G.R. No.

126699

August 7, 1998

AYALA CORPORATION, petitioner, vs. RAY BURTON DEVELOPMENT CORPORATION, respondent. MARTINEZ, J.: Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located in Makati City. The said estate was originally a raw land which was subdivided for sale into different lots devoted for residential, commercial and industrial purposes. The development of the estate consisted of road and building construction and installation of a central sewerage treatment plant and drainage system which services the whole Ayala Commercial Area. On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought from AYALA a piece of land identified as Lot 26, Block 2 consisting of 1,188 square meters, located at what is now known as H.V. de la Costa Street, Salcedo Village, Makati City. The said land, which is now the subject of this case, is more particularly described as follows: A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC] Psd-6086, being a portion of Block D, described as plan [LRC] Psd-5812 LRC [GLRO] Rec. No. 2029) situated in the Municipality of Makati, Province of Rizal, Is. of Luzon. Bounded on the NE., points 2 to 3 by Lot 31, Block 2 (Creek 6.00 m. wide) of the subdivision plan, on the SE., points 3 to 4 by Lot 27, Block 2 of the Subdivision plan; on the SW, points 4 to 5, by proposed Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5 to 1 by Street Lot 2 (17.00 m. wide) of the subdivision plan. On the NW, points 1 to 2 by Lot 25, Block 2 of the subdivision plan. . . . beginning, containing an area of ONE THOUSAND ONE HUNDRED EIGHTY EIGHT (1,188) SQUARE METERS. The transaction was documented in a Deed of Sale 1 of even date, which provides, among others, that the vendee would comply with certain special conditions and restrictions on the use or occupancy of the land, among which are Deed Restrictions: 2 a) The total height of the building to be constructed on the lot shall not be more than forty-two (42) meters, nor shall it have a total gross floor area of more than five (5) times the lot area; and b) The sewage disposal must be by means of connection into the sewerage system servicing the area. Special Conditions: 3 a) The vendee must obtain final approval from AYALA of the building plans and specifications of the proposed structures that shall be constructed on the land;

b) The lot shall not be sold without the building having been completed; and c) Any breach of the stipulations and restrictions entitles AYALA to rescission of the contract. As a result of the sale, a Transfer Certificate of Title No. 132086 4 was issued in the name of KARAMFIL. The said special conditions and restrictions were attached as an annex to the deed of sale and incorporated in the "Memorandum of Encumbrances" at the reverse side of the title of the lot as Entry No. 2432/T-131086. On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and Realty Corporation (PALMCREST) under a Deed of Absolute 5 Sale of even date. This deed was submitted to AYALA for approval in order to obtain the latter's waiver of the special condition prohibiting the resale of the lot until after KARAMFIL shall have constructed a building thereon. AYALA gave its written conformity to the sale but reflecting in its approval the same special conditions/restrictions as in the previous sale. AYALA's conformity was annotated on the deed of sale. 6 PALMCREST did not object to the stipulated conditions and restrictions. 7 PALMCREST in turn sold the lot to Ray Burton Development Corporation (RBDC), now respondent, on April 11, 1988, with the agreement that AYALA retains possession of the Owner's Duplicate copy of the title until a building is erected on said parcel of land in accordance with the requirements and/or restrictions of AYALA. 8 The Deed of Absolute Sale 9 executed on the said date was also presented to AYALA for approval since no building had yet been constructed on the lot at the time of the sale. As in the KARAMFILPALMCREST transaction, AYALA gave its conformity to the sale, subject to RBDC's compliance with the special conditions/restrictions which were annotated in the deed of sale, thus: With our conformity, subject to the compliance by the Vendees of the Special Conditions of Sale on the reverse side of the Deed of Sale dated March 20, 1984 per Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of the Notary Public Silverio Aquino. 10 The conditions and restrictions of the sale were likewise entered as encumbrances at the reverse side of the Transfer Certificate of Title No. 155384 which was later issued in the name of RBDC. 11 Like PALMCREST, RBDC was not also averse to the aforesaid conditions and restrictions. 12 Sometime in June of 1989, RBDC submitted to AYALA for approval a set of architectural plans for the construction of a 5-storey office building on the subject lot, with a height of 25.85 meters and a total gross floor area of 4,989.402 square meters. 13 The building was to be known as "Trafalgar Tower" but later renamed "Trafalgar Plaza." Since the building was well within the 42-meter height restriction, AYALA approved the architectural plans. Upon written request 14 made by RBDC, AYALA likewise agreed to release the owner's copy of the title covering the subject lot to the China Banking

Corporation as guarantee of the loan granted to RBDC for the construction of the 5-storey building. Meanwhile, on November 28, 1989, RBDC, together with the Makati Developers Association, Inc. (MADAI), of which RBDC is a member, and other lot owners, filed a complaint against AYALA before the Housing and Land Use Regulatory Board (HLRB), docketed as HLRB Case No. REM-A-0818 (OAALAREM-111489-4240). The complaint sought the nullification of the very same Deed Restrictions incorporated in the deeds of sale of the lots purchased by the complainants from AYALA and annotated on their certificates of title, on the grounds, inter alia, that said restrictions purportedly: (a) place unreasonable control over the lots sold by AYALA, thereby depriving the vendees of the full enjoyment of the lots they bought, in violation of Article 428 of the Civil Code; (b) have been superseded by Presidential Decree No. 1096 (the National Building Code) and Metro Manila Commission Zoning Ordinance No. 81-01; (c) violate the constitutional provision on equal protection of the laws, since the restrictions are imposed without regard to reasonable standards or classifications; and (d) are contracts of adhesion 15 since AYALA would not sell the lots unless the buyers agree to the deed restrictions. The complaint also alleged that AYALA is in estoppel from enforcing the restrictions in question when it allowed the construction of other high-rise buildings in Makati City beyond the height and floor area limits. AYALA was further charged with unsound business practice. Early in June of 1990, RBDC made another set of building plans for "Trafalgar Plaza" and submitted the same for approval, this time to the Building Official of the Makati City Engineer's Office, 16 not to AYALA. In these plans, the building was to be 26-storey high, or a height of 98.60 meters, with a total gross floor area of 28,600 square meters. After having obtained the necessary building permits from the City Engineer's Office, RBDC began to construct "Trafalgar Plaza" in accordance with these new plans. On July 11, 1990, the majority of the lot owners in the Makati City area, including the Salcedo and Legaspi Village areas, in a general assembly of the Makati Commercial Estate Association, Inc. (MACEA), approved the revision of the Deed Restrictions, which revision was embodied in the "Consolidated and Revised Deed Restrictions" 17 (Revised Deed Restrictions) wherein direct height restrictions were abolished in favor of floor area limits computed on the basis of "floor area ratios" (FARs). In the case of buildings devoted solely to office use in Salcedo Village such as the "Trafalgar Plaza" the same could have a maximum gross floor area of only eight (8) times the lot area. Thus, under the Revised Deed Restrictions, "Trafalgar Plaza" could be built with a maximum gross floor area of only 9,504 square meters (1,188 sq. m. the size of the subject lot multiplied by 8). Even under the Revised Deed Restrictions, Trafalgar would still exceed 19,065 square meters of floor area on the basis of a FARs of 8:1. RBDC did not vote for the approval of the Revised Deed Restrictions and, therefore, it continued to be bound by the original Deed Restrictions. In the meantime, on August 22, 1990, the HLRB En Banc rendered a decision 18 (a) upholding the Deed Restrictions; (b) absolving AYALA from the charge of unsound business practice; and (c) dismissing HLRB Case No. REM-A-

property cases batch 2

0818. MADAI and RBDC separately appealed the decision to the Office of the President, which appeal was docketed as O.P. Case No. 4476. While the appeal was pending before the Office of the President, the September 21, 1990 issue of the Business Worldmagazine 19 featured the "Trafalgar Plaza" as a modern 27-storey structure which will soon rise in Salcedo Village, Makati City. Stunned by this information, AYALA, through counsel, then sent a letter 20 to RBDC demanding the latter to cease the construction of the building which dimensions do not conform to the previous plans it earlier approved. RBDC, through counsel, replied with a series of letters 21 requesting for time to assess the merits of AYALA's demand. For failing to heed AYALA's bidding, RBDC was sued on January 25, 1991 before the Regional Trial Court of Makati City (Branch 148). AYALA's complaint for Specific Performance or Rescission, docketed as Civil Case No. 91220, prayed inter alia that judgment be rendered xxx b. Ordering the defendant to comply with its contractual obligations and to remove or demolish the portions or areas of the Trafalgar Tower/Plaza Building constructed beyond or in excess of the approved height as shown by building plans approved by the plaintiff, including any other portion of the building constructed not in accordance with the building plans and specifications submitted to and approved by plaintiff. c. Alternatively, in the event specific performance becomes impossible: i) Ordering the cancellation and rescission of the Deed of Sale dated March 20, 1984 (Annex "A" hereof) and ordering defendant to return to plaintiff Lot 26, Block 2 of Salcedo Village; ii) Ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of defendant) and directing the Makati Register of Deeds to issue a new title over the Lot in the name of plaintiff; and d. Ordering defendant to pay plaintiff attorney's fees in the amount of P500,000.00, exemplary damages in the amount of P5,000.00 and the costs of the instant suit. 22 In its answer (with counterclaim) to the complaint, RBDC denied having "actual or constructive notice of the Deed Restrictions" imposed by AYALA on the subject lot. RBDC alleged in essence that even if said deed restrictions exist, the same are not economically viable and should not be enforced because they constitute unreasonable restrictions on its property rights and are, therefore, contrary to law, morals, good customs, public order or public policy. Moreover, RBDC claimed that the enforcement of the deed restrictions has also been arbitrary or discriminatory since AYALA has not made any action against a number of violators of the deed restrictions.

Meantime, the appeal of MADAI in O.P. Case No. 44761 was considered resolved when it entered into a compromise agreement with AYALA wherein the latter adopted and acknowledged as binding the Revised Deed Restrictions of July 11, 1990. 23 On the other hand, RBDC's appeal was dismissed in an Order dated February 13, 1992, for the reason that, "insofar as the disposition of the appealed (HLRB) decision is concerned, there is virtually no more actual controversy on the subject of the 'Deed Restrictions' because the same has been overriden by the 'Revised (Deed) Restrictions' which the appellee Ayala Corporation has in fact acknowledged as binding and in full force and effect . . . 24 Accordingly, aside from dismissing RBDC's appeal, the Order of February 13, 1992 also "set aside" the appealed HLRB decision. From this order, AYALA sought a reconsideration or clarification, noting, inter alia, that while the said order has ruled that AYALA can no longer enforce the Deed Restrictions against RBDC, it does not expressly state that RBDC is bound by the Revised Deed Restrictions. Clarifying this matter, the Office of the President issued a Resolution dated April 21,1992, 25 modifying the February 13, 1992 order, ruling: (1) that RBDC is bound by the original Deed Restrictions, but it has the option to accept and be bound by the Revised Deed Restrictions in lieu of the former; and (2) that the "HLRB decision dated 22 August 1990, to the extent that it absolved Ayala from the charge of unsound business practice, subject of the basic complaint, is affirmed." This time RBDC moved for a reconsideration of the April 21, 1992 Order, but the motion was denied in a Resolution dated October 15, 1993. 26 Another Resolution of March 21, 1994 27 was issued denying with finality RBDC's second motion for reconsideration. AYALA then filed a Manifestation 28 in Civil Case No. 91-220, informing the trial court of the pertinent rulings/resolutions in the proceedings before the HLRB and the Office of the President, which rulings, AYALA suggested, amount to res judicataon the issue of the validity and enforceability of the Deed Restrictions involved in the said civil case. After trial on the merits, the trial court rendered a Decision on April 28, 1994 in favor of RBDC, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant and against the plaintiff, and as a consequence: 1. The instant case is hereby dismissed; 2. The motion/application for the annotation of the lis pendens is hereby DENIED; 3. The motion/application to hold defendant in continuing contempt is hereby also DENIED; 4. No damages is awarded to any of the parties; 5. Plaintiff is hereby ordered to pay the defendant P30,000.00 for and as attorney's fees and litigation expenses; With costs against plaintiff.

SO ORDERED. 29 The trial court's decision is based on its findings that: (1) RBDC had neither actual nor constructive notice of the 42-meter height limitation of the building to be constructed on the subject lot; (2) even if the Deed Restrictions did exist, AYALA is estopped from enforcing the same against RBDC by reason of the former's failure to enforce said restrictions against other violators in the same area; (3) the Deed Restrictions partake of the nature of a contract of adhesion; (4) since the Trafalgar Plaza building is in accord with the minimum requirements of P.D. No. 1096 (The National Building Code), the Deed Restrictions may not be followed by RBDC; and (5) the rulings of the HLRB and the Office of the President do not have binding effect in the instant case. Dissatisfied, AYALA appealed to the Court of Appeals which affirmed the judgment of the trial court in a Decision 30 dated February 27, 1996 in CA-G.R. CV No. 46488. AYALA's motion for reconsideration was likewise denied in the Resolution 31of October 7, 1996. AYALA now interposes the present petition for review on certiorari, citing several errors in the decision of the Court of Appeals, some of which involve questions of fact. The resolution of factual issues raised in the petition would certainly call for a review of the Court of Appeals' findings of fact. As a rule, the reexamination of the evidence proffered by the contending parties during the trial of the case is not a function that this Court normally undertakes inasmuch as the findings of fact of the Court of Appeals are generally binding and conclusive on the Supreme Court. 32 The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law. 33 A reevaluation of factual issues by this Court is justified when the findings of fact complained of are devoid of support by the evidence on record, or when the assailed judgment is based on misapprehension of facts. 34 The present petition has shown that certain relevant facts were overlooked by the Court of Appeals, which facts, if properly appreciated, would justify a different conclusion from the one reached in the assailed decision. The principal error raised here by petitioner AYALA pertains to the Court of Appeals' finding that RBDC did not have actual or constructive notice of the 42-meter height restriction, since what was annotated on its (RBDC's) title is the erroneous 23-meter height limit which, according to AYALA's own witness, Jose Cuaresma, was not applicable to RBDC. 35 Thus, the Court of Appeals concluded, RBDC "has the right to enjoy the subject property as if no restrictions and conditions were imposed thereon." 36 The above finding and conclusion of the Court of Appeals, AYALA submits, are based on "surmises and conjectures" which are "contrary to the evidence on record and (RBDC's) own admissions." 37 There is merit in AYALA's submission. The erroneous annotation of the 23-meter height restriction in RBDC's title was explained by Jose Cuaresma, AYALA's Assistant Manager for Marketing and Sales. Cuaresma testified that when the deed of sale between property cases batch 2 2

PALMCREST and RBDC was submitted to the Register of Deeds of Makati and the corresponding title was issued in the name of RBDC, the Register of Deeds annotated the wrong height limit in Entry No. 2432 on the said title, but he emphasized that the incorrect annotation does not apply to RBDC. 38 Jose Cuaresma further clarified that the correct height restriction imposed by AYALA on RBDC was 42 meters. 39 This height ceiling, he said, is based on the deed of restrictions attached as annex to the deed of sale, 40 and the same has been uniformly imposed on the transferees beginning from the original deed of sale between AYALA and KARAMFIL. 41 This clarificatory statement of Jose Cuaresma should have cautioned the Court of Appeals from making the unfounded and sweeping conclusion that RBDC can do anything it wants on the subject property "as if no restrictions and conditions were imposed thereon," on the mistaken premise that RBDC was unaware of the correct 42-meter height limit. It must be stressed that Cuaresma's testimony is bolstered by documentary evidence and circumstances of the case which would show that RBDC was put on notice about the 42-meter height restriction. The record reveals that the subject Lot 26 was first sold by AYALA to KARAMFIL under a deed of sale (Exhibit "A") dated March 20, 1984 and duly notarized by Notary Public Silverio Aquino. Attached to the deed of sale is an appendix of special conditions/restrictions (deed restrictions), which provides, inter alia, that the building to be constructed on the lot must have a total height of not more than 42 meters, and that any building plans and specifications of the proposed structures must have the approval of AYALA. The deed restrictions were incorporated in the memorandum of encumbrances at the reverse side of the title of the lot as Entry No. 2432. When the lot was sold by KARAMFIL to PALMCREST, the deed of sale (Exhibit "B") on this transaction bears an annotation of AYALA's conformity to the transfer, with the condition that the approval was "subject to the compliance by the vendee of the special conditions of sale on the reverse side of the deed of sale dated March 20, 1984, per Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of Notary Public Silverio F. Aquino" (Exhibit "B-1"). PALMCREST later resold the lot to RBDC by virtue of a deed of sale (Exhibit "C"), to which AYALA's approval was also annotated therein (Exhibit "C-1"), but with the same explicit inscription that RBDC, as vendee, must comply with the special deed restrictions appended to the AYALA-KARAMFIL deed of sale of March 20, 1984. All these three (3) deeds of sale and the accompanying special deed restrictions imposing a 42-meter height limit, were duly registered with the Register of Deeds. Thus, RBDC cannot profess ignorance of the 42-meter height restriction and other special conditions of the sale. Verily, the deed restrictions are integral parts of the PALMCRESTRBDC deed of sale, considering that AYALA's required conformity to the transfer, as annotated therein, was conditioned upon RBDC's compliance of the deed restrictions. Consequently, as a matter of contractual obligation, RBDC is bound to observe the deed restrictions which impose a building height of not more than 42 meters.

Moreover, RBDC was fully aware that it was bound by the 42-meter height limit. This is shown by the fact that, pursuant to the special conditions/restrictions of the sale, it submitted to AYALA, for approval, building plans for a 5-storey structure with a height of 25.85 meters. Certainly, RBDC would not have submitted such plans had it truly believed that it was restricted by a lower 23-meter height ceiling, in the same manner that RBDC did not seek AYALA's approval when it later made another set of building plans for the 26storey "Trafalgar Plaza," knowing that the same would be disapproved for exceeding the 42-meter height restriction. The fact that RBDC was later issued a building permit from the Makati City Engineer's Office for the construction of the "Trafalgar Plaza" is not a valid justification to disregard the stipulated contractual restriction of 42 meters. Another error which AYALA claims to have been committed by the Court of Appeals is the latter's finding that AYALA, under the principle of estoppel, is now barred from enforcing the deed restrictions because it had supposedly failed to act against other violators of the said restrictions. AYALA argues that such finding is baseless and is contrary to the Civil Code provisions on estoppel and applicable jurisprudence. We agree with the petitioner. In support of its finding that estoppel operates against AYALA, the Court of Appeals merely cited its decision dated November 17, 1993, in CA-G.R. SP No. 29157, entitled Rosa-Diana Realty and Development Corporation, Petitioner vs. Land Registration Authority and Ayala Corporation, Respondents, and reiterated its findings therein, to wit: Also, Ayala is barred from enforcing the deed of restrictions in question, pursuant to the doctrines of waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed faithful compliance with the special conditions of sale and with the Salcedo Village deed of restrictions. One of the conditions was that a building would be constructed within one year. Ayala did nothing to enforce the terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of the petitioner realty in 1989, or thirteen (13) years later. We, therefore, see no justifiable reason for Ayala to attempt to enforce the terms of the conditions of the sale against the petitioner. It should now be estopped from enforcing the said conditions through any means. xxx Even assuming that petitioner RDR violated the floor area and height restrictions, it is markedly significant that Ayala disregarded the fact that it had previously allowed and tolerated similar and repeated violations of the same restrictive covenants by property owners which it now seeks to enforce against the herein petitioner. Some examples of existing buildings in Salcedo Village that greatly exceeded the gross floor area (5 times lot area) and height (42 meters) limitations are (Rollo, p. 32):

(1) Pacific Star (Nauru Center Building 29 stories and 112.5 meters high) (2) Sagittarius Building 16 stories (3) Shell House Building 14 stories (4) Eurovilla Building 15 stories (5) LPL Plaza Building 18 stories (6) LPL Tower Building 24 stories. 42 An examination of the decision in the said Rosa Diana case reveals that the sole issue raised before the appellate court was the propriety of the lis pendens annotation. However, the appellate court went beyond the sole issue and made factual findings bereft of any basis in the record to inappropriately rule that AYALA is in estoppel and has waived its right to enforce the subject restrictions. Such ruling was immaterial to the resolution of the issue of the propriety of the annotation of the lis pendens. The finding of estoppel was thus improper and made in excess of jurisdiction. Moreover, the decision in CA-G.R. SP No. 29157 is not binding on the parties herein, simply because, except for Ayala, RBDC is not a party in that case. Section 49, Rule 39 of the Revised Rules of Court (now Sec. 47, Rule 39 of the 1997 Rules of Civil Procedure) provides in part: Sec. 49. Effect of judgments. The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows: (a) . . .; (b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of action or special proceeding, litigating for the same thing and under the same title and in the same capacity; (emphasis supplied) (c) . . . . The clear mandate of the above-quoted rule is that a final judgment or order of a court is conclusive and binding only upon the parties to a case and their successors in interest. Both the present case and the Rosa-Diana case, however, involve different parties who are not litigating "for the same thing" nor "under the same title and in the same capacity." Hence, the Rosa-Diana decision cannot have binding effect against either party to the instant case. In any case, AYALA asserts that a few gross violators of the deed restrictions "have been, or are being, proceeded against."43 AYALA admits, though, that there are other violations of the restrictions but these are of a minor nature which do not detract from substantial compliance by the lot owners of the deed restrictions. AYALA submits that minor violations are insufficient to warrant judicial action, thus: property cases batch 2 3

As a rule, non-objection to trivial breaches of a restrictive covenant does not result in loss of the right to enforce the covenant by injunction, and acquiescence in violations of a restrictive covenant which are immaterial and do not affect or injure one will not preclude him from restraining violations thereof which would so operate as to cause him to be damaged." (20 Am Jur. 2d Sec. 271, p. 835; emphasis provided). Occasional and temporary violations by lot owners of a covenant forbidding the use of property for mercantile purposes are not sufficient as a matter of law to warrant a finding of a waiver or abandonment to the right to enforce the restriction. A waiver in favor of one person and for a limited purpose is not a waiver as to all persons generally. (id., at 836; emphasis provided). 44 It is the sole prerogative and discretion of AYALA to initiate any action against violators of the deed restrictions. This Court cannot interfere with the exercise of such prerogative/discretion. How AYALA could be considered in estoppel as found by both the trial court and the Court of Appeals, was not duly established. "Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them." 45 Here, we find no admission, false representation or concealment that can be attributed to AYALA relied upon by RBDC. What is clear from the record, however, is that RBDC was the party guilty of misrepresentation and/or concealment when it resorted to the fraudulent scheme of submitting two (2) sets of building plans, one (1) set conformed to the Deed Restrictions, which was submitted to and approved by AYALA, 46 while another set violated the said restrictions, and which it presented to the Makati City Building Official in order to secure from the latter the necessary building permit. 47 It is noteworthy that after the submission of the second set of building plans to the Building Official, RBDC continued to make representations to AYALA that it would build the five-storey building in accordance with the first set of plans approved by AYALA, obviously for the purpose of securing the release of the title of the subject lot to obtain bank funding. AYALA relied on RBDC's false representations and released the said title. Hence, RBDC was in bad faith. AYALA further assigns as error the finding of the respondent court that, "while the Deed of Sale to Ray Burton (RBDC) did not appear to be a contract of adhesion," however, "the subject Deed Restrictions annotated therein appeared to be one." 48The only basis for such finding is that the Deed Restrictions and Special Conditions were "pre-printed" and "prepared" by AYALA, and that RBDC's participation thereof was "only to sign the Deed of Sale with the said restrictions and conditions."49 The respondent court erred in ruling that the Deed Restrictions is a contract of adhesion.

A contract of adhesion in itself is not an invalid agreement. This type of contract is as binding as a mutually executed transaction. We have emphatically ruled in the case of Ong Yiu vs. Court of Appeals, et. al. 50 that "contracts of adhesion wherein one party imposes a ready-made form of contract on the other . . . are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent." This ruling was reiterated inPhilippine American General Insurance Co., Inc. vs. Sweet Lines, Inc., et. al., 51 wherein we further declared through Justice Florenz Regalado that "not even an allegation of ignorance of a party excuses noncompliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage (a contract of adhesion) devolves not on the carrier but on the owner, shipper, or consignee as the case may be." Contracts of adhesion, however, stand out from other contracts (which are bilaterally drafted by the parties) in that the former is accorded inordinate vigilance and scrutiny by the courts in order to shield the unwary from deceptive schemes contained in ready-made covenants. As stated by this Court, speaking through Justice J.B.L. Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd.: 52 The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared "agreements" that the weaker party may not change one whit, his participation in the "agreement" being reduced to the alternative to "take it or leave it" labeled since Raymond Saleilles "contracts by adherence" (contracts d' adhesion) in contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of lading are prime examples) obviously call for greater strictness and vigilance on the part of the courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary. 53 (Emphasis supplied) The stringent treatment towards contracts of adhesion which the courts are enjoined to observe is in pursuance of the mandate in Article 24 of the New Civil Code that "(i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection." Thus, the validity and/or enforceability of a contract of adhesion will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned. In the instant case, the stipulations in the Deed Restrictions and Special Conditions are plain and unambiguous which leave no room for interpretation. Moreover, there was even no attempt on the part of RBDC to prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker or a disadvantaged party on account of its moral dependence, ignorance, mental weakness or other handicap. On the contrary, as testified to by Edwin Ngo,

President of RBDC, the latter is a realty firm and has been engaged in realty business, 54 and that he, a businessman for 30 years, 55 represented RBDC in the negotiations and in the eventual purchase of the subject lot from PALMCREST. 56 Edwin Ngo's testimony proves that RBDC was not an unwary party in the subject transaction. Instead, Edwin Ngo has portrayed RBDC as a knowledgeable realty firm experienced in real estate business. In sum, there is more than ample evidence on record pinpointing RBDC's violation of the applicable FAR restrictions in the Consolidated and Revised Deed Restrictions (CRDRs) when it constructed the 27-storey Trafalgar Plaza. The prayer of petitioner is that judgment be rendered as follows: a. Ordering Ray Burton to comply with its contractual obligations in the construction of Trafalgar Plaza' by removing or demolishing the portions of areas thereof constructed beyond or in excess of the approved height, as shown by the building plans submitted to, and approved by, Ayala, including any other portion of the building constructed not in accordance with the said building plans; b. Alternatively, in the event specific performance becomes impossible: (1) ordering the cancellation and rescission of the March 20, 1984 "Deed of Sale" and all subsequent "Deeds of Sale" executed in favor of the original vendee's successors-in-interest and ordering Ray Burton to return to Ayala Lot 26, Lot 2 of Salcedo Village; (2) ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of defendant) and directing the Office of the Register of Deeds of Makati to issue a new title over the lot in the name of Ayala; and xxx However, the record reveals that construction of Trafalgar Plaza began in 1990, and a certificate of completion thereof was issued by the Makati City Engineer's Office per ocular inspection on November 7, 1996. 58 Apparently Trafalgar Plaza has been fully built, and we assume, is now fully tenanted. The alternative prayers of petitioner under the CRDRs, i.e., the demolition of excessively built space or to permanently restrict the use thereof, are no longer feasible. Thus, we perforce instead rule that RBDC may only be held alternatively liable for substitute performance of its obligations the payment of damages. In this regard, we note that the CRDRs impose development charges on constructions which exceed the estimated Gross Limits permitted under the original Deed Restrictions but which are within the limits of the CRDRs. In this regard, we quote hereunder pertinent portions of The Revised Deed Restrictions, to wit: 3. DEVELOPMENT CHARGE property cases batch 2 4

For any building construction within the Gross Floor Area limits defined under Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding certain standards defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to the start of construction of any new building or any expansion of an existing building, a DEVELOPMENT CHARGE as a contribution to a trust fund to be administered by MACEA. This trust fund shall be used to improve facilities and utilities in the Makati Central Business District. 3.1 The amount of the development charge that shall be due from the OWNER shall be computed as follows: DEVELOPMENT CHARGE = A x (B - C - D) where: A is equal to the Area Assessment which shall be set at Five Hundred Pesos (P500.00) until December 31, 1990. Each January 1st thereafter, such amount shall increase by ten percent (10%) over the Area Assessment charged in the immediately preceding year; provided that, beginning 1995 and at the end of every successive fiveyear period thereafter, the increase in the Area Assessment shall be reviewed and adjusted by the VENDOR to correspond to the accumulated increase in the construction cost index during the immediately preceding five years as based on the weighted average of wholesale price and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics. B is equal to the total Gross Floor Area of the completed or expanded building in square meters. C is equal to the estimated Gross Floor Area permitted under the original deed restrictions, derived by multiplying the lot area by the effective original FAR shown below for each location: 59 Accordingly, in accordance with the unique, peculiar circumstance of the case at hand, we hold that the said development charges are a fair measure of compensatory damages which RBDC has caused in terms of creating a disproportionate additional burden on the facilities of the Makati Central Business District. As discussed above, Ray Burton Development Corporation acted in bad faith in constructing Trafalgar Plaza in excess of the applicable restrictions upon a double submission of plans and exercising deceit upon both AYALA and the Makati Engineer's Office, and thus by way of example and correction, should be held liable to pay AYALA exemplary damages in the sum of P2,500,000.00. Finally, we find the complaint to be well-grounded, thus it is AYALA which is entitled to an award of attorney's fees, and while it prays for the amount of P500,000.00, we award the amount of P250,000.00 which we find to be reasonable under the circumstances.

WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated February 27, 1996, in CA-G.R. CV No. 46488, and its Resolution dated October 7, 1996 are hereby REVERSED and SET ASIDE, and in lieu thereof, judgment is hereby rendered finding that: (1) The Deed Restrictions are valid and petitioner AYALA is not estopped from enforcing them against lot owners who have not yet adopted the Consolidated and Revised Deed Restrictions; (2) Having admitted that the Consolidated and Revised Deed Restrictions are the applicable Deed Restrictions to Ray Burton Development Corporation's Trafalgar Plaza, RBDC should be, and is, bound by the same; (3) Considering that Ray Burton Development Corporation's Trafalgar Plaza exceeds the floor area limits of the Deed Restrictions, RBDC is hereby ordered to pay development charges as computed under the provisions of the Consolidated and Revised Deed Restrictions currently in force. (4) Ray Burton Development Corporation is further ordered to pay AYALA exemplary damages in the amount of P2,500,000.00, attorney's fees in the amount of P250,000.00, and the costs of suit. SO ORDERED. G.R. No. 134692 August 1, 2000

Front expansion : 2nd Storey: No unit may be extended in the front beyond the line as designed and implemented by the developer in the 60 sq. m. unit. In other words, the 2nd floor expansion, in front, is 6 meters back from the front property line and 4 meters back from the front wall of the house, just as provided in the 60 sq. m. units."2 The above restrictions were also contained in Transfer Certificate of Title No. N-115384 covering the lot issued in the name of petitioner-spouses. The controversy arose when petitioners, despite repeated warnings from respondent, extended the roof of their house to the property line and expanded the second floor of their house to a point directly above the original front wall.3 Respondent filed before the Regional Trial Court, National Capital Judicial Region, Branch 261, Pasig City, an action to demolish the unauthorized structures. After trial, judgment was rendered against petitioners; thus: WHEREFORE, premises considered, defendant spouses Eliseo B. Fajardo, Jr., and Marissa F. Fajardo are hereby directed to immediately demolish and remove the extension of their expanded housing unit that exceeds the limitations imposed by the Restrictive Covenant, otherwise the Branch Sheriff of this Court shall execute this decision at theexpense of the defendants. As to damages and attorney's fees, it appearing from the records of this case that no evidence to sustain the same was adduced by either of the parties, the Court deems itproper not to award any. SO ORDERED."4 On appeal to it, the Court of Appeals affirmed the decision of the trial court. In their petition for review to this Court, the spouses contest the judgment of the courts below. Adjacent owners reportedly have no objection to the construction, and have even expressed interest in undertaking a similar expansion in their respective residences. Moreover, the couple's two children, a son and a daughter, might soon get married and then share, with their families, living quarters with petitioners. The latter also assail the personality of private respondent to question the construction which have effectively relinquished its ownership, right or interest over the subdivision upon the execution of the Deed of Absolute Sale in favor of the individual homeowners. Per the contract between Freedom to Build Incorporated and the De la Costa Low Income Project Homeowners' Association (hereinafter homeowners' association), petitioners aver, the enforcement of the prohibitions contained in the "Restrictive Covenant" originally residing on respondent is now lodged in the homeowners' association. Petitioners maintain that it is incumbent upon the homeowners' association, not on respondent, to enforce compliance with the provisions of the covenant. A perusal of the provisions of the covenant would show that the restrictions therein imposed were intended -

ELISEO FAJARDO, JR., and MARISSA FAJARDO, petitioners, vs. FREEDOM TO BUILD, INC., respondent. VITUG, J.: Freedom To Build, Incorporated, an owner-developer and seller of low-cost housing, sold to petitioner-spouses, a house and lot designated Lot No. 33, Block 14, of the De la Costa Homes in Barangka, Marikina, Metro Manila. The Contract to Sell executed between the parties, contained a Restrictive Covenant providing certain prohibitions, to wit:1 Easements . For the good of the entire community, the homeowner must observe a two-meter easement in front. No structure of any kind (store, garage, bodega, etc.) may be built on the front easement. xxx Upward expansion . A second storey is not prohibited. But the second storey expansion must be placed above the back portion of the house and should not extend forward beyond the apex of the original building. xxx

property cases batch 2

For the protection and benefit of the De La Costa Low Income Housing Project, and of all the persons who may now, or hereafter become owners of any part of the project, and as part of the consideration for the conveyance of the housing unit, these restrictions are promulgated in order that; the intents and purposes for which the project was designed shall be upheld; to wit: subsequent duly approved sale and assignments of housing units shall be made only to low income families; a certain level of privacy shall be observed; a community spirit shall be fostered; and an undisturbed possession and occupancy at the homeowners shall be maintained.5 Restrictive covenants are not, strictly speaking, synonymous with easements. While it may be correct to state that restrictive covenants on the use of land or the location or character of buildings or other structures thereon may broadly be said to create easements or rights, it can also be contended that such covenants, being limitations on the manner in which one may use his own property,6 do not result in true easements,7 but a case of servitudes (burden), sometimes characterized to be negative easements or reciprocal negative easements. Negative easement is the most common easement created by covenant or agreement whose effect is to preclude the owner of the land from doing an act, which, if no easement existed, he would be entitled to do.8 Courts which generally view restrictive covenants with disfavor for being a restriction on the use of one's property, have, nevertheless, sustained them9 where the covenants are reasonable,10 not contrary to public policy,11 or to law,12 and not in restraint of trade.13 Subject to these limitations, courts enforce restrictions to the same extent that will lend judicial sanction to any other valid contractual relationship.14 In general, frontline restrictions on constructions have been held to be valid stipulations.15 The provisions in a restrictive covenant prescribing the type of the building to be erected are crafted not solely for the purpose of creating easements, generally of light and view, nor as a restriction as to the type of construction,16 but may also be aimed as a check on the subsequent uses of the building17 conformably with what the developer originally might have intended the stipulations to be. In its Memorandum, respondent states in arguing for the validity of the restrictive covenant that the x x x restrictions are not without specific purpose. In a low cost-socialized housing, it is of public knowledge that ownersdevelopers are constrained to build as many number of houses on a limited land area precisely to accommodatemarginalized lot buyers, providing as much as possible the safety, aesthetic and decent living condition by controlling overcrowding. Such project has been designed to accommodate at least 100 families per hectare.18 There appears to be no cogent reasons for not upholding restrictive covenants aimed to promote aesthetics, health, and privacy or to prevent overcrowding. Viewed accordingly, the statement of petitioners that their immediate neighbors have not opposed the construction is unavailing to their cause, the

subject restrictive covenant not being intended for the benefit of adjacent owners but to prescribe the uses of the building, i.e., to ensure, among other things, that the structures built on De la Costa Homes Subdivision would prevent overcrowding and promote privacy among subdivision dwellers. The argument then of petitioners that expansion is necessary in order to accommodate the individual families of their two children must fail for like reason. Nor can petitioners claim good faith; the restrictive covenants are explicitly written in the Contract To Sell and annotated at the back of the Transfer Certificate of Title. Petitioners raise the issue of the personality of respondent to enforce the provisions of the covenant. Broadly speaking, a suit for equitable enforcement of a restrictive covenant can only be made by one for whose benefit it is intended.19 It is not thus normally enforceable by one who has no right nor interest in the land for the benefit of which the restriction has been imposed. 20 Thus, a developer of a subdivision can enforce restrictions, even as against remote grantees of lots, only if he retains part of the land.21 There would have been merit in the argument of petitioners - that respondent, having relinquished ownership of the subdivision to the homeowners, is precluded from claiming any right or interest on the same property - had not the homeowners' association, confirmed by its board of directors, allowed respondent to enforce the provisions of the restrictive covenant. Finally, petitioners argue that for lack of a specific provision, prescribing the penalty of demolition in the "Restrictive Covenant" in the event of a breach thereof, the prayer of respondent to demolish the structure should fail. This argument has no merit; Article 1168 of the New Civil Code states: When the obligation consists in not doing and the obligor does what has been forbidden him, it shall be undone at his expense. This Court is not unaware of its ruling in Ayala Corporation vs. Ray Burton Development Corporation,22 which has merely adjudged the payment of damages in lieu of demolition. In the aforementioned case, however, the elaborate mathematical formula for the determination of compensatory damages which takes into account the current construction cost index during the immediately preceding 5 years based on the weighted average of wholesale price and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics is explicitly provided for in the Deed of Restrictions entered into by the parties. This unique and peculiar circumstance, among other strong justifications therein mentioned, is not extant in the case at bar. In sum, the Court holds that (1).... The provisions of the Restrictive Covenant are valid; (2).... Petitioners must be held to be bound thereby; and (3).... Since the extension constructed exceeds the floor area limits of the Restrictive Covenant, petitioner-spouses can be required to demolish the structure to the extent that it exceeds the prescribed floor area limits.

WHEREFORE , the assailed decision, dated 13 July 1998, of the Court of Appeals in CA-G.R. CV No. 50085, sustaining that of the court a quo, is AFFIRMED. No costs. SO ORDERED. G.R. No. 149295 September 23, 2003

PHILIPPINE NATIONAL BANK,, petitioner, vs. GENEROSO DE JESUS, represented by his Attorney-in-Fact, CHRISTIAN DE JESUS, respondent. VITUG, J.: Petitioner Philippine National Bank disputes the decision handed down by the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No. 56001, entitled Generoso De Jesus, represented by his Attorney-in-Fact, Christian De Jesus, versus Philippine National Bank. The assailed decision has affirmed the judgment rendered by the Regional Trial Court, Branch 44, of Mamburao, Occidental Mindoro, declaring respondent Generoso de Jesus as being the true and lawful owner of the 124-square-meter portion of the land covered by Transfer Certificate of Title (TCT) No. T-17197 and ordering petitioner bank to vacate the premises, to deliver possession thereof to respondent, and to remove the improvement thereon. It would appear that on 10 June 1995, respondent filed a complaint against petitioner before the Regional Trial Court of Occidental Mindoro for recovery of ownership and possession, with damages, over the questioned property. In his complaint, respondent stated that he had acquired a parcel of land situated in Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered by TCT No. T-17197, and that on 26 March 1993, he had caused a verification survey of the property and discovered that the northern portion of the lot was being encroached upon by a building of petitioner to the extent of 124 square meters. Despite two letters of demand sent by respondent, petitioner failed and refused to vacate the area. Petitioner, in its answer, asserted that when it acquired the lot and the building sometime in 1981 from then Mayor Bienvenido Ignacio, the encroachment already was in existence and to remedy the situation, Mayor Ignacio offered to sell the area in question (which then also belonged to Ignacio) to petitioner at P100.00 per square meter which offer the latter claimed to have accepted. The sale, however, did not materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later mortgaged the lot to the Development Bank of the Philippines. The trial court decided the case in favor of respondent declaring him to be the rightful owner of the disputed 124-square-meter portion of the lot and ordering petitioner to surrender possession of the property to respondent and to cause, at its expense, the removal of any improvement thereon.

property cases batch 2

The Court of Appeals, on appeal, sustained the trial court but it ordered to be deleted the award to respondent of attorneys fees, as well as moral and exemplary damages, and litigation expenses. Petitioner went to this Court, via a petition for review, after the appellate court had denied the banks motion for reconsideration, here now contending that 1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN QUESTION; 2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN FAVOR OF PNB THE PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN TECNOGAS PHILIPPINES MANUFACTURING CORP. VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA 7.[1 The Regional Trial Court and the Court of Appeals have both rejected the idea that petitioner can be considered a builder in good faith. In the context that such term is used in particular reference to Article 448, et seq., of the Civil Code, a builder in good faith is one who, not being the owner of the land, builds on that land believing himself to be its owner and unaware of any defect in his title or mode of acquisition. The various provisions of the Civil Code, pertinent to the subject, read: Article 448. The owner of the land on which anything has been built, sown, or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such a case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. Article 450. The owner of the land on which anything has been built, planted or sown in bad faith may demand the demolition of the work, or that the planting or sowing be removed, in order to replace things in their former condition at the expense of the person who built, planted or sowed; or he may compel the builder or planter to pay the price of the land, and the sower the proper rent. A builder in good faith can, under the foregoing provisions, compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice

belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around.2 Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He much choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land.[3 In order, however, that the builder can invoke that accruing benefit and enjoy his corresponding right to demand that a choice be made by the landowner, he should be able to prove good faith on his part. Good faith, here understood, is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. An individuals personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry.[4 The essence of good faith lies in an honest belief in the validity of ones right, ignorance of a superior claim, and absence of intention to overreach another.5 Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.6 Given the findings of both the trial court and the appellate court, it should be evident enough that petitioner would fall much too short from its claim of good faith. Evidently, petitioner was quite aware, and indeed advised, prior to its acquisition of the land and building from Ignacio that a part of the building sold to it stood on the land not covered by the land conveyed to it. Equally significant is the fact that the building, constructed on the land by Ignacio, has in actuality been part of the property transferred to petitioner. Article 448, of the Civil Code refers to a piece of land whose ownership is claimed by two or more parties, one of whom has built some works (or sown or planted something) and not to a case where the owner of the land is the builder, sower, or planter who then later loses ownership of the land by sale or otherwise for, elsewise stated, where the true owner himself is the builder of works on his own land, the issue of good faith or bad faith is entirely irrelevant.[7] In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil Code. The Court commiserates with petitioner in its present predicament; upon the other hand, respondent, too, is entitled to his rights under the law, particularly after having long been deprived of the enjoyment of his property. Nevertheless, the Court expresses hope that the parties will still be able to come up with an arrangement that can be mutually suitable and acceptable to them. WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001 is AFFIRMED. No costs. SO ORDERED. G.R. No. L-26694 December 18, 1973

vs. HECTOR LAGUNA, HON. VALERION ROVIRA, Judge, Court of First Instance and HON. JUDGE ROSENDO BALTAZAR, Judge, City Court of Iloilo, respondents. ESGUERRA, J.: I. Nature of the Case The petitioner seeks a writ of certiorari with preliminary injunction to annul an Order of Hon. Rosendo Baltazar, as Judge of the City Court of Iloilo, dated June 30, 1966, ordering the demolition of the residential house of petitioner. 1Assailed likewise is an Order, dated August 25, 1966, of Hon. Valerio V. Rovira, as Judge of the Court of First Instance of Iloilo, stationed at Iloilo City, approving said demolition. 2 II. Facts of the Case The record of this case discloses the following facts: Private respondent Hector Laguda is the registered owner of a residential land known as lot No. 3508 situated at La Paz, Iloilo City 3 many years back, petitioner and her late husband, Dr. Ramon Bacaling, with the acquiescence of private respondent Laguda, constructed a residential house on a portion of said lot fronting Huevana Street, paying a monthly rental of P80.00. 4 Unable to pay the lease rental from July 1959 to September 1961, totalling P2,160.00, an action for ejectment (Civil Case No. 6823) was filed by private respondent Laguda against petitioner in her capacity as judicial administratrix of the estate of her late husband, Dr. Bacaling, in the City Court of Iloilo City. 5 The filing of said case spawned various court suits. Petitioner on July 23, 1962, filed certiorari proceedings in this Court (G.R. No. L-20061) but was dismissed for lack of merit on August 3, 1962. 6 With this setback, petitioner on November 12, 1962, filed with the Court of First Instance of Iloilo a petition for certiorari with preliminary injunction (Civil Case No. 6162) but the same was dismissed on December 1, 1962. 7 Unsuccessful in her motion for reconsideration, petitioner went to the Court of Appeals by way of certiorari (CA-G.R. No. 31882-R) but her petition was dismissed by that Court on March 7, 1967. 8 Suffering from these series of legal reverses, the petitioner entered into a compromise agreement on July 29, 1964, with private respondent Laguda relative to Civil Case No. 6823. 9 Said agreement inter alia, provides as follows: 1. Defendant (petitioner herein) agreed to vacate the premises and remove ... the residential house therefrom ... before December 31, 1966; 2. For the use and occupation ... of the said premises ... from June 1964 to December 31, 1969, the said defendant will pay plaintiff a monthly rent ... of Eighty (P80.00) Pesos per calendar month ...;

NELITA MORENO VDA. DE BACALING, petitioner, property cases batch 2 7

3. Upon failure of defendant to comply with any ... provision of the amicable settlement within ... fifty (50) days ... the plaintiff shall be entitled to "immediate execution to restore plaintiff in possession of the premises and to recover all the unpaid monthly rents from June 1, 1964 until said premises are vacated" by defendant; 4. Defendant "waive her right, under Sec. 6, Rule 39, Rules of Court, to bar enforcement of the execution of the judgment in the case at anytime within one year from December 31, 1969". In a decision dated July 30, 1964, the City Court of Iloilo City approved the amicable settlement and enjoined the parties to comply with its terms. For failure of the petitioner to satisfy the conditions of the settlement within the 50-day period, private respondent Laguda moved for execution which the Court granted on July 7, 1965. 10 On July 14, 1965, petitioner moved for reconsideration to quash the writ of execution, but before the Court could resolve the motion, petitioner on July 19, 1965, served notice of her intention to take the case to the Court of Appeals. 11 Meanwhile on July 23, 1965, respondent Laguda filed an opposition to the petitioner's July 14, 1965, motion, alleging that as judicial administratrix as of July 29, 1964, she was legally authorized to enter into the amicable settlement which was the basis of the decision dated July 30, 1964, of the City Court of Iloilo sought to be executed and, therefore, her act was binding upon the present judicial administrator, Atty. Roberto Dineros, who replaced petitioner upon her discharge as such on November 28, 1964. 12 Denying the petitioner's motion for reconsideration and to quash writ of execution on September 30, 1965, the City Court however, held in abeyance the enforcement of the alias writ of execution until the Court of First Instance of Iloilo stamped its imprimatur considering the pendency of Special Proceedings No. 1469 and of the fact that the properties involved therein are in custodia legis. 13 Thereafter, on October 25, 1965, private respondent Laguda moved the Court of First Instance of Iloilo in Special Proceedings No. 1469 for the approval of the City Court's order of execution which was granted despite petitioner's opposition. 14 With the denial of petitioner's motion for reconsideration on December 4, 1965, a petition for certiorari with preliminary injunction was brought before the Court of Appeals (CA-G.R. No. 36939-R) which dismissed the same on January 18, 1966. 15 On April 14, 1966, the respondent City Judge of Iloilo City issued an alias writ of execution upon representations of private respondent Laguda, copies of which were served sheriff upon the petitioner and Atty. Roberto Dineros in his capacity as judicial administrator of the estate of the deceased, Dr. Ramon Bacaling, in Special Proceedings No. 1469. 16 On June 30, 1966, a Special Order of Demolition was issued by the respondent City Judge upon motion of private respondent Laguda and over petitioner's opposition, subject, however, to the approval of the Court of First Instance of Iloilo in Special Proceedings No. 1469. 17 Upon the denial of petitioner's motion for reconsideration, respondent Laguda on July 12, 1966, filed a manifestation in the Court of First Instance of Iloilo in Special Proceedings No.

1469, praying for the confirmation of the Order to demolish the house under custodia legis. 18 On August 4, 1966, petitioner interposed an opposition alleging: 1. That she was no longer in control of the estate funds when the stipulated obligations in the amicable settlement became due and payable; 2. That the residential house to be demolished is worth P35,000.00 for which she is entitled to reimbursement as a builder in good faith, in addition to reasonable expenses they may incur in transferring the same to another place; and 3. That the guardian ad litem of the minor children was not notified of the motion for the issuance of an order of demolition; 19 On August 25, 1966, respondent Laguda by way of reply disputed petitioner's claim and supported the legality of the court's ruling. 20 On the same date, the probate court in Special Proceedings No. 1469 approved the order of demolition of the house in controversy. 21 Impugning the said Order as violative of the provisions of Sec. 14, Rule 39, of the Rules of Court, and of the constitutional mandate on due process, petitioner moved to reconsider the same but the motion was denied by the Court on September 26, 1966. 22 Frustrated in her effort to set aside the Order of Demolition, petitioner brought this present action of certiorari with preliminary injunction. Upon giving due course to the petition, this Court issued a temporary restraining order on October 21, 1966, to prevent the enforcement of the order of demolition in Special Proceedings No. 1469 of the Court of First Instance of Iloilo, but when served upon the respondents, the building in question was already partially demolished. 23 Upon petitioner's posting a bond of P1,000.00, this Court on November 10, 1966, issued a writ of preliminary injunction restraining the herein respondents from proceeding with the order of demolition, until further orders. 24 III. Issues of the Case The issues raised in the instant petition boil down to the following: 1. Whether or not the acts of the petitioner as judicial administratrix prior to her discharge or removal are valid and binding upon her successor; 2. Whether or not petitioner is a builder in good faith and, therefore, entitled to reimbursement, and/or reasonable expenses that may be incurred in transferring the house to another place; 3. Whether or not due process was denied to the minor children of deceased Ramon Bacaling, and petitioner in connection with the motion for the issuance of the order of demolition. IV. Discussion Petitioner claims before this Court that since she was no longer the judicial administratrix of the estate of her late husband, Dr. Ramon Bacaling, and was no longer in control of estate funds when the stipulated obligations in the

amicable settlement became due and payable, the special order of demolition could not be enforced. Such a view is not tenable. Under Section 3, Rule 82 of the Rules of Court, petitioner's lawful acts before the revocation of her letters of administration or before her removal shall have the same validity as if there was no such revocation or removal. It is elementary that the effect of revocation of letters testamentary or of administration is to terminate the authority of the executor or administrator, but the acts of the executor or administrator, done in good faith prior to the revocation of the letters, will be protected, and a similar protection will be extended to rights acquired under a previous grant of administration. 25 In connection with the petitioner's contention that she be considered a builder in good faith and, therefore, entitled to reimbursement in addition to reasonable expenses that may be incurred in transferring the house to another place, the same cannot stand legal scrutiny. The rule is well-settled that lessees, like petitioner, are not possessors in good faith, because they knew that their occupancy of the premises continues only during the life of the lease, and they cannot as a matter of right, recover the value of their improvements from the lessor, much less retain the premises until they are reimbursed. Their rights are governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects. 26 It is next urged by petitioner that there was a denial of process for failure of private respondent to notify the guardian ad litem of the minor children of the deceased Ramon Bacaling, of the motion for execution. A perusal of the pleadings yields the conclusion that petitioner failed to meet the burden of demonstrating that there was denial of due process. On the contrary, there is evidence to show that Acting Fiscal Alfonso Illemberger guardian ad litem of the minor children of the late Ramon Bacaling, has been duly apprised of the issuance of the assailed special order to demolish, as shown by the certification of the counsel for petitioner at the foot of his opposition dated August 4, 1966, 27 filed with the Court of First Instance of Iloilo, and as also shown by the certification of private respondent's counsel at the foot of his opposition dated September 15, 1966, 28 likewise filed with the same Court. V. Conclusion The petitioner is not entitled to the writ of certiorari. In the case at bar, there is absolutely no showing that the respondent courts acted so "arbitrarily", "despotically" or "capriciously" as to amount to lack of jurisdiction in issuing the questioned orders. "Grave abuse of discretion" which is a ground for certiorari means "such capricious and arbitrary exercise of judgment as is equivalent, in the eyes of the law, to lack of jurisdiction." 29 Even mere abuse of discretion is not sufficient by itself to justify the issuance of a writ of certiorari. For that purpose the abuse of discretion must be grave and patent, and it must be shown that it was exercised arbitrarily or despotically, which is not the case made out by the present petition. 30

property cases batch 2

There is something more to be said about the nature and apparent purpose of this case which has its genesis in the case for illegal detainer (Civil Case No. 6823) brought before the Iloilo City Court. What transpired therein presents a glaring example of a summary proceeding which was deliberately protracted and made to suffer undue delay in its disposal. It was originally filed on September 13, 1960; 31 it reached the appellate courts five (5) times, twice before the Court of Appeals 32, Once before the Court of First Instance of Iloilo 33, and twice before this Court. 34 The present petition smacks of a dilatory tactic and a frivolous attempt resorted to by petitioner to frustrate the prompt termination of the ejectment case and to prolong litigation unnecessarily. Such conduct on the part of petitioner and her counsel deserves the vigorous condemnation of this Court, 35 because it evinces a flagrant misuse of the remedy of certiorari which should only be resorted to in case of lack of jurisdiction or grave abuse of discretion by a inferior court. A recourse of this kind unduly taxes the energy and patience of courts and simply wastes the precious time that they could well devote to really meritorious cases. VI. Judgment IN THE LIGHT OF THE FOREGOING CONSIDERATIONS, the instant petition should be, as it is hereby, dismissed. The writ of preliminary injunction issued by this Court on November 10, 1966, is immediately set aside. 36 Treble costs against the petitioner for the reasons above set forth. 37 G.R. No. 144635 June 26, 2006

leased premises in question, namely, the Piazza Hotel and the Mariveles Lodge, situated at theBataan Export Processing Zone (BEPZ) Compound in Mariveles, Bataan, at the rate of six thousand five hundred pesos (P6,500.00) per month for both establishments, starting in August 1989 with legal interest at 6% per annum, up to and until the legal arrearages shall have been fully paid, and to pay the succeeding rentals therefor at the same rate. SO ORDERED.[4] The controversy arose from the following facts. BASECO was the owner of Piazza Hotel and Mariveles Lodge, both located in Mariveles,Bataan. On May 14, 1986, BASECO granted petitioner a contract of lease over Piazza Hotel at a monthly rental of P6,500 for three years, i.e., from January 1, 1986 to January 1, 1989, subject to renewal by mutual agreement of the parties.After the expiration of the three-year lease period, petitioner was allowed to continue operating the hotel on monthly extensions of the lease.

claim of ownership of Piazza Hotel and Mariveles Lodge. In fact, [petitioner] has not presented evidence proving its ownership of the said buildings[, whereas respondent presented] a tax declaration and certificate of title over the same properties, over which it now exercises full control and dominion.The fact that the subject properties were placed under sequestration is of no moment for the PCGG is not an owner but a conservator who can exercise only powers of administration over property sequestered, frozen or provisionally taken over. As the owner of said properties, [respondent-intervenor] is entitled to the payment of the monthly rental in the sum of P6,500.00 as ruled by the trial court.[8] (emphasis ours) We agree with the appellate court. Time and again, we have ruled that factual matters are best evaluated by trial courts which can scrutinize evidence and hear testimony presented and offered by the parties (in this case, on the issue of ownership of the subject property).All the more does this principle ring true in this petition since such factual determination by the RTC was upheld by the CA.[9] Only questions of law are the proper subject of a petition for review on certiorari in this Court, unless any of the known exceptions is extant in this case.[10]There is none. The evidence clearly established respondent's ownership of Piazza Hotel.[11] First, the title of the land on which Piazza Hotel stands was in the name of respondent.[12] Second, Tax Declaration No. 12782 was in the name of respondent as owner of Piazza Hotel.[13] A note at the back of the tax declaration read: Transferred by virtue of a final bill of sale executed by the Provincial [Treasurer] of Bataan in favor of the Provincial Government on Feb. 13, 1989[, a] year after the expiration of the redemption period from date of auction sale held on Feb. 12, 1988 of all real property declared in the name of [BASECO]. [14] (emphasis ours) Third, petitioner was doubtlessly just a lessee.In the lease contract annexed to the complaint, petitioner in fact admitted BASECO's (respondent's predecessor-in-interest) ownership then of the subject property. A stipulation in the contract read: WHEREAS, the lessor (BASECO) is the owner of the building PIAZZA HOTELand its outlet MARIVELES LODGE located at BASECO, Mariveles, Bataan xxx [15] (emphasis ours) The Rules of Court states that '[a]n admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.[16] [Such admissions] may be made in (a) the pleadings filed by the parties, (b) in the course of the trial either by verbal or written manifestations or stipulations, or (c) in other stages of the judicial proceeding, as in the pre-trial of the case. Admissions obtained property cases batch 2 9

In April 1989, however, the Presidential Commission on Good Government (PCGG) issued a sequestration order against BASECO pursuant to Executive Order No. 1 of former President Corazon C. Aquino.[5] Among the properties provisionally seized and taken over was the lot on which Piazza Hotel stood. On July 19, 1989, however, Piazza Hotel was sold at a public auction for non-payment of taxes to respondent Province of Bataan. The title of the property was transferred to respondent. BASECO's Transfer Certificate of Title (TCT) No. T-59631 was cancelled and a new one, TCT No. T-128456, was issued to the Province of Bataan. On July 21, 1989, petitioner filed a complaint for preliminary injunction and collection of sum of money against BASECO (Civil Case No. 129ML).[6]Respondent, as the new owner of the property, filed a motion for leave to intervene on November 22, 1990. After its motion was granted, respondent filed a complaint-in-intervention praying, inter alia, that petitioner be ordered to vacate Piazza Hotel and Mariveles Lodge for lack of legal interest. During the pre-trial of the complaint-in-intervention, the parties agreed that the case[7]be tried on the sole issue of whether respondent province, as complainant-intervenor, was the legitimate owner of the Piazza Hotel and Mariveles Lodge. On February 3, 1995, after trial on the merits, the trial court rendered judgment in favor of respondent. On appeal, the CA addressed the issue of ownership of Piazza Hotel and Mariveles Lodge as follows: [W]e affirm the trial court's ruling that [respondent] Province of Bataan has established by preponderance of evidence its

PROGRAMME INCORPORATED, petitioner, vs. PROVINCE OF BATAAN, respondent. CORONA, J.: In this petition filed under Rule 45 of the Rules of Court, petitioner ProgrammeIncorporated contests the Court of Appeals (CA) decision[2] and resolution[3] upholding respondent Province of Bataan's ownership of Piazza Hotel and the land on which it stands. The assailed decision in CA-G.R. CV No. 49135 affirmed the decision of the Regional Trial Court (RTC), Branch 4, Balanga, Bataan in a suit for preliminary injunction and sum of money filed by petitioner against Bataan Shipyard and Engineering Co., Inc. (BASECO).The case was docketed as Civil Case No. 129-ML. The dispositive portion of the trial court decision read: WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered dismissing the complaint, without pronouncement as to costs. Similarly, [BASECO's ] counterclaim is dismissed. On the complaint in intervention, judgment is hereby rendered ordering [petitioner] to pay [respondent] the rentals for the

through depositions, written interrogatories or requests for admission are also considered judicial admissions.[17] (emphasis ours) To be considered as a judicial admission, the same must be made in the same case in which it is offered.[18] In its own complaint[19] for preliminary injunction and sum of money, petitioner acknowledged that it was not the owner of the property when it stated that '[BASECO] lease[d] to [petitioner] the building Piazza Hotel and its outlet Mariveles Lodge xxx for monthly rentals of P6,500.00.[20] Petitioner could not possibly be the owner of a building merely leased to it.[21] Furthermore, petitioner's reference to Article 448[22] of the Civil Code to justify its supposed rights as 'possessor in good faith was erroneous. The benefits granted to a possessor in good faith cannot be maintained by the lessee against the lessor because, such benefits are intended to apply only to a case where one builds or sows or plants on land which he believes himself to have a claim of title and not to lands wherein one's only interest is that of a tenant under a rental contract, otherwise, it would always be in the power of a tenant to improve his landlord out of his property.Besides, as between lessorand lessee, the Code applies specific provisions designed to cover their rights. Hence, the lessee cannot claim reimbursement, as a matter of right, for useful improvements he has made on the property, nor can he assert a right of retention until reimbursed.His only remedy is to remove the improvement if the lessor does not choose to pay its value; but the court cannot give him the right to buy the land.[23] Petitioner's assertion that Piazza Hotel was constructed 'at (its) expense found no support in the records. Neither did any document or testimony prove this claim. At best, what was confirmed was that petitioner managed and operated the hotel. There was no evidence that petitioner was the one which spent for the construction or renovation of the property. And since petitioner's alleged expenditures were never proven, it could not even seek reimbursement of one-half of the value of the improvements upon termination of the lease under Article 1678[24] of the Civil Code. Finally, both the trial and appellate courts declared that the land as well as the improvement thereon (Piazza Hotel) belonged to respondent.We find no reason to overturn this factual conclusion. Since this petition for review on certiorari was clearly without legal and factual basis, petitioner's counsel should not have even filed this appeal.It is obvious that the intention was merely to delay the disposition of the case. WHEREFORE, the petition is hereby DENIED. The decision and resolution of the Court of Appeals in CA-G.R. CV No. 49135 are AFFIRMED. Costs against petitioner.Same costs against Atty. Benito R. Cuesta I, petitioner's counsel, for filing this flimsy appeal, payable within ten (10) days from finality of this decision. SO ORDERED.

