of partition, the share of the late Marciano Pada was not transferred in the name of his heirs, one of them Maria Pada-Pavo and still remain [sic] in the name of Jacinto Pada up to the present while the

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part pertaining to the share of Ananias Pada was easily transferred in the name of his heirs . . ..The alleged extra judicial settlement was made in private writing and the genuineness and due execution of said document was assailed as doubtful and it appears that most of the heirs were not participants and signatories of said settlement, and there was lack of special power of attorney to [sic] those who claimed to have represented their co-heirs in the participation [sic] and signing of the said extra judicial statement.Defendants were already occupying the northern portion of the above-described property long before the sale of said property on November 17, 1993 was executed between Maria Pada-Pavo, as vendor and the plaintiff, as vendee. They are in possession of said portion of the above-described property since the year 1960 with the consent of some of the heirs of Jacinto Pada and up to the [sic] present some of the heirs of Jacinto Pada has [sic] donated . . . their share of [sic] the above-described property to them, virtually converting defendants' standing as co-owners of the land under controversy. Thus, defendants as co-owners became the undivided owners of the whole estate . . . . As co-owners of . . . Cadastral Lot No. 5581 . . . their possession in the northern portion is being [sic] lawful.10

From the foregoing decision, private respondent appealed to the Regional Trial Court. On November 6, 1997, it rendered a judgment of reversal. It held:

. . . [T]he said conveyances executed by Juanita Pada and Maria Pada Pavo were never questioned or assailed by their co-heirs for more than 40 years, thereby lending credence on [sic] the fact that the two vendors were indeed legal and lawful owners of properties ceded or sold. . . . At any rate, granting that the co-heirs of Juanita Pada and Maria Pada Pavo have some interests on the very lot assigned to Marciano and Ananias, nevertheless, said interests had long been sadly lost by prescription, if not laches or estoppel.It is true that an action for partition does not prescribe, as a general rule, but this doctrine of imprescriptibility cannot be invoked when one of the heirs possessed the property as an owner and for a period sufficient to acquire it by prescription because from the moment one of the co-heirs claim [sic] that he is the absolute owner and denies the rest their share of the community property, the question then involved is no longer one for partition but of ownership. . . . Since [sic] 1951 up to 1993 covers a

period of 42 long years. Clearly, whatever right some of the co-heirs may have, was long extinguished by laches, estoppel or prescription.x x x x x x x x x. . . [T]he deed of donation executed by the Heirs of Amador Pada, a brother of Marciano Pada, took place only during the inception of the case or after the lapse of more than 40 years reckoned from the time the extrajudicial partition was made in 1951. Therefore, said donation is illegal and invalid [sic] the donors, among others, were absolutely bereft of any right in donating the very property in question.11

The dispositive portion of the decision of the Regional Trial Court reads as follows:

WHEREFORE, a judgment is hereby rendered, reversing the judgment earlier promulgated by the Municipal Circuit Trial Court of Matalom, Leyte, [sic] consequently, defendants-appellees are hereby ordered:1. To vacate the premises in issue and return peaceful possession to the appellant, being the lawful possessor in concept of owner;2. To remove their house at their expense unless appellant exercises the option of acquiring the same, in which case the pertinent provisions of the New Civil Code has to be applied;3. Ordering the defendants-appellees to pay monthly rental for their occupancy and use of the portion of the land in question in the sum of P100.00 commencing on June 26, 1995 when the case was filed and until the termination of the present case;4. Ordering the defendants to pay to the appellant the sum of P5,000.00 as moral damages and the further sum of P5,000.00 as attorney's fees;5. Taxing defendants to pay the costs of suit.12

Petitioners filed in the Court of Appeals a petition for review of the foregoing decision of the Regional Trial Court.On May 20, 1998, respondent Court of Appeals rendered judgment dismissing said petition. It explained:

Well-settled is the rule that in an ejectment suit, the only issue is possession de facto or physical or material possession and not de jure. Hence, even if the question of ownership is raised in the pleadings, the court may pass upon such issue but only to determine the question of possession, specially if the former is inseparably linked with the latter. It cannot dispose with finality the issue of ownership, such issue being




inutile in an ejectment suit except to throw light on the question of possession . . . .Private respondent Silverio Pada anchors his claim to the portion of the land possessed by petitioners on the Deed of Sale executed in his favor by vendor Maria Pada-Pavo, a daughter of Marciano, son of Jacinto Pada who was the registered owner of the subject lot. The right of vendee Maria Pada to sell the property was derived from the extra-judicial partition executed in May 1951 among the heirs of Jacinto Pada, which was written in a Bisayan dialect signed by the heirs, wherein the subject land was adjudicated to Marciano, Maria Pavo's father, and Ananias Pada. Although the authenticity and genuineness of the extra-judicial partition is now being questioned by the heirs of Amador Pada, no action was ever previously filed in court to question the validity of such partition.1âwphi1.nêtNotably, petitioners in their petition admitted among the antecedent facts that Maria Pavo is one of the co-owners of the property originally owned by Jacinto Pada . . . and that the disputed lot was adjudicated to Marciano (father of Maria Pavo) and Ananias, and upon the death of Marciano and Ananias, their heirs took possession of said lot, i.e. Maria Pavo the vendor for Marciano's share and Juanita for Ananias' share . . . . Moreover, petitioners do not dispute the findings of the respondent court that during the cadastral survey of Matalom, Leyte, the share of Maria Pada Pavo was denominated as Lot No. 5581, while the share of Juanita Pada was denominated as Lot No. 6047, and that both Maria Pada Pavo and Juanita were in possession of their respective hereditary shares. Further, petitioners in their Answer admitted that they have been occupying a portion of Lot No. 5581, now in dispute without paying any rental owing to the liberality of the plaintiff . . . . Petitioners cannot now impugn the aforestated extrajudicial partition executed by the heirs in 1951. As owner and possessor of the disputed property, Maria Pada, and her vendee, private respondent, is entitled to possession. A voluntary division of the estate of the deceased by the heirs among themselves is conclusive and confers upon said heirs exclusive ownership of the respective portions assigned to them . . ..The equally belated donation of a portion of the property in dispute made by the heirs of Amador Pada, namely, Concordia, Esperanza and Angelito, in favor of petitioner Verona Pada is a futile attempt to confer

upon the latter the status of co-owner, since the donors had no interest nor right to transfer. . . . This gesture appears to be a mere afterthought to help petitioners to prolong their stay in the premises. Furthermore, the respondent court correctly pointed out that the equitable principle of laches and estoppel come into play due to the donors' failure to assert their claims and alleged ownership for more than forty (40) years . . . . Accordingly, private respondent was subrogated to the rights of the vendor over Lot No. 5581 which include [sic] the portion occupied by petitioners.13

Petitioner spouses filed a Motion for Reconsideration of the foregoing decision.On June 16, 1998, respondent Court of Appeals issued a Resolution denying said motion.Hence this petition raising the following issues:

I.WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT PETITIONERS, AS CO-OWNERS, CANNOT BE EJECTED FROM THE PREMISES CONSIDERING THAT THE HEIRS OF JACINTO PADA DONATED TO THEM THEIR UNDIVIDED INTEREST IN THE PROPERTY IN DISPUTE.II.WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT WHAT MARIA PADA SOLD WAS HER UNDIVIDED SHARE IN THE PROPERTY IN DISPUTE.III.WHETHER OR NOT THE PETITIONERS ARE BUILDERS IN GOOD FAITH.14

There is no merit to the instant petition.First. We hold that the extrajudicial partition of the estate of Jacinto Pada among his heirs made in 1951 is valid, albeit executed in an unregistered private document. No law requires partition among heirs to be in writing and be registered in order to be valid.15 The requirement in Sec. 1, Rule 74 of the Revised Rules of Court that a partition be put in a public document and registered, has for its purpose the protection of creditors and the heirs themselves against tardy claims.16 The object of registration is to serve as constructive notice to others. It follows then that the intrinsic validity of partition not executed with the prescribed formalities is not undermined when no creditors are involved.17 Without creditors to take into consideration, it is competent for the heirs of an estate to enter into an agreement for distribution thereof in a manner and upon a plan different from those provided by the rules






from which, in the first place, nothing can be inferred that a writing or other formality is essential for the partition to be valid.18 The partition of inherited property need not be embodied in a public document so as to be effective as regards the heirs that participated therein.19 The requirement of Article 1358 of the Civil Code that acts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property, must appear in a public instrument, is only for convenience, non-compliance with which does not affect the validity or enforceability of the acts of the parties as among themselves.20 And neither does the Statute of Frauds under Article 1403 of the New Civil Code apply because partition among heirs is not legally deemed a conveyance of real property, considering that it involves not a transfer of property from one to the other but rather, a confirmation or ratification of title or right of property that an heir is renouncing in favor of another heir who accepts and receives the inheritance.21 The 1951 extrajudicial partition of Jacinto Pada's estate being legal and effective as among his heirs, Juanita and Maria Pada validly transferred their ownership rights over Cadastral Lot No. 5581 to Engr. Paderes and private respondent, respectively.22

Second. The extrajudicial partition which the heirs of Jacinto Pada executed voluntarily and spontaneously in 1951 has produced a legal status.23 When they discussed and agreed on the division of the estate Jacinto Pada, it is presumed that they did so in furtherance of their mutual interests. As such, their division is conclusive, unless and until it is shown that there were debts existing against the estate which had not been paid.24 No showing, however, has been made of any unpaid charges against the estate of Jacinto Pada. Thus, there is no reason why the heirs should not be bound by their voluntary acts.The belated act of Concordia, Esperanza and Angelito, who are the heirs of Amador Pada, of donating the subject property to petitioners after forty four (44) years of never having disputed the validity of the 1951 extrajudicial partition that allocated the subject property to Marciano and Ananias, produced no legal effect. In the said partition, what was allocated to Amador Pada was not the subject property which was a parcel of residential land in Sto. Nino, Matalom, Leyte, but rather, one-half of a parcel of coconut land in the interior of Sto. Nino St., Sabang, Matalom, Leyte and one-half of a parcel of rice land in Itum, Sta. Fe, Matalom, Leyte. The donation made by his heirs to petitioners of the subject property, thus, is void for they were not the owners thereof. At any rate it is too late in the day for the heirs of Amador Pada to repudiate the legal effects of the 1951 extrajudicial partition as prescription and laches have equally set in.

Third. Petitioners are estopped from impugning the extrajudicial partition executed by the heirs of Jacinto Pada after explicitly admitting in their Answer that they had been occupying the subject property since 1960 without ever paying any rental as they only relied on the liberality and tolerance of the Pada family.25 Their admissions are evidence of a high order and bind them insofar as the character of their possession of the subject property is concerned.Considering that petitioners were in possession of the subject property by sheer tolerance of its owners, they knew that their occupation of the premises may be terminated any time. Persons who occupy the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise that they will vacate the same upon demand, failing in which a summary action for ejectment is the proper remedy against them.26 Thus, they cannot be considered possessors nor builders in good faith. It is well-settled that both Article 44827 and Article 54628 of the New Civil Code which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof.29 Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith. Neither did the promise of Concordia, Esperanza and Angelito Pada that they were going to donate the premises to petitioners convert them into builders in good faith for at the time the improvements were built on the premises, such promise was not yet fulfilled, i.e., it was a mere expectancy of ownership that may or may not be realized.30 More importantly, even as that promise was fulfilled, the donation is void for Concordia, Esperanza and Angelito Pada were not the owners of Cadastral Lot No. 5581. As such, petitioners cannot be said to be entitled to the value of the improvements that they built on the said lot.WHEREFORE, the petition for review is HEREBY DENIED.Costs against petitioners.SO ORDERED.














ARADA LUMUNGO, JUHURI DAWA, ET AL., petitioners, vs.ASAAD USMAN, JOSE ANGELES and DOMINGA USMAN, ET AL., respondents.Dominador Sobreviñas for petitioners.Marciano Almario for respondents.CONCEPCION, C.J.:Review on certiorari of a decision of the Court of Appeals, on appeal from a decision of the Court of First Instance of Sulu in Civil Cases Nos. 155 and 156 of said court, both instituted by plaintiffs herein, Arada Lumungo (deceased), substituted by her heirs, Juhuri Dawa, Kayajuja, Sadatul, Sarapatul, Jaramatul, Alma, Kalukasa and Vicente, all surnamed Juhuri to recover the possession of lot No. 871 of the Siasi Cadastre, in the first case, and in the second, of lots Nos. 892, 893, 894 and 1121 of the same cadastre. The defendants in case No. 155 are Asaad Usman, Akmadul and Hada, whereas those in case No. 156 are Asaad Usman, Fatima Angeles, Hadjaratul Julkanain, Inkiran and Sitti Haridja, who were subsequently joined by Dominga Usman and Jose Angeles, as defendants-intervenors.After a joint trial of the two (2) cases, the Court of First Instance of Sulu rendered a decision, the dispositive part of which reads as follows:WHEREFORE, judgment is hereby rendered declaring plaintiffs to have a better right to the possession of Lots Nos. 892, 893, 894, 1121 and 871, Siasi and Lapak Cadastral Survey, located at Lapak, Siasi, Sulu and described in Transfer Certificates of Title Nos. T-419, T-422, T-420 and T-421 and Original Certificate of Title No. 8023. The defendants are ordered to vacate said lots in favor of the plaintiffs if they have not already done so.On the other hand, the plaintiffs are ordered to reimburse to the defendant-intervenor, JOSE ANGELES, the sum of P4,500.00 representing the value of the 3,000 coconut trees introduced by him and his predecessors in interest on Lots 892, 893 and 894. Should plaintiffs fail to do so within ninety (90) days from the date this decision becomes final, the three lots shall be ordered sold at public auction, the proceeds of which shall be applied to the P4,500.00 herein adjudged to Jose Angeles, and the balance to be delivered to the plaintiffs.Both parties appealed from this decision to the Court of Appeals, but, later, the defendants withdrew their appeal, which, accordingly, was dismissed. Thus the only question left for determination by the Court of Appeals was plaintiffs' appeal from the trial court's decision, insofar as it sentenced them to pay P4,500.00 to intervenor Jose Angeles. After appropriate proceedings, the Court

of Appeals reduced this amount to P2,500.00 and affirmed the decision of the Court of First Instance in all other respects, with costs against defendants-intervenors. The case is now before us upon petition for review on certiorari filed by the plaintiffs.The pertinent facts are set forth in the decision of the trial court, which were adopted in that of the Court of Appeals, from which we quote:It ... appears that, having allegedly collaborated with the enemy during the Japanese Occupation of Sulu, Datu Idiris Amilhussin was arrested and detained when the American Liberation Forces came to Sulu in the year 1945. On March 1, 1946, Datu Idiris was prosecuted for Treason before the People's Court, docketed as Criminal Case No. 1334 in said Court. Justice of the Peace Asaad Usman of Siasi and his wife Dominga Usman, became interested in Lots Nos. 892, 893, 894, 1121 and 871. Jamasali Usman, brother of Atty. Asaad Usman, also became interested in Lot No. 1226(?). Datu Idiris was desperately in need of money to pay his attorney's fees and the premium on his bailbond. He sent his wife to Jamasali for money. Jamasali proposed to buy Lot No. 1227(?). Upon the execution of a Pacto de Retro sale (Exhibit "DDD"), Jamasali gave Datu Idiris partial payments of the P3,000.00 mentioned in the document. Sometime in the year 1946, Atty. Usman visited Datu Idiris in the Provincial jail and promised to help him in his case and to secure his bailbond for his temporary liberty. But Atty. Usman asked Datu Idiris to sell to his wife, Dominga Miranda Usman, the five lots in question. Datu Idiris agreed.Through the help of Atty. Usman, the bailbond of Datu Idiris was perfected. Consequently, on January 11, 1947, he was released from the Provincial Jail. True to his word, on March 14, 1947, Datu Idiris executed an agreement with Dominga Usman (Exhibit "33"). He also caused Datu Amirul Amilhussin, brother of Datu Idiris, to sign a similar document, being one of the co-owners of said lots (Exh. "34"). Upon execution of the agreement, Dominga Usman paid Datu Idiris P300.00; subsequently, Atty. Usman paid him P500.00 and P10.00. Thus, Datu Idiris received all in all from the spouses, P810.00 in consideration of the tenor stated in the document, Exhibit "33". In the meantime, Atty. Usman took possession of the five lots in question and cultivated the same.As the whole amount of P3,000.00 mentioned in the sale of Pacto de Retro executed by Datu Idiris in favor of Jamasali Usman was not fully paid, Datu Idiris upon his being released from confinement, demanded from Jamasali to complete payment. He also demanded from Atty. Usman the payment of the balance of the purchase price of the lots described in Exhibit "33". After Datu

Idiris had been repeatedly refusedsaid payments by both Jamasali and Atty. Usman, he became exasperated. He wrote two complaints, one to the Secretary of Justice, dated June 15, 1946, and the other, to the President of the Philippines, dated March 8, 1948, complaining against Justice of the Peace Asaad Usman and Jamasali Usman. After filing these complaints, Justice of the Peace Usman immediately caused the revocation of the bailbond of Datu Idiris before the People's Court. On March 31, 1948, he was rearrested and committed to the Provincial Jail again. A serious misunderstanding developed between Datu Idiris on one hand and Atty. Usman and Jamasali Usman on the other. Several complaints for murder were caused to be filed before the Court of Justice of the Peace Usman against Datu Idiris. In the meantime, Atty. Usman wrote letters of demand upon Datu Idiris asking him to produce the titles to the above five lots to enable him to have a sufficient deed of sale conveying the said five lots in favor of his wife. Datu Idiris on the other hand, had been demanding from Atty. Usman to pay the balance of the purchase price of the land. Despite those mutual demands, no one complied therewith. On December 10, 1951, Datu Idiris proposed, thru Atty. Flor, to call off the deal, stated in documents, Exhibits "33" and "34", promising to return the P810.00 which he received from the spouses. Dominga Usman and Atty. Usman agreed to call off the deal. Datu Idiris however, never paid the P810.00. Despite this. Dominga Usman and Atty. Usman never went to Court to file an action to compel Datu Idiris either to comply with his obligation to execute and deliver a good and sufficient deed conveying titles to the five lots in question, or to pay back the P810.00. What Dominga Usman did when Datu Idiris failed to pay her the P810.00 was to sell lots 892, 893 and 894 to Jose Angeles for P1,000.00. Jose Angeles, upon taking possession of the land, planted same with coconuts, which, together with those already planted by Dominga Usman, numbered about 3,000, most of which are now fruit-bearing.On Feb. 2, 1962, Datu Idiris filed a civil complaint against Atty. Asaad Usman for recovery of possession of the five lots in question which was docketed as Civil Case No. 87 of this Court. Atty. Usman, instead of informing the Court that he and his wife had the legal right to possess those lots by virtue of the agreement had between Datu Idiris and his wife embodied in Exhibit "33", manifested in open Court on September 26, 1952, that he was not interested in the posession or ownership of the land, and that he did not buy the land from Datu Idiris. So, on said date, this Court dictated an order as follows:"In Open Court, when this case was called for hearing, the defendant Attorney Asaad Usman manifested that he does not claim ownership nor possession to the

two parcels of land described in paragraph 2 of the complaint of the plaintiff. Thereupon, the plaintiff (moved) the Court to enter judgment, to which motion the defendant interposed no objection. Such being the case, the Court has no alternative but to enter judgment as it is hereby entered in favor of the plaintiff Datu Idiris Amilhussin, and against the defendant — declaring the plaintiff the owner and possessor of the two parcels of land above mentioned, and inasmuch as the defendant is not in possession of the land, the Court finds it unnecessary to enter an order ejecting the said defendant from the two parcels of land, without prejudice to any claim of any other third party, without pronouncement as to costs.On the other hand, the defendant moved for the dismissal of his counterclaim. The Court orders the dismissal of the same, also without pronouncement as to cost."Upon the promulgation of the above-quoted judgment, Datu Idiris, who was badly in need of money, went around, offering to sell the land to another. Spouses Juhuri Dawa and Arada Lumungo being interested in acquiring those lots, asked Atty. Dominador Sobreviñas to verify if they could buy the same. Atty. Sobreviñas went to the Office of the Register of Deeds and found no annotation of encumbrances on the Original Certificates of Title of the five lots . Besides, since the Court had already adjudged in the above-quoted order that Atty. Usman did not have any claim of possession or ownership over the land, and that he did not buy the land from Datu Idiris, Atty. Sobreviñas advised his clients that they may buy the lots. Accordingly, a deed of sale, Exhibits "L" to "L-2", was executed. Upon presentation of this deed of sale to the Register of Deeds, Original Certificates of Title Nos. 8986, 8123, 8087 and 8122 were cancelled and in lieu thereof, Transfer Certificates of Title Nos. T-419, T-420, T-422, and T-421 were issued in the names of the plaintiffs. Plaintiffs took possession of the property, but they were allegedly driven from the land. About three years ago, the defendants left Lots Nos. 892, 893, 894 and 1121. Plaintiffs took possession thereof. The defendants are still in possession of Lot No. 871.[[1]]

Defendants maintained in the Court of Appeals that the sale made by Datu Idiris Amilhussin to plaintiffs Arada Lumungo and Juhuri Dawa, on September 30, 1952, is null and void because the lots thus sold had previously been conveyed by Datu Idiris and Datu Amirul Amilhussin to intervenor Dominga Usman, wife of defendant Asaad Usman, and because the sale to said plaintiffs was not approved by the provincial governor of Sulu, as required by the Administrative Code of Mindanao and Sulu. The Court of Appeals overruled these objections

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upon the ground that the sale to Dominga Usman "did not materialize" and was "called off" by mutual agreement of the vendors and the vendee, and that said lack of approval by the provincial governor is a defense available to the contracting parties only, not to the defendants herein who are not parties to said transaction. Then the Court of Appeals went on to say:Upon the other hand, it is to be noted that when intervenor Dominga Usman who claimed to have purchased the lots in question from one of the original owners, sold and transferred her alleged ownership over the same to her co-intervenor Jose Angeles, the latter made the purchase with the knowledge that the property subject matter of the sale was already in dispute by and between herein defendants, one of whom is the husband of intervener Dominga Usman, on the one hand, and herein plaintiffs on the other. Nevertheless, as well stated by the court a quo, equity should come in to protect the rights of intervenor Jose Angeles who introduced some improvements on three of the lots subject-matter of the litigation, namely, lots Nos. 892, 893 and 894.The Court found for a fact that around 3,000 coconut trees were planted on those lots aforementioned, some of them already fruit-bearing. It appears from the records that not all, but a portion, of the 3,000 were planted by intervenor Jose Angeles. The value placed by the lower court of P1.50 per fruit-bearing coconut tree is reasonable enough, inasmuch as the lower court was in a better position to make the assessment, it being more closely in contact with the conditions and circumstances of the locality. We are not prepared to disturb such finding for lack of evidence to warrant such an action on our part.IN VIEW OF THE FOREGOING CONSIDERATIONS, with the only modification thatthe amount of indemnity should be reduced from P4,500.00 to P2,500.00, the rest of the judgment appealed from is hereby affirmed with costs against defendants-intervenors.[[2]]

The only issue posed by plaintiffs' petition for review is whether or not Jose Angeles is entitled to reimbursement for the coconut trees planted by him on the property in litigation. In this connection, it should be noted that said trees are improvements, not "necessary expenses of preservation," which a builder, planter or sower in bad faith may recover under Arts. 452 and 546, first paragraph, of the Civil Code.Upon the other hand, the Court of Appeals found as a fact that when Dominga Usman sold and transferred her rights in and to the property in question to Jose Angeles "the latter made the purchase with the knowledge that the property subject matter of the sale was already in dispute by and between herein

defendants, one of whom is the husband of intervenor Dominga Usman, on the one hand, and herein plaintiffs on the other." Angeles was, therefore, aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title to the property in question, which was an easy matter for him to ascertain, said property being registered under the Torrens System.[[3]]

Indeed, Jose Angeles is a nephew of defendant Asaad Usman, and the controversy between the latter and Datu Idiris was a matter of public knowledge, for Usman was a justice of the peace, and Datu Idiris had filed charges against him, as such, with the Department of Justice and the Office of the President, to which Usman countered by causing the bail bond of Datu Idiris to be cancelled and his corresponding reincarceration, as well as the filing of complaints for murder against him. Besides, on February 2, 1952, or several months prior to the sale to Angeles on September 30, 1952, Datu Idiris had filed Civil Case No. 87 of the Court of First Instance of Sulu against Asaad Usman to recover the lots in question, and the latter stated in that case, on September 26, 1952, or four (4) days before the aforementioned sale, that he was not interested in either the possession or the ownership of said lots and that he had not bought the same from the former. It may not be amiss to note, also, that at the time of the alleged sale in his favor, Jose Angeles was a law student; that, in fact, on August 9, 1957, he entered his appearance as counsel for the defendants, in collaboration with Asaad Usman; and that the consideration for said sale, involving a land of 46 hectares, was only P1,000.In short, the foregoing facts, and the above-quoted findings of both the trial court and the Court of Appeals, leave no room for doubt that Jose Angeles was a purchaser and a builder in bad faith.[[4]] The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that, "(h)e who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity."Obviously, the alleged equity in favor of Jose Angeles, on which the lower courts have relied, cannot prevail over the aforementioned express statutory provision to the contrary,[[5]] apart from the fact that he who seeks equity must come with clean hands.[[6]]

WHEREFORE, the decision of the Court of Appeals should be as it is hereby modified by eliminating therefrom the contested award of P2,500.00 in favor of Jose Angeles, and, thus modified, said decision is hereby affirmed in all other respects, with the costs. It is so ordered.






MARIO C. RONQUILLO, petitioner vs.THE COURT OF APPEALS, DIRECTOR OF LANDS, DEVELOPMENT BANK OF THE PHILIPPINES, ROSENDO DEL ROSARIO, AMPARO DEL ROSARIO and FLORENCIA DEL ROSARIO, respondents.*Angara, Abello, Concepcion, Regala & Cruz for petitioner.REGALADO, J.:This petition seeks the review of the decision 1 rendered by respondent Court of Appeals on September 25, 1975 in CA-G.R. No. 32479-R, entitled "Rosendo del Rosario, et al., Plaintiffs-Appellees, versus Mario Ronquillo, Defendant-Appellant," affirming in toto the judgment of the trial court, and its amendatory resolution 2 dated January 28, 1976 the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, the decision of this Court dated September 25, 1975 is hereby amended in the sense that the first part of the appealed decision is set aside, except the last portion "declaring the plaintiffs to be the rightful owners of the dried-up portion of Estero Calubcub which is abutting plaintiffs' property," which we affirm, without pronouncement as to costs.SO ORDERED.