G.R. No. 170923

January 20, 2009

SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and JOSE MARCEL E. PANLILIO, petitioners, vs. NAYONG PILIPINO FOUNDATION, respondent.

twenty-six million one hundred eighty-three thousand two hundred twenty-five pesos and fourteen centavos (P26,183,225.14), as of July 31, 2001. On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled, thus: . . . . The court is convinced by the evidence that indeed, defendants defaulted in the payment of their rentals. It is basic that the lessee is obliged to pay the price of the lease according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to pay the stipulated rentals, the lessor may eject (sic) and treat the lease as rescinded and sue to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1).For non-payment of rentals, the lessor may rescind the lease, recover the back rentals and recover possession of the leased premises. . . xxx . . . . Improvements made by a lessee such as the defendants herein on leased premises are not valid reasons for their retention thereof. The Supreme Court has occasion to address a similar issue in which it ruled that: The fact that petitioners allegedly made repairs on the premises in question is not a reason for them to retain the possession of the premises. There is no provision of law which grants the lessee a right of retention over the leased premises on that ground. Article 448 of the Civil Code, in relation to Article 546, which provides for full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on a land in the belief that he is the owner thereof. This right of retention does not apply to a mere lessee, like the petitioners, otherwise, it would always be in his power to improve his landlord out of the latters property (Jose L. Chua and Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No. 109840, January 21, 1999). Although the Contract of Lease stipulates that the building and all the improvements in the leased premises belong to the defendants herein, such will not defeat the right of the plaintiff to its property as the defendants failed to pay their rentals in violation of the terms of the contract. At most, defendants can only invoke [their] right under Article 1678 of the New Civil Code which grants them the right to be reimbursed one-half of the value of the building upon the termination of the lease, or, in the alternative, to remove the improvements if the lessor refuses to make reimbursement. The dispositive portion of the decision reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all persons claiming rights under it, ordering the latter to: 1. VACATE the subject premises and surrender possession thereof to plaintiff; property cases batch 2 10

PUNO, C.J.: On appeal are the Court of Appeals (CAs) October 4, 2005 Decision[1] in CA-G.R. SP No. 74631 and December 22, 2005 Resolution,[2] reversing the November 29, 2002 Decision[3] of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133. The RTC modified the Decision[4] of the Metropolitan Trial Court (MeTC) of Pasay City which ruled against petitioners and ordered them to vacate the premises and pay their arrears. The RTC declared petitioners as builders in good faith and upheld their right to indemnity. The facts are as follows: Respondent Nayong Pilipino Foundation, a government-owned and controlled corporation, is the owner of a parcel of land in Pasay City, known as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc. (PVHI), formerly called Sulo sa Nayon, Inc., is a domestic corporation duly organized and existing under Philippine laws. Petitioner Jose Marcel E. Panlilio is its Senior Executive Vice President. On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of 36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of a hotel building, to be known as the Philippine Village Hotel. The lease was for an initial period of 21 years, or until May 1996. It is renewable for a period of 25 years under the same terms and conditions upon due notice in writing to respondent of the intention to renew at least 6 months before its expiration. Thus, on March 7, 1995, petitioners sent respondent a letter notifying the latter of their intention to renew the contract for another 25 years. On July 4, 1995, the parties executed a Voluntary Addendum to the Lease Agreement. The addendum was signed by petitioner Jose Marcel E. Panlilio in his official capacity as Senior Executive Vice President of the PVHI and by Chairman Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to the renewal of the contract for another 25 years, or until 2021. Under the new agreement, petitioner PVHI was bound to pay the monthly rental on a per square meter basis at the rate of P20.00 per square meter, which shall be subject to an increase of 20% at the end of every 3-year period. At the time of the renewal of the lease contract, the monthly rental amounted to P725,780.00. Beginning January 2001, petitioners defaulted in the payment of their monthly rental. Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises. The last demand letter was sent on March 26, 2001. On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC of Pasay City. The complaint was docketed as Civil Case No. 708-01. Respondent computed the arrears of petitioners in the amount of

2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION ONE HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED TWENTY FIVE PESOS AND 14/100 (P26,183,225.14) incurred as of July 31, 2001; 3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per month starting from August 2001 and every month thereafter by way of reasonable compensation for the use and occupation of the premises; 4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by way of attorneys fees[; and] 5. PAY the costs of suit.

. . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI was constructed with the written consent and knowledge of appellee. In fact, it was precisely the primary purpose for which they entered into an agreement. Thus, it could not be denied that appellants were builders in good faith. Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code, plaintiff-appellee has the sole option or choice, either to appropriate the building, upon payment of proper indemnity consonant to Art. 546 or compel the appellants to purchase the land whereon the building was erected. Until such time that plaintiff-appellee has elected an option or choice, it has no right of removal or demolition against appellants unless after having selected a compulsory sale, appellants fail to pay for the land (Ignacio vs. Hilario; 76 Phil. 605). This, however, is without prejudice from the parties agreeing to adjust their rights in some other way as they may mutually deem fit and proper. The dispositive portion of the decision of the RTC reads as follows: WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying the decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as follows: 1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of a copy of this decision a written manifestation of the option or choice it selected, i.e., to appropriate the improvements upon payment of proper indemnity or compulsory sale of the land whereon the hotel building of PVHI and related improvements or facilities were erected; 2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in the furtherance or exercise of its rights and demolition against appellants unless and after having selected the option of compulsory sale and appellants failed to pay [and] purchase the land within a reasonable time or at such time as this court will direct; 3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent incurred as of July 31, 2001 in the amount of P26,183,225.14; 4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid monthly rentals for the use and occupation of the premises pending this appeal from July to November 2002 only at P725,780.00 per month; 5. The fourth and fifth directives in the dispositive portion of the trial courts decision including that the last paragraph thereof JME Panlilios complaint is hereby affirmed;

6. The parties are directed to adjust their respective rights in the interest of justice as they may deem fit and proper if necessary. SO ORDERED.[6] Respondent appealed to the CA which held that the RTC erroneously applied the rules on accession, as found in Articles 448 and 546 of the Civil Code when it held that petitioners were builders in good faith and, thus, have the right to indemnity. The CA held: By and large, respondents are admittedly mere lessees of the subject premises and as such, cannot validly claim that they are builders in good faith in order to solicit the application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring error on the part of the RTC to apply the aforesaid legal provisions on the supposition that the improvements, which are of substantial value, had been introduced on the leased premises with the permission of the petitioner. To grant the respondents the right of retention and reimbursement as builders in good faith merely because of the valuable and substantial improvements that they introduced to the leased premises plainly contravenes the law and settled jurisprudential doctrines and would, as stated, allow the lessee to easily improve the lessor out of its property. . . . . Introduction of valuable improvements on the leased premises does not strip the petitioner of its right to avail of recourses under the law and the lease contract itself in case of breach thereof. Neither does it deprive the petitioner of its right under Article 1678 to exercise its option to acquire the improvements or to let the respondents remove the same. Petitioners Motion for Reconsideration was denied. Hence, this appeal.[7] Petitioners assign the following errors: I. THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT PETITIONERS WERE BUILDERS IN GOOD FAITH OVER THE SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH THEY HAD INTRODUCED ON THE SUBJECT PROPERTY, THUS COMPELLING THE APPLICATION OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE, INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE. II. THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS REVERSIBLE ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE CONTRACT GOVERNS THE RELATIONSHIP OF THE PARTIES AND CONSEQUENTLY THE PARTIES MAY BE CONSIDERED TO

The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack of cause of action. The said defendants counterclaim however is likewise dismissed as the complaint does not appear to be frivolous or maliciously instituted. SO ORDERED.[5] Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that: . . . it is clear and undisputed that appellants-lessees were expressly required to construct a first-class hotel with complete facilities. The appellants were also unequivocally declared in the Lease Agreement as the owner of the improvements so constructed. They were even explicitly allowed to use the improvements and building as security or collateral on loans and credit accommodations that the Lessee may secure for the purpose of financing the construction of the building and other improvements (Section 2; pars. A to B, Lease Agreement). Moreover, a time frame was setforth (sic) with respect to the duration of the lease initially for 21 years and renewable for another 25 years in order to enable the appellants-lessees to recoup their huge money investments relative to the construction and maintenance of the improvements. xxx Considering therefore, the elements of permanency of the construction and substantial value of the improvements as well as the undispute[d] ownership over the land improvements, these, immensely engender the application of Art. 448 of the Civil Code. The only remaining and most crucial issue to be resolved is whether or not the appellants as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the Civil Code may apply with respect to their rights over improvements. xxx

property cases batch 2

11

HAVE IMPLIEDLY WAIVED THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE TO THE INSTANT CASE. III. ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN GOOD FAITH, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR WHEN IT OVERLOOKED THE FACT THAT RESPONDENT ALSO ACTED IN BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES, THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.

interpretation of the notice given to them. Hence, when the petitioners demanded that either he pays P18,000 in five days or a case of ejectment would be filed against him, he was placed on notice to move out if he does not pay.There was, in effect, a notice or demand to vacate.[9] In the case at bar, the language of the demand letter is plain and simple: respondent demanded payment of the rental arrears amounting to P26,183,225.14 within ten days from receipt by petitioners, or respondent will be constrained to file an appropriate legal action against petitioners to recover the said amount. The demand letter further stated that respondent will possess the leased premises in case of petitioners failure to pay the rental arrears within ten days. Thus, it is clear that the demand letter is intended as a notice to petitioners to pay the rental arrears, and a notice to vacate the premises in case of failure of petitioners to perform their obligation to pay. Second, we resolve the main issue of whether the rules on accession, as found in Articles 448 and 546 of the Civil Code, apply to the instant case. Article 448 and Article 546 provide: Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. We uphold the ruling of the CA. The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains: This article [Article 448] is manifestly intended to apply only to a case where one builds, plants, or sows on land in which he believes himself to have a claim of title,[10]and not to lands where the only interest of the builder, planter or sower is that of a holder, such as a tenant.[11]

In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they recognize that the respondent is the owner of the land. What petitioners insist is that because of the improvements, which are of substantial value, that they have introduced on the leased premises with the permission of respondent, they should be considered builders in good faith who have the right to retain possession of the property until reimbursement by respondent.

IV. TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE WOULD NOT ONLY WREAK HAVOC AND CAUSE SUBSTANTIAL INJURY TO THE RIGHTS AND INTERESTS OF PETITIONER PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT NAYONG PILIPINO FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO WOULD CONSTITUTE UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT EXPENSE AND GRAVE PREJUDICE OF PETITIONERS. V. THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE JURISDICTION OVER THE UNLAWFUL DETAINER CASE FOR NON-COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE OF A NOTICE TO VACATE UPON PETITIONERS.[8] First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire jurisdiction to hear and decide the ejectment case because they never received any demand from respondent to pay rentals and vacate the premises, since such demand is a jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and CA. Contrary to the claim of petitioners, documentary evidence proved that a demand letter dated March 26, 2001 was sent by respondent through registered mail to petitioners, requesting them to pay the rental arrears or else it will be constrained to file the appropriate legal action and possess the leased premises. Further, petitioners argument that the demand letter is inadequate because it contained no demand to vacate the leased premises does not persuade. We have ruled that: . . . . The word vacate is not a talismanic word that must be employed in all notices.The alternatives in this case are clear cut. The tenants must pay rentals which are fixed and which became payable in the past, failing which they must move out. There can be no other

We affirm the ruling of the CA that introduction of valuable improvements on the leased premises does not give the petitioners the right of retention and reimbursement which rightfully belongs to a builder in good faith. Otherwise, such a situation would allow the lessee to easily improve the lessor out of its property. We reiterate the doctrine that a lessee is neither a builder in good faith nor in bad faith[12] that would call for the application of Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code, which reads: 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 onehalf of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. Under Article 1678, the lessor has the option of paying one-half of the value of the improvements which the lessee made in good faith, which are suitable for the use for which the lease is intended, and which have not altered the form and substance of the land. On the other hand, the lessee may remove the improvements should the lessor refuse to reimburse. Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as it would amount to giving away the hotel and its other structures at virtually bargain prices. They allege that the value of the hotel and its appurtenant facilities amounts to more than two billion pesos, while the monetary claim of respondent against them only amounts to a little more than twenty sixmillion pesos. Thus, they contend that it is the lease contract that governs the relationship of the parties, and consequently, the parties may be considered to have impliedly waived the application of Article 1678. We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are deemed incorporated in each and every contract. Existing laws always form part of any contract. Further, the lease contract in the case at bar property cases batch 2 12

shows no special kind of agreement between the parties as to how to proceed in cases of default or breach of the contract. Petitioners maintain that the lease contract contains a default provision which does not give respondent the right to appropriate the improvements nor evict petitioners in cases of cancellation or termination of the contract due to default or breach of its terms. They cite paragraph 10 of the lease contract, which provides that:

at P410.00. In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about November 1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot and built thereon a house of light materials (barong- barong) without any agreement as to payment for the use of said residential lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in favor of FLOREZA. 1 On the following dates, the EVANGELISTAS again borrowed the indicated amounts: September 16, 1946 P100.00; 2 August 17, 1947 3 P200,00; January 30, 1949 P200.00; 4 April 1, 1949 P140.00, 5 or a total of P740.00 including the first loan. The last three items are evidenced by private documents stating that the residential lot stands as security therefor and that the amounts covered thereunder are payable within six years from date, without mention of interest. The document executed on September 16, 1946 stated specifically that the loan was without interest "walang anumang patubo." On January 10, 1949, FLOREZA demolished this house of light materials and in its place constructed one of strong materials assessed in his name at P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no rental as before. 6 On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with a right to repurchase within a period of 6 years from date, or up to August 1, 1955, as evidenced by a notarial document, Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No. 2147. 7 On January 2, 1955, or seven months before the expiry of the repurchase period, the EVANGELISTAS paid in full the repurchase price of P1,000.00. On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a letter 8 asking him to vacate the premises as they wanted to make use of their residential lot besides the fact that FLOREZA had already been given by them more than one year within which to move his house to another site. On May 4, 1956, the EVANGELISTAS made a formal written demand to vacate, within five days from notice, explaining that they had already fully paid the consideration for the repurchase of the lot. 9 FLOREZA refused to vacate unless he was first reimbursed the value of his house. Hence, the filing of this Complaint on May 18, 1956 by the EVANGELISTAS. The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong materials built by FLOREZA on their residential lot, without payment of indemnity; or, in the alternative to order FLOREZA to remove said house; 2) that FLOREZA pay them the sum of P10.00 per month as the reasonable value for the use and occupation of the same from January 2, 1955 (the date the repurchase price was paid) until FLOREZA removes the house and delivers the lot to them; and 3) to declare the transaction between them and FLOREZA as one of mortgage and not of pacto de retro.

In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would execute a deed of repurchase and leave the premises upon payment to him of the reasonable value of the house worth P7,000.00. In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the question of whether the transaction between the parties is one of mortgage or pacto de retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid. And, applying Article 448 of the Civil Code, 10 it rendered a decision dispositively decreeing: FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment granting the plaintiffs the right to elect, as owners of the land, to purchase the house built, on the said lot in question by the defendant for P2,500 or to sell their said land to e defendant for P1,500. In the event that the plaintiffs shall decide not to purchase the house in question the defendant should be allowed to remain in plaintiffs' premises by, paying a monthly rental of P10.00 which is the reasonable value for the use of the same per month as alleged by plaintiffs in their complaint. The Court also orders the defendant to pay a monthly rental of P10.00 for the use of the land in question from May 18, 1956, the date of the commencement of this action. The counterclaim of the defendant is hereby ordered dismissed. Without pronouncement as to costs. SO ORDERED. 11 Both parties appealed to the Court of Appeals. On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement for his house but that he could remove the same at his expense; and accordingly rendered judgment thus: WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-appellant Mariano Floreza to vacate plaintiffs' residential lot described in the complaint and to pay rental of P10.00 a month from May 5, 1956, until he (defendant) shall have vacated the premises; (2) ordering defendant to remove his house from the land in question within 30 days from the time this decision becomes final and executory; (3) ordering the Register of Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol. 36, in the Registration Book under Act 3344 upon payment of his lawful fees; and (4) taxing the costs in both instances against defendant-appellant Mariano Floreza. 12 Hence, this Petition for Review on certiorari by FLOREZA, seeking a reversal of the aforestated judgment and ascribing the following errors: 1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in bad faith without likewise holding that respondents as owners of the land in dispute, were likewise in bad faith and therefore both parties should in accordance with Art. 453 of the New Civil Code be considered as having acted in good faith. property cases batch 2 13

10. DEFAULT. - . . . Default shall automatically take place upon the failure of the LESSEE to pay or perform its obligation during the time fixed herein for such obligations without necessity of demand, or, if no time is fixed, after 90 days from the receipt of notice or demand from the LESSOR. . . In case of cancellation or termination of this contract due to the default or breach of its terms, the LESSEE will pay all reasonable attorneys fees, costs and expenses of litigation that may be incurred by the LESSOR in enforcing its rights under this contract or any of its provisions, as well as all unpaid rents, fees, charges, taxes, assessment and others which the LESSOR may be entitled to. Petitioners assert that respondent committed a breach of the lease contract when it filed the ejectment suit against them. However, we find nothing in the above quoted provision that prohibits respondent to proceed the way it did in enforcing its rights as lessor. It can rightfully file for ejectment to evict petitioners, as it did before the court a quo. IN VIEW WHEREOF, petitioners appeal is DENIED. The October 4, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 74631 and its December 22, 2005 Resolution are AFFIRMED. Costs against petitioners. SO ORDERED. G.R. No. L-25462 February 21, 1980

MARIANO FLOREZA, petitioner, vs. MARIA D. de EVANGELISTA and SERGIO EVANGELISTA, respondents. MELENCIO-HERRERA, J: This is a Petition for Review on certiorari of the Decision of the Court of Appeals (CA-G.R. No. 23516-R) promulgated on November 4, 1965, entitled "Maria de Evangelista and Sergio Evangelists, (now the respondents) vs. Mariano Floreza (petitioner herein)," reversing the judgment of the Court of First Instance of Rizal rendered on July 17, 1957, and instead ordering petitioner to vacate respondents' residential lot, to remove his house at his own expenses and to pay rental from May 5, 1956. Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms., assessed

2) That the Court of Appeals erred in completely ignoring the issue raised on appeal as to whether or not respondents as owners of the questioned lot, were in bad faith in the sense that they had knowledge of and acquiseced to the construction of the house of petitioner on their lot. 3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in the adjudication of the rights of petitioner and respondent. 4) That the Court of Appeals erred in declaring that petitioner is not entitled to reimbursement for the value of his house and that he should instead remove the same at his expense. 5) That the Court of Appeals erred in adjudging petitioner to vacate respondents' lot in question and to pay rentals commencing from May 5, 1956, until he shall have vacated the premises, notwithstanding that petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to retention without payment of rental while the corresponding indemnity of his house had not been paid. 6) That the Court of Appeals erred in taxing costs against petitioner. 7) That the Court of Appeals erred in not awarding petitioner's counterclaim. During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered substituted by her son, petitioner Sergio, as her legal representative, in a Resolution dated May 14, 1976. On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA had since died and that his heirs had voluntarily vacated the residential lot in question. The date FLOREZA passed away and the date his heirs had voluntarily vacated the property has not been stated. Required to comment, "petitioner (represented by his heirs)", through counsel, confirmed his death and the removal of the house and manifested that thereby the question of reimbursement had moot and academic. He objected to the dismissal of the case, however, on the ground that the issue of rentals still pends. On January 21, 1980, complying with a Resolution of 'his Court, the EVANGELISTAS clarified that the dismissal they were praying for was not of the entire case but only of this Petition for Review on Certiorari. We are not in agreement that the question of reimbursement of the value of the improvement erected on the subject property has become moot. Petitioner's right of retention of subject property until he is reimbursed for the value of his house, as he had demanded, is inextricably linked with the question of rentals. For if petitioner has the right to indemnity, he has the right of retention and no rentals need be paid. Conversely, if no right of retention exists, damages in the form of rentals for the continued use and occupation of the property should be allowed. We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable to the factual milieu herein. Said codal provision

applies only when the builder, planter, or sower believes he had the right so to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title. 13 In this case, petitioner makes no pretensions of ownership whatsoever. Petitioner concedes that he was a builder in bad faith but maintains that' the EVANGELISTAS should also be held in bad faith, so that both of them being in bad faith, Article 453 of the Civil Code 14 should apply. By the same token, however, that Article 448 of the same Code is not applicable, neither is Article 453 under the ambiance of this case. Would petitioner, as vendee a retro, then be entitled to the rights granted iii Article 1616 of the Civil Code (Art. 1518 of the old Code)? To quote: Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition: (1) The expenses of the contract, and any other legitimate payments made by reason of the sale; (2) The necessary and useful expenses made on the thing sold. The question again calls for a negative answer. It should be noted that petitioner did not construct his house as a vendee a retro. The house had already been constructed as far back as 1949 (1945 for the house of light materials) even before the pacto de retro sale in 1949. Petitioner incurred no useful expense, therefore, after that sale. The house was already there at the tolerance of the EVANGELISTAS in consideration of the several loans extended to them. Since petitioner cannot be classified as a builder in good faith within the purview of Article 448 of the Civil Code, nor as a vendee a retro, who made useful improvements during the lifetime of the pacto de retro, petitioner has no right to reimbursement of the value of the house which he had erected on the residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed.The rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil (Art. 487 of the old Code), may make on the property useful improvements but with no right to be indemnified therefor. He may, however, remove such improvements should it be possible to do so without damage to the property: For if the improvements made by the usufructuary were subject to indemnity, we would have a dangerous and unjust situation in which the usufructuary could dispose of the owner's funds by compelling him to pay for improvements which perhaps he would not have made. 15 We come now to the issue of rentals. It is clear that from the date that the redemption price had been paid by the EVANGELISTAS on January 2, 1955, petitioner's right to the use of the residential lot without charge had ceased. Having retained the property although a redemption had been made, he should be held liable for damages in the form of rentals for the continued use of the subject residential lot 16 at the rate of P10.00 monthly from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court of Appeals, until the house was removed and the property vacated by petitioner or his heirs.

WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that payment of rentals by the heir, of Mariano Floreza, who are hereby ordered substituted for him, shall commence on January 3, 1955 until the date that the residential lot in question was vacated. Costs against petitioner. SO ORDERED. G.R. No. 152766 June 20, 2003

LILIA SANCHEZ, petitioner, vs. COURT OF APPEALS, HON. VICTORINO S. ALVARO as Presiding Judge, RTC-Br. 120, Caloocan City, and VIRGINIA TERIA, respondents. BELLOSILLO, J.: This is a Special Civil Action for Certiorari under Rule 65 of the Rules of Court to annul and set aside the Decision of the Court of Appeals dated 23 May 2001 as well as its Resolution dated 8 January 2002 in CA-G.R. SP No. 59182. Lilia Sanchez, petitioner, constructed a house on a 76-square meter lot owned by her parents-in-law. The lot was registered under TCT No. 263624 with the following co-owners: Eliseo Sanchez married to Celia Sanchez, Marilyn Sanchez married to Nicanor Montalban, Lilian Sanchez, widow, Nenita Sanchez, single, Susana Sanchez married to Fernando Ramos, and Felipe Sanchez.[1] On 20 February 1995, the lot was registered under TCT No. 289216 in the name of private respondent Virginia Teria by virtue of a Deed of Absolute Sale supposed to have been executed on 23 June 1995[2] by all six (6) co-owners in her favor.[3] Petitioner claimed that she did not affix her signature on the document and subsequently refused to vacate the lot, thus prompting private respondent Virginia Teria to file an action for recovery of possession of the aforesaid lot with the Metropolitan Trial Court (MeTC) of Caloocan City sometime in September 1995, subsequently raffled to Br. 49 of that court. On 12 February 1998, the MeTC-Br. 49 of Caloocan City ruled in favor of private respondent declaring that the sale was valid only to the extent of 5/6 of the lot and the other 1/6 remaining as the property of petitioner, on account of her signature in the Deed of Absolute Sale having been established as a forgery. Petitioner then elevated her appeal to the Regional Trial Court of Caloocan City, subsequently assigned to Br. 120, which ordered the parties to file their respective memoranda of appeal. Counsel for petitioner did not comply with this order, nor even inform her of the developments in her case. Petitioner not having filed any pleading with the RTC of Caloocan City, the trial court affirmed the 27 July 1998 decision of the MeTC. On 4 November 1998, the MeTC issued an order for the issuance of a writ of execution in favor of private respondent Virginia Teria, buyer of the property. On 4 November 1999 or a year later, a Notice to Vacate was served by the sheriff upon petitioner who however refused to heed the Notice. property cases batch 2 14

On 28 April 1999 private respondent started demolishing petitioners house without any special permit of demolition from the court. Due to the demolition of her house which continued until 24 May 1999 petitioner was forced to inhabit the portion of the premises that used to serve as the houses toilet and laundry area. On 29 October 1999 petitioner filed her Petition for Relief from Judgment with the RTC on the ground that she was not bound by the inaction of her counsel who failed to submit petitioners appeal memorandum. However the RTC denied the Petition and the subsequent Motion for Reconsideration. On 14 June 2000 petitioner filed her Petition for Certiorari with the Court of Appeals alleging grave abuse of discretion on the part of the court a quo. On 23 May 2001 the appellate court dismissed the petition for lack of merit. On 18 June 2001 petitioner filed a Motion for Reconsideration but the Court of Appeals denied the motion in its Resolution of 8 January 2002. The only issue in this case is whether the Court of Appeals committed grave abuse of discretion in dismissing the challenged case before it. As a matter of policy, the original jurisdiction of this Court to issue the so-called extraordinary writs should generally be exercised relative to actions or proceedings before the Court of Appeals or before constitutional or other tribunals or agencies the acts of which for some reason or other are not controllable by the Court of Appeals. Where the issuance of the extraordinary writ is also within the competence of the Court of Appeals or the Regional Trial Court, it is either of these courts that the specific action for the procurement of the writ must be presented. However, this Court must be convinced thoroughly that two (2) grounds exist before it gives due course to a certiorari petition under Rule 65: (a) The tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction; and (b) There is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Despite the procedural lapses present in this case, we are giving due course to this petition as there are matters that require immediate resolution on the merits to effect substantial justice. The Rules of Court should be liberally construed in order to promote their object of securing a just, speedy and inexpensive disposition of every action or proceeding.[4] The rules of procedure should be viewed as mere tools designed to aid the courts in the speedy, just and inexpensive determination of the cases before them. Liberal construction of the rules and the pleadings is the controlling principle to effect substantial justice.[5] Litigations should, as much as possible, be decided on their merits and not on mere technicalities.[6] Verily, the negligence of petitioners counsel cannot be deemed as negligence of petitioner herself in the case at bar. A notice to a lawyer who appears to have been unconscionably irresponsible cannot be considered as notice to his client.[7] Under the peculiar circumstances of this case, it appears from the

records that counsel was negligent in not adequately protecting his clients interest, which necessarily calls for a liberal construction of the Rules. The rationale for this approach is explained in Ginete v. Court of Appeals - [8] This Court may suspend its own rules or exempt a particular case from its operation where the appellate court failed to obtain jurisdiction over the case owing to appellants failure to perfect an appeal. Hence, with more reason would this Court suspend its own rules in cases where the appellate court has already obtained jurisdiction over the appealed case. This prerogative to relax procedural rules of the most mandatory character in terms of compliance, such as the period to appeal has been invoked and granted in a considerable number of cases x x x Let it be emphasized that the rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court reflect this principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter even that which this Court itself has already declared to be final, as we are now constrained to do in the instant case x x x x The emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities. Time and again, this Court has consistently held that rules must not be applied rigidly so as not to override substantial justice. Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most mandatory character and an examination and review by the appellate court of the lower courts findings of fact, the other elements that should be considered are the following: (a) the existence of special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced thereby.[9] The suspension of the Rules is warranted in this case since the procedural infirmity was not entirely attributable to the fault or negligence of petitioner. Besides, substantial justice requires that we go into the merits of the case to resolve the present controversy that was brought about by the absence of any partition agreement among the parties who were co-owners of the subject lot in question. Hence, giving due course to the instant petition shall put an end to the dispute on the property held in common. In Peoples Homesite and Housing Corporation v. Tiongco[10] we held:

There should be no dispute regarding the doctrine that normally notice to counsel is notice to parties, and that such doctrine has beneficent effects upon the prompt dispensation of justice. Its application to a given case, however, should be looked into and adopted, according to the surrounding circumstances; otherwise, in the courts desire to make a short-cut of the proceedings, it might foster, wittingly or unwittingly, dangerous collusions to the detriment of justice. It would then be easy for one lawyer to sell ones rights down the river, by just alleging that he just forgot every process of the court affecting his clients, because he was so busy. Under this circumstance, one should not insist that a notice to such irresponsible lawyer is also a notice to his clients. Thus, we now look into the merits of the petition. This case overlooks a basic yet significant principle of civil law: coownership. Throughout the proceedings from the MeTC to the Court of Appeals, the notion of co-ownership[11]was not sufficiently dealt with. We attempt to address this controversy in the interest of substantial justice. Certiorari should therefore be granted to cure this grave abuse of discretion. Sanchez Roman defines co-ownership as the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided.[12]Manresa defines it as the manifestation of the private right of ownership, which instead of being exercised by the owner in an exclusive manner over the things subject to it, is exercised by two or more owners and the undivided thing or right to which it refers is one and the same.[13] The characteristics of co-ownership are: (a) plurality of subjects, who are the co-owners, (b) unity of or material indivision, which means that there is a single object which is not materially divided, and which is the element which binds the subjects, and, (c) the recognition of ideal shares, which determines the rights and obligations of the co-owners.[14] In co-ownership, the relationship of such co-owner to the other coowners is fiduciary in character and attribute. Whether established by law or by agreement of the co-owners, the property or thing held pro-indiviso is impressed with a fiducial nature so that each co-owner becomes a trustee for the benefit of his co-owners and he may not do any act prejudicial to the interest of his coowners.[15] Thus, the legal effect of an agreement to preserve the properties in coownership is to create an express trust among the heirs as co-owners of the properties. Co-ownership is a form of trust and every co-owner is a trustee for the others.[16] Before the partition of a land or thing held in common, no individual or co-owner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire land or thing.[17] Article 493 of the Civil Code gives the owner of an undivided interest in the property the right to freely sell and dispose of it, i.e., his undivided property cases batch 2 15

interest. He may validly lease his undivided interest to a third party independently of the other co-owners.[18] But he has no right to sell or alienate a concrete, specific or determinate part of the thing owned in common because his right over the thing is represented by a quota or ideal portion without any physical adjudication.[19] Although assigned an aliquot but abstract part of the property, the metes and bounds of petitioners lot has not been designated. As she was not a party to the Deed of Absolute Sale voluntarily entered into by the other co-owners, her right to 1/6 of the property must be respected. Partition needs to be effected to protect her right to her definite share and determine the boundaries of her property. Such partition must be done without prejudice to the rights of private respondent Virginia Teria as buyer of the 5/6 portion of the lot under dispute. WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 23 May 2001 as well as its Resolution dated 8 January 2002 in CA-G.R. SP No. 59182 is ANNULLED and SET ASIDE. A survey of the questioned lot with TCT No. 289216 (formerly TCT No. 263624) by a duly licensed geodetic engineer and the PARTITION of the aforesaid lot are ORDERED. Let the records of this case be REMANDED to MeTC-Br. 49, Caloocan City to effect the aforementioned survey and partition, as well as segregate the 1/6 portion appertaining to petitioner Lilia Sanchez. The Deed of Absolute Sale by the other co-owners to Virginia Teria shall be RESPECTED insofar as the other undivided 5/6 portion of the property is concerned. SO ORDERED. G.R. No. 161136 November 16, 2006

GABINO JR.) a portion of Lot No. 1253 (hereafter Lot 1253-B), measuring 1,604 square meters as evidenced by the Deed of Absolute Sale executed by LORETO. In view of the death of ZOILO, his children, LORETO, Efren Labiao (hereafter EFREN) and Priscilla Espanueva (hereafter PRISCILLA) executed an Extrajudicial x x x Settlement of Estate dated January 20, 1987, adjudicating the entire Lot No. 1253, covering 4,280 square meters, to LORETO. On January 29, 1987, Transfer Certificate of Title (TCT) No. T-16693 was issued in favor of LORETO, EFREN and PRISCILLA, but on even date, TCT No. T-16693 was cancelled and TCT No. T-16694, covering the said property, was issued in the name of LORETO alone. On July 31, 1987, GABINO JR., as petitioner, filed a Petition for the Surrender of TCT No. T-16694, covering Lot No. 1253, with the Regional Trial Court of San Jose City, Sixth Judicial Region, against LORETO, docketed as Cadastral Case No. 87-731-A. The plaintiff alleged that, being the owner of x x x Lot No. 1253-B, under TCT No. T-16694, by virtue of the sale that took place on May 12, 1986, he is entitled to ask for the surrender of the owners copy of TCT No. T-16694 to the Register of Deeds of Antique in order to effect the transfer of title to the name of the petitioner. However, as per motion of both counsels[,] since the parties seemed to have already reached an amicable settlement without the knowledge of their counsels, the trial court issued an Order dated March 21, 1994 sending the case to the archives. On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he bought from LORETO as per Tax Declaration No. 1038 where the property was specified as Lot No. 1253-B. GABINO JR. thereafter sold the same lot to Wilfredo Vagilidad (hereafter WILFREDO) as per Deed of Absolute Sale dated December 7, 1989. On even date, Deed of Absolute Sale of a Portion of Land involving the opt-described property was also executed by LORETO in favor of WILFREDO. The aforementioned deeds, which were both executed on December 7, 1989 [and] notarized by Atty. Warloo Cardenal[,] [appear] to have been given the same entry number in his notarial books as both contained the designation "Document No. 236, Page No. 49, Book No. XI, Series of 1989[."] Corollarily, on February 14, 1990, the sale of Lot No. 1253-B to WILFREDO was registered with the Registry of Deeds of the Province of Antique under Entry No. 180425. Consequently, TCT No. T-18023, cancelling TCT No. 16694, was issued in favor of WILFREDO pursuant to the Deed of Absolute Sale dated December 7, 1989. On October 24, 1991, spouses WILFREDO and LOLITA obtained a loan from the Philippine National Bank (PNB for brevity) in the amount of P150,000.00 and mortgaged Lot No. 1253-B as collateral of the said loan and the transaction was inscribed at the back of TCT No. 18023 as Entry No. 186876. Subsequently, the xxx real estate mortgage was cancelled under Entry No. 191053 as per inscription dated November 17, 1992 in xxx TCT No. 18023. Subsequently, WILFREDO obtained another loan from Development Bank of the Philippines (DBP for brevity) in the amount of P200,000.00 and mortgaged Lot No. 1253-B as collateral of the xxx loan and the transaction was

inscribed at the back of TCT No. 18023 as Entry No. 196268. The said loan was paid and, consequently, the mortgage was cancelled as Entry No. 202500. On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages, with the Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, against spouses WILFREDO and Lolita Vagilidad (hereafter LOLITA), docketed as Civil Case No. 2825. The plaintiffs claimed that they are the lawful owners of Lot No. 1253-B which was sold to him by LORETO in 1986. They alleged that [GABINO JR.] is a nephew of defendant WILFREDO. They likewise raised that when GABINO SR. died, defendant WILFREDO requested GABINO JR. to transfer the ownership of Lot No. 1253-B in defendant WILFREDOs name for loaning purposes with the agreement that the land will be returned when the plaintiffs need the same. They added that, pursuant to the mentioned agreement, plaintiff GABINO JR., without the knowledge and consent of his spouse, DOROTHY, executed the Deed of Sale dated December 7, 1989 in favor of defendant WILFREDO receiving nothing as payment therefor. They pointed out that after defendant WILFREDO was able to mortgage the property, plaintiffs demanded the return of the property but the defendants refused to return the same. The plaintiffs claimed that the same document is null and void for want of consideration and the same does not bind the non-consenting spouse. They likewise prayed that the defendant be ordered to pay the plaintiffs not less than P100,000.00 as actual and moral damages, P10,000.00 as attorneys fees and P5,000.00 as litigation expenses. For their part, the defendants, on January 15, 1996, filed their Answer, denying the material allegations of the plaintiffs. Defendants claimed that they are the lawful owners of Lot No. 1253-B. They alleged that LORETO, with conformity of his wife, sold to them Lot No. 1253 on December 7, 1989 for P5,000.00 and the transaction was registered with the Register of Deeds of the Province of Antique under Entry No. 180425. They added that, subsequently, TCT No. T-18023, covering Lot No. 1253-B, was issued in favor of the defendants. Hence, they claimed that the plaintiffs be directed to pay the defendants P200,000.00 as moral damages, P50,000.00 as exemplary damages, P20,000.00 as attorneys fees and P30,000.00 for litigation expenses.4 The trial court ruled in favor of petitioners WILFREDO and LOLITA and held that LORETO did not validly convey Lot No. 1253-B to GABINO, JR. on May 12, 1986 since at that time, the heirs of ZOILO had not partitioned Lot No. 1253.5 It ruled that LORETO could only sell at that time his aliquot share in the inheritance. He could not have sold a divided part thereof designated by metes and bounds. Thus, it held that LORETO remained the owner of the subject lot when he sold it to WILFREDO on December 7, 1989. It further found that there was no proof that WILFREDO knew of the sale that took place between LORETO and GABINO, JR. on May 12, 1986. The dispositive portion of the decision states: WHEREFORE, in view of the foregoing pronouncements and a preponderance of evidence, judgment is hereby rendered: 1. FINDING the defendants WILFREDO VAGILIDAD and LOLITA VAGILIDAD to have duly acquired ownership of Lot property cases batch 2 16

WILFREDO T. VAGILIDAD and LOLITA A. VAGILIDAD, petitioners, vs. GABINO VAGILIDAD, Jr. and DOROTHY VAGILIDAD, respondents. PUNO, J.: This is a Petition for Review on Certiorari of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, reversing and setting aside the decision of the Regional Trial Court of Antique, Sixth Judicial Region, Branch II, in Civil Case No. 2825 dated January 26, 1999. The facts are stated in the assailed Decision of the appellate court, viz.: A parcel of land, Lot No. 1253, situated in Atabay, San Jose, Antique, measuring 4,280 square meters, was owned by Zoilo [Labiao] (hereafter ZOILO) as per Original Certificate of Title No. RO-2301 issued on March 3, 1931. Sometime in 1931, ZOILO died. Subsequently, on May 12, 1986, Loreto Labiao (hereafter LORETO), son of ZOILO, sold to Gabino Vagilidad Jr. (hereafter

No. 1253-B containing an area of 1,604 square meters, more or less, situated in San Jose, Antique; 2. SUSTAINING the validity of Transfer Certificate of Title No. T-18023 covering the subject Lot No. 1253-B and issued in the name of the defendant WILFREDO VAGILIDAD, married to the defendant LOLITA VAGILIDAD; 3. DISMISSING the complaint of the plaintiffs GABINO VAGILIDAD, JR. and MA. DOROTHY VAGILIDAD, as well as the counterclaims of the defendants WILFREDO VAGILIDAD and LOLITA VAGILIDAD and of the defendants LORETO LABIAO and FRANCISCA LABIAO; and 4. PRONOUNCING no cost. GABINO, JR. and DOROTHY filed an appeal with the Court of Appeals. The appellate court reversed and set aside the decision of the court a quo, viz.: WHEREFORE, premises considered, the Decision dated January 26, 1999 of the Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, in Civil Case No. 2825, is hereby REVERSED and SET ASIDE and a new one is entered: (1) declaring the Deed of Absolute Sale [of Portion of Land] dated December 7, 1989 executed by appellee LORETO in favor of appellee WILFREDO null and void; (2) ordering the defendants-appellees WILFREDO and LOLITA to reconvey Lot No. 1253-B to plaintiffs-appellants GABINO, JR. and DOROTHY; and (3) ordering the defendantsappellees to pay the plaintiffs-appellants P100,000.00 as moral damages, P10,000.00 as attorneys fees and P5,000.00 as litigation expenses. The appellate court ruled that the sale made by LORETO in favor of GABINO, JR. on May 12, 1986 is valid. The rights of LORETO to succession are transmitted from the moment of ZOILOs death in 1931. Thus, when LORETO sold the 1,604-square meter portion of Lot No. 1253 to GABINO JR., he already had the right as co-owner to his share to Lot No. 1253, even if at that time the property had not yet been partitioned. Consequently, the sale made by LORETO in favor of WILFREDO on December 7, 1989 is void because LORETO and FRANCISCA were no longer the owners of Lot No. 1253-B as of that time. The appellate court also held WILFREDO and LOLITA liable for moral damages for falsifying the fictitious deeds of sale on December 7, 1989. WILFREDO and LOLITA moved for reconsideration but the motion was denied in the questioned Resolution dated November 13, 2003. Hence, this petition for review on certiorari raising the following errors: I. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1349 AND ARTICLE 1460 OF THE NEW CIVIL CODE IN THE CASE AT BAR. II. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISION OF ARTICLE 1544 OF THE

NEW CIVIL CODE AND THE DOCTRINE OF DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION OF THE TORRENS TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL. III. THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1391 OF THE NEW CIVIL CODE AND THE DOCTRINE THAT IN CASE OF FRAUD, ACTION FOR RECONVEYANCE MUST BE BROUGHT WITHIN FOUR (4) YEARS FROM THE DISCOVERY OF THE FRAUD. IV. THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PRIVATE RESPONDENT MORAL DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES.8 We deny the petition. I First, petitioners contend that the Deed of Absolute Sale between LORETO and GABINO, JR. does not have a determinate object. They anchor their claim on the following discrepancies: (1) the object of the Deed of Absolute Sale between LORETO and GABINO, JR. is Lot No. 1253 with an area of 1,604 square meters; (2) the object of the Deed of Absolute Sale of Portion of Land between LORETO and WILFREDO is a portion of Lot No. 1253, known as Lot No. 1253-B, also with an area of 1,604 square meters;9 (3) the Deed of Absolute Sale between LORETO and GABINO, JR. shows that its object, Lot No. 1253, is not registered under the Land Registration Act nor under the Spanish Mortgage Law; and (4) the property subject of this action, Lot No. 1253-B, was taken from Lot No. 1253 containing an area of 4,280 square meters previously registered in the name of ZOILO under Original Certificate of Title (OCT) No. RO-2301.10 With these discrepancies, petitioners contend that either the Deed of Absolute Sale between LORETO and GABINO, JR. does not have a determinate object or that Lot No. 1253-B, the subject parcel, is not the object thereof. Hence, absent a determinate object, the contract is void. They rely on Articles 1349 and 1460 of the Civil Code, viz.: Art. 1349. The object of every contract must be determinate, as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. Art. 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class. The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. Petitioners err. The evidence on record shows that Lot No. 1253-B, the subject parcel, and the lot described as Lot No. 1253 in the Deed of Absolute Sale of May 12, 1986 between LORETO and GABINO, JR., are the same. In the Deed of Absolute Sale, Lot No. 1253 is described, viz.:

A parcel of land (Lot No. 1253 of the Cadastral Survey of San Jose), with the improvements thereon. Bounded on the North [by] 1254 and 1255; on the South by road; on the East by 1253 and road on the West by 1240-Angel Salazar; containing an area of 1,604 square meters more or less declared under Tax Declaration No. 4159. In the Deed of Absolute Sale of Portion of Land of December 7, 1989 between LORETO and WILFREDO, the subject parcel is described, viz.: A parcel of land (Lot No. 1253. Ap-06-00271) of the Cadastral Survey of San Jose, LRC Cad. Rec. No. 936), situated at Atabay, San Jose, Antique. Bounded on the N. and E. along lines 1-2-3 by lot 1255; San Jose Cadastre; on the S. along line 3-4 by Road; on the W. along line 4-5 by Lot 1240; San Jose Cadastre; and on the N. along line 5-1 by Lot 1254, San Jose Cadastre containing an area of [Four] Thousand Two Hundred Eighty (4,280) square meters, more or less. of which a portion of land subject of this sale is hereinbelow (sic) particularly described as follows, to wit: A portion of Lot No. 1253-B of the Cadastral Survey of San Jose, situated at Atabay, San Jose, Antique. Bounded on the North by Lot No. 1254; South by Road; West by Lot 1253-A; and on the East by Lot No. 1253-C; containing an area of 1,604 square meters, more or less. The description of Lot No. 1253, the object of the Deed of Absolute Sale, as "not registered under Act No. 196[,] otherwise known as the Land Registration Act, nor under the Spanish Mortgage Law"13 is a stray description of the subject parcel. It is uncorroborated by any evidence in the records. This description solely appears on the Deed of Absolute Sale and the discrepancy was not explained by LORETO who signed the Deed of Absolute Sale as vendor. LORETO does not, in fact, deny the existence of the Deed of Absolute Sale. He merely counters that the Deed of Absolute Sale was purportedly a mortgage. However, LORETOs claim that it was one of mortgage is clearly negated by a Certification14 issued by the Bureau of Internal Revenue dated May 12, 1986. It certified that LORETO was not required to pay the capital gains tax on the transfer of Lot No. 1253 to GABINO, JR. because the property was classified as an ordinary asset. To be sure, petitioners could have easily shown that LORETO owned properties other than Lot No. 1253 to bolster their claim that the object of the Deed of Absolute Sale was different from Lot No. 1253-B which is the object described in the Deed of Absolute Sale of Portion of Land. They did not proffer any evidence. The trial court itself comprehensively traced the origin of Lot No. 1253-B. It clearly demonstrated that the subject parcel was originally part of the registered lot of ZOILO. It also showed how the subject parcel was eventually bounded by Lot No. 1253-A on the West and by Lot No. 1253-C on the East, as the lot would be later described in the Deed of Absolute Sale of Portion of Land.

property cases batch 2

17

The trial court found that ZOILO previously owned Lot No. 1253 under OCT No. RO-2301 issued on March 3, 1931. On November 14, 1986, Entry No. 167922 was inscribed in the certificate of title, per Order dated March 30, 1978 of Judge Noli Ma. Cortes of the then Court of First Instance of Antique, stating that it was a reconstituted certificate of title.15 Lot No. 1253 was subdivided by virtue of a subdivision plan dated June 19, 1987. On January 20, 1987, an Extrajudicial Settlement of Estate executed by LORETO, EFREN and PRISCILLA was entered as Entry No. 170722. The OCT of ZOILO was cancelled by TCT No. T-16693 in the names of LORETO, EFREN and PRISCILLA on January 29, 1987. TCT No. T-16693 was cancelled on the same day by TCT No. T-16694 in the name of LORETO alone. The TCT was partially cancelled by the issuance of TCTs covering Lot Nos. 1253-A, 1253-C and 1253D. The TCT of Lot No. 1253-B was issued in the name of WILFREDO married to LOLITA on February 15, 1990. WILFREDOs TCT No. T-18023 appears to be a transfer from LORETOs TCT No. T-16694. II Next, petitioners contend that the appellate court should have upheld the title of WILFREDO under Article 1544 of the Civil Code and the doctrine of double sale where the buyer who is in possession of the Torrens Title must prevail.16 First, petitioners title was issued pursuant to the purported Deed of Absolute Sale of Portion of Land dated December 7, 1989. Second, WILFREDO did not see any encumbrance at the back of the title of the subject lot when he purchased it from LORETO on December 7, 1989. Thus, since he is not bound to go beyond the certificate of title, he has acquired the subject property in due course and in good faith. We disagree. Article 1544 of the Civil Code states, viz.: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. Petitioners reliance on Article 1544 is misplaced. While title to the property was issued in WILFREDOs name on February 15, 1990, the following circumstances show that he registered the subject parcel with evident bad faith. First, the Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO and WILFREDO is tainted with blatant irregularities. It is a fact that the Deed of Absolute Sale of Portion of Land and the Deed of Absolute Sale between GABINO, JR. and WILFREDO are of even date. Both Deeds had the same object Lot No. 1253-B. Both deeds were notarized by Atty. Warloo Cardenal and bear the same entry in his notarial register: Document No. 236, Page No. 49, Book No. XI, Series of 1989.

Second, the testimony of a disinterested witness, Febe Mabuhay, established the irregularity. Mabuhay used to work as secretary for Atty. Cardenal and co-signed as witness in both Deeds. She stated that Atty. Cardenal instructed her to prepare the two documents in the last week of November 1989. She was present when GABINO, JR. signed the Deed of Absolute Sale. She testified that after GABINO, JR. left, LORETO and his wife FRANCISCA arrived and signed the Deed of Absolute Sale of Portion of Land.17 The Decision of the court a quo further states,viz.: [Mabuhay testified that when she prepared the two documents, she] noticed the similarity of Lot No. 1253 as technically described in both documents but she did not call the attention of Atty. Warlo[o] Cardenal. [She likewise stated that Atty. Cardenal] specifically instructed her to assign the same document number to the two documents notarized on December 7, 1989. Third, the testimony of Atty. Ernesto Estoya, then Clerk of Court of the Regional Trial Court of Antique, supports the claim that there was bad faith in the execution of the Deed of Absolute Sale of Portion of Land. Atty. Estoya brought the notarial record of Atty. Cardenal for the year 1989 pursuant to a subpoena. He stated that he had not brought both Deeds as required in the subpoena because "Doc. No. 236; Page No. 49; Book No. XI; Series of 1989" as entered in the notarial register of Atty. Cardenal could not be found in the files. He further explained that the last document on page 48 of the notarial register of Atty. Cardenal is Document No. 235, while the first document on page 49 is Document No. 239, leaving three unexplained gaps for document numbers 236, 237 and 238. Atty. Estoya stated that he was not the one who received the 1989 notarial register of Atty. Cardenal when the latter surrendered it since he assumed office only in 1994. Fourth, we give credence to the testimony of GABINO, JR. that LORETO and WILFREDO had employed the scheme to deprive him and his wife of their lawful title to the subject property. The facts speak for themselves. WILFREDO knew that he could not use the Deed of Absolute Sale executed in his favor by GABINO, JR. because the latter had no title to transfer. Without a title, WILFREDO could not use the subject property as collateral for a bank loan. Hence, LORETO, who had refused to surrender the title to GABINO, JR. and in whose name the land remained registered, had to execute the Deed of Absolute Sale of Portion of Land in favor of WILFREDO. Hence, it was convenient for WILFREDO to deny the existence of the Deed of Absolute Sale of December 7, 1989 between him and GABINO, JR. But the evidence on record shows that after he was able to register the subject property in his name on February 15, 1990, WILFREDO used the title as collateral in the loans that he contracted with the Philippine National Bank on October 24, 1991 and the Development Bank of the Philippines on December 1, 1993. This supports the claim of GABINO, JR. that WILFREDO needed the lot for loaning purposes. With these corroborating circumstances and the following irrefragable documents on record, the evidence preponderates in favor of GABINO, JR. One, he acquired Lot No.1253-B from LORETO on May 12, 198620 by virtue of the Deed of Absolute Sale. Two, the Bureau of Internal Revenue issued a Certification, also on May 12, 1986, for the exemption from the payment of

capital gains tax when LORETO sold to him the subject parcel. Three, GABINO, JR. paid the real estate tax on the subject parcel in 1987. Four, he filed a Petition for the Surrender of LORETOs title on July 31, 1987 so he could transfer the title of the property in his name. Petitioners likewise err in their argument that the contract of sale between LORETO and GABINO, JR. is void on the ground that at the time of the sale on May 12, 1986, LORETO had a right to dispose only an aliquot part of the yet undivided property of ZOILO. The subject parcel, being an inherited property, is subject to the rules of co-ownership under the Civil Code. Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided.21 Before the partition of the property held in common, no individual or co-owner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire property. LORETO sold the subject property to GABINO, JR. on May 12, 1986 as a co-owner. LORETO had a right, even before the partition of the property on January 19, 1987, to transfer in whole or in part his undivided interest in the lot even without the consent of his co-heirs. This right is absolute in accordance with the well-settled doctrine that a co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person for its enjoyment. Thus, what GABINO, JR. obtained by virtue of the sale on May 12, 1986 were the same rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the consideration given under their transaction. LORETO sold some 1,604 square meters of Lot No. 1253 to GABINO, JR. Consequently, when LORETO purportedly sold to WILFREDO on December 7, 1989 the same portion of the lot, he was no longer the owner of Lot No. 1253-B. Based on the principle that "no one can give what he does not have," LORETO could not have validly sold to WILFREDO on December 7, 1989 what he no longer had. As correctly pointed out by the appellate court, the sale made by LORETO in favor of WILFREDO is void as LORETO did not have the right to transfer the ownership of the subject property at the time of sale. III Petitioners contend that since the subdivision plan of Lot No. 1253 was only approved on January 19, 1987, the appellate court can not presume that the aliquot part of LORETO was the parcel designated as Lot 1253-B. Petitioners err. The mere fact that LORETO sold a definite portion of the co-owned lot by metes and bounds before partition does not, per se, render the sale a nullity. We held in Lopez v. Vda. De Cuaycong that the fact that an agreement purported to sell a concrete portion of a co-owned property does not render the sale void, for it is well-established that the binding force of a contract must be recognized as far as it is legally possible to do so. In the case at bar, the contract of sale between LORETO and GABINO, JR. on May 12, 1986 could be legally recognized. At the time of sale, LORETO had an aliquot share of one-third of the 4,280-square meter property or some 1,42630 square meters but sold some 1,604 square meters to GABINO, JR. property cases batch 2 18