The following facts are culled from the decision of the Court of Appeals:It appears that plaintiff Rosendo del Rosario was a registered owner of a parcel of land known as Lot 34, Block 9, Sulucan Subdivision, situated at Sampaloc, Manila and covered by Transfer Certificate of Title No. 34797 of the Registry of Deeds of Manila (Exhibit "A"). The other plaintiffs Florencia and Amparo del Rosario were daughters of said Rosendo del Rosario. Adjoining said lot is a dried-up portion of the old Estero Calubcub occupied by the defendant since 1945 which is the subject matter of the present action.Plaintiffs claim that long before the year 1930, when T.C.T. No. 34797 over Lot No. 34 was issued in the name of Rosendo del Rosario, the latter had been in possession of said lot including the adjoining dried-up portion of the old Estero Calubcub having bought the same from Arsenio Arzaga. Sometime in 1935, said titled lot was occupied by Isabel Roldan with the tolerance and consent of the plaintiff on condition that the former will make improvements on the adjoining dried-up portion of the Estero Calubcub. In the early part of 1945 defendant occupied the eastern portion of said titled lot as well as the dried-up portion of the

old Estero Calubcub which abuts plaintiffs' titled lot. After a relocation survey of the land in question sometime in 1960, plaintiffs learned that defendant was occupying a portion of their land and thus demanded defendant to vacate said land when the latter refused to pay the reasonable rent for its occupancy. However, despite said demand defendant refused to vacate.Defendant on the other hand claims that sometime before 1945 he was living with his sister who was then residing or renting plaintiffs' titled lot. In 1945 he built his house on the disputed dried-up portion of the Estero Calubcub with a small portion thereof on the titled lot of plaintiffs. Later in 1961, said house was destroyed by a fire which prompted him to rebuild the same. However, this time it was built only on the called up portion of the old Estero Calubcub without touching any part of plaintiffs titled land. He further claims that said dried-up portion is a land of public domain.3

Private respondents Rosendo, Amparo and Florencia, all surnamed del Rosario (Del Rosarios), lodged a complaint with the Court of First Instance of Manila praying, among others, that they be declared the rightful owners of the dried-up portion of Estero Calubcub. Petitioner Mario Ronquillo (Ronquillo) filed a motion to dismiss the complaint on the ground that the trial court had no jurisdiction over the case since the dried-up portion of Estero Calubcub is public land and, thus, subject to the disposition of the Director of Lands. The Del Rosarios opposed the motion arguing that since they are claiming title to the dried-up portion of Estero Calubcub as riparian owners, the trial court has jurisdiction. The resolution of the motion to dismiss was deferred until after trial on the merits.Before trial, the parties submitted the following stipulation of facts:

1. That the plaintiffs are the registered owners of Lot 34, Block 9, Sulucan Subdivision covered by Transfer Certificate of Title No. 34797;2. That said property of the plaintiffs abuts and is adjacent to the dried-up river bed of Estero Calubcub Sampaloc, Manila;3. That defendant Mario Ronquillo has no property around the premises in question and is only claiming the dried-up portion of the old Estero Calubcub, whereon before October 23, 1961, the larger portion of his house was constructed;4. That before October 23, 1961, a portion of defendant's house stands (sic) on the above-mentioned lot belonging to the plaintiffs;

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5. That the plaintiffs and defendant have both filed with the Bureau of Lands miscellaneous sales application for the purchase of the abandoned river bed known as Estero Calubcub and their sales applications, dated August 5, 1958 and October 13, 1959, respectively, are still pending action before the Bureau of Lands;6. That the parties hereby reserve their right to prove such facts as are necessary to support their case but not covered by this stipulation of facts. 4

On December 26, 1962, the trial court rendered judgment the decretal portion of which provides:

WHEREFORE, judgment is hereby rendered ordering the defendant to deliver to the plaintiffs the portion of the land covered by Transfer Certificate of title No. 34797 which is occupied by him and to pay for the use and occupation of said portion of land at the rate of P 5.00 a month from the date of the filing of the complaint until such time as he surrenders the same to the plaintiffs and declaring plaintiffs to be the owners of the dried-up portion of estero Calubcub which is abutting plaintiffs' property.With costs to the defendant.SO ORDERED. 5

On appeal, respondent court, in affirming the aforequoted decision of the trial court, declared that since Estero Calubcub had already dried-up way back in 1930 due to the natural change in the course of the waters, under Article 370 of the old Civil Code which it considers applicable to the present case, the abandoned river bed belongs to the Del Rosarios as riparian owners. Consequently, respondent court opines, the dried-up river bed is private land and does not form part of the land of the public domain. It stated further that "(e)ven assuming for the sake of argument that said estero did not change its course but merely dried up or disappeared, said dried-up estero would still belong to the riparian owner," citing its ruling in the case of Pinzon vs. Rama. 6

Upon motion of Ronquillo, respondent court modified its decision by setting aside the first portion of the trial court's decision ordering Ronquillo to surrender to the Del Rosarios that portion of land covered by Transfer Certificate of Title No. 34797 occupied by the former, based on the former's representation that he had already vacated the same prior to the commencement of this case. However, respondent court upheld its declaration that the Del Rosarios are the rightful owners of the dried-up river bed. Hence, this petition.

On May 17, 1976, this Court issued a resolution 7 requiring the Solicitor General to comment on the petition in behalf of the Director of Lands as an indispensable party in representation of the Republic of the Philippines, and who, not having been impleaded, was subsequently considered impleaded as such in our resolution of September 10, 1976. 8 In his Motion to Admit Comment, 9 the Solicitor General manifested that pursuant to a request made by this office with the Bureau of Lands to conduct an investigation, the Chief of the Legal Division of the Bureau sent a communication informing him that the records of his office "do not show that Mario Ronquillo, Rosendo del Rosario, Amparo del Rosario or Florencia del Rosario has filed any public land application covering parcels of land situated at Estero Calubcub Manila as verified by our Records Division.The position taken by the Director of Lands in his Comment 10 filed on September 3, 1978, which was reiterated in the Reply dated May 4, 1989 and again in the Comment dated August 17, 1989, explicates:

5. We do not see our way clear to subscribe to the ruling of the Honorable Court of Appeals on this point for Article 370 of the Old Civil Code, insofar as ownership of abandoned river beds by the owners of riparian lands are concerned, speaks only of a situation where such river beds were abandoned because of a natural change in the course of the waters. Conversely, we submit that if the abandonment was for some cause other than the natural change in the course of the waters, Article 370 is not applicable and the abandoned bed does not lose its character as a property of public dominion not susceptible to private ownership in accordance with Article 502 (No. 1) of the New Civil Code. In the present case, the drying up of the bed, as contended by the petitioner, is clearly caused by human activity and undeniably not because of the natural change of the course of the waters (Emphasis in the original text).

In his Comment 11 dated August 17, 1989, the Director of Lands further adds:8. Petitioner herein and the private respondents, the del Rosarios, claim to have pending sales application(s) over the portion of the dried up Estero Calubcub, as stated in pages 4-5, of the Amended Petition.9. However, as stated in the Reply dated May 4, 1989 of the Director of Lands, all sales application(s) have been rejected by that office because of the objection interposed by the Manila City Engineer's Office that they need the dried portion of the estero for drainage purposes.









10. Furthermore, petitioner and private respondents, the del Rosarios having filed said sales application(s) are now estopped from claiming title to the Estero Calubcub (by possession for petitioner and by accretion for respondents del Rosarios) because for (sic) they have acknowledged that they do not own the land and that the same is a public land under the administration of the Bureau of Lands (Director of Lands vs. Santiago, 160 SCRA 186, 194).

In a letter dated June 29, 1979 12 Florencia del Rosario manifested to this Court that Rosendo, Amparo and Casiano del Rosario have all died, and that she is the only one still alive among the private respondents in this case.In a resolution dated January 20, 1988, 13 the Court required petitioner Ronquillo to implead one Benjamin Diaz pursuant to the former's manifestation 14 that the land adjacent to the dried up river bed has already been sold to the latter, and the Solicitor General was also required to inquire into the status of the investigation being conducted by the Bureau of Lands. In compliance therewith, the Solicitor General presented a letter from the Director of Lands to the effect that neither of the parties involved in the present case has filed any public land application. 15

On April 3, 1989, petitioner filed an Amended Petition for Certiorari, 16 this time impleading the Development Bank of the Philippines (DBP) which subsequently bought the property adjacent to the dried-up river bed from Benjamin Diaz. In its resolution dated January 10, 1990, 17 the Court ordered that DBP be impleaded as a party respondent.In a Comment 18 filed on May 9, 1990, DBP averred that "[c]onsidering the fact that the petitioner in this case claims/asserts no right over the property sold to Diaz/DBP by the del Rosarios; and considering, on the contrary, that Diaz and DBP claims/asserts (sic) no right (direct or indirect) over the property being claimed by Ronquillo (the dried-up portion of Estero Calubcub), it follows, therefore, that the petitioner Ronquillo has no cause of action against Diaz or DBP. A fortiori from the viewpoint of the classical definition of a cause of action, there is no legal justification to implead DBP as one of the respondents in this petition." DBP thereafter prayed that it be dropped in the case as party respondent.On September 13, 1990, respondent DBP filed a Manifestation/Compliance 19 stating that DBP's interest over Transfer Certificate of Title No. 139215 issued in its name (formerly Transfer Certificate of Title No. 34797 of the Del Rosarios and Transfer Certificate of Title No. 135170 of

Benjamin Diaz) has been transferred to Spouses Victoriano and Pacita A. Tolentino pursuant to a Deed of Sale dated September 11, 1990.Petitioner Ronquillo avers that respondent Court of Appeals committed an error of law and gross abuse of discretion, acted arbitrarily and denied petitioner due process of law (a) when it declared private respondents Del Rosarios the rightful owners of the dried-up portion of Estero Calubcub by unduly relying upon decisional law in the case of Pinzon vs. Rama, ante, which case was decided entirely on a set of facts different from that obtaining in this case; and (b) when it ignored the undisputed facts in the present case and declared the dried-up portion of Estero Calubcub as a private property.The main issue posed for resolution in this petition is whether the dried-up portion of Estero Calubcub being claimed by herein petitioner was caused by a natural change in the course of the waters; and, corollary thereto, is the issue of the applicability of Article 370 of the old Civil Code.Respondent court, in affirming the findings of the trial court that there was a natural change in the course of Estero Calubcub declared that:

The defendant claims that Article 370 of the old Civil Code is not applicable to the instant case because said Estero Calubcub did not actually change its course but simply dried up, hence, the land in dispute is a land of public domain and subject to the disposition of the Director of Land(s). The contention of defendant is without merit. As mentioned earlier, said estero as shown by the relocation plan (Exhibit "D") did not disappear but merely changed its course by a more southeasternly (sic) direction. As such, "the abandoned river bed belongs to the plaintiffs-appellees and said land is private and not public in nature. Hence, further, it is not subject to a Homestead Application by the appellant." (Fabian vs. Paculan CA-G.R. Nos. 21062-63-64-R, Jan. 25 1962). Even assuming for the sake of argument that said estero did not change its course but merely dried up or disappeared, said dried-up estero would still belong to the riparian owner as held by this Court in the case of Pinzon vs. Rama (CA-G.R. No. 8389, Jan. 8, 1943; 2 O.G. 307). 20

Elementary is the rule that the jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals in a petition for certiorari under Rule 45 of the Rules of Court is limited to the review of errors of law, and that said appellate court's finding of fact is conclusive upon this Court. However, there are certain exceptions, such as (1) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (2) when the inference made is










manifestly absurd, mistaken or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the judgment is premised on a misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when the Court of Appeals in making its findings went beyond the issues of the case and the same is contrary to the admissions of both appellant andappellee. 21

A careful perusal of the evidence presented by both parties in the case at bar will reveal that the change in the course of Estero Calubcub was caused, not by natural forces, but due to the dumping of garbage therein by the people of the surrounding neighborhood. Under the circumstances, a review of the findings of fact of respondent court thus becomes imperative.Private respondent Florencia del Rosario, in her testimony, made a categorical statement which in effect admitted that Estero Calubcub changed its course because of the garbage dumped therein, by the inhabitants of the locality, thus:

Q When more or less what (sic) the estero fully dried up?A By 1960 it is (sic) already dried up except for a little rain that accumulates on the lot when it rains.Q How or why did the Estero Calubcub dried (sic) up?A It has been the dumping place of the whole neighborhood. There is no street, they dumped all the garbage there. It is the dumping place of the whole community, sir. 22

In addition, the relocation plan (Exhibit "D") which also formed the basis of respondent court's ruling, merely reflects the change in the course of Estero Calubcub but it is not clear therefrom as to what actually brought about such change. There is nothing in the testimony of lone witness Florencia del Rosario nor in said relocation plan which would indicate that the change in the course of the estero was due to the ebb and flow of the waters. On the contrary, the aforequoted testimony of the witness belies such fact, while the relocation plan is absolutely silent on the matter. The inescapable conclusion is that the dried-up portion of Estero Calubcub was occasioned, not by a natural change in the course of the waters, but through the active intervention of man.The foregoing facts and circumstances remove the instant case from the applicability of Article 370 of the old Civil Code which provides:

Art. 370. The beds of rivers, which are abandoned because of a natural change in the course of the waters, belong to the owners of the riparian lands throughout the respective length of each. If the abandoned bed

divided tenements belonging to different owners the new dividing line shall be equidistant from one and the other.