We have ruled that if a co-owner sells more than his aliquot share in the property, the sale will affect only his share but not those of the other co-owners who did not consent to the sale.31 Be that as it may, the co-heirs of LORETO waived all their rights and interests over Lot No. 1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987. They declared that they have previously received their respective shares from the other estate of their parents ZOILO and PURIFICACION.32 The rights of GABINO, JR. as owner over Lot No. 1253-B are thus preserved. These rights were not effectively transferred by LORETO to WILFREDO in the Deed of Absolute Sale of Portion of Land. Nor were these rights alienated from GABINO, JR. upon the issuance of the title to the subject property in the name of WILFREDO. Registration of property is not a means of acquiring ownership.33 Its alleged incontrovertibility cannot be successfully invoked by WILFREDO because certificates of title cannot be used to protect a usurper from the true owner or be used as a shield for the commission of fraud. IV On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an action for reconveyance based on fraud prescribes after the lapse of four years. They cite Article 139136 of the Civil Code and the case of Gerona v. De Guzman. We disagree. This Court explained in Salvatierra v. Court of Appeals, viz.: An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin v. Medalla, which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into effect until August 30, 1950 xxx. It must be stressed, at this juncture, that Article 1144 and Article 1456 are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses. [Thus,] under the present Civil Code, xxx just as an implied or constructive trust is an offspring of xxx Art. 1456, xxx so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis--vis prescription, Article 1144 of the Civil Code is applicable[, viz.:]

Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: 1) Upon a written contract; 2) Upon an obligation created by law; 3) Upon a judgment.40 (emphases supplied) Thus, in the case at bar, although the TCT of WILFREDO became indefeasible after the lapse of one year from the date of registration, the attendance of fraud in its issuance created an implied trust in favor of GABINO, JR. under Article 145641 of the Civil Code. Being an implied trust, the action for reconveyance of the subject property therefore prescribes within a period of ten years from February 15, 1990. Thus, when respondents filed the instant case with the court a quo on September 26, 1995, it was well within the prescriptive period. V On the issue of damages, petitioners contend that the grant is erroneous and the alleged connivance between Atty. Cardenal and WILFREDO lacks basis. We disagree. The evidence on record is clear that petitioners committed bad faith in the execution of the purported Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO and WILFREDO. As stated by the appellate court, viz.: x x x From the series of events, it can be reasonably inferred that appellees WILFREDO, LORETO and Atty. Cardenal connived in attempting to deprive appellants of Lot No. 1253-B, hence, the appellants entitlement to moral damages. Further, it is a well-settled rule that attorneys fees are allowed to be awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party for whom it is sought. xxxx To protect themselves, the appellants engaged the services of counsel and incurred expenses in the course of litigation. Hence, we deem it equitable to award attorneys fees to the appellant xxx.42 IN VIEW WHEREOF, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, are AFFIRMED in toto. Costs against petitioners. SO ORDERED. G.R. No. 169129 March 28, 2007

CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 60450 entitled, Spouses Jose Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos, dated 8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein respondents Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and ordered herein petitioners Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos to reconvey to respondents Spouses Lumbao the subject property and to pay the latter attorneys fees and litigation expenses, thus, reversing the Decision3 of the Regional Trial Court (RTC) of Pasig City, dated 17 June 1998 which dismissed the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao for lack of merit. Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died on 20 October 1985. The other petitioners Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita. Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged owners of the 107-square meter lot (subject property), which they purportedly bought from Rita during her lifetime. The facts of the present case are as follows: On two separate occasions during her lifetime, Rita sold to respondents Spouses Lumbao the subject property which is a part of her share in the estate of her deceased mother, Maria Catoc (Maria), who died intestate on 19 September 1978. On the first occasion, Rita sold 100 square meters of her inchoate share in her mothers estate through a document denominated as "Bilihan ng Lupa," dated 17 August 1979.4 Respondents Spouses Lumbao claimed the execution of the aforesaid document was witnessed by petitioners Virgilio and Tadeo, as shown by their signatures affixed therein. On the second occasion, an additional seven square meters was added to the land as evidenced by a document also denominated as "Bilihan ng Lupa," dated 9 January 1981.5 After acquiring the subject property, respondents Spouses Lumbao took actual possession thereof and erected thereon a house which they have been occupying as exclusive owners up to the present. As the exclusive owners of the subject property, respondents Spouses Lumbao made several verbal demands upon Rita, during her lifetime, and thereafter upon herein petitioners, for them to execute the necessary documents to effect the issuance of a separate title in favor of respondents Spouses Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao alleged that prior to her death, Rita informed respondent Proserfina Lumbao she could not deliver the title to the subject property because the entire property inherited by her and her co-heirs from Maria had not yet been partitioned. property cases batch 2 19

SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS.VICTORINO F. SANTOS, & LAGRIMAS SANTOS, ERNESTO F. SANTOS, and TADEO F. SANTOS, petitioners, vs. SPS. JOSE LUMBAO and PROSERFINA LUMBAO, respondents.

On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in conspiracy with one another, executed a Deed of Extrajudicial Settlement,6 adjudicating and partitioning among themselves and the other heirs, the estate left by Maria, which included the subject property already sold to respondents Spouses Lumbao and now covered by TCT No. 81729 7 of the Registry of Deeds of Pasig City. On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal demand letter8 to petitioners but despite receipt of such demand letter, petitioners still failed and refused to reconvey the subject property to the respondents Spouses Lumbao. Consequently, the latter filed a Complaint for Reconveyance with Damages9before the RTC of Pasig City. Petitioners filed their Answer denying the allegations that the subject property had been sold to the respondents Spouses Lumbao. They likewise denied that the Deed of Extrajudicial Settlement had been fraudulently executed because the same was duly published as required by law. On the contrary, they prayed for the dismissal of the Complaint for lack of cause of action because respondents Spouses Lumbao failed to comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, which repealed Presidential Decree No. 1508 10 requiring first resort to barangay conciliation. Respondents Spouses Lumbao, with leave of court, amended their Complaint because they discovered that on 16 February 1990, without their knowledge, petitioners executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana for the sum of P30,000.00. The said Deed of Real Estate Mortgage was annotated at the back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners that they failed to comply with the mandate of the Revised Katarungang Pambarangay Law, respondents Spouses Lumbao said that the Complaint was filed directly in court in order that prescription or the Statute of Limitations may not set in. During the trial, respondents Spouses Lumbao presented Proserfina Lumbao and Carolina Morales as their witnesses, while the petitioners presented only the testimony of petitioner Virgilio. The trial court rendered a Decision on 17 June 1998, the dispositive portion of which reads as follows: Premises considered, the instant complaint is hereby denied for lack of merit. Considering that [petitioners] have incurred expenses in order to protect their interest, [respondents spouses Lumbao] are hereby directed to pay [petitioners], to wit: 1) the amount of P30,000.00 as attorneys fees and litigation expenses, and 2) costs of the suit.11 Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June 2005, the appellate court rendered a Decision, thus: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated June 17, 1998 of the

Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered ordering [petitioners] to reconvey 107 square meters of the subject [property] covered by TCT No. PT-81729 of the Registry of Deeds of Pasig City, Metro Manila, and to pay to [respondents spouses Lumbao] the sum of P30,000.00 for attorneys fees and litigation expenses. No pronouncement as to costs.12 Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid Decision but it was denied in the Resolution of the appellate court dated 29 July 2005 for lack of merit. Hence, this Petition. The grounds relied upon by the petitioners are the following: I. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN REVERSING THE DECISION OF THE TRIAL COURT, THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS OF TWO COURTS. II. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN ORDERING THE PETITIONERS TO RECONVEY THE SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES LUMBAO] AND IN NOT RULING THAT THEY ARE GUILTY OF LACHES, HENCE THEY CANNOT RECOVER THE LOT ALLEGEDLY SOLD TO THEM. III. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING HEREIN PETITIONER[S] TO BE IN GOOD FAITH IN EXECUTING THE "DEED OF EXTRAJUDICIAL SETTLEMENT" DATED [2 MAY 1986]. IV. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT PETITIONERS ARE NOT LEGALLY BOUND TO COMPLY WITH THE SUPPOSED BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY 1981] THAT WERE SUPPOSEDLY EXECUTED BY THE LATE RITA CATOC. V. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAOS] ACTION FOR RECONVEYANCE WITH DAMAGES CANNOT BE SUPPORTED WITH AN UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY 1981]. VI. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAOS] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE (SIC) FOR NON COMPLIANCE OF THE

MANDATE OF [P.D. NO.] 1508, AS AMENDED BY Republic Act No. 7160. VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO] SHOULD BE HELD LIABLE FOR PETITIONERS CLAIM FOR DAMAGES AND ATTORNEY[]S FEES. Petitioners ask this Court to scrutinize the evidence presented in this case, because they claim that the factual findings of the trial court and the appellate court are conflicting. They allege that the findings of fact by the trial court revealed that petitioners Virgilio and Tadeo did not witness the execution of the documents known as "Bilihan ng Lupa"; hence, this finding runs counter to the conclusion made by the appellate court. And even assuming that they were witnesses to the aforesaid documents, still, respondents Spouses Lumbao were not entitled to the reconveyance of the subject property because they were guilty of laches for their failure to assert their rights for an unreasonable length of time. Since respondents Spouses Lumbao had slept on their rights for a period of more than 12 years reckoned from the date of execution of the second "Bilihan ng Lupa," it would be unjust and unfair to the petitioners if the respondents will be allowed to recover the subject property. Petitioners allege they are in good faith in executing the Deed of Extrajudicial Settlement because even respondents Spouses Lumbaos witness, Carolina Morales, testified that neither petitioner Virgilio nor petitioner Tadeo was present during the execution of the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981. Petitioners affirm that the Deed of Extrajudicial Settlement was published in a newspaper of general circulation to give notice to all creditors of the estate subject of partition to contest the same within the period prescribed by law. Since no claimant appeared to interpose a claim within the period allowed by law, a title to the subject property was then issued in favor of the petitioners; hence, they are considered as holders in good faith and therefore cannot be barred from entering into any subsequent transactions involving the subject property. Petitioners also contend that they are not bound by the documents denominated as "Bilihan ng Lupa" because the same were null and void for the following reasons: 1) for being falsified documents because one of those documents made it appear that petitioners Virgilio and Tadeo were witnesses to its execution and that they appeared personally before the notary public, when in truth and in fact they did not; 2) the identities of the properties in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 in relation to the subject property in litigation were not established by the evidence presented by the respondents Spouses Lumbao; 3) the right of the respondents Spouses Lumbao to lay their claim over the subject property had already been barred through estoppel by laches; and 4) the respondents Spouses Lumbaos claim over the subject property had already prescribed. Finally, petitioners claim that the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao was dismissible because they failed to comply with the mandate of Presidential Decree No. 1508, as amended by Republic Act No. 7160, particularly Section 412 of Republic Act No. 7160. property cases batch 2 20

Given the foregoing, the issues presented by the petitioners may be restated as follows: I. Whether or not the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao is dismissible for their failure to comply with the mandate of the Revised Katarungang Pambarangay Law under R.A. No. 7160. II. Whether or not the documents known as "Bilihan ng Lupa" are valid and enforceable, thus, they can be the bases of the respondents spouses Lumbaos action for reconveyance with damages. III. Whether or not herein petitioners are legally bound to comply with the "Bilihan ng Lupa" dated 17 August 1979 and 9 January 1981 and consequently, reconvey the subject property to herein respondents spouses Lumbao. It is well-settled that in the exercise of the Supreme Courts power of review, the court is not a trier of facts and does not normally undertake the reexamination of the evidence presented by the contending parties during the trial of the case considering that the findings of fact of the Court of Appeals are conclusive and binding on the Court.13 But, the rule is not without exceptions. There are several recognized exceptions14 in which factual issues may be resolved by this Court. One of these exceptions is when the findings of the appellate court are contrary to those of the trial court. This exception is present in the case at bar. Going to the first issue presented in this case, it is the argument of the petitioners that the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao should be dismissed for failure to comply with the barangay conciliation proceedings as mandated by the Revised Katarungang Pambarangay Law under Republic Act No. 7160. This argument cannot be sustained. Section 408 of the aforesaid law and Administrative Circular No. 149315 provide that all disputes between parties actually residing in the same city or municipality are subject to barangay conciliation. A prior recourse thereto is a pre-condition before filing a complaint in court or any government offices. Noncompliance with the said condition precedent could affect the sufficiency of the plaintiffs cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity; but the same would not prevent a court of competent jurisdiction from exercising its power of adjudication over the case before it, where the defendants failed to object to such exercise of jurisdiction.16 While it is true that the present case should first be referred to the Barangay Lupon for conciliation because the parties involved herein actually reside in the same city (Pasig City) and the dispute between them involves a real property, hence, the said dispute should have been brought in the city in which the real property, subject matter of the controversy, is located, which happens to be the same city where the contending parties reside. In the event that respondents Spouses Lumbao failed to comply with the said condition precedent, their Complaint for Reconveyance with Damages can be dismissed. In this case, however, respondents Spouses Lumbaos non-compliance with the aforesaid

condition precedent cannot be considered fatal. Although petitioners alleged in their answer that the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao should be dismissed for their failure to comply with the condition precedent, which in effect, made the complaint prematurely instituted and the trial court acquired no jurisdiction to hear the case, yet, they did not file a Motion to Dismiss the said complaint. Emphasis must be given to the fact that the petitioners could have prevented the trial court from exercising jurisdiction over the case had they filed a Motion to Dismiss. However, instead of doing so, they invoked the very same jurisdiction by filing an answer seeking an affirmative relief from it. Worse, petitioners actively participated in the trial of the case by presenting their own witness and by cross-examining the witnesses presented by the respondents Spouses Lumbao. It is elementary that the active participation of a party in a case pending against him before a court is tantamount to recognition of that courts jurisdiction and a willingness to abide by the resolution of the case which will bar said party from later on impugning the courts jurisdiction.17 It is also well-settled that the non-referral of a case for barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a motion to dismiss.18 Hence, herein petitioners can no longer raise the defense of non-compliance with the barangay conciliation proceedings to seek the dismissal of the complaint filed by the respondents Spouses Lumbao, because they already waived the said defense when they failed to file a Motion to Dismiss. As regards the second issue, petitioners maintain that the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 are null and void for being falsified documents as it is made to appear that petitioners Virgilio and Tadeo were present in the execution of the said documents and that the identities of the properties in those documents in relation to the subject property has not been established by the evidence of the respondents Spouses Lumbao. Petitioners also claim that the enforceability of those documents is barred by prescription of action and laches. It is the petitioners incessant barking that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were falsified because it was made to appear that petitioners Virgilio and Tadeo were present in the executions thereof, and their allegation that even respondents Spouses Lumbaos witness Carolina Morales proved that said petitioners were not present during the execution of the aforementioned documents. This is specious. Upon examination of the aforesaid documents, this Court finds that in the "Bilihan ng Lupa," dated 17 August 1979, the signatures of petitioners Virgilio and Tadeo appeared thereon. Moreover, in petitioners Answer and Amended Answer to the Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made an admission that indeed they acted as witnesses in the execution of the "Bilihan ng Lupa," dated 17 August 1979.19However, in order to avoid their obligations in the said "Bilihan ng Lupa," petitioner Virgilio, in his cross-examination, denied having knowledge of the sale transaction and claimed that he could not remember the same as well as his appearance before the notary public due to the length of time that had passed. Noticeably, petitioner Virgilio did not categorically deny having signed the

"Bilihan ng Lupa," dated 17 August 1979 and in support thereof, his testimony in the cross-examination propounded by the counsel of the respondents Spouses Lumbao is quoted hereunder: ATTY. CHIU: Q. Now, you said, Mr. WitnessVirgilio Santos, that you dont know about this document which was marked as Exhibit "A" for the [respondents spouses Lumbao]? ATTY. BUGARING: The question is misleading, your Honor. Counsel premised the question that he does not have any knowledge but not that he does not know. ATTY. CHIU: Q. Being you are one of the witnesses of this document? [I]s it not? WITNESS: A. No, sir. Q. I am showing to you this document, there is a signature at the left hand margin of this document Virgilio Santos, will you please go over the same and tell the court whose signature is this? A. I dont remember, sir, because of the length of time that had passed. Q. But that is your signature? A. I dont have eyeglasses My signature is different. Q. You never appeared before this notary public Apolinario Mangahas? A. I dont remember.20 As a general rule, facts alleged in a partys pleading are deemed admissions of that party and are binding upon him, but this is not an absolute and inflexible rule. An answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence.21 And in spite of the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented.22 However, in the case at bar, as the Court of Appeals mentioned in its Decision, "[herein petitioners] had not adduced any other evidence to override the admission made in their [A]nswer that [petitioners Virgilio and Tadeo] actually signed the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled as to the purpose of the document, x x x."23 Virgilios answers were unsure and quibbled. Hence, the general rule that the admissions made by a party in a pleading are binding and conclusive upon him applies in this case. On the testimony of respondents Spouses Lumbaos witness Carolina Morales, this Court adopts the findings made by the appellate court. Thus -

property cases batch 2

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[T]he trial court gave singular focus on her reply to a question during cross-examination if the [petitioners Virgilio and Tadeo] were not with her and the vendor [Rita] during the transaction. It must be pointed out that earlier in the direct examination of said witness, she confirmed that [respondents spouses Lumbao] actually bought the lot from [Rita] ("nagkabilihan"). Said witness positively identified and confirmed the two (2) documents evidencing the sale in favor of [respondents spouse Lumbao]. Thus, her subsequent statement that the [petitioners Virgilio and Tadeo] were not with them during the transaction does not automatically imply that [petitioners Virgilio and Tadeo] did not at any time sign as witnesses as to the deed of sale attesting to their mothers voluntary act of selling a portion of her share in her deceased mothers property. The rule is that testimony of a witness must be considered and calibrated in its entirety and not by truncated portions thereof or isolated passages therein.24 Furthermore, both "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were duly notarized before a notary public. It is well-settled that a document acknowledged before a notary public is a public document 25 that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution.26 To overcome this presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the presumption must be upheld.27 In addition, one who denies the due execution of a deed where ones signature appears has the burden of proving that contrary to the recital in the jurat, one never appeared before the notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the present case petitioners denials without clear and convincing evidence to support their claim of fraud and falsity were not sufficient to overthrow the above-mentioned presumption; hence, the authenticity, due execution and the truth of the facts stated in the aforesaid "Bilihan ng Lupa" are upheld. The defense of petitioners that the identities of the properties described in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 in relation to the subject property were not established by respondents Spouses Lumbaos evidence is likewise not acceptable. It is noteworthy that at the time of the execution of the documents denominated as "Bilihan ng Lupa," the entire property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs and so the description of the entire estate is the only description that can be placed in the "Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981" because the exact metes and bounds of the subject property sold to respondents Spouses Lumbao could not be possibly determined at that time. Nevertheless, that does not make the contract of sale between Rita and respondents Spouses Lumbao invalid because both the law and jurisprudence have categorically held that even while an estate remains undivided, co-owners have each full ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage them.28 The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned in common, because such right over the thing is represented by an aliquot or ideal portion without any physical division. In any

case, the mere fact that the deed purports to transfer a concrete portion does not per se render the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the sale is subject to the results of the partition upon the termination of the co-ownership.29 In the case at bar, when the estate left by Maria had been partitioned on 2 May 1986 by virtue of a Deed of Extrajudicial Settlement, the 107- square meter lot sold by the mother of the petitioners to respondents Spouses Lumbao should be deducted from the total lot, inherited by them in representation of their deceased mother, which in this case measures 467 square meters. The 107-square meter lot already sold to respondents Spouses Lumbao can no longer be inherited by the petitioners because the same was no longer part of their inheritance as it was already sold during the lifetime of their mother. Likewise, the fact that the property mentioned in the two "Bilihan ng Lupa" documents was described as "a portion of a parcel of land covered in Tax Declarations No. A-018-01674," while the subject matter of the Deed of Extrajudicial Settlement was the property described in Transfer Certificate of Title (TCT) No. 3216 of the Registry of Deeds of the Province of Rizal in the name of Maria is of no moment because in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981, it is clear that there was only one estate left by Maria upon her death. And this fact was not refuted by the petitioners. Besides, the property described in Tax Declaration No. A-018-01674 and the property mentioned in TCT No. 3216 are both located in Barrio Rosario, Municipality of Pasig, Province of Rizal, and almost have the same boundaries. It is, thus, safe to state that the property mentioned in Tax Declaration No. A-018-01674 and in TCT No. 3216 are one and the same. The defense of prescription of action and laches is likewise unjustifiable. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another persons name to its rightful or legal owner, or to the one with a better right. It is, indeed, true that the right to seek reconveyance of registered property is not absolute because it is subject to extinctive prescription. However, when the plaintiff is in possession of the land to be reconveyed, prescription cannot set in. Such an exception is based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of another. 30 In the case at bar, the right of the respondents Spouses Lumbao to seek reconveyance does not prescribe because the latter have been and are still in actual possession and occupation as owners of the property sought to be reconveyed, which fact has not been refuted nor denied by the petitioners. Furthermore, respondents Spouses Lumbao cannot be held guilty of laches because from the very start that they bought the 107-square meter lot from the mother of the petitioners, they have constantly asked for the transfer of the certificate of title into their names but Rita, during her lifetime, and the petitioners, after the death of Rita, failed to do so on the flimsy excuse that the lot had not been partitioned yet. Inexplicably, after the partition of the entire estate of Maria, petitioners still included the 107-square meter lot in their inheritance which they divided among themselves despite their knowledge of the contracts of sale between their mother and the respondents Spouses Lumbao.

Under the above premises, this Court holds that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 are valid and enforceable and can be made the basis of the respondents Spouses Lumbaos action for reconveyance. The failure of respondents Spouses Lumbao to have the said documents registered does not affect its validity and enforceability. It must be remembered that registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. 31 Hence, the "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981, being valid and enforceable, herein petitioners are bound to comply with their provisions. In short, such documents are absolutely valid between and among the parties thereto. Finally, the general rule that heirs are bound by contracts entered into by their predecessors-in-interest applies in the present case. Article 1311 32 of the NCC is the basis of this rule. It is clear from the said provision that whatever rights and obligations the decedent have over the property were transmitted to the heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value of the inheritance of the heirs.33 Thus, the heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting their common ancestor. Being heirs, there is privity of interest between them and their deceased mother. They only succeed to what rights their mother had and what is valid and binding against her is also valid and binding as against them. The death of a party does not excuse non-performance of a contract which involves a property right and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, non-performance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract. 34 In the end, despite the death of the petitioners mother, they are still bound to comply with the provisions of the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981. Consequently, they must reconvey to herein respondents Spouses Lumbao the 107-square meter lot which they bought from Rita, petitioners mother. And as correctly ruled by the appellate court, petitioners must pay respondents Spouses Lumbao attorneys fees and litigation expenses for having been compelled to litigate and incur expenses to protect their interest. 35 On this matter, we do not find reasons to reverse the said findings. WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution of the Court of Appeals dated 8 June 2005 and 29 July 2005, respectively, are hereby AFFIRMED. Herein petitioners are ordered to reconvey to respondents Spouses Lumbao the subject property and to pay the latter attorneys fees and litigation expenses. Costs against petitioners. SO ORDERED.

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G.R. No. 157767

September 9, 2004

REYNALDO BALOLOY and ADELINA BALOLOY-HIJE, petitioners, vs. ALFREDO HULAR, respondent. CALLEJO, SR., J.: Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, as amended, of the Decision 1 of the Court of Appeals in CA-G.R. CV No. 51081, which affirmed the Decision 2 of the Regional Trial Court of Sorsogon, Branch 51, in Civil Case No. 93-5871. The antecedents are as follows: On May 11, 1993, respondent Alfredo Hular filed a complaint for quieting of title of real property with damages against the children and heirs of Iluminado Baloloy, namely, Anacorita, Antonio, and petitioners Reynaldo and Adelina, all surnamed Baloloy. The respondent alleged, inter alia, in his complaint that his father, Astrologo Hular, was the owner of a parcel of residential land located in Sitio Page, Biriran, Juban, Sorsogon, with an area of 287 square meters, and that such lot was part of Lot No. 3347 of the Juban Cadastre. The respondent alleged that Iluminado Baloloy, the petitioners predecessor-in-interest, was able to secure a Free Patent over the property through fraud on March 1, 1968, on the basis of which the Register of Deeds issued Original Certificate of Title (OCT) No. P-16540 in his name. The respondent later discovered that in the cadastral survey of lands in Juban, the property of his father, which actually consisted of 1,405 square meters was made to form part of Lot No. 3353, the property of Iluminado Baloloy. According to the respondent, even if the residential land was made to form part of Lot No. 3353 registered under the name of Iluminado Baloloy, he had acquired ownership of the property by acquisitive prescription, as he and his predecessors had been in continuous, uninterrupted and open possession of the property in the concept of owners for more than 60 years. The respondent prayed for alternative reliefs that, after due hearing, judgment be rendered in his favor, thus: a) Declaring the plaintiff as the absolute owner of the land in question; b) Ordering the defendants to perpetually refrain from disturbing plaintiff in his peaceful possession in the land in question; c) Ordering the defendants to remove their houses in the land in question, and to declare OCT No. P-16540, and whatever paper, form, document or proceeding the defendants may have, as null and void and without any effect whatsoever as far as the land in question is concerned as they cast cloud upon the title of the plaintiff; d) In the alternative, defendants be ordered to reconvey the title in favor of the plaintiff as far as the land in question is concerned;

e) Ordering the defendants to jointly and severally pay the plaintiff the amount of P50,000.00 as moral damages; P5,000.00 as attorneys fee plus P500.00 for every appearance or hearing of his lawyer in court; P1,500.00 as consultation fee; P5,000.00 as incidental litigation expenses;P20,000.00 as exemplary damages; and to pay the costs. Plaintiff further prays for such other relief [as are] just and equitable in the premises.3 The Evidence of the Respondent The respondent adduced evidence that the Spouses Lino and Victoriana Estopin were the original owners of a parcel of land located in Barangay Biriran, Juban, Sorsogon, designated as Lot No. 3347 of the Juban Cadastre. A major portion of the property, where a house of strong materials was constructed, was agricultural, while the rest was residential. The respondent also averred that the Spouses Estopin declared the property in their names under Tax Declaration No. 4790. On the north of the agricultural portion of the property was the road leading to Biriran, while north of the residential portion was a creek (canal) and the property of Iluminado. When Lino Estopin died intestate, his widow, Victoriana Lagata, executed a Deed of Absolute Sale4 on November 11, 1961 over the agricultural portion of Lot No. 3347, which had an area of 15,906 square meters, more or less, in favor of Astrologo Hular, married to Lorenza Hular. Shortly thereafter, on November 25, 1961, Lagata executed a Deed of Absolute Sale5 over the residential portion of the property with an area of 287 square meters, including the house constructed thereon, in favor of Hular. Hular and his family, including his son, the respondent, then resided in the property. In 1961 or thereabouts, Iluminado asked Hulars permission to construct a house on a portion of Lot No. 3347 near the road, and the latter agreed. In l977, Lorenza Hular, wife of Astrologo, declared the residential land in the latters name under Tax Declaration No. 6841.6 Earlier, or on August 14, 1945, Irene Griarte had executed a Deed of Absolute Sale over a coconut land located in Barangay Biriran, Juban, with an area of 6,666 square meters in favor of Martiniano Balbedina, with the following boundaries: North, Alejandro Gruta; South, Lino Estopin; East, River Page; West, Pedro Grepal and Esteban Grepal.7 Subsequently, after a cadastral survey was conducted on lands in Juban, the property of Balbedina was designated as Lot No. 3353, with the following boundaries: North: Lot No. 3353 (portion), Alejandro Gruta; South: Lino Estopin; West: Lot No. 3349; East: creek. A trail was then established between Lot No. 3353 and Lot No. 3347 resulting in the decrease of Lot No. 3353 owned by Balbedina to 4,651 square meters. He declared the property under his name under Tax Declaration No. 191 with the following boundaries: North: Lot No. 3353 (portion) Alejandro Gruta; South: trail; East: creek; West: Lot No. 3349.8 On June 4, 1951, Balbedina executed a Deed of Absolute Sale over Lot No. 3353 with an area of only 4,651 square meters in favor of Iluminado.9 The latter declared the property in his name under Tax Declaration

No. 5359.10 Iluminado filed an application with the Bureau of Lands for a free patent over the entirety of Lot No. 3353 on January 5, 1960. 11 He indicated in his application that the property was not occupied by any person and was disposable or alienable public land. In support thereof, he executed an affidavit wherein he declared that he purchased about one-half portion of the property in 1951 based on a deed of absolute sale attached to said affidavit; that in 1957, he purchased the other one-half portion, but "for economic reasons," no deed of sale was executed by the parties. He also alleged that the improvements on the land consisted of coconut trees.12 The Bureau of Lands processed the application in due course. In the meantime, Iluminado constructed his house on a portion of Lot No. 3353 near the trail (road) leading to Biriran. He and his family, including his children, forthwith resided in said house. On March 1, 1968, the Secretary of Agricultural and Natural Resources approved Iluminados application and issued Free Patent No. 384019 covering Lot No. 3353 with an area of 9,302 square meters, on the basis of which OCT No. P-16540 was thereafter issued by the Register of Deeds on March 1, 1968.13 On August 2, 1975, Alejandro Gruta had executed a deed of absolute sale over a portion of Lot No. 3353 with an area of 4,651 square meters in favor of Estelito Hije, the husband of petitioner Adelina Baloloy, one of Iluminados children.14 Before he left for employment in Saudi Arabia in 1979, respondent Hular had his house constructed near the trail (road) on Lot No. 3347, which, however, occupied a big portion of Lot No. 3353.15 Iluminado died intestate on November 29, 1985. His widow and their children continued residing in the property, while petitioner Reynaldo Baloloy, one of Iluminados children, later constructed his house near that of his deceased father. When Astrologo died intestate on December 25, 1989, he was survived by his children, Jose, Romeo, Anacleto, Elena, Leo, Teresita, and the respondent, among others,16 who continued to reside in their house.17 Sometime in l991, the respondents house helper was cleaning the backyard, but was prevented from doing so by petitioner Adelina Baloloy who claimed that their father Iluminado owned the land where the respondents house was located. To determine the veracity of the claim, the respondent had Lot No. 3353 surveyed by Geodetic Engineer Rodolfo Cunanan on February 16, 1993, in the presence of Balbedina, Antonio Baloloy and petitioner Reynaldo Baloloy. Cunanan prepared a Special Sketch Plan of Lot No. 3353 18 showing that the house of Iluminado was constructed on Lot No. 3353 19 near the road behind the houses owned by Astrologo and Alfredo.20The engineer discovered that the residential area deeded by Lagata to Hular had an area of 1,405 square meters, instead of 287 square meters only.21 In their Answer to the complaint, the heirs of Iluminado Baloloy averred that Iluminados house was built in 1962 on a portion of Lot No. 3353, which the latter purchased from Balbedina, and not on a portion of Lot No. 3347 which Hular purchased from Lagata. They alleged that Hular constructed his house on a portion of Lot No. 3353 after securing the permission of their father property cases batch 2 23

Iluminado, and that the respondent had no cause of action for the nullification of Free Patent No. 384019 and OCT No. P-16540 because only the State, through the Office of the Solicitor General, may file a direct action to annul the said patent and title; and even if the respondent was the real party in interest to file the action, such actions had long since prescribed. The heirs of Baloloy prayed that judgment be rendered in their favor, thus: WHEREFORE, it is most respectfully prayed of the Honorable Court to DISMISS this case pursuant to paragraph 15, et seq., hereof, and/or DECIDE it in favor of the defendants by UPHOLDING the sanctity of OCT No. P-16540 and ordering plaintiff to: 1. RESPECT defendants proprietary rights and interests on the property in question covered by OCT No. P-16540; 2. VACATE it at his sole and exclusive expense, and never to set foot on it ever again; 3. PAY defendants: a) MORAL at P50,000.00 EACH; DAMAGES

Hulars claim over the property, the petitioners and their co-heirs filed a complaint for unlawful detainer with the Municipal Trial Court of Juban, docketed as Civil Case No. 331. The case was, however, dismissed for lack of jurisdiction. On December 4, 1995, the trial court rendered judgment in favor of the respondent. The fallo of the decision reads: a/ Declaring plaintiff the absolute owner of the land in question, consisting of 1,405 square meters, more or less, and entitled to the peaceful possession thereof; b/ Ordering the defendants to reconvey the title to the plaintiff as far as the land in question is concerned within fifteen (15) days counted from the finality of the decision, failing in which, the Clerk of Court is hereby ordered to execute the necessary document of reconveyance of the title in favor of the plaintiff after an approved survey plan is made; c/ Ordering defendants to remove their houses from the land in question at their own expense within fifteen (15) days after the decision has become final; d/ Ordering the defendants to pay jointly and severally plaintiff the amount of P5,000.00 as attorneys fees. P5,000.00 as incidental litigation expenses; e/ To pay the costs. SO ORDERED.25 The trial court ruled that the property subject of the complaint, with an area of 1,405 square meters, was part of Lot No. 3347 which the Spouses Estopin owned, and which they later sold to Astrologo Hular. The trial court also held that Iluminado committed fraud in securing the free patent and the title for the property in question, and that when Victoriana Lagata executed the deed of absolute sale on the residential portion of Lot No. 3347, she did not know that it formed part of Lot No. 3353. It further held that the action of the plaintiff to nullify the title and patent was imprescriptible. The petitioners filed on December 8, 1995 a motion to reopen the case to admit Tax Declaration Nos. 6957 and 4790 covering Lot No. 3347, under the names of Astrologo Hular and Victoriana Lagata, respectively, in which it was declared that Lot No. 3347 was coconut land. The trial court ruled that the motion had been mooted by its decision. On appeal, the Court of Appeals rendered judgment affirming the decision of the trial court, and thereafter denied the motion for reconsideration thereof. The Present Petition The petitioners, who are still residing on the subject property, filed their petition for review on certiorari for the reversal of the decision and resolution of the Court of Appeals.

The issues for resolution are: (1) whether all the indispensable parties had been impleaded by the respondent in the trial court; (2) whether the said respondent had a cause of action against the petitioners for the nullification of Free Patent No. 384019 and OCT No. P-16540; for reconveyance and for possession of the subject property; and for damages; and (3) whether the respondent had acquired ownership over the property through acquisitive prescription. The first issue, while not raised by the parties in the trial court and in the Court of Appeals, is so interwoven with the other issues raised therein and is even decisive of the outcome of this case; hence, such issue must be delved into and resolved by this Court.26 We note that the action of the respondent in the trial court is for: (a) reinvidicatoria, to declare the respondent the absolute owner of the subject property and its reconveyance to him as a consequence of the nullification of Free Patent No. 384019 and OCT No. P-16540; (b) publiciana, to order the petitioners and the other heirs of Iluminado Baloloy to vacate the property and deliver possession thereof to him; and (c) damages and attorneys fees. It is the contention of the respondent that the subject property was sold by Lagata to his father, Astrologo Hular, in 1961. He adduced evidence that when his parents died intestate, they were survived by their children, the respondent and his siblings Elena, Jose, Romeo, Anacleto, Leo, and Teresita. Article 1078 of the Civil Code provides that where there are two or more heirs, the whole estate of the decedent is, before partition, owned in common by such heirs, subject to the payment of the debts of the deceased. Until a division is made, the respective share of each cannot be determined and every co-owner exercises, together with his co-participants, joint ownership over the pro indiviso property, in addition to the use and enjoyment of the same. Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession, including an accion publiciana and a reinvidicatory action. A co-owner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs because the suit is deemed to be instituted for the benefit of all.27 Any judgment of the court in favor of the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are indispensable parties. In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property and praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their rights over the subject property or conveyed the same to the respondent or such coowners were aware of the case in the trial court. The trial court rendered judgment property cases batch 2 24

b) ACTUAL DAMAGES and UNREALIZED PROFITS at P1,000.00/MONTH COMPUTED UP TO THE TIME OF PAYMENT PLUS LEGAL RATE OF INTEREST; c) of P50,000.00 EXEMPLARY DAMAGES

d) ATTYS FEES and LITIGATION EXPENSES of P100,000.00; and e) THE COSTS OF THIS SUIT. DEFENDANTS pray for all other reliefs and remedies consistent with law and equity.22 The Evidence for the Petitioners Sometime in 1982, Hular asked permission from Iluminado to construct his house on Lot No. 3353 near the road leading to Biriran. Iluminado agreed, in the presence of his daughter, petitioner Adelina Baloloy. As per the plan of Lot No. 3353 certified by a Director of the Bureau of Lands on November 6, 1961, Lot No. 3353 had an area of 9,302 square meters.23 As gleaned from the Sketch Plan of Lot Nos. 3347 and 3353 prepared on February 7, 1991 by Geodetic Engineer Salvador Balilo, the houses of the Baloloy siblings and those of Astrologo and Alfredo were located in Lot No. 3353.24 In the said sketch plan, Lot No. 3353 had an area of 9,302 square meters, while Lot No. 3347 had an area of 15,905 square meters. When apprised of

declaring the respondent as the sole owner of the property and entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of the trial court is erroneous. Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being co-owners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be stressed that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is impleaded as partydefendant, any decision of the Court would not be binding on it. It has been held that the absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment.28 The absence of the respondents siblings, as parties, rendered all proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority to act, not only as to the absent parties but even as to those present.29 Even if we glossed over the procedural lapses of the respondent, we rule that he failed to prove the material allegations of his complaint against the petitioners; and that he is not entitled to the reliefs prayed for. The burden of proof is on the plaintiff to establish his case by the requisite quantum of evidence. If he claims a right granted as created by law or under a contract of sale, he must prove his claim by competent evidence. He must rely on the strength of his own evidence and not on the weakness or absence of the evidence of that of his opponent.30 He who claims a better right to real estate property must prove not only his ownership of the same but also the identity thereof.31 In Huy v. Huy,32 we held that where a property subject of controversy is duly registered under the Torrens system, the presumptive conclusiveness of such title should be given weight and in the absence of strong and compelling evidence to the contrary, the holder thereof should be considered as the owner of the property until his title is nullified or modified in an appropriate ordinary action. A Torrens Certificate is evidence of an indefeasible title to property in favor of the person in whose name appears therein.33 Such holder is entitled to the possession of the property until his title is nullified. The petitioners aver that Lot No. 3347 owned by the Spouses Estopin was coconut, and not residential, land. The petitioners contend that, under the deed of absolute sale, Victoriana Lagata executed on November 25, 1961 in favor of Astrologo Hular, she sold the residential portion of Lot No. 3347; however, the latter constructed his house on a portion of Lot No. 3353 which Iluminado had purchased from Balbedina, now covered by OCT No. P-16540. The petitioners assert that along with their mother Anacorita and their brother Antonio Baloloy, they constructed their houses on a part of Lot No. 3353, titled in the name of their father Iluminado; hence, they could not be dispossessed of the said property. The petitioners posit that, whether the house of Hular was constructed on a portion of Lot No. 3353 of the property of Balbedina or Gruta is irrelevant because both properties are now covered by OCT No. P-16540 under the name of Iluminado, their predecessor-in-interest.

The Court of Appeals ruled that Victoriana Lagata owned the subject property, which turned out to be 1,405 square meters, and sold the same to Hular. In contrast, the RTC declared in its decision that while under the deed of absolute sale executed by Irene Griarte in favor of Balbedina, Lot No. 3353 had an area of 6,666 square meters, Griarte actually owned only 4,651 square meters; a portion of the lot was actually owned by Lino Estopin. Hence, Balbedina sold only 4,651 square meters to Iluminado34 because he was aware that he owned only 4,651 square meters of the land. It also held that, unknown to Lagata, a portion of Lot No. 3347 was declared as part of Lot No. 3353 when the lands in Juban were surveyed. The trial court concluded that Lagata erroneously declared, under the deed of absolute sale executed on November 25, 1961 in favor of Hular, that the property was part of Lot No. 3347. The trial and appellate courts erred in their decisions. The evidence on record shows that Irene Griarte owned a parcel of land with an area of 6,666 square meters, more or less.35 When she sold the property to Martiniano Balbedina on August 14, 1945, it was bounded on the south by the property of Lino Estopin. There was no trail yet between the property of Griarte on the south and of Lino Estopin on the north. In the meantime, however, a road (trail) leading to Biriran was established between the property of Balbedina on the south and that of Lino Estopin on the north. Thereafter, a cadastral survey of the lands in Juban was conducted by the Bureau of Lands. The property of Balbedina was designated as a portion of Lot No. 3353, while that of Estopin was designated as Lot No. 3347. The other portion of Lot No. 3353, with an area of 4,561 square meters, belonged to Alejandro Gruta. Because of the construction of the road, the property of Balbedina, which was a part of Lot No. 3353, was reduced to 4,651 square meters. Balbedina declared, under Tax Declaration No. 391, that Lot No. 3353 had an area of 4,651 square meters and was coconut land36 and that his property was bounded on the south by a trail (road). Lino Estopin declared Lot No. 3347 under his name for taxation purposes, in which he stated that his property was bounded on the north by the trail going to Biriran.37Clearly, then, Lot No. 3353 and Lot No. 3347 had a common boundary the trail (road) going to Biriran. Balbedina sold his property, which was a portion of Lot No. 3353, with an area of 4,651 square meters to Iluminado Baloloy on June 4, 1951.38 Under the deed of absolute sale, the property was bounded on the south by the trail (road) owned by Lino Estopin.39 The English translation of the deed of sale attached as page 85 to the RTC Records, which both the trial court and the appellate court relied upon, is incorrect. The original deed of absolute sale, which is in Spanish, states that the boundary of the property on the south is "con camino, Lino Estopin," while the English version of the deed, indicates that the property is bounded "on the south by Lino Estopin." Being an earlier document, the deed in Spanish signed by the parties therefore should prevail. Conformably to such deed, Iluminado Baloloy declared in Tax Declaration No. 5359 under his name that the property is bounded on the south by a trail,40 and not by Lot No. 3347 owned by Lino Estopin. The respondent failed to adduce any documentary evidence to prove how the Spouses Estopin acquired the disputed property. The respondents

reliance on the testimonies of Melissa Estopin, the daughter of the Spouses Estopin, and on Porfirio Guamos as well as the May 8, 1993 Affidavit of Martiniano Balbedina, and the deed of sale executed by Victoriana Lagata on November 27, 1961 in favor of Astrologo Hular to corroborate his claim over the lot in question, is misplaced. First. Per the testimony of Porfirio Guamos, the witness of the respondent, Lino Estopin purchased the disputed property in 1941 from Irene Griarte and insisted that there was a deed of sale evidencing the sale: Atty. Dealca: Q The area of the land in question is 1,405 sq. m., you claim that way back in 1944 the owner of the land was Lino Estopin; 41 to 44? A 1941. Q And you said that Lino Estopin was able to acquire the land by purchase? A That was very long time when Lino Estopin sold the property. Q My question is whether you know because you testified earlier that Lino Estopin was able to acquire the land by purchase; do you confirm that? A Yes, Sir. Q From whom? A From Irene Griarte. Q Were you present when that sale was consummated? A I was not there. Q So you do not know how much was it bought by Lino Estopin from Irene Griarte? A No, Sir. Q You do not know whether a document to that effect was actually drafted and executed? A There was. Q Have you seen the document? A I did not see but there was a document. Q You maintain there was a document but you did not see a document, is that it? A In my belief there was a document. Q In your belief, how did you organize that belief when you did not see a document?

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A I insist there was a document. Q That is why, why are you insisting when you did not see a document? A Well, during the sale that document was used. Q How was it used when you did not see that document? A When the deed of sale was executed I did not see the document, but I insist there was a document. Q Thats why, how were you able to say before the court that there was a document when you contend that you did not see any? A There was basis in the sale the sale was based on a document. You cannot sell a property without document? (sic) Q Is that your belief? A Yes, Sir. Q But you did not see any document? Atty. Diesta: Already answered. Witness: A I did not see. Atty. Dealca: Q You said that that document was used when the property was sold by Lino Estopin to Alfredo Hular. . . A In 1961. Yes.41 However, the respondent failed to adduce in evidence the said deed or even an authentic copy thereof. The respondent did not offer any justification for his failure to adduce the same in evidence. As against the respondents verbal claim that his father acquired the property from Lagata, the Torrens title of Iluminado Baloloy must prevail.42 Second. The respondent even failed to adduce in evidence any tax declarations over the disputed property under the name of Irene Griarte and/or Lino Estopin, or realty tax payment receipts in their names from 1941 to November 1961. The documents are circumstantial evidence to prove that Irene Griarte claimed ownership over the disputed property and that Lino Estopin acquired the same from her. After all, such tax declarations and tax receipts can be strong evidence of ownership of land when accompanied by possession for a period sufficient for acquisitive prescription.43 Third. The respondent even failed to adduce in evidence Tax Declaration No. 4790 covering the two parcels of land under the name of Lino Estopin to prove his claim that Lot No. 3347 consisted of agricultural and

residential lands. We note that the petitioners appended a certified true copy of Tax Declaration No. 4790 under the name of Victoriana Lagata over Lot No. 3347 to their Motion to Reopen the Case. In the said declaration, Lot No. 3347 was described as coconut land; this is contrary to the respondents claim that the said lot was then residential, and that the boundary of the property on the north was the road to Biriran which, in turn, is consistent with the petitioners claim.44 Unfortunately, the trial court denied the said motion on the ground that it was mooted by its decision. Fourth. During the cadastral survey of lands in Juban, the lot of Gruta and that of Balbedina, inclusive of the subject property, were designated as Lot No. 3353 with a total area of 9,302 square meters under their names, while that of Lino Estopin was designated as Lot No. 3347 with an area of 15,906 square meters. Iluminado Baloloy applied for a free patent over Lot No. 3353, including the disputed property, under his name. The respondent failed to adduce any evidence that the Spouses Estopin and/or Astrologo Hular opposed Balbedina and/or Iluminados claim of ownership of Lot No. 3353 during the survey and after the filing of the application. A propos is our ruling in Urquiaga v. Court of Appeals:45 As succinctly observed by respondent Court of Appeals in assessing the totality of the evidence We do not agree with defendants that they are also the occupants and possessors of the subject lot just because it "is adjacent to their titled property." Precisely, the boundaries of defendants titled property were determined, delineated and surveyed during the cadastral survey of Dipolog and thereafter indicated in their certificate of title in order that the extent of their property will be known and fixed. Since the subject lot was already found to be outside their titled property, defendants have no basis in claiming it or other adjacent lots for that matter. Otherwise, the very purpose of the cadastral survey as a process of determining the exact boundaries of adjoining properties will be defeated. Defendants own title, O.C.T. No. 0-357 (in the names of Jose Aguirre and Cristina Gonzales), in fact belies their claim of occupation and possession over the adjacent subject lot. Examining said title, we note that: (1) the cadastral survey of Dipolog was conducted from January, 1923 to November 1925; (2) defendants titled property was one of those lots surveyed and this was designated as Lot No. 2623; (3) during the survey, it was already determined and known that Lot No. 2623 is bounded on the northeast, southeast, southwest and west by Lot No. 4443 (as we have seen in our narration of facts, the subject lot is a subdivision lot of Lot No. 6552 which was originally identified as Lot No. 4443-B-1, Dipolog Cadastre 85 Ext.: hence, the subject lot is a portion of Lot No. 4443); and (4) O.C.T. No. 0-357 was issued on October 11, 1965 on the strength of the judgment rendered on July 31 (sic), 1941 by the then Court of First Instance of Zamboanga del Norte in Cadastral Case No. 6, LRC Cadastral Record No. 756.

From the foregoing facts, we find that as early as January, 1923 when the cadastral survey was started, the boundaries of Lot Nos. 2623 and 4443 were already determined and delineated. Since the subject lot was surveyed to be part of Lot No. 4443, it means that during that time defendants predecessors-in-interest never claimed ownership or possession over the subject lot. Otherwise, they would have complained so that the subject lot could be excluded from Lot No. 4443 and included in Lot No. 2623, they being adjacent lots. It is obvious then that defendants predecessors only claimed Lot No. 2623 and they pursued their claim in Cadastral Case No. 6, LRC Cadastral Record No. 756 until O.C.T. No. 0-357 was issued to them. The contention of defendants that they and their predecessors-in-interest occupied and possessed the subject lot since time immemorial therefore is not true.46 Fifth. Under the deed of absolute sale dated November 25, 1961, Lagata sold to Astrologo Hular Lot No. 3347, and not Lot No. 3353. In Veterans Federation of the Philippines v. Court of Appeals,47 we ruled that: Petitioner VFP maintains that the deed of sale was valid and enforceable and that it was perfected at the very moment that the parties agreed upon the thing which was the object of the sale and upon the price. The parties herein had agreed on the parcel of land that petitioner would purchase from respondent PNR, and the same was described therein; thus, petitioner VFP cannot conveniently set aside the technical description in this agreement and insist that it is the legal owner of the property erroneously described in the certificate of title. Petitioner can only claim right of ownership over the parcel of land that was the object of the deed of sale and nothing else.48 Sixth. Under the said deed of sale dated November 11, 1961, Victoriana Lagata sold Lot No. 3347 which had an area of 15,906 square meters and covered by Tax Declaration No. 4790. The deed does not state that what was sold was only a portion of Lot No. 3347, excluding therefrom the disputed property. This is understandable, since the subject property is a portion of Lot No. 3353 owned by Alejandro Gruta and Iluminado Baloloy, and not of Lino Estopin and/or Victoriana Lagata. Lagata could not have sold a portion of Lot No. 3353 which she does not own. As the Latin adage goes: "NEMO DAT QUOD NON HABET." Seventh. The Balbedinas Affidavit dated May 8, 1993 offered by the respondent to prove the contents thereof is inadmissible in evidence against the petitioners. Balbedina did not testify; as such, the petitioners were deprived of their right to cross-examine him. The said affidavit is thus hearsay and barren of probative weight. The affidavit varies the contents of the deed of absolute sale which he (Balbedina) executed in favor of Iluminado more than forty years earlier. In the said affidavit, it was made to appear that Balbedina sold to Iluminado on June 4, 1951 only a portion of Lot 3353 with an area of 3,333 square meters, when under the said deed of absolute sale, the property that was sold consisted of 4,651 square meters. The affidavit is proscribed by Section 9, Rule 130 of the Rules of Court, which provides:

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Section 9. Evidence of written agreements. - When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of the written agreement. ... It bears stressing that the deed of absolute sale executed by Balbedina in favor of Baloloy was notarized by the Justice of the Peace who was an Ex-Officio Notary Public; hence, entitled to full probative weight. Eighth. The Special Sketch Plan of Lot No. 3353 prepared by Geodetic Engineer Rodolfo P. Cunanan49 cannot prevail over OCT No. P-16540. In fact, the plan even buttressed the case for the petitioners because it shows that the subject property is a portion of Lot No. 3353, and not of Lot No. 3347, covered by OCT No. P-16540 under the name of Iluminado Baloloy, the deceased father of the petitioners. Ninth. The conclusion of the RTC that Lagata in fact sold a portion of Lot No. 3347 under the deed of absolute sale dated November 25, 1961, unaware that the property was a part of Lot No. 3353, is based on mere speculations and surmises. Iluminado Baloloy included in his application for a free patent the property of Alejandro Gruta, and was able to secure a free patent over said property in addition to his own. As such, Gruta, not the respondent, is the proper party to assail such free patent, as well as OCT No. P-16540 which was issued based thereon. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decisions of the Regional Trial Court and the Court of Appeals are REVERSED and SET ASIDE. The complaint of the respondent is DISMISSED. No costs. SO ORDERED. G.R. No. 161916 January 20, 2006

the January 8, 2004 Resolution4of the Court of Appeals which denied petitioners motion for reconsideration. The instant ejectment suit stemmed from the parties dispute over Lot 7226 and the house built thereon, covered by Transfer Certificate of Title No. 8842,5 registered in the name of the late Dominador Adlawan and located at Barrio Lipata, Municipality of Minglanilla, Cebu. In his complaint, petitioner claimed that he is an acknowledged illegitimate child 6 of Dominador who died on May 28, 1987 without any other issue. Claiming to be the sole heir of Dominador, he executed an affidavit adjudicating to himself Lot 7226 and the house built thereon.7 Out of respect and generosity to respondents who are the siblings of his father, he granted their plea to occupy the subject property provided they would vacate the same should his need for the property arise. Sometime in January 1999, he verbally requested respondents to vacate the house and lot, but they refused and filed instead an action for quieting of title8 with the RTC. Finally, upon respondents refusal to heed the last demand letter to vacate dated August 2, 2000, petitioner filed the instant case on August 9, 2000.9 On the other hand, respondents Narcisa and Emeterio, 70 and 59 years of age, respectively,10 denied that they begged petitioner to allow them to stay on the questioned property and stressed that they have been occupying Lot 7226 and the house standing thereon since birth. They alleged that Lot 7226 was originally registered in the name of their deceased father, Ramon Adlawan11 and the ancestral house standing thereon was owned by Ramon and their mother, Oligia Maacap Adlawan. The spouses had nine12 children including the late Dominador and herein surviving respondents Emeterio and Narcisa. During the lifetime of their parents and deceased siblings, all of them lived on the said property. Dominador and his wife, Graciana Ramas Adlawan, who died without issue, also occupied the same.13 Petitioner, on the other hand, is a stranger who never had possession of Lot 7226. Sometime in 1961, spouses Ramon and Oligia needed money to finance the renovation of their house. Since they were not qualified to obtain a loan, they transferred ownership of Lot 7226 in the name of their son Dominador who was the only one in the family who had a college education. By virtue of a January 31, 1962 simulated deed of sale,14 a title was issued to Dominador which enabled him to secure a loan with Lot 7226 as collateral. Notwithstanding the execution of the simulated deed, Dominador, then single, never disputed his parents ownership of the lot. He and his wife, Graciana, did not disturb respondents possession of the property until they died on May 28, 1987 and May 6, 1997, respectively. Respondents also contended that Dominadors signature at the back of petitioners birth certificate was forged, hence, the latter is not an heir of Dominador and has no right to claim ownership of Lot 7226.15 They argued that even if petitioner is indeed Dominadors acknowledged illegitimate son, his right to succeed is doubtful because Dominador was survived by his wife, Graciana.16 On February 12, 2002, the MTC dismissed the complaint holding that the establishment of petitioners filiation and the settlement of the estate of Dominador are conditions precedent to the accrual of petitioners action for ejectment. It added that since Dominador was survived by his wife, Graciana,

who died 10 years thereafter, her legal heirs are also entitled to their share in Lot 7226. The dispositive portion thereof, reads: In View of the foregoing, for failure to prove by preponderance of evidence, the plaintiffs cause of action, the aboveentitled case is hereby Ordered DISMISSED. SO ORDERED.17 On appeal by petitioner, the RTC reversed the decision of the MTC holding that the title of Dominador over Lot 7226 cannot be collaterally attacked. It thus ordered respondents to turn over possession of the controverted lot to petitioner and to pay compensation for the use and occupation of the premises. The decretal portion thereof, provides: Wherefore, the Judgment, dated February 12, 2002, of the Municipal Trial Court of Minglanilla, Cebu, in Civil Case No. 392, is reversed. Defendants-appellees are directed to restore to plaintiffappellant possession of Lot 7226 and the house thereon, and to pay plaintiff-appellant, beginning in August 2000, compensation for their use and occupation of the property in the amount of P500.00 a month. So ordered.18 Meanwhile, the RTC granted petitioners motion for execution pending appeal19 which was opposed by the alleged nephew and nieces of Graciana in their motion for leave to intervene and to file an answer in intervention.20 They contended that as heirs of Graciana, they have a share in Lot 7226 and that intervention is necessary to protect their right over the property. In addition, they declared that as co-owners of the property, they are allowing respondents to stay in Lot 7226 until a formal partition of the property is made. The RTC denied the motion for leave to intervene.21 It, however, recalled the order granting the execution pending appeal having lost jurisdiction over the case in view of the petition filed by respondents with the Court of Appeals.22 On September 23, 2003, the Court of Appeals set aside the decision of the RTC and reinstated the judgment of the MTC. It ratiocinated that petitioner and the heirs of Graciana are co-owners of Lot 7226. As such, petitioner cannot eject respondents from the property via an unlawful detainer suit filed in his own name and as the sole owner of the property. Thus WHEEFORE, premises considered, the appealed Decision dated September 13, 2002 of the Regional Trial Court of Cebu City, Branch 7, in Civil Case No. CEB-27806 is REVERSED and SET ASIDE, and the Judgment dated February 12, 2002 of the Municipal Trial Court of Minglanilla, Metro Cebu, in Civil Case No. 392 is REINSTATED. Costs against the respondent. SO ORDERED.23 Petitioners motion for reconsideration was denied. Hence, the instant petition. property cases batch 2 27

ARNELITO ADLAWAN, petitioner, vs. EMETERIO M. ADLAWAN and NARCISA M. ADLAWAN, respondents. YNARES-SANTIAGO, J.: Assailed in this petition for review is the September 23, 2003 Decision1 of the Court of Appeals in CA-G.R. SP No. 74921 which set aside the September 13, 2002 Decision2 of the Regional Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No. CEB-27806, and reinstated the February 12, 2002 Judgment3 of the Municipal Trial Court (MTC) of Minglanilla, Metro Cebu, in Civil Case No. 392, dismissing petitioner Arnelito Adlawans unlawful detainer suit against respondents Emeterio and Narcisa Adlawan. Likewise questioned is