The law is clear and unambiguous. It leaves no room for interpretation.1âwphi1 Article 370 applies only if there is a natural change in the course of the waters. The rules on alluvion do not apply to man-made or artificial accretions23 nor to accretions to lands that adjoin canals or esteros or artificial drainage systems. 24 Considering our earlier finding that the dried-up portion of Estero Calubcub was actually caused by the active intervention of man, it follows that Article 370 does not apply to the case at bar and, hence, the Del Rosarios cannot be entitled thereto supposedly as riparian owners.The dried-up portion of Estero Calubcub should thus be considered as forming part of the land of the public domain which cannot be subject to acquisition by private ownership. That such is the case is made more evident in the letter, dated April 28, 1989, of the Chief, Legal Division of the Bureau of Lands 25 as reported in the Reply of respondent Director of Lands stating that "the alleged application filed by Ronquillo no longer exists in its records as it must have already been disposed of as a rejected application for the reason that other applications "covering Estero Calubcub Sampaloc, Manila for areas other than that contested in the instant case, were all rejected by our office because of the objection interposed by the City Engineer's office that they need the same land for drainage purposes". Consequently, since the land is to be used for drainage purposes the same cannot be the subject of a miscellaneous sales application.Lastly, the fact that petitioner and herein private respondents filed their sales applications with the Bureau of Lands covering the subject dried-up portion of Estero Calubcub cannot but be deemed as outright admissions by them that the same is public land. They are now estopped from claiming otherwise.WHEREFORE, the decision appealed from, the remaining effective portion of which declares private respondents Del Rosarios as riparian owners of the dried-up portion of Estero Calubcub is hereby REVERSED and SET ASIDE.SO ORDERED.






ANGELICA VIAJAR and CELSO VIAJAR, plaintiffs-appellants, vs.COURT OF APPEALS, LEONOR P. LADRIDO, LOURDES LADRIDO IGNACIO, EUGENIO P. LADRIDO and L P. LADRIDO, defendants-appellees.Ramon A. Gonzales for petitioner.Miraflores Law Offices for respondents.MEDIALDEA, J.:This is a petition for review on certiorari of the decision of the Court of Appeals dated December 29, 1986, in CA-G.R. CV No. 69942 entitled, "ANGELICA VIAJAR, et. al., Plaintiffs-Appellants, versus LEONOR LADRIDO, et. al., Defendants-Appellees," affirming the decision of the Court of First Instance (now Regional Trial Court) of Iloilo dated December 10, 1981.The antecedent facts in the instant case are as follows: The spouses Ricardo Y. Ladrido and Leonor P. Ladrido were the owners of Lot No. 7511 of the Cadastral Survey of Pototan situated in barangay Cawayan, Pototan, Iloilo. This lot contained an area of 154,267 square meters and was registered in the names of the spouses under Transfer Certificate of Title No. T-21940 of the Register of Deeds of Iloilo.Spouses Rosendo H. Te and Ana Te were also the registered owners of a parcel of land described in their title as Lot No. 7340 of the Cadastral Survey of Pototan.On September 6, 1973, Rosendo H. Te, with the conformity of Ana Te, sold this lot to Angelica F. Viajar and Celso F. Viajar for P5,000. A Torrens title was later issued in the names of Angelica F. Viajar and Celso F. Viajar.Later, Angelica F. Viajar had Lot No. 7340 relocated and found out that the property was in the possession of Ricardo Y. Ladrido. Consequently, she demanded its return but Ladrido refused.On February 15, 1974, Angelica F. Viajar and Celso F. Viajar instituted a civil action for recovery of possession and damages against Ricardo Y. Ladrido. This case was docketed as Civil Case No. 9660 of the Court of First Instance of Iloilo. Summoned to plead, defendant Ladrido filed his answer with a counterclaim. Plaintiffs filed their reply to the answer.Subsequently, the complaint was amended to implead Rosendo H. Te as another defendant. Plaintiffs sought the annulment of the deed of sale and the restitution of the purchase price with interest in the event the possession of defendant Ladrido is sustained. Defendant Te filed his answer to the amended complaint and he counter claimed for damages. Plaintiffs answered the counterclaim.

During the pendency of the case, plaintiff Celso F. Viajar sold his rights over Lot No. 7340 to his mother and co-plaintiff, Angelica F. Viajar. For this reason, plaintiff Angelica F. Viajar now appears to be the sole registered owner of this lot.On May 25, 1978, defendant Ladrido died. He was substituted in the civil action by his wife, Leonor P. Ladrido, and children, namely: Lourdes Ladrido-Ignacio, Eugenio P. Ladrido and Manuel P. Ladrido, as parties defendants.The facts admitted by the parties during the pre-trial show that the piece of real property which used to be Lot No. 7340 of the Cadastral Survey of Pototan was located in barangay Guibuanogan Pototan, Iloilo; that it consisted of 20,089 square meters; that at the time of the cadastral survey in 1926, Lot No. 7511 and Lot No. 7340 were separated by the Suague River; that the area of 11,819 square meters of what was Lot No. 7340 has been in the possession of the defendants; that the area of 14,036 square meters, which was formerly the river bed of the Suague River per cadastral survey of 1926, has also been in the possession of the defendants; and that the plaintiffs have never been in actual physical possession of Lot No. 7340.After trial on the merits, a second amended complaint which included damages was admitted.The plaintiffs raised the following issues to be resolved:

1. Whether the change in the course of the Suague River was sudden as claimed by the plaintiffs or gradual as contended by the defendants;2. Assuming arguendo it was gradual, whether or not the plaintiffs are still entitled to Lot "B' appearing in Exhibit "4" and to one-half (½) of Lot "A," also indicated in Exhibit "4;" and3. Damages (pp. 12-13, Rollo).

On December 10, 1981, the trial court rendered its decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs:

1. Dismissing the complaint of plaintiffs Angelica F. Viajar and Celso F. Viajar with costs against them;

2. Declaring defendants Leonor P. Ladrido, Lourdes Ladrido-Ignacio, Eugenio P. Ladrido and Manuel P. Ladrido as owner of the parcel of land indicated as Lots A and B in the sketch plan (Exhs. 'C' as well as '4,' '4-B' and '4-C') situated in barangays Cawayan and Guibuanogan Pototan, Iloilo, and containing an area of 25,855 square meters, more or less; and3. Pronouncing that as owners of the land described in the preceding paragraph, the defendants are entitled to the possession thereof.

Defendants' claim for moral damages and attorney's fees are dismissed.SO ORDERED (p. 36, Rollo).

Not satisfied with the decision, the plaintiffs appealed to the Court of Appeals and assigned the following errors:

I.THE LOWER COURT ERRED IN NOT HOLDING THAT PLAINTIFFS ARE ENTITLED TO LOT B APPEARING IN EXHIBIT "4" AND TO ONE-HALF (½) OF LOT A IN THE SAID EXHIBIT "4."IITHE LOWER COURT ERRED IN NOT AWARDING DAMAGES TO PLAINTIFFS (p. 42, Rollo).

As earlier stated, the Court of Appeals affirmed the decision of the court a quo. Plaintiffs (the petitioners herein) now come to Us claiming that the Court of Appeals palpably erred in affirming the decision of the trial court on the ground that the change in the course of the Suague River was gradual and not sudden.In the decision appealed from, the Court of Appeals held:

This appeal is not impressed with merit.Article 457 of the New Civil Code provides that:

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

The presumption is that the change in the course of the river was gradual and caused by accretion and erosion (Martinez

Canas vs. Tuason, 5 Phil. 668; Payatas Estate Improvement Co. vs. Tuason, 53 Phil. 55; C.H. Hodges vs. Garcia, 109 Phil. 133). In the case at bar, the lower court correctly found that the evidence introduced by the plaintiff to show that the change in the course of the Suague River was sudden or that it occurred through avulsion is not clear and convincing.Contrariwise, the lower court found that:... the defendants have sufficiently established that for many years after 1926 a gradual accretion on the eastern side of Lot No. 7511 took place by action of the current of the Suague River so that in 1979 an alluvial deposit of 29,912 square meters (2.9912 hectares), more or less, had been added to Lot No. 7511. (Exhs. '1' as well as Exhs. 'C' and '4'). Apropos it should be observed that the accretion consisted of Lot A with an area of 14,036 square meters; Lot B, 11,819 square meters; and Lot C, 4,057 square meters. (Exhs. '4-B,' '4-C' and '4-D'). Only Lot C is not involved in this litigation. (See Pre-trial Order, supra)The established facts indicate that the eastern boundary of Lot No. 7511 was the Suague River based on the cadastral plan. For a period of more than 40 years (before 1940 to 1980) the Suague River overflowed its banks yearly and the property of the defendant gradually received deposits of soil from the effects of the current of the river. The consequent increase in the area of Lot No. 7511 due to alluvion or accretion was possessed by the defendants whose tenants plowed and planted the same with coin and tobacco.The quondam river bed had been filled by accretion through the years. The land is already plain and there is no indication on the ground of any abandoned river bed. The river bed is definitely no longer discernible now.What used to be the old river bed (Lot A) is in level with Lot No. 7511. So are the two other areas to the East. (Lots B and C) Lots A, B and C are still being cultivated.Under the law, accretion which the banks or rivers may gradually receive from the effects of the current of the waters becomes the property of the owners of the lands adjoining the banks. (Art. 366, Old Civil Code; Art. 457, New Civil Code which took

effect on August 30, 1950 [Lara v. Del Rosario, 94 Phil. 778]. Therefore, the accretion to Lot No. 7511 which consists of Lots A and B (see Exhs. 'C' and '4') belongs to the defendants (pp. 34-35, Record on Appeal).We find no cogent reason to disturb the foregoing finding and conclusion of the lower court.The second assignment of error is a mere offshoot of the first assignment of error and does not warrant further discussion (pp. 4244, Rollo).

The petition is without merit.The petitioners contend that the first issue raised during the trial of the case on the merits in the Court of First Instance, that is, "whether the change in the course of the Suague River was sudden as claimed by the plaintiffs or gradual as contended by the defendants," was abandoned and never raised by them in their appeal to the Court of Appeals. Hence, the Court of Appeals, in holding that the appeal is without merit, because of the change of the Suague River was gradual and not sudden, disposed of the appeal on an issue that was never raised and, accordingly, its decision is void. In support of its contention, petitioners cite the following authorities:

It is a well-known principle in procedure that courts of justice have no jurisdiction or power to decide a question not in issue (Lim Toco vs. Go Fay, 80 Phil. 166).A judgment going outside the issues and purporting to adjudicate something upon which the parties were not heard, is not merely irregular, but extra-judicial and invalid ( Salvante vs. Cruz, 88 Phil. 236-244; Lazo vs. Republic Surety & Insurance Co., Inc., 31 SCRA 329, 334).

The pivotal issue in the petitioners' appeal was whether the change in the course of the Suague River was gradual or sudden because the trial court below resolved the same in its decision thus subjecting the same to review by respondent appellate court. By simply abandoning this issue, the petitioners cannot hope that the affirmance of the decision wherein this issue was resolved makes the decision of the Court of Appeals void. In effect, the petitioners are expounding a new procedural theory that to render a questioned decision void, all that has to be done is to simply abandon on appeal the pivotal issue as resolved by the lower court and when its decision is affirmed on appeal, attack the decision of the appellate court as void on the principle that a court of justice

has no jurisdiction or power to decide the question not in issue. This is not correct. Even the authorities cited by the petitioners, more specifically the Salvante and Lazo cases, supra, do not support their contention. They were heard in the trial court and they cannot complain that the proceeding below was irregular and hence, invalid.The trial court found that the change in the course of the Suague River was gradual and this finding was affirmed by the respondent Court of Appeals. We do not find any valid reason to disturb this finding of fact.Article 457 of the New Civil Code (reproduced from Article 366 of the Old), the law applied by the courts a quoprovides:

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

Petitioners contend that this article must be read together with Sections 45 an 46 of Act No. 496 which provides:

SEC. 45. 1 The obtaining of a decree of registration and the entry of a certificate of title shall be regarded as an agreement running with the land, and binding upon the applicant and all successors in title that the land shall be and always remain registered land, and subject to the provisions of this Act and all Acts amendatory thereof.SEC. 46. 2 No title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession.

As a result, petitioners contend, Article 457 of the New Civil Code must be construed to limit the accretion mentioned therein as accretion of unregistered land to the riparian owner, and should not extend to registered land. Thus, the lot in question having remained the registered land of the petitioners, then the private respondents cannot acquire title there in derogation to that of the petitioners, by accretion, for that will defeat the indefeasibility of a Torrens Title.The rule that registration under the Torrens System does not protect the riparian owner against the diminution of the area of his registered land through gradual changes in the course of an adjoining stream is well settled. InPayatas Estate Improvement Co. vs. Tuason, 53 Phil. 55, We ruled:

The controversy in the present cases seems to be due to the erroneous conception that Art. 366 of the Civil Code does not apply to Torrens registered land. That article provides that "any

accretions which the banks of rivers may gradually receive from the effects of the current belong to the owners of the estates bordering thereon." Accretions of that character are natural incidents to land bordering on running streams and are not affected by the registration laws. It follows that registration does not protect the riparian owner against diminution of the area of his land through gradual changes in the course of the adjoining stream.

In C.N. Hodges vs. Garcia, 109 Phil. 133, We also ruled:It clearly appearing that the land in question has become part of defendant's estate as a result of accretion, it follows that said land now belongs to him. The fact that the accretion to his land used to pertain to plaintiffs estate, which is covered by a Torrens Certificate of Title, cannot preclude him (defendant) from being the owner thereof. Registration does not protect the riparian owner against the diminution of the area of his land through gradual changes in the course of the adjoining stream. Accretions which the banks of rivers may gradually receive from the effect of the current become the property of the owners of the banks (Art. 366 of the Old Civil Code; Art. 457 of the New). Such accretions are natural incidents to land bordering on running streams and the provisions of the Civil Code in that respect are not affected by the Registration Act.

We find no valid reason to review and abandon the aforecited rulings.As the private respondents are the owners of the premises in question, no damages are recoverable from them.ACCORDINGLY, the petition is DISMISSED for lack of merit without pronouncement as to costs.SO ORDERED.

SIMPLICIO BINALAY, PONCIANO GANNABAN, NICANOR MACUTAY, DOMINGO ROSALES, GREGORIO ARGONZA, EUSTAQUIO BAUA, FLORENTINO ROSALES, TEODORO MABBORANG, PATRICIO MABBORANG and FULGENCIO MORA, petitioners vs.GUILLERMO MANALO and COURT OF APPEALS, respondents.Josefin De Alban Law Office for Petitioners.FELICIANO, J.:The late Judge Taccad originally owned a parcel of land situated in Tumauini, Isabela having an estimated area of twenty (20) hectares. The western portion of this land bordering on the Cagayan River has an elevation lower than that of the eastern portion which borders on the national road. Through the years, the western portion would periodically go under the waters of the Cagayan River as those waters swelled with the coming of the rains. The submerged portion, however, would re-appear during the dry season from January to August. It would remain under water for the rest of the year, that is, from September to December during the rainy season.The ownership of the landholding eventually moved from one person to another. On 9 May 1959, respondent Guillermo Manalo acquired 8.65 hectares thereof from Faustina Taccad, daughter of Judge Juan Taccad. The land sold was described in the Deed of Absolute Sale 1 as follows:

. . . a parcel of agricultural land in Balug, Tumauini, Isabela, containing an area of 8.6500 hectares, more or less; bounded on the North by Francisco Forto on the East by National Road; on South by Julian Tumolva and on the West by Cagayan River; declared for taxation under Tax Declaration No. 12681 in the name of Faustina Taccad, and assessed at P 750.00. . . .

Later in 1964, respondent Manalo purchased another 1.80 hectares from Gregorio Taguba who had earlier acquired the same from Judge Juan Taccad. The second purchase brought the total acquisition of respondent Manalo to 10.45 hectares. The second piece of property was more particularly described as follows:

. . . a piece of agricultural land consisting of tobacco land, and containing an area of 18,000 square meters, more or less, bounded on the North by Balug Creek; on the South, by Faustina Taccad (now Guillermo R. Manalo); on the East, by a Provincial Road; and on the West, by Cagayan River assessed at P 440.00, as tax Declaration No. 3152. . . . 2

During the cadastral survey conducted at Balug, Tumauini, Isabela on 21 October 1969, the two (2) parcels of land belonging to respondent Manalo were surveyed and consolidated into one lot, designated as Lot No. 307, Pls-964. Lot 307 which contains 4.6489 hectares includes: (a) the whole of the 1.80 hectares acquired from Gregorio Taguba; and (b) 2.8489 hectares out of the 8.65 hectares purchased from Faustina Taccad. As the survey was conducted on a rainy month, a portion of the land bought from Faustina Taccad then under water was left unsurveyed and was not included in Lot 307.The Sketch Plan 3 submitted during the trial of this case and which was identified by respondent Manalo shows that the Cagayan River running from south to north, forks at a certain point to form two (2) branches—the western and the eastern branches—and then unites at the other end, further north, to form a narrow strip of land. The eastern branch of the river cuts through the land of respondent Manalo and is inundated with water only during the rainy season. The bed of the eastern branch is the submerged or the unsurveyed portion of the land belonging to respondent Manalo. For about eight (8) months of the year when the level of water at the point where the Cagayan River forks is at its ordinary depth, river water does not flow into the eastern branch. While this condition persists, the eastern bed is dry and is susceptible to cultivation.Considering that water flowed through the eastern branch of the Cagayan River when the cadastral survey was conducted, the elongated strip of land formed by the western and the eastern branches of the Cagayan River looked very much like an island. This strip of land was surveyed on 12 December 1969. 4

It was found to have a total area of 22.7209 hectares and was designated as Lot 821 and Lot 822. The area of Lot 822 is 10.8122 hectares while Lot 821 has an area of 11.9087 hectares. Lot 821 is located directly opposite Lot 307 and is separated from the latter only by the eastern branch of the Cagayan River during the rainy season and, during the dry season, by the exposed, dry river bed, being a portion of the land bought from Faustina Taccad. Respondent Manalo claims that Lot 821 also belongs to him by way of accretion to the submerged portion of the property to which it is adjacent.Petitioners who are in possession of Lot 821, upon the other hand, insist that they own Lot 821. They occupy the outer edges of Lot 821 along the river banks, i.e., the fertile portions on which they plant tobacco and other agricultural products. They also cultivate the western strip of the unsurveyed portion during summer. 5 This situation compelled respondent Manalo to file a case for forcible entry against petitioners on 20 May 1969. The case was

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dismissed by the Municipal Court of Tumauini, Isabela for failure of both parties to appear. On 15 December 1972, respondent Manalo again filed a case for forcible entry against petitioners. The latter case was similarly dismissed for lack of jurisdiction by the Municipal Court of Tumauini, Isabela.On 24 July 1974, respondent Manalo filed a complaints 6 before the then Court of First Instance of Isabela, Branch 3 for quieting of title, possession and damages against petitioners. He alleged ownership of the two (2) parcels of land he bought separately from Faustina Taccad and Gregorio Taguba for which reason he prayed that judgment be entered ordering petitioners to vacate the western strip of the unsurveyed portion. Respondent Manalo likewise prayed that judgment be entered declaring him as owner of Lot 821 on which he had laid his claim during the survey.Petitioners filed their answer denying the material allegations of the complaint. The case was then set for trial for failure of the parties to reach an amicable agreement or to enter into a stipulation of facts. 7 On 10 November 1982, the trial court rendered a decision with the following dispositive portion:

WHEREFORE, in the light of the foregoing premises, the Court renders judgment against the defendants and in favor of the plaintiff and orders:1. That plaintiff, Guillermo Manalo, is declared the lawful owner of the land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in paragraph 2-b of the Complaint;2. That the defendants are hereby ordered to vacate the premises of the land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in paragraph 2-b of the Complaint;3. That the defendants are being restrained from entering the premises of the land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more particularly described in paragraph 2-b of the Complaint; and4. That there is no pronouncement as to attorney's fees and costs.SO ORDERED. 8

Petitioners appealed to the Court of Appeals which, however, affirmed the decision of the trial court. They filed a motion for reconsideration, without success.While petitioners insist that Lot 821 is part of an island surrounded by the two (2) branches of the Cagayan River, the Court of Appeals found otherwise. The Court of Appeals concurred with the finding of the trial court that Lot 821 cannot be considered separate and distinct from Lot 307 since the eastern branch of the

Cagayan River substantially dries up for the most part of the year such that when this happens, Lot 821 becomes physically (i.e., by land) connected with the dried up bed owned by respondent Manalo. Both courts below in effect rejected the assertion of petitioners that the depression on the earth's surface which separates Lot 307 and Lot 821 is, during part of the year, the bed of the eastern branch of the Cagayan River.It is a familiar rule that the findings of facts of the trial court are entitled to great respect, and that they carry even more weight when affirmed by the Court of Appeals. 9 This is in recognition of the peculiar advantage on the part of the trial court of being able to observe first-hand the deportment of the witnesses while testifying. Jurisprudence is likewise settled that the Court of Appeals is the final arbiter of questions of fact. 10 But whether a conclusion drawn from such findings of facts is correct, is a question of law cognizable by this Court. 11

In the instant case, the conclusion reached by both courts below apparently collides with their findings that periodically at the onset of and during the rainy season, river water flows through the eastern bed of the Cagayan River. The trial court held:

The Court believes that the land in controversy is of the nature and character of alluvion (Accretion), for it appears that during the dry season, the body of water separating the same land in controversy (Lot No. 821, Pls-964) and the two (2) parcels of land which the plaintiff purchased from Gregorio Taguba and Justina Taccad Cayaba becomes a marshy land and is only six (6) inches deep and twelve (12) meters in width at its widest in the northern tip (Exhs. "W", "W-l", "W-2", "W-3" and "W-4"), It has been held by our Supreme Court that "the owner of the riparian land which receives the gradual deposits of alluvion, does not have to make an express act of possession. The law does not require it, and the deposit created by the current of the water becomes manifest" (Roxas vs. Tuazon, 6 Phil. 408). 12

The Court of Appeals adhered substantially to the conclusion reached by the trial court, thus:

As found by the trial court, the disputed property is not an island in the strict sense of the word since the eastern portion of the said property claimed by appellants to be part of the Cagayan River dries up during summer. Admittedly, it is the action of the heavy rains which comes during rainy season especially from September to November which increases the water level of the Cagayan river. As the river becomes








swollen due to heavy rains, the lower portion of the said strip of land located at its southernmost point would be inundated with water. This is where the water of the Cagayan river gains its entry. Consequently, if the water level is high the whole strip of land would be under water.

In Government of the Philippine Islands vs. Colegio de San Jose, it was held that —

According to the foregoing definition of the words "ordinary" and "extra-ordinary," the highest depth of the waters of Laguna de Bay during the dry season is the ordinary one, and the highest depth they attain during the extra-ordinary one (sic); inasmuch as the former is the one which is regular, common, natural, which occurs always or most of the time during the year, while the latter is uncommon, transcends the general rule, order and measure, and goes beyond that which is the ordinary depth. If according to the definition given by Article 74 of the Law of Waters quoted above, the natural bed or basin of the lakes is the ground covered by their waters when at their highest ordinary depth, the natural bed or basin of Laguna de Bay is the ground covered by its waters when at their highest depth during the dry season, that is up to the northeastern boundary of the two parcels of land in question.

We find the foregoing ruling to be analogous to the case at bar. The highest ordinary level of the waters of the Cagayan River is that attained during the dry season which is confined only on the west side of Lot [821] and Lot [822]. This is the natural Cagayan river itself. The small residual of water between Lot [821] and 307 is part of the small stream already in existence when the whole of the late Judge Juan Taccad's property was still susceptible to cultivation and uneroded. 13

The Court is unable to agree with the Court of Appeals that Government of the Philippine Islands vs. Colegio de San Jose 14 is applicable to the present case. That case involved Laguna de Bay; since Laguna de Bay is a lake, the Court applied the legal provisions governing the ownership and use of lakes and their beds and shores, in order to determine the character and ownership of the disputed property. Specifically, the Court applied the definition of the natural bed or basin of lakes found in Article 74 of the Law of Waters of 3 August 1866. Upon the other hand, what is involved in the instant case is the eastern bed of the Cagayan River.We believe and so hold that Article 70 of the Law of Waters of 3 August 1866 is the law applicable to the case at bar:

Art. 70. The natural bed or channel of a creek or river is the ground covered by its waters during the highest floods. (Emphasis supplied)

We note that Article 70 defines the natural bed or channel of a creek or river as the ground covered by its waters during the highest floods. The highest floods in the eastern branch of the Cagayan River occur with the annual coming of the rains as the river waters in their onward course cover the entire depressed portion. Though the eastern bed substantially dries up for the most part of the year (i.e., from January to August), we cannot ignore the periodical swelling of the waters ( i.e., from September to December) causing the eastern bed to be covered with flowing river waters.The conclusion of this Court that the depressed portion is a river bed rests upon evidence of record.1âwphi1 Firstly, respondent Manalo admitted in open court that the entire area he bought from Gregorio Taguba was included in Lot 307. 15 If the 1.80 hectares purchased from Gregorio Taguba was included in Lot 307, then the Cagayan River referred to as the western boundary in the Deed of Sale transferring the land from Gregorio Taguba to respondent Manalo as well as the Deed of Sale signed by Faustina Taccad, must refer to the dried up bed (during the dry months) or the eastern branch of the river (during the rainy months). In the Sketch Plan attached to the records of the case, Lot 307 is separated from the western branch of the Cagayan River by a large tract of land which includes not only Lot 821 but also what this Court characterizes as the eastern branch of the Cagayan River.Secondly, the pictures identified by respondent Manalo during his direct examination depict the depressed portion as a river bed. The pictures, marked as Exhibits "W" to "W-4", were taken in July 1973 or at a time when the eastern bed becomes visible. 16 Thus, Exhibit "W-2" which according to respondent Manalo was taken facing the east and Exhibit "W-3" which was taken facing the west both show that the visible, dried up portion has a markedly lower elevation than Lot 307 and Lot 821. It has dike-like slopes on both sides connecting it to Lot 307 and Lot 821 that are vertical upward and very prominent. This topographic feature is compatible with the fact that a huge volume of water passes through the eastern bed regularly during the rainy season. In addition, petitioner Ponciano Gannaban testified that one had to go down what he called a "cliff" from the surveyed portion of the land of respondent Manalo to the depressed portion. The cliff, as related by petitioner Gannaban, has a height of eight (8) meters. 17






The records do not show when the Cagayan River began to carve its eastern channel on the surface of the earth. However, Exhibit "E" 18 for the prosecution which was the Declaration of Real Property standing in the name of Faustina Taccad indicates that the eastern bed already existed even before the sale to respondent Manalo. The words "old bed" enclosed in parentheses—perhaps written to make legitimate the claim of private ownership over the submerged portion—is an implied admission of the existence of the river bed. In the Declaration of Real Property made by respondent Manalo, the depressed portion assumed the name Rio Muerte de Cagayan. Indeed, the steep dike-like slopes on either side of the eastern bed could have been formed only after a prolonged period of time.Now, then, pursuant to Article 420 of the Civil Code, respondent Manalo did not acquire private ownership of the bed of the eastern branch of the river even if it was included in the deeds of absolute sale executed by Gregorio Taguba and Faustina Taccad in his favor. These vendors could not have validly sold land that constituted property of public dominion. Article 420 of the Civil Code states:

The following things are property of public dominion:(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)

Although Article 420 speaks only of rivers and banks, "rivers" is a composite term which includes: (1) the running waters, (2) the bed, and (3) the banks. 19 Manresa, in commenting upon Article 339 of the Spanish Civil Code of 1889 from which Article 420 of the Philippine Civil Code was taken, stressed the public ownership of river beds:

La naturaleza especial de los rios, en punto a su disfrute general, hace que sea necesario considerar en su relacion de dominio algo mas que sus aguas corrientes. En efecto en todo rio es preciso distinguir 1. esta agua corriente; 2. el alveo o cauce, y 3. las riberas. Ahora bien: son estas dos ultimas cosas siempre de dominio publico, como las aguas?Realmente no puede imaginarse un rio sin alveo y sin ribera; de suerte que al decir el Codigo civil que los rios son de dominio publico, parece que debe ir implicito el dominio publico de aquellos tres elementos que integran el rio. Por otra parte, en cuanto a los alveos o cauces tenemos

la declaracion del art. 407, num 1, donde dice: son de dominion publico . . . los rios y sus cauces naturales; declaracion que concuerda con lo que dispone el art. 34 de la ley de [Aguas], segun el cual, son de dominion publico: 1. los alveos o cauces de los arroyos que no se hallen comprendidos en el art. 33, y 2. los alveos o cauces naturales de los riosen la extension que cubran sus aguas en las mayores crecidas ordinarias. 20 (Emphasis supplied)

The claim of ownership of respondent Manalo over the submerged portion is bereft of basis even if it were alleged and proved that the Cagayan River first began to encroach on his property after the purchase from Gregorio Taguba and Faustina Taccad. Article 462 of the Civil Code would then apply divesting, by operation of law, respondent Manalo of private ownership over the new river bed. The intrusion of the eastern branch of the Cagayan River into his landholding obviously prejudiced respondent Manalo but this is a common occurrence since estates bordering on rivers are exposed to floods and other evils produced by the destructive force of the waters. That loss is compensated by, inter alia, the right of accretion acknowledged by Article 457 of the Civil Code. 21 It so happened that instead of increasing the size of Lot 307, the eastern branch of the Cagayan River had carved a channel on it.We turn next to the issue of accretion. After examining the records of the case, the Court considers that there was no evidence to prove that Lot 821 is an increment to Lot 307 and the bed of the eastern branch of the river. Accretion as a mode of acquiring property under Article 457 of the Civil Code requires the concurrence of three (3) requisites: (a) that the deposition of soil or sediment be gradual and imperceptible; (b) that it be the result of the action of the waters of the river (or sea); and (c) that the land where accretion takes place is adjacent to the banks of rivers (or the sea coast). 22 The Court notes that the parcels of land bought by respondent Manalo border on the eastern branch of the Cagayan River. Any accretion formed by this eastern branch which respondent Manalo may claim must be deposited on or attached to Lot 307. As it is, the claimed accretion (Lot 821) lies on the bank of the river not adjacent to Lot 307 but directly opposite Lot 307 across the river.Assuming (arguendo only) that the Cagayan River referred to in the Deeds of Sale transferring ownership of the land to respondent Manalo is the western branch, the decision of the Court of Appeals and of the trial court are bare of factual findings to the effect that the land purchased by respondent Manalo received alluvium from the action of the aver in a slow and gradual manner. On






the contrary, the decision of the lower court made mention of several floods that caused the land to reappear making it susceptible to cultivation. A sudden and forceful action like that of flooding is hardly the alluvial process contemplated under Article 457 of the Civil Code. It is the slow and hardly perceptible accumulation of soil deposits that the law grants to the riparian owner.Besides, it is important to note that Lot 821 has an area of 11.91 hectares. Lot 821 is the northern portion of the strip of land having a total area of 22.72 hectares. We find it difficult to suppose that such a sizable area as Lot 821 resulted from slow accretion to another lot of almost equal size. The total landholding purchased by respondent Manalo is 10.45 hectares (8.65 hectares from Faustina Taccad and 1.80 hectares from Gregorio Taguba in 1959 and 1964, respectively), in fact even smaller than Lot 821 which he claims by way of accretion. The cadastral survey showing that Lot 821 has an area of 11.91 hectares was conducted in 1969. If respondent Manalo's contention were accepted, it would mean that in a span of only ten (10) years, he had more than doubled his landholding by what the Court of Appeals and the trial court considered as accretion. As already noted, there are steep vertical dike-like slopes separating the depressed portion or river bed and Lot 821 and Lot 307. This topography of the land, among other things, precludes a reasonable conclusion that Lot 821 is an increment to the depressed portion by reason of the slow and constant action of the waters of either the western or the eastern branches of the Cagayan River.We turn finally to the issue of ownership of Lot 821. Respondent Manalo's claim over Lot 821 rests on accretion coupled with alleged prior possession. He alleged that the parcels of land he bought separately from Gregorio Taguba and Faustina Taccad were formerly owned by Judge Juan Taccad who was in possession thereof through his (Judge Taccad's) tenants. When ownership was transferred to him, respondent Manalo took over the cultivation of the property and had it declared for taxation purposes in his name. When petitioners forcibly entered into his property, he twice instituted the appropriate action before the Municipal Trial Court of Tumauini, Isabela. Against respondent Manalo's allegation of prior possession, petitioners presented tax declarations standing in their respective names. They claimed lawful, peaceful and adverse possession of Lot 821 since 1955.If respondent Manalo had proved prior possession, it was limited physically to Lot 307 and the depressed portion or the eastern river bed. The testimony of

Dominga Malana who was a tenant for Justina Taccad did not indicate that she was also cultivating Lot 821. In fact, the complaints for forcible entry lodged before the Municipal Trial Court of Tumauini, Isabela pertained only to Lot 307 and the depressed portion or river bed and not to Lot 821. In the same manner, the tax declarations presented by petitioners conflict with those of respondent Manalo. Under Article 477 of the Civil Code, the plaintiff in an action for quieting of title must at least have equitable title to or interest in the real property which is the subject matter of the action. The evidence of record on this point is less than satisfactory and the Court feels compelled to refrain from determining the ownership and possession of Lot 821, adjudging neither petitioners nor respondent Manalo as owner(s) thereof.WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-GR CV No. 04892 are hereby SET ASIDE. Respondent Manalo is hereby declared the owner of Lot 307. The regularly submerged portion or the eastern bed of the Cagayan River is hereby DECLARED to be property of public dominion. The ownership of Lot 821 shall be determined in an appropriate action that may be instituted by the interested parties inter se. No pronouncement as to costs.SO ORDERED.

ROSENDO BALUCANAG, Petitioner, vs. HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, Respondents.

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.chanroblesvirtualawlibrarychanrobles virtual law library

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 2140.00, 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 shag see fit. All such buildings and improvements shall remain the property of the lessee and he may remove them at any nine, 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.chanroblesvirtualawlibrarychanrobles virtual law library

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

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, orchanrobles virtual law library

[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 Attomey's fees which is considered reasonable within the premises.

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.chanroblesvirtualawlibrarychanrobles virtual law library

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

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 shan 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.chanroblesvirtualawlibrarychanrobles virtual law library

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. ..."chanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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 reconduccion 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 entities petitioner to recover possession of the premises.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.

THE MUNICIPALITY OF OAS,Plaintiff-Appellee, vs. BARTOLOME ROA,Defendant-Appellant.

Del-Pan, Ortigas and Fisher, for appellant. Enrique Llopiz for appellee.

WILLARD, J.:

The plaintiff brought this action for the recovery of a tract of land in the pueblo of Oas, claiming that it was a part of the public square of said town. The defendant in his answer alleged that he was the owner of the property. Judgment was rendered in favor of the plaintiff and the defendant has brought the case here by bill of exceptions.chanroblesvirtualawlibrary chanrobles virtual law library

As we look at the case, the only question involved is one of fact. Was the property in question a part of the public square of the town of Oas? The testimony upon this point in favor of the plaintiff consisted of statements made by witnesses to the effect that this land had always been a part of the public square, and of certain resolutions adopted by the principalia of the pueblo reciting the same fact, the most important of these being the minutes of the meeting of the 27th of February, 1892. In that document it is expressly stated that this land was bought in 1832 by the then parish priest for the benefit of the pueblo. It recites various proceedings taken thereafter in connection with this ownership, including among them an order of the corregidor of Nueva Caceres prohibiting the erection of houses upon the land by reason of the fact above recited - namely, that the land belonged to the pueblo. This resolution terminated with an order to the occupant of the building then standing upon the property that he should not repair it. The defendant signed this resolution.chanroblesvirtualawlibrary chanrobles virtual law library

It further appears that the same building was almost entirely destroyed by a baguio on the 13th and 14th of May, 1893, and that the authorities of the puebo ordered the complete demolition thereof. The resolution of the 31st of May, 1893, declared that the then owner of the building, Jose Castillo, had no right to reconstruct it because it was situated upon land which did not belong to him. This resolution was also signed by the defendant.chanroblesvirtualawlibrary chanrobles virtual law library

The evidence on the part of the defendant tends to show that in 1876 Juana Ricarte and Juana Riquiza sold the land in question to Juan Roco, and that on the 17th day of December, 1894, Jose Castillo sold it to the defendant. No deed of conveyance from Juan Roco to Jose Castillo was presented in evidence, but Castillo, testifying as a witness, said that he had bought the property by verbal contract from Roco, his father-in-law. The defendant, after his purchase in 1894, procured a possessory of information which was allowed by an order of the justice of the peace of Oas on the 19th day of January, 1895, and recorded in the Registry of Property on the 28th of March of the same year.chanroblesvirtualawlibrary chanrobles virtual law library

In this state of the evidence, we can not say that the proof is plainly and manifestly against the decision of the court below. Unless it is so, the finding of fact made by that court can not be reversed. (De la Rama vs. De la Rama, 201 U. S., 303.) chanrobles virtual law library

The two statements signed by Roa, one in 1892 and the other in 1893, are competent evidence against him. They are admissions by him to the effect that at that time the pueblo was the owner of the property in question. They are, of course, not conclusive against him. He was entitled to, and did present evidence to overcome the effect of these admissions. The evidence does not make out a case of estoppel against him. (sec. 333, par. 1, Code of Civil Procedure.) chanrobles virtual law library

The admissibility of these statements made by Roa do not rest upon section 278 of the Code of Civil Procedure, which relates to declarations or admissions made by persons not a party to the suit, but it rests upon the principle that when the defendant in a suit has himself made an admission of any fact pertinent to issue

involved, it can be received against him.chanroblesvirtualawlibrary chanrobles virtual law library

This action was commenced on the 17th of December, 1902. There is no evidence of any adverse occupation of this land for thirty years, consequently the extraordinary period of prescription does not apply. The defendant can not rely upon the ordinary period of prescription of ten years because he was not a holder in good faith. He knew at that time of his purchase in 1894, and had so stated in writing, that the pueblo was the owner of the property. So that, even if the statute of limitations ran against a municipality in reference to a public square, it could not avail the defendant in this case.chanroblesvirtualawlibrary chanrobles virtual law library

It appears that Roa has constructed upon the property, and that there now stands thereon, a substantial building. As early as 1852 this land had been used by the municipality constructed thereon buildings for the storage of property of the State, quarters for the cuadrilleros, and others of a like character. It therefore had ceased to be property used by the public and had become a part of the bienes patrimoniales of the pueblo. (Civil Code, arts. 341, 344.) To the case are applicable those provisions of the Civil Code which relate to the construction by one person of a building upon land belonging to another. Article 364 of the Civil Code is as follows:

Where there has been bad faith, not only on the part of the person who built, sowed, or planted on another's land, but also on the part of the owner of the latter, the rights of both shall be the same as if they had acted in good faith.chanroblesvirtualawlibrary chanrobles virtual law library

Bad faith on the part of the owner is understood whenever the act has been executed in his presence with his knowledge and tolerance and without objection.

The defendant constructed the building in bad faith for, as we have said, he had knowledge of the fact that his grantor was not the owner thereof. There was a bad faith also on the part of the plaintiff in accordance with the express provisions of article 364 since it allowed Roa to construct the building without any opposition on its part and to so occupy it for eight years. The rights of the

parties must, therefore, be determined as if they both had acted in good faith. Their rights in such cases are governed by article 361 of the Civil Code, which is as follows:

The owner of the land on which the building, sowing, or planting is done in good faith shall have a right to appropriate as his own the work, sowing, or planting after the indemnity mentioned in articles 453 and 454, or, to oblige the person who has built or planted, to pay him the value of the land and to force the person who sowed to pay the proper rent.

The judgment of the court below is so modified as to declare that the plaintiff is the owner of the land and that it has the option of buying the building thereon, which is the property of the defendant, or of selling to him the land on which it stands. The plaintiff is entitled to recover the costs of both instances.chanroblesvirtualawlibrary chanrobles virtual law library

After the expiration of twenty days let judgment be entered in accordance herewith and at the proper time thereafter let the record be remanded to the court below for proper action. So ordered.chanroblesvirtual

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), Petitioner, v.COURT OF APPEALS, HON. PERCIVAL LOPEZ, AYALA CORPORATION and AYALA LAND, INC., Respondents.