The decisive issue to be resolved is whether or not petitioner can validly maintain the instant case for ejectment. Petitioner averred that he is an acknowledged illegitimate son and the sole heir of Dominador. He in fact executed an affidavit adjudicating to himself the controverted property. In ruling for the petitioner, the RTC held that the questioned January 31, 1962 deed of sale validly transferred title to Dominador and that petitioner is his acknowledged illegitimate son who inherited ownership of the questioned lot. The Court notes, however, that the RTC lost sight of the fact that the theory of succession invoked by petitioner would end up proving that he is not the sole owner of Lot 7226. This is so because Dominador was survived not only by petitioner but also by his legal wife, Graciana, who died 10 years after the demise of Dominador on May 28, 1987.24 By intestate succession, Graciana and petitioner became co-owners of Lot 7226.25 The death of Graciana on May 6, 1997, did not make petitioner the absolute owner of Lot 7226 because the share of Graciana passed to her relatives by consanguinity and not to petitioner with whom she had no blood relations. The Court of Appeals thus correctly held that petitioner has no authority to institute the instant action as the sole owner of Lot 7226. Petitioner contends that even granting that he has co-owners over Lot 7226, he can on his own file the instant case pursuant to Article 487 of the Civil Code which provides: ART. 487. Any one of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession. Article 487 includes forcible entry and unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de reivindicacion).26 A co-owner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed to benefit his co-owners. It should be stressed, however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession of the litigated property, the action should be dismissed.27 The renowned civilist, Professor Arturo M. Tolentino, explained A co-owner may bring such an action, without the necessity of joining all the other co-owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all. If the action is for the benefit of the plaintiff alone, such that he claims possession for himself and not for the co-ownership, the action will not prosper. (Emphasis added)28 In Baloloy v. Hular,29 respondent filed a complaint for quieting of title claiming exclusive ownership of the property, but the evidence showed that respondent has co-owners over the property. In dismissing the complaint for want of respondents authority to file the case, the Court held that Under Article 487 of the New Civil Code, any of the coowners may bring an action in ejectment. This article covers all kinds

of actions for the recovery of possession, including an accion publiciana and a reinvidicatory action. A co-owner may bring such an action without the necessity of joining all the other co-owners as coplaintiffs because the suit is deemed to be instituted for the benefit of all. Any judgment of the court in favor of the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are indispensable parties. In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property and praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their rights over the subject property or conveyed the same to the respondent or such coowners were aware of the case in the trial court. The trial court rendered judgment declaring the respondent as the sole owner of the property and entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of the trial court is erroneous. Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being co-owners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be stressed that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is impleaded as partydefendant, any decision of the Court would not be binding on it. It has been held that the absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment. The absence of the respondents siblings, as parties, rendered all proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority to act, not only as to the absent parties but even as to those present.30 In the instant case, it is not disputed that petitioner brought the suit for unlawful detainer in his name alone and for his own benefit to the exclusion of the heirs of Graciana as he even executed an affidavit of self- adjudication over the disputed property. It is clear therefore that petitioner cannot validly maintain the instant action considering that he does not recognize the co-ownership that necessarily flows from his theory of succession to the property of his father, Dominador. In the same vein, there is no merit in petitioners claim that he has the legal personality to file the present unlawful detainer suit because the ejectment of respondents would benefit not only him but also his alleged co-owners. However, petitioner forgets that he filed the instant case to acquire possession of the property and to recover damages. If granted, he alone will gain possession of the lot and benefit from the proceeds of the award of damages to the exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the alleged benefit to his co-owners. Incidentally, it should be pointed out that in default of the said heirs of Graciana, whom petitioner labeled as "fictitious heirs," the State

will inherit her share31 and will thus be petitioners co-owner entitled to possession and enjoyment of the property. The present controversy should be differentiated from the cases where the Court upheld the right of a co-owner to file a suit pursuant to Article 487 of the Civil Code. In Resuena v. Court of Appeals,32 and Sering v. Plazo,33 the coowners who filed the ejectment case did not represent themselves as the exclusive owner of the property. InCelino v. Heirs of Alejo and Teresa Santiago,34 the complaint for quieting of title was brought in behalf of the co-owners precisely to recover lots owned in common.35 Similarly in Vencilao v. Camarenta,36 the amended complaint specified that the plaintiff is one of the heirs who co-owns the controverted properties. In the foregoing cases, the plaintiff never disputed the existence of a co-ownership nor claimed to be the sole or exclusive owner of the litigated lot. A favorable decision therein would of course inure to the benefit not only of the plaintiff but to his co-owners as well. The instant case, however, presents an entirely different backdrop as petitioner vigorously asserted absolute and sole ownership of the questioned lot. In his complaint, petitioner made the following allegations, to wit: 3. The plaintiff was the only son (illegitimate) and sole heir of the late DOMINADOR ADLAWAN who died intestate on 28 May 1987 without any other descendant nor ascendant x x x. xxx 5. Being the only child/descendant and, therefore, sole heir of the deceased Dominador Adlawan, the plaintiff became the absolute owner, and automatically took POSSESSION, of the aforementioned house and lot x x x. (Emphasis added)37 Clearly, the said cases find no application here because petitioners action operates as a complete repudiation of the existence of co-ownership and not in representation or recognition thereof. Dismissal of the complaint is therefore proper. As noted by Former Supreme Court Associate Justice Edgrado L. Paras "[i]t is understood, of course, that the action [under Article 487 of the Civil Code] is being instituted for all. Hence, if the co-owner expressly states that he is bringing the case only for himself, the action should not be allowed to prosper."38 Indeed, respondents not less than four decade actual physical possession of the questioned ancestral house and lot deserves to be respected especially so that petitioner failed to show that he has the requisite personality and authority as co-owner to file the instant case. Justice dictates that respondents who are now in the twilight years of their life be granted possession of their ancestral property where their parents and siblings lived during their lifetime, and where they, will probably spend the remaining days of their life. WHEREFORE, the petition is DENIED. The September 23, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 74921 which reinstated the February 12, 2002 Judgment of the Municipal Trial Court of Minglanilla, Metro

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Cebu, dismissing petitioners complaint in Civil Case No. 392, and its January 8, 2004 Resolution, are AFFIRMED. SO ORDERED. G.R. No. 168943 October 27, 2006

WHEREFORE, it is respectfully prayed that, after due hearing, judgment be rendered quieting the title of plaintiffs over and/or recover possession of their said property in the name of deceased Enrique Santos, covered by said TCT No. RT110323(57272) of the Register of Deeds at Quezon City and that: 1. The title of defendant, TCT No. 321744 be ordered cancelled by the Register of Deeds of Quezon City; 2. The defendant be ordered to pay plaintiffs claims for actual damages in the sum of P100,000.00; 3. The defendant be ordered to pay plaintiffs claims for compensatory damages in the sum of at least P1,000,000.00; 4. The defendant be ordered to pay plaintiffs claims for reimbursement of the lawyers professional fees consisting of the aforesaid P50,000.00 acceptance fee and reimbursement of the said success fee in par. 10 above; and lawyers expenses of P2,000.00 for each hearing in this case; 5. The defendant be ordered to pay expenses and costs of litigation in the sum of at leastP200,000.00. Other reliefs that are just and equitable in the premises are, likewise, prayed for.4 As gleaned from the caption of the complaint, plaintiffs appear to be the heirs of Enrique Santos, represented by Enrique G. Santos. The latter signed the Verification and Certificate of Non-Forum Shopping which reads: I, ENRIQUE G. SANTOS, of legal age, under oath, state that I am one of the children of the late Enrique Santos and I represent the heirs of said Enrique Santos who are my co-plaintiffs in the abovecaptioned case and that I directed the preparation of the instant complaint, the contents of which are true and correct to the best of my knowledge and the attachments are faithful reproductions of the official copies in my possession. I hereby certify that I have not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and that I shall notify this Commission within three days from notice that a similar action or proceeding has been filed or is pending thereat. IN WITNESS WHEREOF, I hereby affix my signature this 23rd day of October 2001 at Pasig City, Metro Manila. (Sgd.)

ENRIQUE G. SANTOS SUBSCRIBED AND SWORN to before me this 23rd day of October 2001 at Pasig City, affiant exhibiting to me his CTC No. 07303074 issued at Sta. Cruz, Laguna on April 16, 2001. (Sgd.) PETER FRANCIS G. ZAGALA Notary Public Until December 31, 2002 PTR No. 0287069 Issued on 1-10-01 At Pasig City5 Defendant moved to dismiss plaintiffs complaint on the following grounds: (1) plaintiffs failed to faithfully comply with the procedural requirements set forth in Section 5, Rule 7 of the 1997 Rules of Civil Procedure; (2) the action (either Quieting of Title or Accion Reinvindicatoria) had prescribed, the same having been filed only on October 24, 2001 beyond the statutory tenyear period therefor; and (3) that the complaint is defective in many respects.6 Defendant asserted that the case involved more than one plaintiff but the verification and certification against forum shopping incorporated in the complaint was signed only by Enrique Santos. Although the complaint alleges that plaintiffs are represented by Enrique Santos, there is no showing that he was, indeed, authorized to so represent the other plaintiffs to file the complaint and to sign the verification and certification of non-forum shopping.7 Thus, plaintiffs failed to comply with Section 5, Rule 7 of the Rules of Court. Defendant cited the ruling of this Court in Loquias v. Office of the Ombudsman.8 Defendant maintained that the complaint is defective in that, although there is an allegation that Enrique Santos represents the other heirs, there is nothing in the pleading to show the latters authority to that effect; the complaint fails to aver with particularity the facts showing the capacity of defendant corporation to sue and be sued; and the pleading does not state the address of plaintiffs. Defendant likewise averred that the complaint should be dismissed on the ground of prescription. It argued that plaintiffs anchor their claim on quieting of title and considering that they are not in possession of the land in question, their cause of action prescribed after ten years. On the other hand, if the supposed right of plaintiffs is based on accion reinvindicatoria, prescription would set in after 10 years from dispossession. In both cases, defendant asserts, the reckoning point is 1984 when defendant acquired TCT No. 321744 and possession of the land in question. In their Comment9 on the motion, plaintiffs averred that the relationship of a co-owner to the other co-owners is fiduciary in character; thus, anyone of them could effectively act for another for the benefit of the property without need for an authorization. Consequently, Enrique Santos had the authority to represent the other heirs as plaintiffs and to sign the verification and certification against forum shopping.10 On the issue of prescription, plaintiffs argued that the prescriptive period for the actions should be reckoned from 1996, when defendant claimed ownership over the property and barred plaintiffs from property cases batch 2 29

IGLESIA NI CRISTO, petitioner, vs. HON. THELMA A. PONFERRADA, in her capacity as Presiding Judge, Regional Trial Court, Br. 104, Quezon City, and HEIRS OF ENRIQUE G. SANTOS, respondents. CALLEJO, SR, J.: This is a Petition for Review on Certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 72686 and its Resolution2 denying the motion for reconsideration of the said decision. On October 24, 2001, Alicia, Alfredo, Roberto, Enrique and Susan, all surnamed Santos, and Sonia Santos-Wallin, represented by Enrique G. Santos, filed a complaint3 for Quieting of Title and/or Accion Reinvindicatoria before the Regional Trial Court (RTC) of Quezon City against the Iglesia Ni Cristo (INC), defendant therein. Plaintiffs alleged therein that, during his lifetime, Enrique Santos was the owner of a 936-square-meter parcel of land located in Tandang Sora, Quezon City covered by Transfer Certificate of Title (TCT) No. 57272 issued by the Register of Deeds on July 27, 1961 which cancelled TCT No. 57193-289. He had been in possession of the owners duplicate of said title and had been in continuous, open, adverse and peaceful possession of the property. He died on February 9, 1970 and was survived by his wife, Alicia Santos, and other plaintiffs, who were their children. Thereafter, plaintiffs took peaceful and adverse possession of the property, and of the owners duplicate of said title. When the Office of the Register of Deeds of Quezon City was burned on June 11, 1988, the original copy of said title was burned as well. The Register of Deeds had the title reconstituted as TCT No. RT-110323, based on the owners duplicate of TCT No. 57272. Sometime in February 1996, plaintiffs learned that defendant was claiming ownership over the property based on TCT No. 321744 issued on September 18, 1984 which, on its face, cancelled TCT No. 320898, under the name of the Philippine National Bank, which allegedly cancelled TCT No. 252070 in the names of the spouses Marcos and Romana dela Cruz. They insisted that TCT Nos. 321744, 320898 and 252070 were not among the titles issued by the Register of Deeds of Quezon City and even if the Register of Deeds issued said titles, it was contrary to law. Enrique Santos, during his lifetime, and his heirs, after his death, never encumbered or disposed the property. In 1996, plaintiffs had the property fenced but defendant deprived them of the final use and enjoyment of their property. Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:

fencing their property, not in 1984 when TCT No. 321744 was issued by the Register of Deeds in the name of defendant as owner. In its reply, defendant averred that absent any authority from his coheirs, Enrique Santos must implead them as plaintiffs as they are indispensable parties. In response, plaintiffs aver that a co-owner of a property can execute an action for quieting of title without impleading the other co-owners. The trial court issued an Order denying defendants motion to dismiss. It declared that since Enrique Santos was one of the heirs, his signature in the verification and certification constitutes substantial compliance with the Rules. The court cited the ruling of this Court in Dar v. Alonzo-Legasto.12 The court, likewise, held that prescription had not set in and that failure to state the address of plaintiffs in the complaint does not warrant the dismissal of the complaint.
11

Petitioner averred that, of the plaintiffs below, only plaintiff Enrique Santos signed the verification and certification of non-forum shopping. Under Section 5, Rule 7 of the 1997 Rules of Civil Procedure, all the plaintiffs must sign, unless one of them is authorized by a special power of attorney to sign for and in behalf of the others. Petitioner argues that the bare claim of Enrique Santos that he signed the verification and certification in his behalf and of the other plaintiffs who are his co-heirs/co-owners of the property does not even constitute substantial compliance of the rule. Contrary to the ruling of the trial court, the absence or existence of an authority of Enrique Santos to sign the verification and certification for and in behalf of his co-plaintiffs is not a matter of evidence. The defect is fatal to the complaint of respondents and cannot be cured by an amendment of the complaint. The trial court erred in applying the ruling of this Court in Dar v. Alonzo-Legasto.16 Petitioner maintained that the action of respondents, whether it be one for quieting of title or an accion reinvindicatoria, had prescribed when the complaint was filed on October 24, 2001. Petitioner asserts that this is because when respondents filed their complaint, they were not in actual or physical possession of the property, as it (petitioner) has been in actual possession of the property since 1984 when TCT No. 321744 was issued to it by the Register of Deeds. This is evident from the nature of a reinvindicatory action itself which is an action whereby plaintiff alleges ownership over the subject parcel of land and seeks recovery of its full possession. By their action, respondents thereby admitted that petitioner was in actual possession of the property, and as such, respondents action for quieting of title or accion reinvindicatoria may prescribe in ten (10) years from 1984 or in 1994, it appearing that it acted in good faith when it acquired the property from the registered owner, conformably with Article 555(4) of the New Civil Code. On April 7, 2005, the CA rendered the assailed decision17 dismissing the petition, holding that the RTC did not commit grave abuse of its discretion amounting to lack or excess of jurisdiction in denying petitioners motion to dismiss. As the Court held in DAR v. Alonzo-Legasto18 and in Gudoy v. Guadalquiver,19 the certification signed by one with respect to a property over which he shares a common interest with the rest of the plaintiffs (respondents herein) substantially complied with the Rules. As to the issue of prescription, the appellate court held that the prescriptive period should be reckoned from 1996, when petitioner claimed ownership and barred respondents from fencing the property. Petitioner is now before this Court on petition for review on certiorari, raising the following issues: I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE CERTIFICATION OF NONFORUM SHOPPING SIGNED BY RESPONDENT ENRIQUE G. SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE AND IN APPLYING THE CASE OF GUDOY V. GUADALQUIVER, 429 SCRA 723, WITHOUT REGARD TO MORE RECENT JURISPRUDENCE.

II. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE AUTHORITY OF RESPONDENT ENRIQUE G. SANTOS TO REPRESENT HIS COHEIRS IN THE FILING OF THE COMPLAINT AGAINST THE PETITIONER IS A MATTER OF EVIDENCE. III. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION FOR QUIETING OF TITLE AND/OR ACCION REINVINDICATORIA (CIVIL CASE NO. Q-01-45415) HAS NOT YET PRESCRIBED.20 Petitioner reiterated its arguments in support of its petition in the CA as its arguments in support of its petition in the present case. Sections 4 and 5, Rule 7 of the Revised Rules of Court on verification and certification against forum shopping read: Sec. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. A pleading required to be verified which contains a verification based on "information and belief" or upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an unsigned pleading. Sec. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with

Defendant filed a motion for reconsideration, which the court likewise denied in an Order13 dated July 10, 2002. Unsatisfied, defendant, as petitioner, filed a Petition for Certiorari and Prohibition with Prayer for the Issuance of a Temporary Restraining Order and/or Preliminary Injunction14 before the CA, raising the following issues: I. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION WHEN SHE HELD THAT THE CERTIFICATION OF NON-FORUM SHOPPING SIGNED BY ENRIQUE G. SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE, IN CLEAR CONTRAVENTION OF THE RULES OF COURT, AND THE RULING IN LOQUIAS V. OFFICE OF THE OMBUDSMAN, G.R. NO. 1399396 (SIC), AUGUST 16, 2000, 338 SCRA 62, AND ORTIZ V. COURT OF APPEALS, G.R. NO. 127393, 299 SCRA 708 (DECEMBER 4, 1998). II. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION IN APPLYING THE RULING IN DAR, ET. AL. V. HON. ROSE MARIE ALONZO-LEGASTO, ET. AL., G.R. NO. 143016, AUGUST 30, 2000 TO THE INSTANT CASE. III. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION WHEN SHE HELD THAT THE AUTHORITY OF ENRIQUE G. SANTOS TO REPRESENT HIS CO-HEIRS IN THE FILING OF THE COMPLAINT AGAINST THE "INC" IS A MATTER OF EVIDENCE. IV. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION WHEN SHE HELD THAT THE ACTION FOR QUIETING OF TITLE AND/OR ACCION REINVINDICATORIA (CIVIL CASE NO. Q-0145415) HAS NOT YET PRESCRIBED.15

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prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. The purpose of verification is simply to secure an assurance that the allegations of the petition (or complaint) have been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and noncompliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement.21 The issue in the present case is not the lack of verification but the sufficiency of one executed by only one of plaintiffs. This Court held in Ateneo de Naga University v. Manalo,22 that the verification requirement is deemed substantially complied with when, as in the present case, only one of the heirsplaintiffs, who has sufficient knowledge and belief to swear to the truth of the allegations in the petition (complaint), signed the verification attached to it. Such verification is deemed sufficient assurance that the matters alleged in the petition have been made in good faith or are true and correct, not merely speculative. The same liberality should likewise be applied to the certification against forum shopping. The general rule is that the certification must be signed by all plaintiffs in a case and the signature of only one of them is insufficient. However, the Court has also stressed in a number of cases that the rules on forum shopping were designed to promote and facilitate the orderly administration of justice and thus should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. The rule of substantial compliance may be availed of with respect to the contents of the certification. This is because the requirement of strict compliance with the provisions merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded.23 The substantial compliance rule has been applied by this Court in a number of cases: Cavile v. Heirs of Cavile,24where the Court sustained the validity of the certification signed by only one of petitioners because he is a relative of the other petitioners and co-owner of the properties in dispute; Heirs of Agapito T. Olarte v. Office of the President of the Philippines,25 where the Court allowed a certification signed by only two petitioners because the case involved a family home in which all the petitioners shared a common interest; Gudoy v. Guadalquiver,26where the Court considered as valid the certification signed by only four of the nine petitioners because all petitioners filed as co-owners pro indiviso a complaint against respondents for quieting of title and damages, as such, they all have joint interest in the undivided whole; and Dar v. AlonzoLegasto,27 where the Court sustained the certification signed by only one of the spouses as they were sued jointly involving a property in which they had a common interest. It is noteworthy that in all of the above cases, the Court applied the rule on substantial compliance because of the commonality of interest of all the parties with respect to the subject of the controversy. Applying the doctrines laid down in the above cases, we find and so hold that the CA did not err in affirming the application of the rule on substantial

compliance. In the instant case, the property involved is a 936-square-meter real property. Both parties have their respective TCTs over the property. Respondents herein who are plaintiffs in the case below have a common interest over the property being the heirs of the late Enrique Santos, the alleged registered owner of the subject property as shown in one of the TCTs. As such heirs, they are considered co-owners pro indiviso of the whole property since no specific portion yet has been adjudicated to any of the heirs. Consequently, as one of the heirs and principal party, the lone signature of Enrique G. Santos in the verification and certification is sufficient for the RTC to take cognizance of the case. The commonality of their interest gave Enrique G. Santos the authority to inform the RTC on behalf of the other plaintiffs therein that they have not commenced any action or claim involving the same issues in another court or tribunal, and that there is no other pending action or claim in another court or tribunal involving the same issues. Hence, the RTC correctly denied the motion to dismiss filed by petitioner. Considering that at stake in the present case is the ownership and possession over a prime property in Quezon City, the apparent merit of the substantive aspects of the case should be deemed as a special circumstance or compelling reason to allow the relaxation of the rule. Time and again, this Court has held that rules of procedure are established to secure substantial justice. Being instruments for the speedy and efficient administration of justice, they may be used to achieve such end, not to derail it. In particular, when a strict and literal application of the rules on nonforum shopping and verification will result in a patent denial of substantial justice, these may be liberally construed.28 The ends of justice are better served when cases are determined on the merits after all parties are given full opportunity to ventilate their causes and defenses rather than on technicality or some procedural imperfections.29 Indeed, this Court strictly applied the rules on verification and certification against forum shopping as in the cases of Loquias v. Office of the Ombudsman30 and Tolentino v. Rivera.31 However, in both cases, the commonality of interest between or among the parties is wanting. In Loquias, the co-parties were being sued in their individual capacities as mayor, vice mayor and members of the municipal board. In Tolentino, the lone signature of Tolentino was held insufficient because he had no authority to sign in behalf of the Francisco spouses. In such case, the Court concluded that Tolentino merely used the spouses names for whatever mileage he thought he could gain. It is thus clear from these cases that the commonality of interest is material in the relaxation of the Rules. Anent the issue of the authority of Enrique G. Santos to represent his co-heirs/co-plaintiffs, we find no necessity to show such authority. Respondents herein are co-owners of the subject property. As such co-owners, each of the heirs may properly bring an action for ejectment, forcible entry and detainer, or any kind of action for the recovery of possession of the subject properties. Thus, a coowner may bring such an action, even without joining all the other co-owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all. 32

We uphold the validity of the complaint because of the following circumstances: (1) the caption of the instant case is Heirs of Enrique Santos v. Iglesia ni Cristo;33 (2) the opening statement of the complaint states that plaintiffs are the heirs of Enrique Santos and likewise names the particular heirs of the latter who instituted the complaint below;34 (3) the case involves a property owned by the predecessor-in-interest of plaintiffs therein;35 and (4) the verification signed by Enrique G. Santos clearly states that he is one of the children of the late Enrique Santos and that he represents the heirs of said Enrique Santos. 36 On the issue of prescription of action, petitioner avers that the action of respondents is one to quiet title and/or accion reinvindicatoria, and that respondents asserted ownership over the property and sought the recovery of possession of the subject parcel of land. It insists that the very nature of the action presupposes that respondents had not been in actual and material possession of the property, and that it was petitioner which had been in possession of the property since 1984 when it acquired title thereon. The action of respondent prescribed in ten years from 1984 when petitioner allegedly dispossessed respondents, in accordance with Article 555(4) of the New Civil Code. The contention of petitioner has no merit. The nature of an action is determined by the material allegations of the complaint and the character of the relief sought by plaintiff, and the law in effect when the action was filed irrespective of whether he is entitled to all or only some of such relief.37 As gleaned from the averments of the complaint, the action of respondents was one for quieting of title under Rule 64 of the Rules of Court, in relation to Article 476 of the New Civil Code. The latter provision reads: Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title. An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein. A cloud is said to be a semblance of a title, either legal or equitable, or a cloud of an interest in land appearing in some legal form but which is, in fact, unfounded, or which it would be inequitable to enforce. 38 An action for quieting of title is imprescriptible until the claimant is ousted of his possession.39 The owner of a real property, as plaintiff, is entitled to the relief of quieting of title even if, at the time of the commencement of his action, he was not in actual possession of real property. After all, under Article 477 of the New Civil Code, the owner need not be in possession of the property. If on the face of TCT No. 321744 under the name of plaintiff, its invalidity does not appear but rests partly in pais, an action for quieting of title is proper.40 In the present case, respondents herein, as plaintiffs below, alleged in their complaint, that their father, Enrique Santos, was the owner of the property based on TCT No. 57272 issued on July 27, 1961; and that, after his death on February 9, 1970, they inherited the property; Enrique Santos, during his lifetime, property cases batch 2 31

and respondents, after the death of the former, had been in actual, continuous and peaceful possession of the property until 1994 when petitioner claimed ownership based on TCT No. 321744 issued on September 18, 1984 and barred respondents from fencing their property. Petitioners claim that it had been in actual or material possession of the property since 1984 when TCT No. 321744 was issued in its favor is belied by the allegations in the complaint that respondents had been in actual and material possession of the property since 1961 up to the time they filed their complaint on October 24, 2001. Admittedly, respondents interposed the alternative reinvindicatory action against petitioner. An accion reinvindicatoria does not necessarily presuppose that the actual and material possession of the property is on defendant and that plaintiff seeks the recovery of such possession from defendant. It bears stressing that anaccion reinvindicatoria is a remedy seeking the recovery of ownership and includes jus possidendi, jus utendi, andjus fruendi as well. It is an action whereby a party claims ownership over a parcel of land and seeks recovery of its full possession.41 Thus, the owner of real property in actual and material possession thereof may file an accion reinvindicatoria against another seeking ownership over a parcel of land including jus vindicandi, or the right to exclude defendants from the possession thereof. In this case, respondents filed an alternative reinvindicatory action claiming ownership over the property and the cancellation of TCT No. 321744 under the name of petitioner. In fine, they sought to enforce their jus utendi and jus vindicandi when petitioner claimed ownership and prevented them from fencing the property. Since respondents were in actual or physical possession of the property when they filed their complaint against petitioner on October 24, 2001, the prescriptive period for the reinvindicatory action had not even commenced to run, even if petitioner was able to secure TCT No. 321744 over the property in 1984. The reason for this is that x x x one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.42 IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 72686 is AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. 168747 October 19, 2007

CLUB, Inc., respondents. CHICO-NAZARIO, J.: This Petition for Review on Certiorari seeks to reverse the Decision1 dated 6 May 2005 of the Court of Appeals in CA-G.R. CV No. 71028 entitled, "Victoria Regner v. Cynthia Logarta, Teresa R. Tormis and Cebu Country Club, Inc.," which affirmed the Order dated 9 November 2000 of the Regional Trial Court (RTC) of Cebu, granting herein respondents motion to dismiss Civil Case No. CEB 23927. The Order dated 9 November 2000 of the RTC dismissed herein petitioners complaint for declaration of nullity of a deed of donation, for failure to serve summons on Cynthia Logarta, an indispensable party therein. Civil Case No. CEB. 23927 arose from the following factual antecedents: Luis Regner (Luis) had three daughters with his first wife, Anicita C. Regner, namely, Cynthia Logarta (Cynthia) and Teresa Tormis (Teresa), the respondents herein, and Melinda Regner-Borja (Melinda). Herein petitioner Victoria Regner (Victoria) is the second wife of Luis. During the lifetime of Luis, he acquired several properties, among which is a share at Cebu Country Club Inc., evidenced by Proprietary Ownership Certificate No. 0272. On 15 May 1998, Luis executed a Deed 2 of Donation in favor of respondents Cynthia and Teresa covering Proprietary Ownership Certificate No. 0272 of the Cebu Country Club, Inc. Luis passed away on 11 February 1999. On 15 June 1999, Victoria filed a Complaint for Declaration of Nullity of the Deed of Donation with Prayer for Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order against Cynthia and Teresa with the RTC, docketed as Civil Case No. CEB. 23927. Victoria alleged in her complaint that: on 17 March 1997, Luis made a written declaration wherein he stated that due to his illness and forgetfulness, he would not sign any document without the knowledge of his lawyer, Atty. Francis Zosa; on 15 May 1998, when Luis was already very ill and no longer of sound and disposing mind, Cynthia and Teresa , conspiring and confederating with each other, fraudulently made or caused to be fraudulently made a Deed of Donation whereby they made it appear that Luis donated to them Proprietary Ownership Certificate No. 0272; since Luis no longer had the ability to write or affix his signature, Melinda, acting under the influence of her sisters, Cynthia and Teresa, fraudulently manipulated the hand of Luis so that he could affix his thumb mark on the assailed Deed of Donation; on 8 February 1998, or three days before the death of Luis, and when he was already in comatose condition at the Cebu Doctors Hospital, Melinda, Teresa, and Cynthia caused the preparation of an affidavit to the effect that Luis affirmed the Deed of Donation he allegedly executed earlier by lifting his hand to affix his thumb mark on the said affidavit. Sheriff Melchor A. Solon served the summonses on Cynthia and Teresa at the Borja Family Clinic in Tagbilaran City wherein Melinda worked as
3

a doctor, but Melinda refused to receive the summonses for her sisters and informed the sheriff that their lawyer, Atty. Francis Zosa, would be the one to receive the same. Upon her arrival in the Philippines, on 1 June 2000, Teresa was personally served the summons at Room 304, Regency Crest Condominium, Banilad, Cebu City. She filed her Answer4 with counterclaim with the RTC on 6 June 2000. Subsequently, on 12 September 2002, Teresa filed a motion to dismiss Civil Case No. CEB 23927 because of petitioners failure to prosecute her action for an unreasonable length of time. Petitioner opposed5 the motion and filed her own motion to set the case for pre-trial, to which Teresa filed her rejoinder on the ground that their sister, Cynthia, an indispensable party, had not yet been served a summons. Thus, Teresa prayed for the dismissal of petitioners complaint, as the case would not proceed without Cynthias presence. On 9 November 2000, the RTC issued an Order6 granting respondent Teresas motion to dismiss, pertinent portions of which read: Considering that the donees in the Deed of Donation are Cynthia R. Logarta and Teresa R. Tormis, they are therefore an (sic) indispensable party (sic). In the case of Quisumbing vs. Court of Appeals, 189 SCRA 325, indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights so that the court could not proceed without their presence. Wherefore, in view of the foregoing, the instant case is hereby dismissed without prejudice. A motion for reconsideration was filed by petitioner, but the same was denied in an Order dated 14 February 2001. Aggrieved, petitioner appealed to the Court of Appeals. On 6 May 2005, the Court of Appeals rendered a Decision denying the appeal and affirming in toto the order of dismissal of the complaint by the RTC and the denial of the motion for reconsideration thereof. The Court of Appeals ratiocinated that petitioners failure to move for an extraterritorial service of summons constitutes failure to prosecute for an unreasonable length of time, thus: [T]he plaintiff-appellant [Victoria Regner] should have moved for the extraterritorial service of summons for both defendants-appellees Teresa R. Tormis and Cynthia R. Logarta as they were not residing and were not found in the Philippines when plaintiff-appellant [Victoria Regner] filed this case below. Although defendant-appellant Teresa Tormis was personally served with summons on June 1, 2000 when she came to the Philippines but the same was only effected after a long wait or after the lapse of almost one year from the date the complaint was filed on June 15, 1999. To allow this practice would be to make the continuation of like proceedings before the courts dependent on when the defendants would be personally served with summons by the time they would come to the Philippines, which would only unnecessarily delay the proceedings