G.R. No. 128520. October 7, 1998

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, Petitioner, v. HON. PERCIVAL MANDAP LOPEZ, CAPITOL HILLS GOLF AND COUNTRY CLUB INC., SILHOUETTE TRADING CORPORATION, and PABLO ROMAN JR., Respondents.

D E C I S I O N

MARTINEZ, J.:

These are consolidated petitions for review emanating from Civil Case No. Q-93-15266 of the Regional Trial Court of Quezon City, Branch 78, entitled "Metropolitan Waterworks and Sewerage System (hereafter MWSS) vs. Capitol Hills Golf & Country Club Inc. (hereafter, CHGCCI), STC (hereafter, SILHOUETTE), Ayala Corporation, Ayala Land, Inc.(hereafter AYALA) Pablo Roman, Jr., Josefino Cenizal, Jose A. Roxas, Jesus Hipolito, Alfredo Juinio, National Treasurer of the Philippines and the Register of Deeds of Quezon City."

From the voluminous pleadings and other documents submitted by the parties and their divergent styles in the presentation of the facts, the basic antecedents attendant herein are as follows:

Sometime in 1965, petitioner MWSS (then known as NAWASA) leased around one hundred twenty eight (128) hectares of its land (hereafter, subject property) to respondent CHGCCI (formerly the International Sports Development Corporation) for twenty five (25) years and renewable for another fifteen (15) years or until the year 2005, with the stipulation allowing the latter to exercise a

right of first refusal should the subject property be made open for sale. The terms and conditions of respondent CHGCCI's purchase thereof shall nonetheless be subject to presidential approval.

Pursuant to Letter of Instruction (LOI) No. 440 issued on July 29, 1976 by then President Ferdinand E. Marcos directing petitioner MWSS to negotiate the cancellation of the MWSS-CHGCCI lease agreement for the disposition of the subject property, Oscar Ilustre, then General Manager of petitioner MWSS, sometime in November of 1980 informed respondent CHGCCI, through its president herein respondent Pablo Roman, Jr., of its preferential right to buy the subject property which was up for sale. Valuadation thereof was to be made by an appraisal company of petitioner MWSS'choice, the Asian Appraisal Co., Inc. which, on January 30, 1981, pegged a fair market value of P40.00 per square meter or a total of P53,800,000.00 for the subject property.

Upon being informed that petitioner MWSS and respondent CHGCCI had already agreed in principle on the purchase of the subject property, President Marcos expressed his approval of the sale as shown in his marginal note on the letter sent by respondents Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.

The Board of Trustees of petitioner MWSS thereafter passed Resolution 36-83, approving the sale of the subject property in favor of respondent SILHOUETTE, as assignee of respondent CHGCCI, at the appraised value given by Asian Appraisal Co., Inc. Said Board Resolution reads:

"NOW, THEREFORE, BE IT RESOLVED, as it is hereby resolved, that in accordance with Section 3, Par. (g) of the MWSS Charter and subject to the approval of the President of the Philippines, the sale of a parcel of land located in Balara, Quezon City, covered by TCT No. 36069 of the Registry of Deeds of Quezon City, containing an area of ONE HUNDRED TWENTY SEVEN (127.313) hectares more or less, which is the remaining portion of the area under lease after segregating a BUFFER ZONE already surveyed along the undeveloped area near the treatment plant and the developed portion of the CHGCCI golf course, to SILHOUETTE TRADING CORPORATION as Assignee of Capitol Hills Golf & Country Club, Inc., at FORTY (P40.00) PESOS per square meter, be and is hereby approved.

"BE IT RESOLVED FURTHER, that the General Manager be authorized, as he is hereby authorized to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative thereto."

The MWSS-SILHOUETTE sales agreement eventually pushed through. Per the Agreement dated May 11, 1983 covering said purchase, the total price for the subject property isP50,925,200, P25 Million of which was to be paid upon President Marcos' approval of the contract and the balance to be paid within one (1) year from the transfer of the title to respondent SILHOUETTE as vendee with interest at 12% per annum. The balance was also secured by an irrevocable letter of credit. A Supplemental Agreement was forged between petitioner MWSS and respondent SILHOUETTE on August 11, 1983 to accurately identify the subject property.

Subsequently, respondent SILHOUETTE, under a deed of sale dated July 26, 1984, sold to respondent AYALA about sixty-seven (67) hectares of the subject property at P110.00 per square meter. Of the total price of around P74 Million, P25 Million was to be paid by respondent AYALA directly to petitioner MWSS for respondent SILHOUETTE's account andP2 Million directly to respondent SILHOUETTE. P11,600,000 was to be paid upon the issuance of title in favor of respondent AYALA, and the remaining balance to be payable within one (1) year with 12% per annum interest.

Respondent AYALA developed the land it purchased into a prime residential area now known as the Ayala Heights Subdivision.

Almost a decade later, petitioner MWSS on March 26, 1993 filed an action against all herein named respondents before the Regional Trial Court of Quezon City seeking for the declaration of nullity of the MWSS-SILHOUETTE sales agreement and all subsequent conveyances involving the subject property, and for the recovery thereof with damages.

Respondent AYALA filed its answer pleading the affirmative defenses of (1) prescription, (2) laches, (3) waiver/estoppel/ratification, (4) no cause of action, (5) non-joinder of indispensable parties, and (6) non-jurisdiction of the court for non-specification of amount of damages sought.

On June 10, 1993; the trial court issued an Order dismissing the complaint of petitioner MWSS on grounds of prescription, laches, estoppel and non-joinder of indispensable parties.

Petitioner MWSS's motion for reconsideration of such Order was denied, forcing it to seek relief from the respondent Court where its appeal was docketed as CA-G.R. CV No. 50654. It assigned as errors the following:

"I. The court a quo committed manifest serious error and gravely abused its discretion when it ruled that plaintiff's cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment.

II. The lower court erred and exceeded its jurisdiction when, contrary to the rules of court and jurisprudence, it treated and considered the affirmative defenses of Ayalas - defenses not categorized by the rules as grounds for a motion to dismiss - as grounds of a motion to dismiss which justify the dismissal of the complaint.

III. The lower court abused its discretion and exceeded its jurisdiction when it favorably acted on Ayala's motion for preliminary hearing of affirmative defenses (motion to dismiss) by dismissing the complaint without conducting a hearing or otherwise requiring the Ayalas to present evidence on the factual moorings of their motion.

IV. The lower court acted without jurisdiction and committed manifest error when it resolved factual issues and made findings and conclusions of facts all in favor of the Ayalas in the absence of any evidence presented by the parties.

V. The court a quo erred when, contrary to the rules and jurisprudence, it prematurely ruled that laches and estoppel bar the complaint as against Ayalas or that otherwise the alleged failure to implead indispensable parties dictates the dismissal of the complaint."

In the meantime, respondents CHGCCI and Roman filed their own motions to hear their affirmative defenses which were identical to those adduced by respondent AYALA. For its part, respondent SILHOUETTE filed a similarly grounded motion to dismiss.

Ruling upon these motions, the trial court issued an order dated December 13, 1993 denying all of them. The motions for reconsideration of the respondents concerned met a similar fate in the May 9, 1994 Order of the trial court. They thus filed special civil actions for certiorari before the respondent Court which were docketed as CA-G.R. SP Nos. 34605, 34718 and 35065 and thereafter consolidated with CA-G.R. CV No. 50694 for disposition.

Respondent court, on August 19, 1996, rendered the assailed decision, the dispositive portion of which reads:

"WHEREFORE, judgment is rendered:

1.) DENYING the petitions for writ of certiorari for lack of merit; and

2.) AFFIRMING the order of the lower court dismissing the complaint against the appellees Ayalas.

"SO ORDERED."

Petitioner MWSS appealed to this Court that portion of the respondent Court's decision affirming the trial court's dismissal of its complaint against respondent AYALA, docketed as G.R. No. 126000. The portion dismissing the petition for certiorari (CA-GR Nos. 34605, 347718 and 35065) of respondents Roman, CHGCCI and SILHOUETTE, however, became final and executory for their failure to appeal therefrom. Nonetheless, these respondents were able to thereafter file before the trial court another motion to dismiss grounded, again, on prescription which the trial court in an Order of October 1996 granted.

This prompted petitioner MWSS to file another petition for review of said trial court Order before this Court and docketed as G.R. No. 128520. On motion of

petitioner MWSS, this Court in a Resolution dated December 3, 1997 directed the consolidation of G.R. Nos. 126000 and 128520.

The errors assigned by petitioner MWSS in CA-GR No. 126000 are:

I

In holding, per the questioned Decision dated 19 August 1996, that plaintiffs cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment and in effect affirming the dismissal by the respondent judge of the complaint against respondent Ayalas. This conclusion of respondent CH is, with due respect, manifestly mistaken and legally absurd.

II

In failing to consider that the complaint recited six alternative causes of action, such that the insufficiency of one cause - assuming there is such insufficiency - does not render insufficient the other causes and the complaint itself. The contrary ruling in this regard by respondent CA is founded entirely on speculation and conjecture and is constitutive of grave abuse of discretion.

In G.R. No. 128520, petitioner MWSS avers that:

I

The court of origin erred in belatedly granting respondent's motions to dismiss which are but a rehash, a disqualification, of their earlier motion for preliminary hearing of affirmative defense / motion to dismiss. These previous motions were denied by the lower court, which denial the respondents raised to the Court of Appeals by way of perfection for certiorari, which petitions in turn were dismissed for lack of merit by the latter court. The correctness and validity of the lower court's previous orders denying movant's motion for preliminary hearing of affirmative

defense/motion to dismiss has accordingly been settled already with finality and cannot be disturbed or challenged anew at this instance of defendant's new but similarly anchored motions to dismiss, without committing procedural heresy causative of miscarriage of justice.

II

The lower court erred in not implementing correctly the decision of the Court of Appeal. After all, respondents' own petitions for certiorari questioning the earlier denial of their motion for preliminary hearing of affirmative defense / motion to dismiss were dismissed by the Court of Appeal, in the process of affirming the validity and legality of such denial by the court a quo. The dismissal of the respondents' petitions are embodied in the dispositive portion of the said decision of the Court of Appeals dated 19 August 1996. The lower court cannot choose to disregard such decretal aspect of the decision and instead implement an obiter dictum.

III.

That part of the decision of the decision of the Court of Appeals resolving the issue of prescription attendant to the appeal of plaintiff against the Ayalas, has been appealed by plaintiff to the Supreme Court by way of a petition for review oncertiorari. Not yet being final and executory, the lower court erred in making capital out of the same to dismiss the case against the other defendants, who are the respondents herein.

IV.

The lower court erred in holding, per the questioned orders, that plaintiff's cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment. This conclusion of public respondent is manifestly mistaken and legally absurd.

V.

The court a quo erred in failing to consider the complaint recites six alternative causes of action, such that the insufficiency of one cause - assuming there is such insufficiency - does not render insufficient the other cause and the complaint itself. The contrary ruling in this regard by public respondent is founded entirely on speculation and conjecture and is constitutive of grave abuse of discretion.

In disposing of the instant petition, this Court shall dwell on the more crucial upon which the trial court and respondent based their respective rulings unfavorable to petitioner MWSS; i.e., prescription, laches, estoppel/ratification and non-joinder of indispensable parties.

RE: Prescription

Petitioner MWSS claims as erroneous both the lower courts' uniform finding that the action has prescribed, arguing that its complaint is one to declare the MWSS-SILHOUETTE sale, and all subsequent conveyances of the subject property, void which is imprescriptible.

We disagree.

The very allegations in petitioner MWSS' complaint show that the subject property was sold through contracts which, at most, can be considered only as voidable, and not void. Paragraph 12 of the complaint reads in part:

"12. xxx.

The plaintiff has been in continuous, peaceful and public possession and ownership of the afore-described properties, the title (TCT No. [36069] 199170) thereto, including its derivative titles TCT Nos. 213872 and 307655, having been duly issued in its name. However, as a result of fraudulent and illegal acts of herein defendants, as described in the paragraphs hereinafter following, the original of said title/s were cancelled and in lieu thereof new titles were issued to corporate defendant/s covering subject 127.9271 hectares. xxx."

Paragraph 34 alleges:

"34. Sometime thereafter, clearly influenced by the premature if not questionable approval by Mr. Marcos of a non-existent agreement, and despite full knowledge that both the assessed and market value of subject property were much much higher, the MWSS Board of Trusties illegally passed an undated resolution ( 'Resolution No. 36-83' ), approving the 'sale' of the property to CHGCCI at P40/sq.m. and illegally authorizing General Manager Ilustre to sign the covering contract.

This 'resolution' was signed by Messrs. Jesus Hipolito as Chairman; Oscar Ilustre, as Vice Chairman; Aflredo Junio, as Member; and Silvestre Payoyo, as Member; xxx"

Paragraph 53 states:

" 53. Defendants Pablo Roman, Jr., Josefino Cenizal, and Jose Roxas as well as defendant corporations (CHGCCI, STC and Ayala) who acted through the former and their other principal officers, knowingly inducedand caused then President Marcos and the former officers of plaintiff MWSS to enter into the aforesaid undated 'Agreement' which are manifestly and grossly disadvantageous to the government and which gave the same defendants unwarranted benefits, i.e., the ownership and dominion of the afore-described property of plaintiff."

Paragraph 54 avers:

"54. Defendants Jesus Hipolito and Alfredo Junio, then public officers, together with the other public officers who are now deceased (Ferdinand Marcos, Oscar liustre, and Sivestre Payoyo) knowingly allowed themselves to be persuaded, induced and influenced to approve and/or enter into the aforementioned 'Agreements' which are grossly and manifestly disadvantageous to the MWSS/government and which bestowed upon the other defendants the unwarranted benefit/ownership of subject property."

The three elements of a contract - consent, the object, and the cause of obligation11 are all present. It cannot be otherwise argued that the contract had for its object the sale of the property and the cause or consideration thereof was the price to be paid (on the part of respondents CHGCCI/SILHOUETTE) and the

land to be sold (on the part of petitioner MWSS). Likewise, petitioner MWSS' consent to the May 11, 1983 and August 11, 1983 Agreements is patent on the face of these documents and on its own resolution No. 36-83.

As noted by both lower courts, petitioner MWSS admits that it consented to the sale of the property, with the qualification that such consent was allegedly unduly influenced by the President Marcos. Taking such allegation to be hypothetically true, such would have resulted in only voidable contracts because all three elements of a contract, still obtained nonetheless. The alleged vitiation of MWSS' consent did not make the sale null and void ab initio. Thus, "a contract where consent is given through mistake, violence, intimidation, undue influence or fraud, is voidable."2 Contracts "where consent is vitiated by mistake, violence, intimidation, undue influence or fraud" are voidable or annullable.3These are not void as -

"Concepts of Voidable Contracts. - Voidable or anullable contracts are existent, valid, and binding, although they can be annulled because of want of capacity or vitiated consent of the one of the parties, but before annulment, they are effective and obligatory between parties. Hence, it is valid until it is set aside and its validity may be assailed only in an action for that purpose. They can be confirmed or ratified."4

As the contracts were voidable at the most, the four year prescriptive period under Art. 1391 of the New Civil Code will apply. This article provides that the prescriptive period shall begin in the cases of intimidation, violence or undue influence, from the time the defect of the consent ceases", and "in case of mistake or fraud, from the time of the discovery of the same time".

Hypothetically admitting that President Marcos unduly influenced the sale, the prescriptive period to annul the same would have begun on February 26, 1986 which this Court takes judicial notice of as the date President Marcos was deposed. Prescription would have set in by February 26, 1990 or more than three years before petitioner MWSS' complaint was filed.

However, if petitioner MWSS' consent was vitiated by fraud, then the prescriptive period commenced upon discovery. Discovery commenced from the date of the execution of the sale documents as petitioner was party thereto. At

http://www.chanrobles.com/scdecisions/jurisprudence1998/oct1998/126000.php#_edn4




the least, discovery is deemed to have taken place on the date of registration of the deeds with the register of Deeds as registration is constructive notice to the world.5 Given these two principles on discovery, the prescriptive period commenced in 1983 as petitioner MWSS actually knew of the sale, or, in 1984 when the agreements were registered and titles thereafter were issued to respondent SILHOUETTE. At the latest, the action would have prescribed by 1988, or about five years before the complaint was instituted. Thus, in Aznar vs. Bernard6, this Court held that:

"Lastly, even assuming that the petitioners had indeed failed to raise the affirmative defense of prescription in a motion to dismiss or in an appropriate pleading (answer, or amended or supplemental answer) and an amendment would no longer be feasible, still prescription, if apparent on the face of the complaint, may be favorably considered. In the case at bar, the private respondents admit in their complaint that the contract or real estate mortgage which they alleged to be fraudulent and which had been foreclosed, giving rise to this controversy with the petitioners, was executed on July 17, 1978, or more than eight long years before the commencement of the suit in the court a quo, on September 15, 1986. And an action declare a contract null and void on the ground of fraud must be instituted within four years. Extinctive prescription is thus apparent on the face of the complaint itself as resolved by the Court."

Petitioner MWSS further contends that prescription does not apply as its complaint prayed not for the nullification of voidable contracts but for the declaration of nullity of void ab initio contracts which are imprescriptible. This is incorrect, as the prayers in a complaint are not determinative of what legal principles will operate based on the factual allegations of the complaint. And these factual allegations, assuming their truth, show that MWSS consented to the sale, only that such consent was purportedly vitiated by undue influence or fraud. Therefore, the rules on prescription will operate. Even if petitioner MWSS asked for the declaration of nullity of these contracts, the prayers will not be controlling as only the factual allegations in the complaint determine relief. "(I)t is the material allegations of fact in the complaint, not the legal conclusion made therein or the prayer that determines the relief to which the plaintiff is entitled"7. Respondent court is thus correct in holding that:

"xxx xxx xxx

The totality then of those allegations in the complaint makes up a case of a voidable contract of sale - not a void one. The determinative allegations are those that point out that the consent of MWSS in the Agreement of Sale was vitiated either by fraud or undue for the declaration of nullity of the said contract because the Complaint says no. Basic is the rule however that it is the body and not the caption nor the prayer of the Complaint that determines the nature of the action. True, the caption and prayer of the Complaint state that the action is for a judicial declaration of nullity of a contract, but alas, as already pointed out, its body unmistakably alleges only a voidable contract. One cannot change the real nature of an action adopting a different nomenclature any more than one can change gin into whisky by just replacing the label on the bottle with that of the latter's and calling it whisky. No matter what, the liquid inside remains gin.

xxx xxx xxx."

Petitioner MWSS also theorizes that the May 11, 1983 MWSS-SILHOUETTE Agreement and the August 11, 1983 Supplemental Agreement were void ab initio because the "initial agreement" from which these agreements emanated was executed "without the knowledge, much less the approval" of petitioner MWSS through its Board of Trustees. The "initial agreement" referred to in petitioner MWSS' argument is the December 20, 1982 letter of respondents Roxas and Roman, Jr. to President Marcos where the authors mentioned that they had reached an agreement with petitioner's then general manager, Mr. Oscar Ilustre. Petitioner MWSS maintains that Mr. Ilustre was not authorized to enter into such "initial agreement", contrary to Art. 1874 of the New Civil Code which provides that "when a sale of a parcel of land or any interest therein is through an agent, the authority of the latter shall be in writing otherwise the sale shall be void." It then concludes that since its Res. No. 36-83 and the May 11, 1983 and August 11, 1983 Agreements are "fruits" of the "initial agreement" (for which Mr. Ilustre was allegedly not authorized in writing), all of these would have been also void under Art. 1422 of NCC, which provides that a contract which is the direct result of a pronounced illegal contract, is also void and inexistent."

The argument does not impress. The "initial agreement" reflected in the December 20, 1982 letter of respondent Roman to Pres. Marcos, is not a sale




under Art. 1874. Since the nature of the "initial agreement" is crucial, we quote8 the letter in full:

"We respectfully approach Your Excellency in all humility and in the spirit of the Yuletide Season. We have explained to Your Excellency when you allowed us the honor to see you, that the negotiations with MWSS which the late Pablo R. Roman initiated way back in 1975, with your kind approval, will finally be concluded.

We have agreed in principle with Mr. Oscar llustre on the terms of the sale as evidenced by the following:

1 . Our written agreement to hire Asian Appraisal Company to appraise the entire leased area which would then be the basis for the negotiations of the purchase price of the property; and

2. Our exchange of communications wherein MWSS made a counter-offer and our acceptance of the counter-offer.

However, we were informed by Mr. Ilustre that only written instruction from Your Excellency will allow us to finally sign the Agreement.

In sum, our Agreement is for the purchase price of FIFTY-SEVEN MILLION TWO-HUNDRED-FORTY THOUSAND PESOS (P 57,240,000) for the entire leased area of 135 hectares; TWENTY-SEVEN MILLION PESOS (P27,000,000) payable upon approval of the contract by Your Excellency and the balance of THIRTY MILLION TWO HUNDRED FORTY THOUSAND PESOS (P 30,240,000) after one (1) year inclusive of a 12% interest.

We believe that this arrangement is fair and equitable to both parties considering that the value of the land was appraised by a reputable company and independent appraisal company jointly commissioned by both parties and considering further that Capitol Hills has still a 23-year lien on the property by virtue of its existing lease contract with MWSS.

We humbly seek your instruction, Your Excellency and please accept our families' sincere wish for a Merry Christmas and a Happy New Year to you and the First Family."

The foregoing does not document a sale, but at most, only the conditions proposed by respondent Roman to enter into one. By the terms thereof, it refers only to an "agreement in principle". Reflecting a future consummation, the letter mentions "negotiations with MWSS (which) with your (Marcos') kind approval, will finally be concluded". It must likewise be noted that presidential approval had yet to be obtained. Thus, the "initial agreement" was not a sale as it did not in any way transfer ownership over the property. The proposed terms had yet to be approval by the President and the agreement in principle still had to be formalized in a deed of sale. Written authority as is required under Art. 1834 of the New Civil Code, was not needed at the point of the "initial agreement".

Verily, the principle on prescription of actions is designed to cover situations such as the case at bar, where there have been a series of transfers to innocent purchasers for value. To set aside these transactions only to accommodate a party who has slept on his rights is anathema to good order.9

RE: Laches

Even assuming, for argument's sake, that the allegations in the complaint establish the absolute nullity of the assailed contracts an hence imprescriptible, the complaint can still be dismissed on the ground of laches which is different from prescription. This Court, as early as 1966, has distinguished these two concepts in this wise:

"x x x (T)he defense of laches applies independently of prescription. Laches is different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in inequity, whereas prescription applies at law. Prescription is based on fixed-time; laches is not."10




Thus, the prevailing doctrine is that the right to have a contract declared void ab initiomay be barred by laches although not barred by prescription.11

It has, for all its elements are present, viz:

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

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

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

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred.12

There is no question on the presence of the first element. The main thrust of petitioner MWSS's complaint is to bring to the fore what it claims as fraudulent and/or illegal acts of the respondents in the acquisition of the subject property.

The second element of delay is evident from the fact that petitions tarried for almost ten (10) years from the conclusion of the sale sometime in 1983 before formally laying claim to the subject property in 1993.

The third element is present as can be deduced from the allegations in the complaint that petitioner MWSS (a) demanded for downpayment for no less than three times; (b) accepted downpayment for P25 Million; and (c) accepted a letter of credit for the balance. The pertinent paragraphs in the complaint thus read:

"38. In a letter dated September 19, 1983, for failure of CHGCCI to pay on time, Mr. Ilustre demanded payment of the downpayment of P25 Million which was due as of 18 April 1983. A copy of this letter is hereto attached as Annex 'X';

"39. Again, in a letter dated February 7, 1984, then MWSS Acting General Manager Aber Canlas demanded payment from CHGCCI of the purchase price long overdue. A copy of this letter is hereto attached as Annex 'Y';

"40. Likewise, in a letter dated March 14, 1984, Mr. Canlas again demanded from CHGCCI payment of the price. A copy of this demand letter is hereto attached as Annex 'Z';

"41. Thereafter, in a letter dated July 27, 1984, another entity, defendant Ayala Corporation, through SVP Renato de la Fuente, paid with a check the long overdue downpayment of P25,000,000.00 of STC/CHGCCI. Likewise a domestic stand-by letter of credit for the balance was issued in favor of MWSS; Copies of the said letter, check and letter of credit are hereto attached as Annexes 'AA', 'BB', and 'CC', respectively."

Under these facts supplied by petitioner MWSS itself, respondents have every good reason to believe that petitioner was honoring the validity of the conveyances of the subject property, and that the sudden institution of the complaint in 1993 alleging the nullity of such conveyances was surely an unexpected turn of events for respondents. Hence, petitioner MWSS cannot escape the effect of laches.

RE: Ratification

Pertinent to this issue is the claim of petitioner MWSS that Mr. Ilustre was never given the authority by its Board of Trustees to enter into the "initial agreement" of December 20, 1982 and therefore, the sale of the subject property is invalid.

Petitioner MWSS misses the point. The perceived infirmity in the "initial agreement" can be cured by ratification. So settled is the precept that ratification can be made by the corporate board either expressly or impliedly. Implied ratification may take various forms - like silence or acquiescence; by acts



showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.13 Both modes of ratification have been made in this case.

There was express ratification made by the Board of petitioner MWSS when it passed Resolution No. 36-83 approving the sale of the subject property to respondent SILHOUETTE and authorizing Mr. Ilustre, as General Manager, "to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative thereto." Implied ratification by "silence or acquiescence" is revealed from the acts of petitioner MWSS in (a) sending three (3) demand letters for the payment of the purchase price, (b) accepting P25 Million as downpayment, and (c) accepting a letter of credit for the balance, as hereinbefore mentioned. It may well be pointed out also that nowhere in petitioner MWSS' complaint is it alleged that it returned the amounts, or any part thereof, covering the purchase price to any of the respondents-vendees at any point in time. This is only indicative of petitioner MWSS' acceptance and retention of benefits flowing from the sales transactions which is another form of implied ratification.

RE: Non-joinder of indispensable parties

There is no denying that petitioner MWSS' action against herein respondents for the recovery of the subject property now converted into a prime residential subdivision would ultimately affect the proprietary rights of the many lot owners to whom the land has already been parceled out. They should have been included in the suit as parties-defendants, for. "it is well established that owners of property over which reconveyance is asserted are indispensable parties without whom no relief is available and without whom the court can render no valid judgment."14 Being indispensable parties, the absence of these lot-owners in the suit renders all subsequent actions of the trial court null and void for want of authority to act, not only as to the absent parties but even as to those present.15 Thus, when indispensable parties are not before the court, the action should be dismissed.16

WHEREFORE, in view of the foregoing, the consolidated petitions are hereby DENIED.

SO ORDERED





Property Cases 3

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