VICTORIA REGNER, petitioner, vs. CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU COUNTRY

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and clog the court dockets as well. The afore-cited rule was precisely crafted to meet situations similar to the present case to avoid unnecessary delays. It has to be emphasized that it is incumbent upon the plaintiff [Victoria Regner] to move with leave of court for the extraterritorial service of summons. Taking into account the considerable time that had elapsed from the filing of the complaint on June 15, 1999 until defendant-appellee Teresa R. Tormis, through counsel, filed a motion to dismiss on September 12, 2000, or approximately fifteen (15) months, without any act on the part of plaintiff-appellant [Victoria Regner] to move for extraterritorial service of summons upon the person of defendant-appellee Cynthia Logarta renders plaintiff-appellants [Victoria Regner] complaint dismissible for failure to prosecute her action for unreasonable length of time under Section 3, Rule 17, Revised Rules of Court, x x x. 7 Hence, this appeal via petition8 for review on certiorari filed by petitioner raising the following assignment of errors: THE COURT OF APPEALS ERRED IN HOLDING THAT THE DELAY IN SERVING SUMMONS ON ONE OF THE DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE NOTWITHSTANDING THAT THE REST OF THE CODEFENDANTS WERE DULY SERVED WITH SUMMONSES THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE ANSWER FILED BY ONE INDIVIDUAL DEFENDANT REDOUNDS TO THE BENEFIT OF THE OTHER DEFENDANT WHO HAS NOT BEEN SERVED WITH SUMMONS, THE NATURE OF ACTION BEING ADMITTEDLY COMMON AMONG ALL DEFENDANTS.9 From the foregoing, this Court identifies the issues to be resolved in this petition as: (1) Whether a co-donee is an indispensable party in an action to declare the nullity of the deed of donation, and (2) whether delay in the service of summons upon one of the defendants constitutes failure to prosecute that would warrant dismissal of the complaint. A Court must acquire jurisdiction over the persons of indispensable parties before it can validly pronounce judgments personal to the parties. Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint. On the other hand, jurisdiction over the person of a party defendant is assured upon the service of summons in the manner required by law or otherwise by his voluntary appearance. As a rule, if a defendant has not been summoned, the court acquires no jurisdiction over his person, and a personal judgment rendered against such defendant is null and void.10 A decision that is null and void for want of jurisdiction on the part of the trial court is not a decision in the contemplation of law and, hence, it can never become final and executory.11 Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-interest without whom there can be no final determination of an action. As such, they must be joined either as plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action requires, of course, the joinder of all necessary parties where possible, and the joinder of all indispensable parties under any and all conditions, their presence being a sine qua

non for the exercise of judicial power.12 It is precisely "when an indispensable party is not before the court [that] the action should be dismissed."13 The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present.14 As we ruled in Alberto v. Mananghala : In an action for recovery of property against a person who purchased it from another who in turn acquired it from others by the same means or by donation or otherwise, the predecessors of defendants are indispensable parties if the transfers, if not voided, may bind plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In the latter case, this Court held: In order to bring this suit duly to a close, it is imperative to determine the only question raised in connection with the pending appeal, to wit, whether all the persons who intervened in the matter of the transfers and donation herein referred to, are or are not necessary parties to this suit, since it is asked in the complaint that the said transfers and donation be declared null and void an indispensable declaration for the purpose, in a proper case, of concluding the plaintiff to be the sole owner of the house in dispute. If such a declaration of annulment can directly affect the persons who made and who were concerned in the said transfers, nothing could be more proper and just than to hear them in the litigation, as parties interested in maintaining the validity of those transactions, and therefore, whatever be the nature of the judgment rendered, Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente Miranda, and Rafael Sierra, besides the said minors, must be included in the case as defendants." (Garcia vs. Reyes, 17 Phil., 130-131.) It takes no great degree of legal sophistication to realize that Cynthia and Teresa are indispensable parties to Civil Case No. CEB 23927. Cynthia and Teresa allegedly derived their rights to the subject property by way of donation from their father Luis. The central thrust of the petitioners complaint in Civil Case No. CEB 23927 was that Luis could not have donated Proprietary Ownership Certificate No. 0272 to his daughters Cynthia and Teresa, as Luis was already very ill and no longer of sound and disposing mind at the time of donation on 15 May 1997. Accordingly, the prayer in petitioners complaint was for the trial court to declare null and void the Deed of Donation and to restrain the Cebu Country Club, Inc. from transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa. Thus, based on the Deed of Donation, Teresa and Cynthia are coowners of Proprietary Membership Certificate No. 0272 of Cebu Country Club, Inc. The country club membership certificate is undivided and it is impossible to
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pinpoint which specific portion of the property belongs to either Teresa or Cynthia. Indeed, both Teresa and Cynthia are indispensable parties in Civil Case No. CEB 23927. An indispensable party has been defined as follows: An indispensable party is a party who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has not only an interest in the subject matter of the controversy, but also has an interest of such nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. It has also been considered that an indispensable party is a person in whose absence there cannot be a determination between the parties already before the court which is effective, complete, or equitable. Further, an indispensable party is one who must be included in an action before it may properly go forward. A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them. Also, a person is not an indispensable party if his presence would merely permit complete relief between him and those already parties to the action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare a person to be an indispensable party that his presence will avoid multiple litigation.16 In Servicewide Specialists, Incorporated v. Court of Appeals, 17 this Court held that no final determination of a case could be made if an indispensable party is not legally present therein: An indispensable party is one whose interest will be affected by the courts action in the litigation, and without whom no final determination of the case can be had. The partys interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable. The rationale for treating all the co-owners of a property as indispensable parties in a suit involving the co-owned property is explained in Arcelona v. Court of Appeals18 : As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by a person having merely an undivided interest in any given tract of land, a judgment in favor of the defendants would not be conclusive as against the other co-owners not parties to the suit, and thus the defendant in possession of the property might be harassed by as many succeeding actions of ejectment, as there might be co-owners of the title asserted against him. The purpose property cases batch 2 33

of this provision was to prevent multiplicity of suits by requiring the person asserting a right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole matter in dispute may be determined once and for all in one litigation. Applying the foregoing definitions and principles to the present case, this Court finds that any decision in Civil Case No. CEB 23927 cannot bind Cynthia, and the Court cannot nullify the donation of the property she now coowns with Teresa, even if limited only to the portion belonging to Teresa, to whom summons was properly served, since ownership of the property is still pro indiviso. Obviously, Cynthia is an indispensable party in Civil Case No. CEB 23927 without whom the lower court is barred from making a final adjudication as to the validity of the entire donation. Without the presence of indispensable parties to a suit or proceeding, a judgment therein cannot attain finality. 19 Being an indispensable party in Civil Case No. CEB 23927, the trial court must also acquire jurisdiction over Cynthias person through the proper service of summons. Based on the foregoing disquisitions, the issue of whether the answer filed by Teresa should benefit Cynthia who was not served summons need not be discussed. As to determine whether Cynthia was properly served a summons, it will be helpful to determine first the nature of the action filed against Cynthia and Teresa by petitioner Victoria, whether it is an action in personam, in rem or quasi in rem. This is because the rules on service of summons embodied in Rule 14 apply according to whether an action is one or the other of these actions. In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the recovery of damages. 20 In contrast, in a real action, the plaintiff seeks the recovery of real property; or, as indicated in Section 2(a), Rule 4 of the then Rules of Court, a real action is an action affecting title to real property or for the recovery of possession, or for partition or condemnation of, or foreclosure of mortgage on, real property. An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an action against the thing itself, instead of against the person.21 In an action in personam, personal service of summons or, if this is not possible and he cannot be personally served, substituted service, as provided in Section 7, Rule 14 of the Rules of Court,22 is essential for the acquisition by the court of jurisdiction over the person of a defendant who does not voluntarily submit himself to the authority of the court.23 If defendant cannot be served a summons because he is temporarily abroad, but is otherwise a Philippine resident, service of summons may, by leave of court, be made by publication.24 Otherwise stated, a resident defendant in an action in personam, who cannot be personally served a summons, may be summoned either by means of substituted service in accordance with Section 7, Rule 14 of the Rules of Court, or by publication as provided in Sections 15 and 16 of the same Rule.

In all of these cases, it should be noted, defendant must be a resident of the Philippines; otherwise an action in personam cannot be brought because jurisdiction over his person is essential to make a binding decision. On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the defendant is not essential for giving the court jurisdiction so long as the court acquires jurisdiction over the res. If the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in accordance with Section 15, Rule 14 of the Rules of Court, which provides: Section 15. Extraterritorial service. - When the defendant does not reside and is not found in the Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under Section 6; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer. As stated above, there are only four instances wherein a defendant who is a non-resident and is not found in the country may be served a summons by extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is property within the Philippines, on which the defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines; and (4) when the defendant non-residents property has been attached within the Philippines. In these instances, service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may deem sufficient. 25 In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has jurisdiction over the res, i.e., the personal status of the plaintiff who is domiciled in the Philippines or the property litigated or attached. Service of summons in the manner provided in Section 15, Rule 14 of the Rules of Court is not for the purpose of vesting the court with jurisdiction, but for complying with the requirements of fair play or due process, so that the defendant will be informed of the pendency of the action against him; and the possibility that property in the Philippines belonging to him, or in which he has an interest, might be subjected to a judgment in favor of the plaintiff and he can thereby take steps to protect his interest if he is so minded.26

In petitioners Complaint in Civil Case No. CEB No. 23427, she alleged that Cynthia is residing at 462 West Vine No. 201, Glendale, California, 912041, U.S.A.; while Teresa is residing at 2408 South Hacienda Boulevard, Hacienda Heights, California, but they usually visit here in the Philippines and can be served summonses and other processes at the Borja Family Clinic, Bohol. Pertinent portions of the Complaint read: 2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married to Ramon Logarta, resident (sic) 463 West Vine No.201, Glendale, California, 912041, USA. She however usually visits in the Philippines and can be served with summons and other processes of this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol; 3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age, married to Antonio Tormis, and a resident of 2408 South Hacienda Heights, California, 19745, U.S.A. She however usually visits in the Philippines and can be served with summons and other processes of this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol.27 Petitioner prayed for a declaration of nullity of the deed of donation, to restrain Cebu Country Club, Inc. from transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia and Teresa, and for moral and exemplary damages. Civil Case No. CEB 23927 is evidently an action against Cynthia and Teresa on the basis of their personal liability for the alleged fraudulent transfer of the subject Country Club membership from Luis to their name. In this sense, petitioner questions the participation and shares of Cynthia and Teresa in the transferred Country Club membership. Moreover, the membership certificate from the Cebu Country Club, Inc. is a personal property. Thus, the action instituted by petitioner before the RTC is in personam. Being an action in personam, the general rule requires the personal service of summons on Cynthia within the Philippines, but this is not possible in the present case because Cynthia is a non-resident and is not found within the Philippines. As Cynthia is a nonresident who is not found in the Philippines, service of summons on her must be in accordance with Section 15, Rule 14 of the Rules of Court. Such service, to be effective outside the Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court should be sent by registered mail to the last known address of the defendant; or (3) in any other manner which the court may deem sufficient. The third mode, like the first two, must be made outside the Philippines, such as through the Philippine Embassy in the foreign country where Cynthia resides. Since in the case at bar, the service of summons upon Cynthia was not done by any of the authorized modes, the trial court was correct in dismissing petitioners complaint. Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states

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SEC. 3. Dismissal due to fault of plaintiff. If, for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with these Rules or any order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion, without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise declared by the court. As can be gleaned from the rule, there are three instances when the complaint may be dismissed due to the plaintiff's fault: (1) if he fails to appear during a scheduled trial, especially on the date for the presentation of his evidence in chief; (2) if he fails to prosecute his action for an unreasonable length of time; and (3) if he fails to comply with the rules or any order of the court.28 Considering the circumstances of the case, it can be concluded that the petitioner failed to prosecute the case for an unreasonable length of time. There is failure to prosecute when the plaintiff, being present, is not ready or is unwilling to proceed with the scheduled trial or when postponements in the past were due to the plaintiff's own making, intended to be dilatory or caused substantial prejudice on the part of the defendant.29 While a court can dismiss a case on the ground of failure to prosecute, the true test for the exercise of such power is whether, under the prevailing circumstances, the plaintiff is culpable for want of due diligence in failing to proceed with reasonable promptitude.30 As to what constitutes an "unreasonable length of time," within the purview of the above-quoted provision, the Court has ruled that it "depends upon the circumstances of each particular case," and that "the sound discretion of the court" in the determination of said question "will not be disturbed, in the absence of patent abuse"; and that "the burden of showing abuse of judicial discretion is upon the appellant since every presumption is in favor of the correctness of the court's action."31 Likewise, the concept of promptness is a relative term and must not unnecessarily be an inflexible one. It connotes an action without hesitation and loss of time. As to what constitutes the term is addressed to the consideration of the trial court, bearing in mind that while actions must be disposed of with dispatch, the essential ingredient is the administration of justice and not mere speed.32 It is well to quote the doctrine laid in Padua v. Ericta,33 as accentuated in the subsequent case Marahay v. Melicor34 : Courts should not brook undue delays in the ventilation and determination of causes. It should be their constant effort to assure that litigations are prosecuted and resolved with dispatch. Postponements of trials and hearings should not be allowed except on meritorious grounds; and the grant or refusal thereof rests entirely in the sound discretion of the Judge. It goes without saying, however, that discretion must be reasonably and wisely exercised, in the light of the attendant circumstances. Some reasonable deferment of the proceedings may be allowed or tolerated to the end that cases may be

adjudged only after full and free presentation of evidence by all the parties, especially where the deferment would cause no substantial prejudice to any part. The desideratum of a speedy disposition of cases should not, if at all possible, result in the precipitate loss of a partys right to present evidence and either in plaintiff's being non-suited or the defendant's being pronounced liable under an ex parte judgment. "[T]rial courts have x x x the duty to dispose of controversies after trial on the merits whenever possible. It is deemed an abuse of discretion for them, on their own motion, to enter a dismissal which is not warranted by the circumstances of the case (Municipality of Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While it is true that the dismissal of an action on grounds specified under Section 3, Rule 17 of the Revised Rules of Court is addressed to their discretion (Flores v. Phil. Alien Property Administrator, 107 Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna, L-17631, October 19, 1966, 18 SCRA 390), such discretion must be exercised soundly with a view to the circumstances surrounding each particular case (Vernus-Sanciangco v. Sanciangco, L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that serve as mitigating circumstances for the delay, the same should be considered and dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672; Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]), especially where the suit appears to be meritorious and the plaintiff was not culpably negligent and no injury results to defendant (27 C.J.S. 235-36; 15 ALR 3rd 680)." (Abinales vs. Court of First Instance of Zamboanga City, Br. I, 70 SCRA 590, 595). "It is true that the allowance or denial of petitions for postponement and the setting aside of orders previously issued, rest principally upon the sound discretion of the judge to whom they are addressed, but always predicated on the consideration that more than the mere convenience of the courts or of the parties of the case, the ends of justice and fairness would be served thereby (Camara Vda. de Zubiri v. Zubiri, et al., L-16745, December 17, 1966). When no substantial rights are affected and the intention to delay is not manifest, the corresponding motion to transfer the hearing having been filed accordingly, it is sound judicial discretion to allow them (Rexwell Corp. v. Canlas, L-16746, December 30, 1961)." x x x. This Court recalls that the complaint herein was filed on 15 June 1999. The summonses for Cynthia and Teresa were served on their sister Melinda at the Borja Family Clinic in Tagbilaran City, but the latter refused to receive the same. It was only on 1 June 2000 that summons was served on Teresa at Room 304, Regency Crest Condominium, Banilad, Cebu City, when she was in the Philippines for a visit. However, the summons for Cynthia was never served upon her. Although Section 1, Rule 14 of the Rules, imposes upon the clerk of court the duty to serve summons, this does not relieve the petitioner of her own duty as the plaintiff in a civil case to prosecute the case diligently. If the clerk had been negligent, it was petitioners duty to call the courts attention to that fact. It must be noted that it was not even petitioner who called the courts attention that summons had not been served on Cynthia, but Teresa. This despite the fact that petitioner was aware, as early as 15 June 1999, when she filed her complaint, that

the summonses could not be served on Teresa and Cynthia, as she admitted therein that Teresa and Cynthia were residing abroad. Petitioner as plaintiff should have asked that Cynthia and Teresa be summoned by publication at the earliest possible time. She cannot idly sit by and wait till this is done. She cannot afterwards wash her hands and say that the delay was not her fault. She cannot simply "fold [her] hands" and say that it is the duty of the clerk of court to have the summonses served on Cynthia and Teresa for the prompt disposition of her case. If there were no means of summoning any of the defendants, petitioner should have so informed the court within a reasonable period of time, so that the case could be disposed of one way or another and the administration of justice would not suffer delay. The non-performance of that duty by petitioner as plaintiff is an express ground for dismissing an action. For, indeed, this duty imposed upon her was precisely to spur on the slothful. For failure to diligently pursue the complaint, petitioner trifled with the right of the respondents to speedy trial. It also sorely tried the patience of the court and wasted its precious time and attention. To allow petitioner to wait until such time that summonses were served on respondents would frustrate the protection against unreasonable delay in the prosecution of cases and violate the constitutional mandate of speedy dispensation of justice which would in time erode the peoples confidence in the judiciary. We take a dim view of petitioners complacent attitude. Ex nihilo nihil fit.35 Likewise, petitioners counsel inexplicably failed to diligently pursue the service of summonses on respondents. These were acts of negligence, laxity and truancy which the court could have very easily avoided or timely remedied. Petitioner and her counsel could not avail themselves of this Courts sympathy, considering their apparent complacency, if not delinquency, in the conduct of their litigation. Considering the foregoing, we sustain the dismissal by the trial court of the petitioners complaint for failure to prosecute for a period of more than one year (from the time of filing thereof on 15 June 1997 until Teresas filing of a motion to dismiss). WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and the assailed Decision dated 6 May 2005 of the Court of Appeals in CA-G.R. CV No. 71028 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. 164110 February 12, 2008

LEONOR B. CRUZ, petitioner, vs. TEOFILA M. CATAPANG, respondent. QUISUMBING, J.: This petition for review seeks the reversal of the Decision 1 dated September 16, 2003 and the Resolution2 dated June 11, 2004 of the Court of Appeals in CA-G.R. SP No. 69250. The Court of Appeals reversed the property cases batch 2 35

Decision3dated October 22, 2001 of the Regional Trial Court (RTC), Branch 86, Taal, Batangas, which had earlier affirmed the Decision 4 dated September 20, 1999 of the 7th Municipal Circuit Trial Court (MCTC) of Taal, Batangas ordering respondent to vacate and deliver possession of a portion of the lot co-owned by petitioner, Luz Cruz and Norma Maligaya. The antecedent facts of the case are as follows. Petitioner Leonor B. Cruz, Luz Cruz and Norma Maligaya are the coowners of a parcel of land covering an area of 1,435 square meters located at Barangay Mahabang Ludlod, Taal, Batangas.5 With the consent of Norma Maligaya, one of the aforementioned co-owners, respondent Teofila M. Catapang built a house on a lot adjacent to the abovementioned parcel of land sometime in 1992. The house intruded, however, on a portion of the co-owned property.6 In the first week of September 1995, petitioner Leonor B. Cruz visited the property and was surprised to see a part of respondents house intruding unto a portion of the co-owned property. She then made several demands upon respondent to demolish the intruding structure and to vacate the portion encroaching on their property. The respondent, however, refused and disregarded her demands.7 On January 25, 1996, the petitioner filed a complaint8 for forcible entry against respondent before the 7th MCTC of Taal, Batangas. The MCTC decided in favor of petitioner, ruling that consent of only one of the co-owners is not sufficient to justify defendants construction of the house and possession of the portion of the lot in question.9 The dispositive portion of the MCTC decision reads: WHEREFORE, judgment is hereby rendered ordering the defendant or any person acting in her behalf to vacate and deliver the possession of the area illegally occupied to the plaintiff; ordering the defendant to pay plaintiff reasonable attorneys fees of P10,000.00, plus costs of suit. SO ORDERED.10 On appeal, the RTC, Branch 86, Taal, Batangas, affirmed the MCTCs ruling in a Decision dated October 22, 2001, the dispositive portion of which states: Wherefore, premises considered, the decision [appealed] from is hereby affirmed in toto. SO ORDERED.
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petitioners remedy is not an action for ejectment but an entirely different recourse with the appropriate forum. The Court of Appeals disposed, thus: WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The challenged Decision dated 22 October 2001 as well as the Order dated 07 January 2002 of the Regional Trial Court of Taal, Batangas, Branch 86, are hereby REVERSED and SET ASIDE and, in lieu thereof, another is enteredDISMISSING the complaint for forcible entry docketed as Civil Case No. 71-T. SO ORDERED.13 After petitioners motion for reconsideration was denied by the Court of Appeals in a Resolution dated June 11, 2004, she filed the instant petition. Raised before us for consideration are the following issues: I. WHETHER OR NOT THE KNOWLEDGE AND CONSENT OF CO-OWNER NORMA MALIGAYA IS A VALID LICENSE FOR THE RESPONDENT TO ERECT THE BUNGALOW HOUSE ON THE PREMISES OWNED PROINDIVISO SANS CONSENT FROM THE PETITIONER AND OTHE[R] CO-OWNER[.] II. WHETHER OR NOT RESPONDENT, BY HER ACTS, HAS ACQUIRED EXCLUSIVE OWNERSHIP OVER THE PORTION OF THE LOT SUBJECT OF THE PREMISES PURSUANT TO THE CONSENT GRANTED UNTO HER BY COOWNER NORMA MALIGAYA TO THE EXCLUSION OF THE PETITIONER AND THE OTHER CO-OWNER.14 III. . . . WHETHER OR NOT RESPONDENT IN FACT OBTAINED POSSESSION OF THE PROPERTY IN QUESTION BY MEANS OF SIMPLE STRATEGY.15 Petitioner prays in her petition that we effectively reverse the Court of Appeals decision. Simply put, the main issue before us is whether consent given by a coowner of a parcel of land to a person to construct a house on the co-owned property warrants the dismissal of a forcible entry case filed by another co-owner against that person. In her memorandum,16 petitioner contends that the consent and knowledge of co-owner Norma Maligaya cannot defeat the action for forcible entry since it is a basic principle in the law of co-ownership that no individual coowner can claim title to any definite portion of the land or thing owned in common until partition. On the other hand, respondent in her memorandum17 counters that the complaint for forcible entry cannot prosper because her entry into the property was not through strategy or stealth due to the consent of one of the co-owners. She further argues that since Norma Maligaya is residing in the house she built,

the issue is not justpossession de facto but also one of possession de jure since it involves rights of co-owners to enjoy the property. As to the issue of whether or not the consent of one co-owner will warrant the dismissal of a forcible entry case filed by another co-owner against the person who was given the consent to construct a house on the co-owned property, we have held that a co-owner cannot devote common property to his or her exclusive use to the prejudice of the co-ownership.18 In our view, a co-owner cannot give valid consent to another to build a house on the co-owned property, which is an act tantamount to devoting the property to his or her exclusive use. Furthermore, Articles 486 and 491 of the Civil Code provide: Art. 486. Each co-owner may use the thing owned in common, provided he does so in accordance with the purpose for which it is intended and in such a way as not to injure the interest of the co-ownership or prevent the other co-owners from using it according to their rights. The purpose of the co-ownership may be changed by agreement, express or implied. Art. 491. None of the co-owners shall, without the consent of the others, make alterations in the thing owned in common, even though benefits for all would result therefrom. However, if the withholding of the consent by one or more of the co-owners is clearly prejudicial to the common interest, the courts may afford adequate relief. Article 486 states each co-owner may use the thing owned in common provided he does so in accordance with the purpose for which it is intended and in such a way as not to injure the interest of the co-ownership or prevent the other co-owners from using it according to their rights. Giving consent to a third person to construct a house on the co-owned property will injure the interest of the coownership and prevent other co-owners from using the property in accordance with their rights. Under Article 491, none of the co-owners shall, without the consent of the others, make alterations in the thing owned in common. It necessarily follows that none of the co-owners can, without the consent of the other co-owners, validly consent to the making of an alteration by another person, such as respondent, in the thing owned in common. Alterations include any act of strict dominion or ownership and any encumbrance or disposition has been held implicitly to be an act of alteration.19 The construction of a house on the co-owned property is an act of dominion. Therefore, it is an alteration falling under Article 491 of the Civil Code. There being no consent from all co-owners, respondent had no right to construct her house on the co-owned property. Consent of only one co-owner will not warrant the dismissal of the complaint for forcible entry filed against the builder. The consent given by Norma Maligaya in the absence of the consent of petitioner and Luz Cruz did not vest upon respondent any right to enter into the co-owned property. Her entry into the property still falls under the classification "through strategy or stealth."

After her motion for reconsideration was denied by the RTC, respondent filed a petition for review with the Court of Appeals, which reversed the RTCs decision. The Court of Appeals held that there is no cause of action for forcible entry in this case because respondents entry into the property, considering the consent given by co-owner Norma Maligaya, cannot be characterized as one made through strategy or stealth which gives rise to a cause of action for forcible entry.12 The Court of Appeals decision further held that

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The Court of Appeals held that there is no forcible entry because respondents entry into the property was not through strategy or stealth due to the consent given to her by one of the co-owners. We cannot give our imprimatur to this sweeping conclusion. Respondents entry into the property without the permission of petitioner could appear to be a secret and clandestine act done in connivance with co-owner Norma Maligaya whom respondent allowed to stay in her house. Entry into the land effected clandestinely without the knowledge of the other co-owners could be categorized as possession by stealth. 20 Moreover, respondents act of getting only the consent of one co-owner, her sister Norma Maligaya, and allowing the latter to stay in the constructed house, can in fact be considered as a strategy which she utilized in order to enter into the co-owned property. As such, respondents acts constitute forcible entry. Petitioners filing of a complaint for forcible entry, in our view, was within the one-year period for filing the complaint. The one-year period within which to bring an action for forcible entry is generally counted from the date of actual entry to the land. However, when entry is made through stealth, then the one-year period is counted from the time the petitioner learned about it.21 Although respondent constructed her house in 1992, it was only in September 1995 that petitioner learned of it when she visited the property. Accordingly, she then made demands on respondent to vacate the premises. Failing to get a favorable response, petitioner filed the complaint on January 25, 1996, which is within the one-year period from the time petitioner learned of the construction. WHEREFORE, the petition is GRANTED. The Decision dated September 16, 2003 and the Resolution dated June 11, 2004 of the Court of Appeals in CA-G.R. SP No. 69250 are REVERSED and SET ASIDE. The Decision dated October 22, 2001 of the Regional Trial Court, Branch 86, Taal, Batangas is REINSTATED. Costs against respondent. SO ORDERED.

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